Kasireddi Siddareddi (dead) and Others vs Mandapalle Co-operative Society and Another

Horwill, J.—The husband of the second defendant, Lakshmayya, owed two sums of money to the Mandapalle Co-operative Society. The

first was secured and the second unsecured. The Registrar passed an award with regard to the first debt; and it was then sent to the revenue

authorities for execution under rule 14(5) of the Co-operative Societies Act and for recovery of the decree amount as if it were arrears of land

revenue. Where land is sold for recovery of land revenue it is sold free of encumbrances; but it has been frequently held that where land is sold for

the recovery of money due to Government or to public bodies under Special Acts, such as the Co-operative Societies Act and Abkari Act for

example, the land is not actually sold free of encumbrances. Nevertheless, a precisely similar form of proclamation is generally used in the recovery

of such money; and so there is no mention in the proclamation, as there would be in a proclamation in a sale held under the Civil Procedure Code,

of any encumbrance. In the present case, although there were encumbrances, there was therefore no mention of them in the proclamation; and the

appellant purchased the land believing, he says, that there were no encumbrances on it. He therefore brought the present suit for a declaration that

this land belonged to him free of all encumbrances. The question that arose for consideration in the Courts below and also arises here is whether, in

fact, the land may be deemed to belong to the appellant free from encumbrances or not. The lower appellate Court held that the land was not sold

free of encumbrances and it therefore dismissed the suit.

The land can only be deemed to have been sold free from emcumbrances if there was a duty cast upon the Co-operative Society of informing

intending purchasers that the land was being sold free from encumbrances. No satisfactory reason has been given to me why it should be assumed

that such a duty lay upon the Co-operative Society. Ordinarily, the principle of caveat emptor applies and the mortgagee is under no obligation to

reveal his mortgage. There was further no reason why the appellant should conclude, from the absence of any mention of any encumbrance in the

proclamation, that there was no encumbrance. There were in fact three encumbrances, one of which was in favour of his own father and uncle. If

there was no duty cast upon the Co-operative Society to reveal their mortgage, then there was no estoppel. The Co-operative Society did not do

any act which led the appellant to believe that there was no encumbrance and to bid on that assumption.

The learned Advocate for, the appellant has placed reliance on some observations in N.R.M. Govindarajulu Naidu Vs. The Secretary of State

for India in Council, . There, some property was sold for arrears of abkari revenue. The purchaser did not pay the money he bid and so the land

was resold and the Government sought to recover from the first bidder the difference between the amount that he bid and the amount that was

subsequently realised in the second sale. That difference was an enormous one; and the Court concluded on the facts that the difference was due

to the fact that the property was first sold with a proclamation in the ordinary form, whereas in the second case it was sold with a proclamation

which revealed an existing mortgage. In that decision far from it being held that the proclamation was bound to reveal the mortgage, it was held that

the Government Were not legally bound to notify in the sale of immovable property for default under the Abkari Act that it is subject to

encumbrances. The decision in that case turned on the finding that the same property was not sold on the two occasions. Section 36(4) of the

Revenue Recovery Act runs thus:

Where the purchaser may refuse or omit to deposit the said sum of money the property shall be re-sold at the expense and hazard of such

purchaser.

It was there held that the property that was sold in the first instance was property free of mortgage and the property sold in the second case was

property subject to a mortgage, and that therefore Section 36(4) did not apply, in that the same property was not re-sold.

The Co-operative Society was therefore under no legal obligation to notify that mortgage, although one would have expected them to do so. In

fact, they seem to have done their best to notify bidders. D.W. 1, who was acting on behalf of the Co-operative Society, obtained an

encumbrance certificate and sent it to the Tahsildar before the sale. He was surprised, he says, to learn that no mention was made of the

encumbrance. The appellant could have ascertained the existence of the mortgage if he had so chosen; and as there was no mention of an

encumbrance or the absence of one in the proclamation, one would have expected him to have ascertained before purchasing the property whether

or not there was any encumbrance.

The appeal fails and is dismissed with costs.

(No Leave).