State Bank of India vs S.B. Associates

V.K. Bali, J.—The common saying that the travails of a decree-holder or an auction purchaser start with far greater dimensions after the decree is passed or the properties purchased in auction, is well illustrated by the facts of this case.

The appellant-State Bank of India financed a Company-known as Haryana Rubber Industries (P) Lt. at Ballabgarh, District Sonepat and when the Company aforesaid defaulted in repaying of the loan, the appellant filed a suit against it and its guarantors for recovery of Rs. 22,97,398.95 paise on September 15, 1980. During the currency of the suit, the Company was ordered to be wound up by this Court in a petition instituted on that behalf under the Companies Act vide Orders dated March 3, 1981 and the Official Liquidator was ordered to take over its affairs on an application filed by the appellant. However, the suit was allowed to continue after the same was transferred to the files of this Court but after its transfer it was registered as Company Petition No. 29 of 1982. The suit, after full length trial, came to be decreed on December 14, 1984. Obviously, the appellant sought execution of the decree and in the course of execution proceedings, this Court directed that the mortgaged properties be sold in an open auction. The Official Liquidator, with a view to carry out the directions aforesaid, was directed to assist in making the property available for sale. The appellant-bank was directed, vide orders dated April 29, 1988 to issue an advertisement with regard to the sale of the mortgaged properties in various News Papers. The immovable property of the Company to be sold was a piece of land measuring 38 Kanals 13 marlas including the building constructed thereon. The public auction was held on September 17, 1988 and the respondent-M/s S.B. Associates, G.T. Road, Ballabgarh, being the highest bidder, succeeded in purchasing the property aforesaid. The sale came to be confirmed by this Court on November 3, 1988. The dispute giving rise to this appeal surfaced when the auction purchaser, respondent-herein, made an application for getting possession of the property sold to it and when the Official Liquidator was directed by orders passed by this Court to deliver possession to it and when he reached the premises for handing-over the possession to the respondent, it transpired then that apart from the land, some constructed portion in the premises was in occupation of the appellant i.e. decree-holder. The appellant had refused to part with the possession, thus, resulting into an application that was moved by the Company, auction purchaser, praying therein that the decree-holder be directed to deliver vacant possession to it. The bank resisted this application on the solitary ground that it was a tenant over the property in dispute even prior to the date when the Company was ordered to be wound up. With a view to prop up its plea of tenancy some accounts statements maintained by it in the name of the company showing that the rent was being regularly credited to the accounts of the Company, were filed in addition to some correspondence between the Company, prior to its liquidation and the bank. The auction purchaser filed rejoinder to the reply aforesaid and denied the tenancy of the bank over the premises. It was also asserted that the bank could not possibly be in possession of the property as tenant but for as mortgagee as also that the bank in the suit for recovery had no where asserted that it was a tenant in some part of the building of the Company.

The learned Single Judge, before whom the matter came, on appreciation of the entire controversy, came to a firm conclusion that assuming that the bank was a tenant on a part of the premises, it could not possibly resist the prayer of the respondent-auction purchaser for handing-over vacant possession to the later. The learned Single Judge in holding so, adversely commented upon the conduct of the appellant by observing that when the decree-holding itself was a tenant and had withheld the information about its tenancy rights from the intending buyer, the auction purchaser could not be held to be bound by any encumbrances which were not mentioned either in the suit or in the advertisement issued by the decree-holder itself and the auction purchaser, in the said situation, would be entitled to take possession of the property free from any encumbrances. It is against this order of the learned Single Judge that the present appeal has been filed by the appellant-State Bank of India.

We have heard learned counsel for the parties and gone through the records of the case. The two fold contention of Mr. Sarin, learned Senior Advocate, appearing on behalf of the appellant is that the order for handing over vacant possession to the auction purchaser could not be passed without there being a decree of eviction against the appellant and that the appellant was given no chance to bring on records the evidence which could conclusively prove that it was a tenant under the Company known as M/s Haryana Rubber Industries (P) Ltd.

We have given our thoughtful consideration to the contentions, noticed above, but we find no substance in either of them. Dealing with the later contention first, it shall be seen that but for claim of the respondent-auction purchaser for handing-over vacant possession, no other material at all was brought on the records of the case. Even copies of statements of accounts, said to be maintained by the appellant showing that the rent was being regularly credited to the accounts of the Company, were filed later. It is only after the conclusion of arguments before the learned Single Judge that learned counsel appearing for the appellant submitted that the bank wanted to lead evidence to prove the factum of tenancy and that the case may be adjourned for that purpose. The learned Single Judge, in our opinion, rightly declined the prayer aforesaid being made at such a belated stage. It requires to be mentioned here that the application filed by the respondent-auction purchaser for handing-over to it vacant possession came to be ultimately disposed of by the learned Single-Judge on January 29, 1993 and all this while, when the case was going on, no request for leading evidence at any stage was made.

Insofar as to first contention of learned counsel with regard to passing of an order of eviction before possession could be taken over, is concerned, suffice it to say that there is no admissible evidence brought on the records to prove that the appellant was ever a tenant under the Company. It is true that the learned Single Judge proceeded on that premise i.e. by assuming that the appellant was a tenant and knocked out its case by adversely commenting upon its act and conduct. We are in complete agreement with the view expressed by the learned single Judge but we only hasten to add that there was no need to presume that the appellant was a tenant under the company when, admittedly, it had brought no admissible evidence on records of the case to prove the same. The assertion of the appellant made in its reply resisting the application of the respondent-auction-purchaser that it was a tenant of the Company, was refuted in the rejoinder filed by the respondent-auction-purchaser. The parties were, thus, at variance on the crucial issue and yet no issue was claimed nor any evidence was led by the appellant and in its wisdom the appellant thought it enough to argue the matter on the basis of some statements of accounts which were filed later in point of time and which were not even proved by any of the admissible modes of proving a document. The plea of the appellant that it was a tenant is also falsified from the fact that all through when the civil suit, instituted by it, was pending against M/s Haryana Rubber Industries, it was no where mentioned that on part of the building the appellant-bank was a tenant. Even at the time when the creditors of the Company were required to stake claim of their respective shares, the appellant evinced no interest in disclosing before the Company Judge that it was a tenant of the Company. It is interesting to note that in execution of the decree obtained by the appellant the Court had ordered the appellant itself to publish the sale of the properties in dispute in The Tribune and other leading News Papers. In this notice as well there is no mention whatsoever that on a part of the building in dispute the decree holder was tenant.

Proclamation of sales by public auction is governed by Rule 66 of Order 21 of the Code of Civil Procedure. The same reads thus:-

"66. Proclamation of sales by public auction:-(1) Where any property is ordered to be sold by public auction in execution of a decree the Court shall cause a proclamation of the intended sale to be made in the language of such Court;

(2) Such proclamation shall be drawn up after notice to the decree holder and the judgment debtor shall state the time and place of sale and specify as fairly and accurately as possible:

(a) the property to be sold or where a part of the property would be sufficient to satisfy the decree, such part,

(b)xx xx

(c) Any encumbrance to which the property is liable;

(d) the amount for the recovery of which the sale is ordered; and

(e) every other thing which the Court considers material for a purchaser to know in order to judge the nature and value of the property;

xx xx"

It is conceded position that in the notice of proclamation of sale of the property in dispute it was no where mentioned that there was any encumbrance on the property in dispute. It requires to be reiterated here that the appellant-decree-holder was itself arranging the sale. It can not be denied nor was it actually denied by learned counsel for the appellant that if the factum of tenancy of the appellant was mentioned in the sale proclamation, the bid would have been on far lesser amount, as it is well known that the property under dispute, possession whereof depends on successful litigation, which may also span over number of years, is not purchased by a purchaser for an amount which he will spend for buying a property without any encumbrances and of which he can take immediate possession. The learned Single Judge, on the facts aforesaid, was right in concluding that the appellant-decree-holder, who itself got the sale proclaimed and had not mentioned about its tenancy rights, should not be permitted to contend that it was a tenant as it would amount to permitting it to take advantage of its own wrongs. The learned Single Judge for his aforestated conclusion relied upon a judgment of Patna High Court in Rajkishore Lall and Others Vs. Begum Sultan Jehan and Others, wherein the Division Bench of the said Court held that "where the sale proclamation did not specify any encumbrance to which the property was liable and the auction purchaser has suffered detriment on account of the decree-holder, the auction purchaser is not bound by the same. In almost similar circumstances, the Madras High Court in Sivakami Ammal Vs. C. Ganpathia Pillai and Another, held that the decree-holder was bound to have notified the existence of a charge over the property for sale and the decree for arrears of tax for subsequent period in the previous execution, not having done this, no act of theirs in the subsequent execution could adversely affect the title obtained by the auction purchaser.

Mr. Sarin, learned counsel for the appellant has, however, relied upon Paul Brothers and Ors. v. Phani Bhushan Ghosh and Ors. AIR 1991 S.C. 796 and Dev Raj Dogra and others Vs. Gyan Chand Jain and others, . In Dev Raj Dogra''s case (Supra) it was held that "an auction purchaser, who makes an application under Order 21, Rule 95 and 96 for possession, is entitled only to symbolic possession of the premises which were leased out." The facts of the said case would, however, reveal that after the decree had been passed, the judgment debtor had leased out portions of premises and inasmuch as there was failure to pay decretal amount in terms of consent decree which was earlier passed, the property was sold in public auction. The facts of the case aforesaid reveal that it was an admitted position that the premises, subject matter of sale, were on tenancy. In Paul Brothers'' case (Supra) also it was an admitted position that the tenant was in admitted position that the tenant was in lawful possession and, therefore, it had to be, held that he could not be evicted in pursuance of the Court''s interim orders to attach and sell the property.

The respondent-auction purchaser, in our view, has been wrongly denied possession of the premises in dispute purchased by it way back in 1988. This possession has been denied to it for a period of about ten years. It is rather unfortunate that rightful claimant of property who had purchased the same in an open auction, has been denied possession for such a long time and it is in that context that we have observed in the earlier part of this judgment that the present case provides a clear illustration of the difficulties of a decree-holder or an auction purchaser even after the litigation has come to an end or the property has been purchased in execution of the decree, as the case may be. The learned Single Judge had rightly rejected the objections raised by the appellant with costs which were quantified at Rs. 2000/-. This appeal also deserves the same fate and is accordingly dismissed with costs which are quantified at Rs. 3,000/-.