Holding

A court sale confirmed by a judge is illegal and can be set aside even if the limitation period for an Order 21 application has expired, when the sale is manifestly vitiated by the judge’s irregular conduct.

Summary

The case arose from a foreclosure suit where a court‑appointed receiver sold the mortgaged property to the appellant, Nani Gopal Paul, for Rs 60 lakhs, of which only Rs 5 lakhs was deposited. The sale was confirmed by a single High Court judge despite the existence of higher offers and without proper scrutiny. Respondents sought to be impleaded, but the single judge denied their inclusion; the Division Bench later intervened, holding that the sale was vitiated by the judge’s irregular conduct. On appeal, the Supreme Court took suo motu notice of the manifest illegality and set aside the confirmation of sale, directing a fresh open auction in accordance with law. The Court emphasized that although applications under Order 21 Rules 89/90 or Section 48 CPC must ordinarily be filed within limitation, a court cannot remain a mute spectator to obvious illegality in court‑conducted sales. The appeal was allowed and the matter remanded to the High Court for a proper auction.

Issues considered

Whether a court‑ordered auction sale confirmed by a judge can be set aside despite the lapse of the limitation period for applications under Order 21 Rules 89/90 or Section 48 CPC.
Whether the conduct of the single judge in approving the sale despite higher offers constitutes a vitiating illegality.
What appropriate remedy should be granted when the confirmed sale is found to be illegal.

Legislation cited

Code of Civil Procedure, 1908s. Order 21 Rule 89, s. Order 21 Rule 90, s. Section 48

Subjects

court auctionsale confirmationvitiated saleOrder 21Section 48 CPCforeclosurereceiverlimitation periodillegal saleremandopen auction

Judgment

NANI GOPAL PAUL A
v.
T. PRASAD SINGH AND ORS.

MARCH 6, 1995

[K. RAMASWAMY AND B.L. HANSARIA, JJ.) B

Code of Civil Procedure, 1908: Order 21 Rules 89 and 90.

Court Decree-Execution of-Auction sale for-Illegality in conduct
\ of-Sale held vitiated. C
In an auction sale conducted by a court receiver in execution of a
Court decree, the appellant was the highest bidder and the sale was
confirmed in his favour. Thereafter respondents were sought to be im·
pleaded to the suit but a single judge of the High Court denied the same.
On appeal a Division Bench while impleading the respondents pointed out D
, that the sale was vitiated due to the manner in which the single judge dealt
with the matter and passed orders relating to sale of the property in favour
of the appellant when there were other higher offers.

In appeal to this Court, taking suo motu judicial notice of the E
illegality pointed out by the Division Bench and setting aside the sale and
confirmation thereof, this Court

HELD : 1. Normally an application under Order 21 Rule 89 or 90 or
under section 48 CPC need to be filed within limitation to have the sale
conducted by the court set aside and that procedure need to be insisted F
upon; but this Court or appellate court would not remain a mute or
-< helpless spectator to obvious and manifest illegality committed in conduct-
ing court sales. [523-D]

2. In this case the circumstances are sufficient to vitiate the validity
of the sale conducted by the court Receiver as approved by the Single G
· --, Judge. Confirmation of sale was illegal. The appeal is remanded to the
High Court and the appropriate Single Judge would proceed to conduct
the sale in accordance with law by open auction after, due publication of
the sale so that all the intending bidders would have opportunity to
participate in the sale. [523-C, F] H
521
~
I

522 SUPREME COURT REPORTS (1995) 2 S.C.R.

A CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4007 of
1995.

From the Judgment and Order dated ·2.3.94 of the Calcutta High
Court in A.No. 572/91 in (T.C. Suit No. 2 of 1966).

B H.N. Salve, S. Ganesh, Pratap Venugopal and K.J. John for the
Appellants.

Soli J. Sorabjee and Ranjit Kumar for the Respondents.

G.L. Sanghi, Anand Agarwalla and Ms. Radha Rangaswamy for the
·c Respondent in No. 4.
The following Order of the Court was delivered :

Leave granted.

D In Suit No. 2 of 1966 filed by United Bank of India against Hanuman
Foundries Ud. for foreclosure and sale of hypothicated property, pursuant
to a preliminary decree, the court receiver sold the hypothica at which the
appellant became highest bidder for Rs. 60 lakhs and he paid a sum of Rs.
5 lakhs. The sale was confirmed in his favour on August 29, 1990. There-
after respondents No. 1 and 2 were sought to be impleaded to the suit but
E denied by the single Judge. On appeal, while impleading them, the Division
Bench directed the single Judge to hear the respondents before they are
ejected from the property in question by order dated 2.3.92 which is the
subject-matter of this appeal.

While disposing of the appeal, the Division Bench has pointed out
F that the sale was vitiated due to the manner in which the single Judge
dealing with Company Law matters, passed the orders in his Chamber by
observing thus:

"It would be sufficient for this court, if we make our observations
to deprecate the way His Lordship took up the matter on various
G dates subsequent to the passing of the decree and sought to pass
various orders relating to sale of the property in favour of the
intending purchaser Nani Gopal Paul and others at a price of Rs.
60 lakhs, when there were other ·offers on the field of a higher
denomination and magnitude. Judicial property prevents us from
H making further comments in respect of the manner. His Lordship
N.G. PAUL v. T.P.SINGH 523

directed Mr. Gour Roychoudhury, the Receiver to make the choice A
relating to the intending purchaser with full rights to make a
contract with the intending purchaser in the manner it was so done.
If there were other offers on the field, the court would have been
vigilant enough to scrutinise such offers whatever they were worth
and there ought to have been a due application of mind in this
particular perspective. B

Sadly enough that was not so done in the present case."

We are of the view that we can take suo motu judicial notice of the
illegality pointed out by the Division Bench, committed by the single Judge
of the High Court in bringing the properties to sale. Accordingly, we are c
of the view that the circumstances are sufficient to vitiate the validity of the
sale conducted by the court Receiver as approved by the learned single
Judge. Confirmation of sale was illegal. Though, as contended by Sri.
Ganesh that normally an application under Order 21 Rule 89 or 90 or
under s.48 CPC need. to be filed within limitation to have the sale con- D
ducted by the court set aside and that procedure need to be insisted upon,
we are of the view that this court or appellate court would not remain a
mute or helpless spectator to obvious and manifest illegality committed in
conducting court sales. We are informed and it is not disputed that the
appellant had deposited only Rs. 5 lakhs and balance amount was assured
to be deposited only after delivery of possession. That also would be illegal. E

Accordingly, the sale and confirmation thereof on 29.8.90 are set
aside. The appeal is remanded to the High Court and the appropriate
single Judge would proceed to conduct the sale in accordance with law by
open auction after due publication of the sale so that all the intending
bidders would have opportunity to participate in the sale. Thereafter, it F
would take acfr Jn according to law. Since it is a suit for foreclosure and
the preliminary decree has become final, it is not open to any party to
widen the scope of the suit or sale made pursuant to the preliminary
decree. If any party has got any other right or remedy, the same has to be
worked out elsewhere, according to law and not in this suit. We are not G
expressing any opinion with regard to the rights, if any, of respondent Nos.
1 and 2 in the property.

The appeal is allowed with no orders as to costs.

T.N.A. Appeals allowed.