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Judgment
C. Shivappa, J.—In this appeal, the appellants have challenged the order dated 24.4.1998, passed on Application No. 5103 of 1990 in C.S. No. 180 of 1984, by the learned single Judge on the Original side of this Court, on the ground that the properties were sold for a gross inadequate price, consequently, the confirmation of auction is bad in law. The question for consideration in this appeal is whether the auction held on 4.2.1998 by the Advocate Commissioner and its consequent confirmation calls for interference on the ground of illegality committed in the process of auction?
In order to decide mis question, it is appropriate to refer to certain salient features and facts that led to the decree in pursuance of which, the Advocate Commissioner was appointed to conduct the auction. The facts are as follows:- Respondent No. 1 Bank filed a suit for recovery of certain amount due to it Wider mortgage and hypothecation. A consent decree was passed on 12.6.89, directing the appellants 1 to 16 herein, to pay a sum of Rs. 1,30,00,000/- with further interest at the rate of 12% per annum on the sum of Rs. 1,10,00,000/- from 17.8.1998, till the date of realisation. One of the conditions in the consent decree is that in default of payment, the mortgaged property or sufficient part thereof shall be sold and the sale proceeds shall be paid into court and shall be duly applied (after deduction therefrom of the expenses of the sales) in payment of the said sums due to the respondent No. 1 herein as aforestated, together with subsequent interest at the rate of 16-1/2% and such further costs as may be allowed to the respondents 1 to 16 and the balance shall be paid to the defendants or other persons entitled to receive the same. Respondent No. 1 Bank have a charge over all the machineries, movables and equipments lying at the factory premises of defendants 1 to 16 and the respondent herein is entitled to execute the decree bringing all the machineries, movables and equipments lying at the factory premises for sale by the Advocate Commissioner. The factories, machineries, etc. are in the custody of the Advocate Commissioner Mr. C.N. Sivakumar and he continued to be in custody till the entire amount due under the decree, is paid and full satisfaction is recorded.
That appellants 1 to 16 did not pay the decretal amount as per the terms of the compromise decree, an application was filed to direct the Advocate Commissioner to sell the movable and immovable properties with the assistance of the public auctioneers M/s. Alwin and Company and deposit the sale proceeds with the decree holder. The Advocate Commissioner, with the assistance of the public auctioneers M/s. Alwin and Company, held the auction on 25.9.1991, fixing the upset price at Rs. 2.4 crores for item No. 1, and Rs. 75 lakhs for item No. 2, and the movable properties were sold, but there were no bidders for the immovable properties. Subsequently, the Advocate Commissioner made an inventory on 24.7.1991 and found 94 additional items and 38 additional items of immovable properties in Korukkupet and Ambattur factories respectively.
Since there were no bidders, the respondent Bank was permitted to make private negotiations. Accordingly, negotiations were made with K.K.R. Financing and Housing Developments (P) Ltd., who agreed to purchase the entire properties for Rs. 2.25 crores, but the proposal did not fructify. Later, the Commissioner held an auction on 7.10.1991 in which one Arun Agarwal purchased the movables for Rs. 20 lakhs.
The additional movables and item Nos. 1 and 2 immovable properties were put to auction on 4.2.1998 after wide publication. M/s. Sun Metal Factory India (P) Ltd. offered to purchase the lands at Korukkupet for Rs. 1,50,00,000/- and the additional machineries available therein for Rs. 4,00,000/- and the same bidder offered the highest bid of Rs. 51,50,000/- for the Ambattur factory land and Rs. 1,50,000/- for the machineries therein. Thus, among the bidders on that day, he was the highest bidder.
The appellants herein objected to the sale on the ground that the price fixed for auction is very low and less than the guideline value. According to them, the guideline value of the property in item No. 1 is Rs. 4 crores and for the property in item No. 2 is Rs. 1.5 crores.
The learned counsel for the respondent No. 1 Bank submitted that as per the consent decree, the appellants failed to pay the installments and disentitled themselves to any advantage or concession as agreed and the suit will stand decreed as prayed for in the plaint for a sum of Rs. 1,96,92,775.22 and interest thereon at 6-1/2% per annum from the date of plaint till the date of realisation. If the confirmation is set aside, auction postponed, having regard to the decline in the price of real estate and also due to uncertainty in the auction sales, there may not be bidders even for the present price for which auction has been confirmed.
The Advocate Commissioner denied the allegation that the upset price was reduced at the bidder''s request and did not represent the higher side. He further denied the allegation that the guideline value is only for house sites and not for the industrial land. He invited our attention to the fact that the appellants though negotiated for selling the property to third parties, several parties though inspected were not willing to purchase the properties, in view of the fact that the approach road to the factory premises is completely damaged and sewerage water is blocking the road, and the property is also not properly managed.
Apart from, that, wide publicity about the inspection and public auction of the property at Korukkupet and Ambattur factory premises was made in: (i) The Hindu dated 14.1.1998 (published at Chennai, Coimbatore, Bangalore, Hyderabad, Madurai, Delhi, Visakapatinam and Thiruvananthapuram); (ii) The Indian Express (Chennai, Bangalore, Hyderabad, Bombay, Delhi editions); (iii) The Deccan Herald (Bangalore) and (iv) Dina Thanthi (Tamil) (Chennai, Coimbatore, Tirunelveli, Vellore editions). Four parties inspected the Korukkupet factory on 22.1.1998 and three parties inspected the Ambattur factory on 23.1.1998 and the auction was conducted in the presence of the Bank''s Chief Manager and the Manager, with the assistance of M/s. Alwin and Company, Public auctioneers. The allegation that at the request of the bidders, the upset price was reduced from Rs. 4 crores to Rs. 1 crore is false. The auction conditions do not contain Rs. 4 crores as the upset price.
One applicant is seeking for impleading as one of the parties in the appeal and resisting the confirmation of auction. But, there is nothing in writing offering any higher price. But one Sr. V.L. Aboot, through the counsel, submitted that he is prepared to take for Rs. 2.50 crores on 31st of August, 1998 in Court at the time of hearing. But, declined to deposit the amount and the counsel is also not certain about the date within which the entire amount will be deposited by the party and sought for an adjournment to make submission after contacting his client and taking instructions from him. Even on 1.9.1998, the counsel is not able to give a positive reply about the willingness to deposit the entire amount In such a situation, it is not proper to give any further opportunity to the third party, who is quoting a higher price.
On uncertainties, the Court need not act extending the time to make deposit at the request of a party who did not participate in the auction. A person interested in the property sold in the execution requesting the court to set aside the sale in all fairness must be prepared to deposit the amount offered by him to show his bona fides. In the absence of such readiness to deposit the amount, it is not proper for the court to act upon such offers.
Whoever offers a higher price and seeks to set aside the sale, he must have the responsibility of paying the amount without seeking time and also causing inconvenience to the decree-holder or the auction-purchaser. Such deposit is intended not merely for the benefit of the auction-purchaser and the decree-holder, but also to maintain the solemnity of the court sale.
In Jaswantlal Natvarlal Thakkar Vs. Sushilaben Manilal Dangarwala and others, the Apex Court has held that
"it is not sufficient for the appellant to contend that there was illegality or irregularity in the conduct of the sale; he must also prove that some substantial injury has been caused to him as a result of the order....."
In the instant case, since all the formalities have been complied with and publicity was given and having regard to the nature of the property and depreciation in the real-estate value, the Advocate Commissioner, keeping in view the private negotiations earlier made by the bank and the present value for which the properties were auctioned thought it fit that the price is not inadequate. Since the property guideline value at Rs. 4 crores, is not mentioned in the auction notice, there is no justification to say that it was reduced at the instance of the bidders. The only grievance of the learned counsel for the appellant is that the property was sold for an inadequate price. There are no imputations of bias or mala fides against the Advocate Commissioner in the conduct of the sale. Except the allegation of inadequate price, no unfairness or impropriety is alleged in the conduct of the sale. The sale cannot be set aside on mere inadequacy of price. The court sale being an involuntary sale, it cannot fetch the same price expected of from a regular voluntary sale. There is a presumption that the price fetched in auction sale is adequate. Inadequacy of price fetched is not an injury or far less a substantial injury.
In Kayjay Industries (P) Ltd. Vs. Asnew Drums (P) Ltd. and Others, the Supreme Court, after discussing the principles applicable to court sales, held that where the court had exercised a conscientious and lively discretion in concluding the sale, mere inadequacy of price cannot demolish every court sale.
In O.S.A. No. 121 of 1998, decided on 24.8.1998, (since reported in 1998-3-L.W. 465) in Sri Ramajeyam Lorry Agency v. V.B. Giri and others, this Court has held in para 13 thus :-
"On the point that inadequacy of price is a sufficient criterion to invalidate the auction sale, the learned counsel relied on a decision of this Court in Bancorex S.A. Vs. Ocean Marine Services Co. Ltd. and Others, . In that case, this Court held that the price offered was grossly inadequate, having regard to the minimum price fixed by the Court. It was that criteria which weighed with the Court on the principle that the court should be satisfied about the adequacy of price before confirmation of the sale. We wish to add here that it is settled in law that mere inadequacy of price, without the least impropriety in the conduct of the auction sale, is no ground to set aside the sale. The question of inadequacy of the consideration must of course be decided at the time of contract and not by the light of subsequent events. No purchase made bona fide and without fraud or unfair dealing of any interest in the property should thereafter be opened or set aside merely on the ground of under-valuation. The inadequacy of price should shock the conscience of the court and the court should opine coupled with other circumstances of oppression and unfairness, in which event, inadequacy of the price assumes relevance to reopen the auction. Though impropriety in the conduct, not adverted to in the ship case, cited supra, but while setting aside the sale, it was viewed that inadequacy of price was of that magnitude which was too gross in its nature, which implied impromptu conduct in the auction sale. But that is not the situation in the given case."
Having regard to the earlier negotiations not fructified and also no bidders came forward in spite of inspecting the properties, constant postponement in public auction, there may be every possibility for the buyers being afraid of hurdles ahead, and the property not getting a proper value. If the court sales are too frequently adjourned with a view to obtaining a higher price, it may prove a self-defeating exercise and persons may tend to lose faith in court sales and even it may result in yielding less price or no price at all and may even add to the agony of the decree-holders. Having regard to the earlier private negotiations at Rs. 2.25 crores and the present auction for Rs. 2.12-1/2 crores, including the movables, it cannot be said to be for grossly inadequate price. In the instant case, the auction-purchaser deposited the 1 entire amount and interfering with the auction sale which had reached its finality may cause even misery and hardship to him. It is equally well-settled that if any court auction sale in execution of a decree, properties are purchased by a bona fide purchaser, who is a stranger to the court proceedings, the sale in his favour has to be protected and it cannot be upset at the instance of an offer or who is not prepared to deposit the amount offered.
Therefore, we hold that this is not a case where there are overwhelming circumstances indicating irregularities or illegalities in the conduct of the auction sale and that the property was sold for grossly inadequate price. We see no ground to interfere with the confirmation of the auction held on 4.2.1998, which is the subject-matter of this appeal. For reasons aforestated, the appeal fails and the same is accordingly dismissed. Consequently, the connected miscellaneous petitions are also dismissed. Parties to bear their own costs.