1. ZAFFAR HUSSAIN MIRZA, J.--The important question of law that arises in this case for determination is whether in the facts and circumstances of this case, the provisions of Order XXI of the C . P. C. , more particularly those of Order XXI rules 89 and 92 of the said Code were applicable, in respect of an auction sale held in pursuance of an order in execution of a decree passed under section 8 of the Banking Companies (Recovery of Loans) Ordinance, 1979, (hereinafter referred to as "the Ordinance").
2. Briefly the facts forming the background of this appeal are that on 18th February, 1975, the Allied Bank of Pakistan Limited, Gole Bazar Branch, Faisalabad, sanctioned a loan of Rs.14,49,427 to the Premier Cloth Mills (Pvt.) Limited for the import of parts of textile machinery from United Kingdom by means of a Letter of Credit. The goods having been imported and at the request of the aforesaid mill the Bank having incurred further expenses by way of clearance of goods on payment of customs duty etc., the loan facility was fully availed. However, the delivery of goods was not taken from the Bank, but in the meantime a scheme was filed by the Premier Cloth Mills Ltd., in the Lahore High Court for bifurcation, which was allowed on 26th March, 1976, whereby a rearrangement dividing the original company was effected, resulting into the following units:- (i)Hudaybia Textile Mills (Pvt.) Limited.
2. (ii)Zulfiqar Associates (Pvt.) Limited.
3. (iii)A.B.M. Associates (Pvt.) Limited.
4. The three new companies and their directors undertook to be jointly and severally liable for the liabilities of the defunct Premier Cloth Textile Mills (Pvt.) Limited.'
5. 2-AAs the loan secured by and outstanding against the Premier Coth Mills (Pvt) Limited was not repaid, the Allied Bank of Pakistan Limited brought a suit for recovery of Rs.44,95,039 against the three newly constituted companies after rearrangement, in the High Court at Lahore, in its special original jurisdiction under the Ordinance. As the ABM Associates (Pvt.) Limited had gone into liquidation, the learned Single Judge trying the suit directed that the suit will proceed against the remaining two companies, namely, Hudaybia Textile Mills (Pvt) Limited and Zulfiqar Associates (Pvt.) Limited. The learned Single Judge decreed the suit of the Bank in the sum of Rs.65,60,651 vide judgment dated 30th October, 1984, against the said two companies. Out of the said two companies, Zulfiqar Associates (Pvt.) Limited did not challenge the decree, but Hudaybia Textile Mills (Pvt.) Limited filed an appeal against the decree dated 30th October, 1984, which was dismissed on the preliminary ground of non-furnishing of security required by the Court.
6. 3.As none of the judgment-debtors challenged the decree further, the same attained finality.
7. Accordingly the decree holder Bank filed execution application No.2-B/85 for execution of the decree, praying therein for attachment and sale of the land, building and machinery belonging to the said judgment-debtors as per details given in the attached schedule. On this execution application the learned Single Judge passed order dated 8th May, 1985, which reads as follows:- "Mr. Shahid Hamid, Advocate, for the decree-holder.
8. Let notice issue to the judgment-debtors for 3rd of July, 1985. The properties mentioned in the Fard Taliqa be also attached in the meanwhile."
4. On the service of notice the judgment-debtors put in appearance on 3rd July, 1985, when a further order was recorded by the learned Single Judge in the following terms:- "Mr. Shahid Hamid Advocate for the decree-holder.
9. S.M. Almas Ali, Advocate has put in a memo of appearance on behalf of judgment-debtors Nos. 1, 3, 4, 5 and 6. He states that these judgment debtors want to file some objections.
10. The property ordered to be attached has since been attached and a report submitted. The report of attachment dated 9th of June, 1985, has been placed on record. Let the attached property be put to sale through public auction. The attached property consists of some 66 cases of textile machinery lying in the godown of the decree holder-bank building, land and machinery, furniture and fittings of Messrs Zulfiqar Associates Limited Nazimabad, Faisalabad, and building, land and machinery, furniture and fittings of Messrs Hudaybia Textile Mills Limited, Dijkot Road, Faisalabad.
11. The learned counsel for the decree-holder has placed today on record the terms of auction as required under Order XXI Rule 66, C.P.C.
12. Let the judgment debtors have notice of the terms. S.M. Almas Ali, Advocate accepts service on behalf of judgment debtors Nos. 1, 3, 4, 5 and 6. A copy of the terms of auction has been provided to him.
13. The case to be listed on 10th of July, 1985."
14. (Underlining is mine).
15. The terms and conditions of the auction were finalized on 10th July, 1985. It may be mentioned that no one took any objection to the attachment of the property or to the proposed terms and conditions of the auction. In pursuance of the aforesaid order for auction sale, the immovable property of the share of Hudaybia Textile Mills (Pvt.) Limited was auctioned on 15th September, 1985.
16. In this auction Rao Muhammad Suleman and Sh. Muhammad Shafiq were the highest bidders. The machinery was auctioned on 16th September, 1985 after which the Court auctioneer submitted his report to the executing Court. The Hudaybia Textile Mills (Pvt.) Limited, (appellant herein) before the confirmation of the auction, on 18th September, 1985, filed an application (C.M.103-B/1985) under section 151, C.P.C. For holding the auction held in abeyance until the finalization of the negotiations between the parties, namely, the judgment-debtors and the decree holder Bank.
17. 5.One of the auction purchasers, Rao Muhammad Suleman (respondent No.8 herein) submitted two applications for refund of sale amount as according to him there was some clog on the property. A notice was issued to the decree-holder Bank in these applications but the said applications were withdrawn later on, as a result of which they were dismissed vide order dated 23rd April, 1986. It appears that some negotiations took place for compromise between the appellant and the decree-holder Bank in the presence of the Court on 30th April, 1986 and 4th May, 1986. In these negotiations the decree-holder Bank is said to have offered that if out of the decretal amount, it was paid Rs.35,00,000 by the appellant, the decree would be deemed to be satisfied in full as regards it. The appellants accepted this offer and certain amounts were paid in different instalments to the decree-holder including the sale proceeds of items of machinery packed in 66 cases for which an amount of Rs.2,80,000 was obtained which was also ordered to be paid to the decree holder making up a total amount of Rs.35,00,000 out of the decretal amount. In its order dated 1st June, 1986, the executing Court in para 2 made the following directions which are material for the present purposes:- "The next question that arises is how to deal with the property sold in execution to recover the above-mentioned portion of the decretal amount. It was auctioned for a sum of Rs.30,50,000 which amount is lying with the Allied Bank, Gole Cloth Market Branch, Faisalabad. Since the judgment debtors have paid up the amount, the auction is set aside and the property, namely, lands and buildings belonging to judgment debtor No. 2 Hudaybia Textile Mills Limited, is restored to them. The Court auctioneers will arrange delivery of the property to them.
18. The auction purchaser will get back his amount of Rs.30,50,000 deposited by him. Of course, he is entitled to 5$ of this amount in terms of Order XXI, rule 89, C.P.C."
19. However, since there was some confusion about the interest that the Bank might have paid during the period of deposit the matter was adjourned for further consideration.
6. Before this, however, on 9th December, 1985, the auction purchaser submitted C.M. No.162- B/1985, under Order XXI rules 89/92 read with section 151, C . P. C . Praying that the objection petition filed by various parties to the sale of the property through public auction may be dismissed summarily and the auction be confirmed, on the ground that the mandatory requirement for the deposit of a sum equal to 5$ of the purchase money and the amount specified in the proclamation of sale was not deposited. This application was disposed of by the learned Single Judge by his order dated 5th June, 1986, in which he took the view that the grounds urged by the auction purchasers for rejecting the application of the appellants (judgment debtor) bearing No.C.M. 103- B/1985 were not tenable. The reasons that prevailed with the learned Judge would appear from the following extract from the order:- "Be that as it may, the Objection Petition (C.M. 103-B/85) by the judgment-debtors was filed in time and for a specific purpose. Negotiations were taking place which ended the other day when a huge amount of Rs.35,00,000 was tendered before the Court to the decree-holder. For this simple reason, by order dated 18th September, 1985, the auction was directed" not to be confirmed". Ordinarily, the judgment-debtors should have tendered a sum equal to 5$ of the purchase-money and also the decretal amount mentioned in the relevant proclamation in Court. Admittedly, this was not done but it did not appear to be of the essence of the proceedings in the midst of which the parties were locked. They were negotiating and ultimately in pursuance of the final settlement, a sizeable amount of Rs.35,00,000 was paid. Keeping in view the impending result of the negotiations perhaps my predecessor did not make any direction requiring the judgment-debtors to make the two types of deposits. The omission, if at all, appears to have been supplied because qua the liability of the aforementioned judgment-debtors, a sum of Rs.35,00,000 had been paid towards the decretal amount. The purport of the rule was to make the amount available for the decree-holder and that object has been achieved though a little later than the prescribed 30 days.
20. As regards 5$ of the purchase money to be deposited for the benefit of the auction-purchasers, the judgment-debtors never prevaricated and are even now willing to pay. It should suffice to meet the procedure. This amount comes to Rs.1,52,500 which they shall tender to the auction-purchasers in Court by the next date."
7. Rao Muhammad' Suleman, the auction purchaser (respondent No.8) being aggrieved then filed an appeal (FAO No.138/86) in the Lahore High Court against the orders dated 13th May, 1986, 1st June, 1986 and 4th June, 1986, passed by the learned Single Judge whereby the sale of land and buildings of Hudaybia Textile Mills (Pvt) Limited (appellant), in favour of the auction purchaser had been set aside. A Division Bench of the Lahore High Court by its judgment and order dated 13th April, 1987, accepted the appeal and the sale by auction of the properties of the said company held on 15/16th September, 1985 was confirmed. This appeal has been filed by Hudaybia Textile Mills
(Pvt) Limited and others calling in question the aforesaid judgment of the Division Bench of the Lahore High Court. The Division Bench in accepting the appeal mainly took into consideration the provisions of Order XXI rules 89 and 90 of the C.P.C. And held as under:- "An objection to the sale of immovable property in execution of decree could be taken either under rule 89 or rule 90 of Order 21 C.P.C. It is conceded that Hudaybia Mills before filing application dated 18th September, 1985, (C.M. No.103-B/ 1985) did not deposit in Court firstly, for payment to the purchaser, a sum equal to 5 per cent of the purchase money; and secondly, for payment to the decree-holder the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered. Rule 89 of Order 21, C.P. C. Makes it a condition precedent that the above said two deposits be made in the Court before applying for setting aside of the sale. The sale could not be permitted to be challenged through an application under section 151 C.P.C. It was held in Nanhelal and another v . Umrao Singh AIR 1931 P.C. 33 that when once a sale had been effected, a third party's interest intervene and there is nothing to suggest that the provisions of Order 21 rule 2 or 89 are to be disregarded. It was further held that after a sale is duly held, the Court cannot refuse to confirm sale on the ground that the decree-holder and judgment debtor say that the decree has been satisfied."
21. 8.The conclusions reached by the Division Bench may be reproduced in their words from the judgment in the following passage:- "As such, Hudaybia Mills, one of the judgment-debtors whose property was sold by the Court auctioneer having failed to make requisite deposit under rule 89 of Order 21, C.P.C., the Court was left with no choice except to confirm the sale. It was argued by the learned counsel that application dated 18th September, 1985, was filed under section 151 C . P. C . And as such, no deposit was required to be made by the judgment--debtor. In alternate, the learned counsel contended that the said application could be treated as an application under Order 21 rule 90 C . P. C . This argument is without any force and cannot be given any credit. The inherent powers under the Code of Civil Procedure can be exercised only where no specific provision of law is available. In the instant case, as held above, the sale of attached property in execution of decree could be challenged either under rule 89 or under rule 90 of Order 21, C . P. C . The argument that the said application be treated as an application under Order 21 rule 90, C.P.C. Cannot be accepted because the judgment debtor, in the said application did not allege any material irregularity or fraud in publishing or conduction of sale by the Court auctioneer. Secondly, the allegation of material irregularity and fraud by the Court auctioneer before us seems to be an afterthought, and thirdly, no finding on material irregularity or fraud could be recorded without recording evidence.
22. As no such objection was taken before the executing Court, these questions were not adverted to and as such, cannot be permitted to be convassed by the judgment-debtor, for the first time, before us."
23. 9.The central point urged in the arguments by Mr. S.M. Zaffar, learned counsel appearing in support of this appeal, is that the fundamental premises on which the High Court judgment proceeds, namely, that the proceedings of the auction sale in execution of the decree were governed-by the C . P . C . , is wholly baseless and without foundation in the proper law applicable to the case. Before adverting to the arguments of the learned counsel in detail, it will be profitable to set out the relevant provisions of the Ordinance because undoubtedly the suit was tried and decreed by the learned Single Judge under the provisions of the Ordinance. The Ordinance as originally promulgated envisaged the establishment of special courts by the Federal Government under section 5 and such a special Court was to consist of a person who is a District Judge. However, section 5 of the Ordinance was omitted by Ordinance II of 1983 on 30th January, 1983. The following sections which have a bearing on the question raised in this appeal may now be reproduced:- "Section 2(f) "Special Court" means (i)in respect of a case in which the outstanding amount of the loan does not exceed one million rupees, or the trial of offences punishable under this Ordinance a person who is or who has been, a District Judge or an Additional District Judge and is appointed by the Federal Government, by notification in the official Gazette, to be a Special Court to exercise jurisdiction within such territorial limits as may be specified in the notification, and, in the absence of such appointment, the District Court, and (ii)in respect of any other case, the High Court in the exercise of original Civil jurisdiction; Section 3. Ordinance not to derogate from other laws: "The provisions of this Ordinance shall be in addition to and, save as hereinafter expressly provided, not in derogation of any other law for the time being in force.
24. Section 6. Powers of Special Court (1)A Special Court shall:- (a)in the exercise of its civil jurisdiction, have in respect of a claim filed by a banking company against a borrower or by a borrower against a banking company in respect of, or arising out of, a loan all the powers vested in a Civil Court under the Code of Civil Procedure, 1908 (Act V of 1908).
25. (b)
26. Section 7. Procedure of Special Court: (1)
27. (2)In the exercise of its civil jurisdiction, the Special Court shall in all suits before it, including suits based on mortgages of all kinds or statement of accounts for recovery of money paid to, or to the order of, the defendant, follow the summary procedure provided for in Order XXXVII in the First Schedule to the Code of Civil Procedure, 1908 (Act V of 1908).
28. Section 8. Judgment and decree: (1)A Special Court shall, after the case has been heard, pronounce -judgment as early as practicable, and on such judgment a decree shall follow forthwith.
(2) (2A)
29. (3)The Special Court shall, on the application of the decree-holder forthwith order execution of the decree as arrears of land revenue or such other manner as it may deem fit."
10. Now it was contended. On behalf of the appellants that so far as execution of the decree passed by the Special Court is concerned, the .Procedure for execution thereof is governed by section 8(3) of the Ordinance which does not contemplate the technicalities of the provisions contained in Order XXI of the C.P.C. The Special Court while executing the decree, according to the learned counsel can adopt either of the modes available to it under the said provisions. It can either order execution of the decree as arrears of land revenue or direct the execution of the decree in "such other manner as it may deem fit". Learned counsel compared the aforesaid provisions with the procedure laid down in Order XXI of the C.P.C. As regards the mode of the execution by a Civil Court governed by the said Code, by attachment and sale of the immovable property of the judgment debtor. In this connection he referred to rule 64 which gives power to the executing Court to order property attached to be sold and proceeds to be paid to the person entitled under the decree. He also referred to rules 89, 90 and 92 of the, said Order. Rule 89 contemplates an application for setting aside a sale in execution of a decree, inter alia, by the owner of the property on his depositing in Court a sum equal to 5$ of the purchase money for the payment to the purchaser and the amount specified in the proclamation of sale for the recovery of which the sale was ordered, for payment to the decree holder. Under Article 166 of the Limitation Act such an application as well as the deposit thereunder are both to be made within a period of 30 days from the date of the sale. The deposit is a condition precedent to the entertainment of the application and the Court cannot extend time under section 148 of the C.P.C. The date of the sale means the date on which the property was knocked down to the highest bidder and not the date of confirmation. Rule 90 provides for an application to set aside the sale on the ground of irregularity or fraud which is not relevant in the present case as no such ground is being pressed. However, it may be pointed out that by amendment affected under Ordinance XII of 1972 even such application is not entertainable unless the applicant deposits 20$ of the sum realized at the sale or furnished such security as the Court directs. Rule 92 of Order XXI C.P.C. May be reproduced as under:- "Rule 92. Sale when to become absolute or be set aside- (1) Where no application is made under rule 89, rule 90 or rule 91, or where such application is made and disallowed, the Court shall make an order confirming the sale, and thereupon the sale shall become absolute.
30. (2)Where such application is made and allowed, and where, in the case of an application under rule 89, the deposit required by that rule is made within thirty days from the date of sale, the Court shall make an order setting aside the sale: Provided that no order shall be made unless notice. Of the application has been given to all persons affected thereby.
31. (3)No suit to set aside an order made under this rule shall be brought by any person against whom such order is made."
32. In the light of the aforesaid provisions it was urged that the hands of the executing Court are not tied down under section 8(3) by the limitations provided in rules 89, 90 and 92 of Order XXI, C.P.C., because the Court has a wide discre tion to choose any manner of executing the decree as it may deem fit. In this context learned counsel put great emphasis on the terms and conditions of the auction to which no objection was taken by any party. He referred particularly to conditions No.6 and 9 incorporated in the conditions of sale by public auction, which are in the following terms:- "(6)The highest bidder shall be declared to be the purchaser of the auctioned property, provided always that he is qualified to bid and provided further that it shall be in the discretion of the Court or the Court Auctioneer to decline acceptance of the highest bid if in the opinion of the Court or the Court Auctioneer the highest bid is deemed to be an inadequate one.
(9) The auction shall be subject to confirmation by this Court." It was the submission of the learned counsel that the sale was expressly made subject to confirmation under the aforesaid condition No.9 in the discretion of the Court by virtue of the power under section 8(3) of the Ordinance. It was also pointed out that the Court -was informed about the compromise negotiations between the parties and it was ordered that the confirmation of auction was stayed pending the conclusion of the compromised negotiation. Reference was also made to form No.29 in Appendix E of the C.P.C.
33. Regarding proclamation of sale and the conditions incorporated therein and it was pointed out' that there is no mention of the condition regarding confirmation of sale by the Court.
11. Now having regard to section 3, section 6(1) (a) and section 7(2), it is clear that while trying a suit the Special Court has to follow the. Procedure laid down in the Code of Civil Procedure particularly the summary procedure provided for in Order XXXVII. It may further be noted that by virtue of the fact that section 7(2) expressly provides that in all suits the Special Court shall follow the summary procedure provided -for in Order XXXVII C.P.C. It follows that as provided by rule 7 of the said Order, the provisions of the A procedural law in regard to ordinary suits filed in Civil Courts is to be followed save as provided by the said Order. In other words the only distinction between the procedure applicable to a suit instituted in the ordinary manner and a suit under Order XXXVII is that the defendants cannot appear and defend the suit as a matter of right but only after he obtained leave to defend on showing that there is a triable issue. In this connection it will be useful to refer to section 4(1) and section 141 of the C.P.C. Which provided as under:- "Section 4(1). In the absence of any specific provision to the contrary, nothing in this Code shall be deemed to limit or otherwise affect any special or .Local law now in force or any special jurisdiction or power conferred, or any special form of procedure prescribed, by or under any other law for the time being in force."
34. Section 141. Miscellaneous proceedings.--The procedure provided in this Code in regard to suits shall be followed, as far as it can be made applicable, in all proceedings in any Court of civil jurisdiction."
35. Reading sections 4(1) and 141, C.P.C. Together the position that emerges clearly, is that while exercising its civil jurisdiction the special Court has to follow the procedure laid down in regard to the suits in the C.P.C. Except to the extent any contrary provision is made in the special enactment.
36. Therefore, wherever the provisions of the Ordinance are repugnant to the provisions of the C . P. C . , the former will override the latter. To that extent the general provisions' of the C . P. C . Will give way to the contrary provisions of the Ordinance, which will take over to the extent of the repugnancy.
37. From another angle also the same position seems to arise. It will be noticed that a~ Special Court under the Ordinance in respect of a case involving loan not exceeding one million rupees is the Court designated by the Federal Government, by notification in the official Gazette comprising a District Judge or Additional District Judge or in absence of such notification the District Court. But in respect of any other case, namely, cases involving outstanding amount of loan exceeding one million rupees, the jurisdiction has been vested in the High Court in the exercise of its original civil jurisdiction. As the High Court is an already established Court and is not the creature of the special enactment the procedure ordinarily governing the trial of suits would regulate the proceedings, except as already stated to the extent contrary provision is made in the special enactment conferring jurisdiction. This principle has been approved in the case of Hussain Bakhsh v.
38. Settlement Commissioner, and others PLD 1970 SC 1. In this case it was held that the C.P.C.
39. Governs civil proceedings in the High Court and the dictum was stated as under:- "When a question is stated to be referred to an established) Court without more, it in my opinion, imports that the ordinary incidents of the procedure of that Court are to attach, and also that any general right to appeal from its decisions likewise attaches."
40. It is important to note the words "without more" which clearly imply that the ordinary incidents of the procedure of such an established Court would apply provided the special enactment which creates the D jurisdiction does not provide anything by way of procedure for the trial of the question referred to such established Court, in which case the special procedural provisions will override the ordinary procedure even of such established Court.
12. In view of what has been stated Mr. S.M. Zaffar was on safe ground whilesubmitting that so far as execution of the decree passed by the special Court is concerned the procedure provided in section E 8(3) is contrary to the procedure provided for execution of a decree under the C . P. C . As already pointed out learned counsel submitted that the Court in the present case had expressly reserved power of confirmation of sale and the argument was that the auction purchaser having participated in the auction with notice of this condition, did not acquire any vested right merely because the bid given by him was accepted by the auctioneer and reported to the Court for its decision as to confirmation or otherwise. So far as the conditions of sale mentioned in the form in C.P.C., it is immaterial to expressly provide for confirmation of sale as a condition, because every party is deemed to know the law and under the C.P.C. a set procedure has been provided for confirmation of sale in Order XXI rule 92. But still the argument was that the special provisions of the Ordinance conferred a discretion on the Court to adopt any manner deemed fitfor execution of the decree requires to be considered. The argument was that the Court was not bound by the provisions of the C . P. C . To automatically confirm the sale, on the failure of the decree holder to comply with the technicalities with regard to deposit of money as provided by Order XXI rule 89.
41. Learned counsel placed reliance on a decision of the Indian Supreme Court reported as Navalkha and Sons v. Sri Ramanya Das and others AIR 1970 SC 2037. The other case relied upon by the learned counsel was Subbaraya Mudaliar v. K. Sundararajan and others AIR 1951 Mad. 986. In the first case there were winding up proceedings of a company in liquidation in which the company Judge had passed an order directing sale of the immovable and movable properties of the company by appointing joint commissioners for the purpose. A sale proclamation was drawn up and issued by the joint Commissioners. According to the terms and conditions of sale, incorporated in the proclamation, the Commissioners were not bound to accept the highest offer and were at liberty to reject any offer without assigning any reason. The acceptance of the offer by the Commissioners was, however, subject to the condition of confirmation by the High Court. It so happened that the appellants were the sole offerers and after they made the requisite deposits their offer was accepted by the Commissioners. The matter was then referred to the High Court and at this stage an intervener applied to the Court offering much higher price than the one accepted by the Commissioners and urged that he could not make the offer in time as there was no adequate publicity. Upon this the Court, instead of ordering a fresh auction conducted a limited auction itself between the appellants and the intervener. In this limited auction the appellants became the highest bidders and the learned Judge accepted the bid and concluded the sale in their favour. This was the matter which ultimately came to the Supreme Court and the principles laid down in the judgment were incorporated in the following passage thereof which,, may be reproduced:- "The principles which should govern confirmation of sales are well established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offerer does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The Condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable.
42. Unless, the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not a proper exercise of judicial discretion. In Gordhan Das Chuni Lal v. Kanthimathinatha Pillai AIR 1921 Mad. 286, it was observed that where the property is authorised to be sold by private contract or otherwise it is the duty of the Court to satisfy itself that the price fixed is the best that could be expected to be offered. That is because the Court is the custodian of the interests of the Company and its creditors and the sanction of the Court required under the Companies Act has to be exercised with judicial discretion regard being had to the interests of the Company and its creditors as well. This principle was followed in Rathnasami Pillai v. Sabapathi Pillai, AIR 1925 Mad.
43. 318 and S. Soundararjan v. Mahomed Ismail, M/s Roshan and Co. AIR 1940 Mad.
42. In A Subbaraya Mudaliar v. K. Sundararajan AIR 1951 Mad. 986, it was pointed out that the condition of confirmation by the Court being a safeguard against the property being sold at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion which it undoubtedly has of accepting of refusing the highest bid at the auction held in pursuance or its orders, should see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. It is well to bear in mind the other principle which is equally well settled namely that once the Court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. See the decision of the Madras High Court in Roshan and Co's case, AIR 1940 Mad. 42.
44. The basis of the decision that the auction sale in favour of the appellants was not rightly confirmed proceeded on the following grounds:- "But having made up his mind to resort to auction the learned Judge confined the auction to only two persons namely the previous tenderer and the fresh tenderer. The auction in question no doubt was conducted in a public place but it was not a public auction because it was confined to two named persons. Secondly it was not held after due publicity. It was held immediately after it was decided upon."
45. The argument was advanced, as in the present case that the confirmation was discretionary with the Court and the Division Bench ought not to have interfered with the discretion exercised by the company Judge. But this argument was repelled on the following grounds:- "It is true that the discretion exercised by the judge ought not to be interfered with unless the Judge has gone wrong on principle. As already pointed out the learned Company Judge having decided to put the property to auction went wrong innot holding the auction as a public suction after due publicity and this has resulted in prejudice to the Company and the creditors in that the auction did not fetch adequate price."
46. The various passages set out above from the judgment clearly demonstrate that it has no application to the facts of the present case and the principles enunciated therein, on the contrary support the result arrived at by the Division Bench of the High Court as will be discussed hereinafter. The principles postulated may briefly be stated as follows: Even where the Judge was free to adopt any mode of sale, he having made up his mind to resort to auction, the same had to be a public auction and cannot be converted during the proceedings or in mid course to be limited auction between specified persons without inviting the public at large; a public auction must be held after due publicity; the condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequance of any irregularity or fraud in the conduct of the sale; the discretion vesting in the- Judge as to confirmation of the sale through public auction is a judicial discretion exercisable on judicial principles and not arbitrarily.
13. Having regard to these principles we may now advert to the facts of present case. The sole ground that prevailed with the learned Single Judge to set aside the sale and refuse confirmation was the fact that the decree had been adjusted or satisfied to the satisfaction of the decree holder.
47. There was no objection raised, nor is any such objection being pressed before us, that there was any fraud or irregularity in the conduct of the auction, or the price offered by the auction purchaser was inadequate. There is no doubt that the executing Court had a discretion to choose the mode of execution as it deemed fit but it cannot be denied that the Court by its order dated 3rd July, 1985, clearly and unequivocally directed that the attached property be put to sale through public auction. The perusal of the various orders passed by the executing Court also clearly show that the Court had adopted the procedure provided in Order XXI C.P.C. For the sale through public auction of the property attached. Even the terms and conditions of the auction were expressly determined in accordance with Order XXI rule 66, C.P.C. Further in his order dated 5th June, 1986, whereby the learned Single Judge finally refused to confirm the sale, it is conceded that the judgment debtor had to deposit the 5$ of the purchase money and the decretal amount which are the requirements of the Order XXI rule 89, C.P.C. The difficulty was overcome by taking the view that such deposits were not the essence of the proceedings. This view is not based on any recognized principle of law.
48. On the contrary even if the Civil Procedure Code is not attracted by its own force in any procedural matter before a Court seized of proceedings of a civil nature, the F equitable principles underlying the provisions of the said Code can be invoked in such proceedings. But in any case the Court had made up its mind to resort to execution by way of attachment and sale through public auction.
49. Under section 6(1)(a) read with section 3 of the Ordinance the Court was competent to adopt the procedure provided in Order XXI, C . P. C . For purposes of the execution of the decree in regard to sale by auction. It has the same powers as a G Civil Court under the C . P. C . In section 51 of the C .
50. P. C . One of the modes of execution of the decree is by attachment and sale or by sale without attachment of any property.
14. Therefore, the question is whether even if the technicalities of order XXI, Rule 89 were not attracted, the Court was justified in refusing to confirm the sale on the ground that the decree was satisfied after the sale and before the confirmation of the sale; or even if the provisions of rule 92 of Order XXI C.P.C. Were not directly applicable, the Court rightly refused confirmation on the aforesaid ground. In Nanhelal and another v. Umrao Singh AIR 1931 P C 33, the question of law had arisen whether on adjustment between the decree holder and the judgment debtor come to at any time before the confirmation of an execution sale, would nullify the decree taking away the very foundation of the Court's power to execute the decree, viz, the existence of the decree capable of execution. Their Lordship resolved this question in the following manner:- "In the first place, Order XXI, rule 2, which provides for certification of an adjustment come to out of Court, clearly contemplates a stage in the execution proceedings when the matter lies only between the judgment-debtor and the decree--holder, and when no other interests have come into being. When once a sale has been effected, a third party's interest intervenes, and there is nothing in this rule to suggest that it is to be disregarded. The only means by which the judgment- debtor can get rid of a sale, which has been duly carried out, are those embodied in rule 89 viz by depositing in Court the amount for the recovery of which the property was sold, together with 5 per cent on the purchase money which goes to the purchaser as statutory compensation, and this remedy can only be pursued within 30 days of the sale; see Article 166, Sch. , Lim. Act, 1908. That this is so is, in their Lordships opinion, clear under the wording of rule 92, which provides that in such a case (i.e. Where the sale has been duly carried.Out), if no application is made under rule 99: "The Court shall make an order confirming the sale and thereupon the sale shall become absolute."
51. Although the aforesaid decision turns on the provisions of the C.P.C. The general principle laid down therein that once a sale has been effected a third party interest intervenes which cannot be disregarded would be applicable in the present case. It cannot, therefore, be argued that the auction purchaser had no interest whatsoever before confirmation of the sale and the Court could disregard the same by merely looking at the arrangement made between the decree-holder and the judgment debtor about the satisfaction of the decree. In Mian Muhammad Abdul Khaliq v. M.
52. Abdul Jabbar Khan and others PLD 1953 Lah. 147, similar view was taken and it was held that confirmation of sale cannot be withheld merely on the ground that the decree was wiped out or reversed before confirmation of the sale.
15. But apart from the above another vital principle is involved. In the American Jurisprudence (2nd Edition) Volume 47, Article 178 at page 440, the general principles governing the discretion to grant or refuse confirmation of a judicial sale are discussed. It has been observed:- "Although in some jurisdictions a more restrictive rule is followed in cases where it is urged that confirmation should be refused on the sole ground that an advance or upset bid has been received, the confirmation of, or refusal to confirm, judicial sales, as a general rule, rests largely within the discretion of the trial Court, and such determinations ordinarily will not be reviewed except for manifest abuse of such discretion. The discretion to be exercised is not arbitrary, however, but should be one which is sound and equitable in view of all the circumstances. The Court must act in the interest of fairness and prudence, and with a just regard to the rights of all concerned, and the stability of judicial sales. Thus, if the sale was fairly conducted and the property sold for a reasonable and fair value under the circumstances, the Court is ordinarily required in the exercise of its judicial discretion to confirm the sale."
53. In Article 179 on page 441 further observations as regards the policy of law in respect of judicial sales have been made as under:- "Nevertheless, the policy of the law does not require Courts to scrutinize the proceedings of a judicial sale with a view to defeat them, but on the contrary, every reasonable intendment will be made in their favour, so as to secure, if it can be done consistently with legal rules, the object which they are intended to accomplish. As a consequence, in order to maintain confidence in the stability of judicial sales, Courts have adopted the wise policy that confirmation will not be refused except for substantial reasons, and that in the absence of fraud or misconduct, the highest bidder will ordinarily be accepted as the purchaser of the property offered for sale."
54. The above passages from the American Jurisprudence clearly point out the dominant principle of law in such cases, namely, the stability of judicial sales. In this context the argument that since the Court was vested with the wide discretion to choose any mode of execution of the decree, it can likewise refuse confirmation of sale on any ground it chooses is without substance. Judicial discretion vested by statutory provisions cannot be construed in such a manner as it will arm the Court with arbitrary powers and would inevitably destroy the public confidence in the stability of the judicial sales as pointed out by the American Jurisprudence. Therefore, on facts as well as on principle the learned Single Judge went wrong in refusing confirmation on the ground that after the sale the decree had been satisfied. Even otherwise once the Court had made up its mind to I execute the decree by attachment and sale by public auction, as long as the order so directing was in the field, the discretion vesting in it under section 8(3) of the Ordinance stood exhausted and a particular course of proceedings was brought into motion which had to culminate in a result contemplated by legal principles, and this course could not be diverted on the assumption that the executing Court had discretion to choose any mode of execution. In the premises the question of confirmation was to be regulated either by the C .P. C . Or equitable principles under the provisions thereof or on general principles as pointed out above. From any angle the refusal of confirmation by the learned Single Judge is unsustainable and the auction purchaser was entitled, in the circumstances of the case to the confirmation of the auction sale. It was urged that the discretion was properly exercised because the purchaser himself was present when the negotiations between the decree-holder and the judgment debtor were taking place in Court and had applied at one stage for withdrawal of deposit. This argument is without substance because purchaser has not been shown to be a consenting party to the arrangement between the decree-holder and the judgment debtor. He had no doubt at one stage applied for withdrawal of the amount deposited by him on the ground that there was some clog on the title of the judgment debtor in the property subjected to Court sale but before any orders were passed on this application it was withdrawn stating that the same was made under wrong advice and the Court dismissed the application. It is well recognized that a proceeding withdrawn with the permission of the Court is wiped off from the) record as non-existent.
16. Mr. S.M. Zaffar submitted in the alternative that even under the C . P. C . , the trend of the authorities is that although in ordinary circumstances the provisions of Order XXI rule 89 are mandatory, still under some circumstances the inherent power of the Court under section 151, C.P.C.
55. Is preserved and the Court can refuse confirmation on grounds other than those mentioned in Order XXI rule 92, C.P.C. In support of this proposition learned counsel invited our attention to Shivaram Sand and others v. Manu Lal Khemka and others AIR 1928 Patna 40; Govinda Padayachi v. Velu Murugayya Chettiar and another AIR 1933 Mad. 399, Collector of Benaras and another v. Jai Narain Rai AIR 1938 All. 89; and Mubarak Begum and another v. Sushil Kumar and others AIR 1957 Rajasthan 154. None of these decisions is applicable to the facts of the case in hand. The principles on which the Court set aside the sale in these cases were that the decree holder himself was the auction purchaser and joined in the prayer , in setting aside the sale on satisfaction of the decree, or the sale was held in contravention of express order of the Court or the execution application upon which the sale was ordered was barred by limitation or the sale was found to be nullity in law. These decisions, therefore, in no way advanced the case of the appellants.
17. For the foregoing reasons this appeal fails and is accordingly dismissed with no order as to costs.
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