Dhirendra Nath Gorai And Subal... vs Sudhir Chandra Ghosh And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: C.A. Nos. 85 and 86 of 1961

Decision Date: 4 March, 1964

Coram: K.C. Das Gupta, Raghubar Dayal, Subba Rao

In the matter titled Dhirendra Nath Gorai and Subal Chandrashaw and others versus Sudhir Chandra Ghosh and others, the Supreme Court delivered its judgment on 4 March 1964. The bench that heard the appeal comprised Justice Subbarao, Justice K Gupta, Justice K C Das Gupta and Justice Raghubar Dayal. The case is reported in the 1964 AIR 1300 and also appears in the 1964 SCR (6) 1001, with a citator reference to RF 1981 SC 693 (5, 6). The dispute concerned the execution of a decree in a mortgage suit under the Bengal Money Lenders Act, 1940 (10 of 1940), specifically section 35, and the procedural provisions of the Code of Civil Procedure, 1908 (V of 1908), Order XXI, rules 64, 66 and 90. The appellant, seeking to enforce the decree, filed an execution application that included a schedule of eleven properties proposed for sale to satisfy the judgment debt. The appellant also submitted a valuation report for those properties. The first respondent received a notice of the intended sale pursuant to Order XXI, rule 66, but did not raise any objection to the valuation. Although the respondent secured several adjournments by promising to pay the decretal amount, he ultimately failed to make payment, and the executing court proceeded to sell two of the listed properties.

The first respondent subsequently filed an application under Order XXI, rule 90, requesting that the sale be set aside on the ground that section 35 of the Bengal Money Lenders Act had not been complied with. The subordinate judge dismissed the application, holding that there was no fraud in the publication or conduct of the sale, that the price obtained for the lots was fair, and that the failure to observe section 35 did not vitiate the sale. On appeal, the High Court reversed that finding, observing that although the respondent did not suffer substantial injury, the provisions of section 35 were mandatory and that any breach of those mandatory provisions would render the sale invalid. Before the Supreme Court, counsel for the appellants argued that irrespective of whether section 35 was mandatory or merely directory, a breach of the provision made the sale illegal but not a nullity, and therefore the sale could be set aside only in accordance with the specific procedure and grounds provided in Order XXI, rule 90. They further contended that because the respondents neither attended the drawing up of the proclamation of sale nor raised any objection to the defect, they could not maintain an application under the same rule. The Court held that non‑compliance with the provisions of section 35 of the Bengal Money Lenders Act constituted a defect in the execution process.

It was held that a defect or an irregularity in publishing or conducting the sale could not, by itself, give a party the right to set aside the sale. A party who had received the notice of the proclamation but who neither attended the drawing up of the proclamation nor objected to the defect was prohibited from maintaining an application under Order XXI, rule 90 of the Code of Civil Procedure. Even if such a party were permitted to file an application, the sale could be set aside only when the party demonstrated that he had suffered substantial injury because of the defect or irregularity. The decision in Ashram Thikadar v. Vijay Singh Chopra, I.L.R. (1944) 1 Cal. 166, was distinguished, whereas the authorities Manindra Chandra v. Jagdish Chandra, (1945) 50 C.W.N. 266 and Maniruddin Ahmed v. Umanprasamma, (1959) 64 C.W.N. 20, were approved.

The Court examined the true construction of section 35 of the Bengal Money‑Lenders Act, 1940 and concluded that the provision was intended solely for the benefit of the judgment‑debtor. Consequently, the judgment‑debtor possessed the power to waive the right granted to him by section 35. After reviewing the relevant case law, the Court found that, if this interpretation were correct, Order XXI, rule 90 of the Code of Civil Procedure would become immediately applicable.

The courts simultaneously found that the failure to observe the requirements of section 35 had not caused any substantial injury to the judgment‑debtor. In one instance, although notice had been given, the judgment‑debtor never filed an objection. In another instance, the judgment‑debtor did file objections but failed to attend the drawing up of the proclamation. Because the judgment‑debtor neither suffered a substantial loss nor complied with the procedural requirements, the sales in question could not be set aside under the provisions of section 35.

The judgment that followed pertained to Civil Appeals Nos. 85 and 86 of 1961, which were appeals from the judgment and decree dated 23 November 1954 of the Calcutta High Court, arising from Original Orders Nos. 84 and 83 of 1953. Counsel for the appellants appeared in both appeals, while counsel for respondents numbered 12 and 13 appeared in Civil Appeal No. 85 of 1961. The judgment was delivered on 4 March 1964 by Justice Subba Rao.

The two appeals centered on the validity of a court sale that had been conducted in contravention of section 35 of the Bengal Money‑Lenders Act, 1940 (referred to as the Act). The factual background was summarized briefly. In Civil Appeal No. 85 of 1961, the first respondent, Sudhir Chandra Ghosh, had executed a first mortgage in favor of the late Provash Chandra Mukherjee for a sum of Rs 12,000. The same respondent executed second, third and fourth mortgages in favor of the appellant for a total sum of Rs 7,700 and also executed an additional mortgage in favor of the ninth respondent. In 1948, respondents 2 and 3, representing the estate of the first mortgagee, instituted Title Suit No. 8 of 1948 in the Seventh Additional Court of the Subordinate Judge at Alipore to enforce the first mortgage, with the junior mortgagees joined as parties. On 24 May 1948 a preliminary decree was passed in that suit.

In the suit, the court ordered the judgment‑debtor to pay a sum of Rs 15,473‑7‑9 to the appellant in seven equal annual instalments. Because the judgment‑debtor did not make any of the required payments, the court subsequently passed a final decree in the mortgage suit, dated about 2 February 1949. The decree was then set for execution on 31 January 1950, and the execution application included a schedule listing the properties that were to be sold in order to satisfy the claim. The schedule identified eleven properties, and the appellant provided a valuation for each of those properties. The first respondent received a notice under Order XXI, Rule 66 of the Code of Civil Procedure, but he did not raise any objection to the valuations. Although the first respondent obtained several adjournments of the sale, promising to pay the decretal amount, he nevertheless failed to make the payment. Ultimately, two of the listed properties were scheduled for sale on 23 June 1951. One property was bought by the twelfth respondent for Rs 11,800, and the other was purchased by the thirteenth respondent for Rs 10,100. On 21 July 1951, the first respondent filed an application before the executing court seeking to set aside the sale under Order XXI, Rule 90 of the Code of Civil Procedure, alleging, among other grounds, that section 35 of the Bengal Money‑Lenders Act, 1940 had not been complied with. The learned Subordinate Judge held that there was no fraud in the publication or conduct of the sale, that the sale price of the lots was reasonable, and that the sale was not invalidated by any breach of section 35 of the Act. On appeal, a Division Bench of the High Court observed that, although the first respondent had not suffered any substantial injury, the provisions of section 35 of the Act were mandatory; consequently, any breach of those provisions would render the sale void. Accordingly, the High Court set aside the sale and ordered the appellant to return the proceeds with interest. The second appeal, Civil Appeal No 86 of 1961, arose from the same execution proceedings. Under the compromise preliminary decree, the judgment‑debtor had agreed to pay Rs 25,687 to the executors of the estate of the first mortgagee, identified as respondents 2 and 3. Because that amount remained unpaid, respondents 2 and 3 filed an application in the Seventh Court of the Additional Subordinate Judge at Alipore for execution of the decree. In that execution petition, eight properties were described and valuation figures were submitted. The judgment‑debtor raised objections to the valuations offered by the decree‑holders; however, on the appointed date for finalizing those valuations, neither the judgment‑debtor nor his counsel appeared before the court. By an order dated 11 February 1950, the learned Subordinate Judge directed that the valuations submitted by both the decree‑holders and the judgment‑debtor be recorded for the purpose of the sale.

The court observed that after the proclamation of the intended sale was prepared, the official proclamation was issued and the sale was scheduled for 11 May 1950. The judgment‑debtor subsequently obtained fifteen separate adjournments of the sale, each time assuring that the decretal sum would be paid, yet the payment never materialised. Consequently, the sale was finally rescheduled for 23 June 1951. On that date two separate lots of the property were sold in execution. The appellants acquired lot 1 for a price of Rs 14,000 and respondent No 9 acquired lot 2 for a price of Rs 19,600. On 21 July 1951 the first respondent presented an application before the learned Subordinate Judge seeking to set aside the sale pursuant to Order XXI, rule 90 of the Code of Civil Procedure, relying on grounds that were substantially similar to those raised in the other application that formed the subject‑matter of Civil Appeal No 85 of 1961. The Subordinate Judge heard this application together with the other pending application and, applying the same reasoning, dismissed the request. The decision was appealed to a Division Bench of the High Court, which heard both the present appeal and the connected appeal and consequently set aside the sale. The present appeals were filed by way of certificate against the common judgment of the High Court in both matters.

Counsel for the appellants, identified only as the lawyer representing the appellants in both appeals, argued that it was necessary to determine whether section 35 of the Act operated as a mandatory rule or merely a directory provision. He maintained that a sale contravening that provision was merely illegal and not void, and therefore could be set aside only in accordance with the procedure and reasons prescribed in Order XXI, rule 90 of the Code of Civil Procedure. He further submitted that because the respondents had not been present at the preparation of the proclamation of sale, the sale could not be set aside at their instance. To evaluate this contention, the court deemed it appropriate to recite the relevant statutory language. Section 35 of the Act states: “Notwithstanding anything contained in any other law for the time being in force, the proclamation of the intended sale of property in execution of a decree passed in respect of a loan shall specify only so much of the property of the judgment‑debtor as the Court considers to be saleable at a price sufficient to satisfy the decree, and the property so specified shall not be sold at a price which is less than the price specified in such proclamation: Provided that, if the highest amount bid for the property so specified is less than the price so specified, the Court may sell such property for such amount, if the decree‑holder consents in writing to forego so much of the amount decreed as is equal to the difference between the highest amount bid and the price so specified.” The court also referred to Order XXI, rule 64 of the Code of Civil Procedure, which provides that any court executing a decree may order that any attached property liable to sale be dealt with accordingly.

Under Order XXI, rule 64 of the Code of Civil Procedure, the court that is executing a decree may order that any property which it has attached and which is liable to be sold, or any portion of that property that it deems necessary to satisfy the decree, shall be sold. Rule 66 further provides that when a property is ordered to be sold by public auction in execution of a decree, the court must cause a proclamation of the intended sale to be issued in the language of that court. The proclamation must be prepared only after the decree‑holder and the judgment debtor have been given notice. It must state the time and place of the sale and must specify, as fairly and accurately as possible, the property that is to be sold. In addition, Rule 90 states that where any immovable property has been sold in execution of a decree, the decree‑holder, or any person who is entitled to a share in a rateable distribution of assets or whose interests are affected by the sale, may apply to the court to have the sale set aside. Such an application may be made on the ground of a material irregularity or fraud in publishing or conducting the sale, or on the ground of a failure to issue notice as required by Rule 22 of the same order. The court, however, may set aside a sale on those grounds only if, based on the evidence proved, it is satisfied that the applicant has suffered substantial injury as a result of the irregularity, fraud or failure. Moreover, a sale cannot be set aside on the basis of any defect in the proclamation of sale by a person who, after being given notice, did not attend the drawing up of the proclamation, nor by a person who was present at its drawing up, unless that person raised an objection at that time regarding the specific defect on which the objection is based.

Rule 66 also empowers the court, under sub‑rule (4), to summon and examine any person or to require that person to produce any document in his possession or power that relates to the sale. Consequently, the court possesses the authority to direct the sale of the entire property attached, or any part of it that is sufficient to satisfy the decree, and it must ensure that the property to be sold is clearly specified in the proclamation that is issued after notice has been given to both the decree‑holder and the judgment debtor. The proceeds of such a sale, or a sufficient portion of those proceeds, must be paid to the party who is entitled under the decree to receive them.

The Court observed that the decree‑holder and the judgment‑debtor must both be given notice before a proclamation of sale is issued. Section 35 of the Act imposes a specific duty on the court when it prepares the proclamation of an intended sale of property that is to be executed against a loan decree covered by the Act. Under that provision the court must specify only that portion of the judgment‑debtor’s property which it deems saleable for a price sufficient to satisfy the decree, and it must not authorize the sale of that specified property for a price lower than the price set out in the proclamation. The provision functions as a statutory addition to Order XXI, rule 66 of the Code of Civil Procedure, and it could have been drafted as an additional clause to that rule because it deals with the same subject of proclamation. Accordingly, the two requirements laid down in section 35 are to be treated as steps that the court must follow when publishing or conducting the sale. The Court then considered the remedial mechanism available when a sale is conducted without observing those requirements. Order XXI, rule 90 of the Code provides the appropriate remedy. That rule states that any person whose interest is affected by the sale may apply to the court to set aside the sale on the ground of a material irregularity or fraud in the publication or conduct of the sale, or on the ground of failure to give notice as required by rule 22 of the Order. Because non‑compliance with section 35 constitutes a material irregularity in the publication or conduct of the sale, the first proviso to Order XXI, rule 90 permits the court to set aside the sale only if it is satisfied that the applicant has suffered substantial injury as a result of that irregularity. The second proviso further provides that a sale cannot be set aside on the basis of any defect in the proclamation when the objection is raised by a person who, after receiving notice, did not attend the drawing up of the proclamation, or by a person who was present at the drawing up but did not make an objection at that time concerning the specific defect relied upon. In short, failure to comply with the provisions of section 35 is deemed a defect or irregularity in the publication or conduct of the sale. A party who merely received the proclamation notice but neither attended the drafting of the proclamation nor objected to the defect at that moment is barred from filing an application under Order XXI, rule 90 of the Code of Civil Procedure. Even if such an application were permitted, the sale could be set aside only if the claimant demonstrates that the defect or irregularity caused him substantial injury. The Court noted that differing opinions on this issue appear in the authorities cited earlier.

In the case of Asharam Thikadar v. Bijay Singh Chopra, the judges Mukherjea and Pal set aside the order of the executing court and remitted the matter to that court because the latter had inserted in the sale proclamation both the valuation supplied by the judgment‑debtor and the valuation supplied by the decree‑holder, while it failed, as required by section 35 of the Act, to determine the price of the property on the basis of proper evidence. The present Court observed that this decision does not bear on the issue presently before it, since the appeal before the High Court concerned the order of the executing court that dismissed the judgment‑debtor’s application for the court to demarcate the property to be sold in accordance with section 35 of the Act. The question of whether a sale conducted in breach of the provisions of section 35 could be set aside outside the mechanism provided by Order XXI, rule 90 of the Code of Civil Procedure did not arise for consideration in that appeal. The matter now before this Court directly emerged for decision before a Division Bench of the Calcutta High Court composed of Justices Akram and Chakravartti in Manindra Chandra v. Jagadish Chandra. Justice Chakravartti addressed the objection raised by the judgment‑debtor who sought to have the sale set aside on the ground of non‑compliance with section 35 of the Act. He explained that section 35 relates to the contents of the sale proclamation and, in his view, amends or supplements Order 21, rule 66(2)(a), which obliges the court to specify in the proclamation the property to be sold. Consequently, any objection concerning failure to comply with section 35 in specifying the property constitutes a defect in the sale proclamation within the meaning of the second proviso to Order 21, rule 90 of the Code. He further held that such an objection cannot be used by a judgment‑debtor in an application under Order 21, rule 90 if the debtor was present at the drawing up of the proclamation and failed to object at that time, nor can it be used by a debtor who, after receiving notice, did not attend the drawing up of the proclamation at all. This Court concurs with that reasoning. Another Division Bench of the Calcutta High Court, constituted by Justices Guha and Banerjee in Maniruddin Ahmed v. Umaprasanna, examined the full body of case law on the issue, including the decision now under appeal, and departed from the view expressed by Justices S. R. Das‑Gupta and Mallick in the same appeal. The Bench of Guha and Banerjee aligned itself with the position taken by Justices Akram and Chakravartti in Manindra Chandra v. Jagadish Chandra, and found that the earlier decisions were consistent with that approach.

The Court reiterated the view it had expressed earlier in the judgment, emphasizing its consistent approach to the legal issue under consideration. The High Court, however, adopted the opposite view in the present case, holding that a sale conducted in violation of section 35 of the Act was a nullity and consequently that no issue of setting aside the sale arose under Order XXI, rule 90 of the Code of Civil Procedure. This position raised the legal question of whether such a sale indeed constituted a nullity under the relevant statutory framework. The Court noted that when a statutory provision is merely directory, any act performed in breach of that provision is clearly not a nullity. Section 35 of the Act, however, is expressed in mandatory language and imposes a duty upon the court to comply with its provisions before a sale is effected. This mandatory character was noted in the decisions reported in (1) (1959) 64 C.W.N. 20 and (2) (1945) 50 C.W.N. 266, 270. On its face, the provision appears to be mandatory; for the purposes of these appeals, the Court assumed it to be mandatory. Even assuming mandatory character, the Court still considered whether an act performed in breach of such a mandatory provision automatically amounted to a nullity. The Court referred to the decision in Ashutosh Sikdar v. Behari Lal Kirtania(1), where Justice Mookerjee, after citing Macnamara on “Nullity and Irregularities”, observed that no strict rule separates a nullity from an irregularity. He explained that an irregularity merely deviates from a legal rule without destroying the foundation or authority of the proceeding, whereas a nullity lacks any foundation, is fundamentally defective, void, and incapable of validation. He further stated that determining whether a provision leads to a nullity or merely an irregularity is not easy, and ultimately depends on the nature, scope and purpose of the specific provision. Justice Coleridge, in Holmes v. Russell(2), provided a practical test, stating that because it is difficult to differentiate an irregularity from a nullity, the safest approach is to examine whether the affected party can waive the objection. If waiver is possible, the defect is an irregularity, whereas if it cannot be waived, the defect constitutes a nullity. The Court explained that a waiver represents an intentional relinquishment of a known right, but an objection to jurisdiction cannot be waived because consent cannot confer jurisdiction on a court that otherwise lacks it. Even when a court possesses inherent jurisdiction, the Court observed that certain statutory provisions remain non‑waivable because they are essential to the legal framework. Maxwell, in his treatise Interpretation of Statutes, 11th edition, page 375, observed (1) (1908) I.L.R. 35 Cal. 61, 72 and (2) [1841] 9 Dowl. 487, that another maxim permitting non‑observance of a statutory provision states: “cuilibet licet renuntiare juri pro se introducto.” He further explained that every person has the right to waive, and to agree to waive, the benefit of a law or rule that is made solely for their advantage.

The Court observed that a statutory condition created solely for the benefit and protection of an individual in his private capacity may be dispensed with without infringing any public right or public policy. The same principle is restated in Craies on Statute Law, 6th edition, page 269, where it is said that, as a general rule, conditions imposed by statutes which authorise legal proceedings are treated as indispensable to giving the court jurisdiction; however, if the statutory conditions were inserted by the legislature merely for the security or benefit of the parties to the action themselves and no public interest is involved, those conditions are not indispensable and either party may waive them without affecting the court’s jurisdiction. The Judicial Committee, in AL. AR. Vellayan Chettiar v. Government of Madras(1), pointed out that there is no inconsistency between the propositions that the provisions of section 80 of the Code of Civil Procedure are mandatory and must be enforced by the court, and that they may be waived by the authority for whose benefit they were provided. In that case the Committee held that section 80 of the Code of Civil Procedure was explicit and mandatory, yet it could be waived by the authority for whose benefit it was provided. This aspect of the law, as it relates to section 35 of the Bengal Money‑Lenders Act, was considered by a Division Bench of the Calcutta High Court in Gaya Prosad v. Seth[1947] L.R. 74 I.A. 223, 228, Dhanrupwal Bhandari(1). Justice P. N. Mookerjee, speaking for the court, observed that section 35 of the Bengal Money‑Lenders Act imposes a duty upon the court but that duty is solely for the private benefit of the judgment‑debtor. Consequently, the judgment‑debtor may waive this benefit, or, in other words, waive his objection to the non‑observance of that statutory provision by the court. Similarly, Justices Guha and Banerjee, in Maniruddin Ahmed v. Umaprasanna(2) at page 30, noted that while the Bengal Money‑Lenders Act, 1940 was enacted to improve the control of money‑lenders and to regulate money‑lending – thereby having a public‑policy purpose – certain provisions, including section 35, are intended for the benefit of individual judgment debtors and have no public‑policy basis. Such provisions may therefore be waived by the person for whose benefit they were enacted. A Division Bench of the Patna High Court, in Sheo Dayal Narain v. Musammat Moti Kuer(3), speaking through Justice Meredith, addressed the provisions of section 13 of the Bihar Money‑Lenders (Regulation of Transactions) Act, 1939, which are pari materia with section 35 of the Bengal Money‑Lenders Act, 1940, and rejected the contention that a sale held in contravention of those provisions was a nullity, describing the sale as illegal only in the limited sense that it was conducted contrary to a mandatory statutory provision that does not relate to the court’s jurisdiction.

The sale may have been, in the narrow sense, conducted in a manner that contravened a mandatory statutory provision. However, that provision does not address the Court’s jurisdiction at all. Consequently, it provides no basis for the argument—citing (1953) 58 C.W.N. 503, 508; 64 C.W.N. 20; and (1942) I.L.R. 21 Pat. 281, 286—that the Court lacked any power to decree the sale. When a court acts without inherent jurisdiction, an affected party cannot, through a waiver, confer jurisdiction upon a court that does not possess it. If the jurisdiction is present, a directory provision may be waived without difficulty. Conversely, a mandatory provision may be waived only when it is designed to serve the interests of the party seeking the waiver rather than the public interest. In the case before us, the executing court possessed inherent jurisdiction to order the sale of the property. The Court presumed that section 35 of the Bengal Money‑Lenders Act is a mandatory provision. If that assumption is correct, the next issue is whether the provision is intended to protect public interests or the interests of the person whose rights are affected when the provision is not observed. It is acknowledged that many sections of the Act serve public policy, but section 35 differs because its purpose is to safeguard the judgment‑debtor and to prevent the sale of more of his property than is required to satisfy the debt. Various scenarios can be imagined in which a judgment‑debtor may not wish to invoke the benefit granted by section 35. For example, if the court isolates a portion of his land for sale, the separation may depress the market value of the remaining land, thereby harming the debtor. In such circumstances the debtor might prefer that the whole property be sold so that its full market value is realized and a portion of the proceeds can be applied to the decree amount. The debtor cannot be forced to accept a partial sale that places him at a disadvantage. A provision that is meant to protect him must not be interpreted so that it harms him. However, it has been contended that the proviso to section 35 reveals an opposite intention. The proviso states that if the highest bid for the identified property falls short of the stipulated price, the court may sell the property for the bid amount, provided that the decree‑holder signs a written consent to waive the shortfall between the bid and the stipulated price. This clause therefore presents an optional right to the decree‑holder, who may elect to use it if he wishes to avoid restarting the entire sale process.

In this case, the Court observed that the proviso to section 35 also operated for the benefit of the judgment‑debtor because it would relieve him of a portion of his liability. However, the Court said that this ancillary benefit did not demonstrate that the principal provision of section 35 was meant for anyone other than the judgment‑debtor. After examining the language of section 35, the Court concluded that the provision was intended solely to protect the interests of the judgment‑debtor and that, consequently, the judgment‑debtor could voluntarily relinquish the right created by that provision. The Court further stated that, if this interpretation was correct, Order XXI, rule 90 of the Code of Civil Procedure would automatically apply. The Court noted that the lower courts had concurrently found that the failure to follow the requirements of section 35 had not caused any material injury to the judgment‑debtor. Moreover, the Court recorded that although notice had been served on the judgment‑debtor, in one proceeding the judgment‑debtor never filed any objections, and in the other proceeding he filed objections but did not appear at the stage when the proclamation was prepared. On that basis, the Court held that the sales could not be set aside under the provisions of section 35. Accordingly, the Court set aside the orders of the High Court and reinstated the orders of the Additional Subordinate Judge. The Court ordered that the appellants would recover their costs throughout from the first respondent and that only one set of hearing fee would be payable. The appeals were allowed.