1962 (9) TMI 110 - HC - Indian Laws

House Auction Nullified Due to Fraud; Court Orders Re-auction to Ensure Fair Sale and Justice for All Parties Involved.

The HC set aside the auction-sale of a house due to fraud and irregularities, including insufficient publicity and collusion to keep the price low. The ... - Issues Involved:1. Liability of the house to be re-auctioned.2. Maintainability of the petition under Section 47 of the Civil Procedure Code.3. Locus standi of Dharam Singh to bring the application.4. Allegations of fraud and irregularities in the auction process.5. Inherent powers of the Court to set aside the sale.Issue-Wise Detailed Analysis:1. Liability of the House to be Re-Auctioned:The judgment-debtor objected to the auction, claiming that the house was auctioned on 9th March 1962, though the date announced was 16th March 1962, leading to a low price due to the absence of prospective bidders. The auction-purchaser denied these allegations. The Court found that the auction-sale was not genuine, with significant irregularities such as insufficient publicity and no indication of the property's value. The Court concluded that the auction-sale was a result of a conspiracy to keep the price low and decided to set aside the sale and order a re-auction.2. Maintainability of the Petition under Section 47:The judgment-debtor's objections were submitted under sections 47/151 of the Civil Procedure Code. The Court noted that Section 47 was not applicable because Dharam Singh was not a party to the decree and could not be considered a representative of the judgment-debtor. Therefore, the judgment-debtor's petition under Section 47 was not maintainable.3. Locus Standi of Dharam Singh to Bring the Application:Dharam Singh applied under Section 151 of the Civil Procedure Code, claiming the auction was conducted improperly and offering to purchase the property for a higher amount. The auction-purchaser objected, arguing that Dharam Singh had no locus standi and that his application was collusive. The Court agreed that Dharam Singh had no locus standi as he had no existing interest in the property affected by the sale. However, the Court acknowledged that Dharam Singh's application revealed a fraud on the Court.4. Allegations of Fraud and Irregularities in the Auction Process:The Court found convincing evidence of fraud and irregularities in the auction process. The auction was held in a village instead of Hoshiarpur, and there was no proof of wide publicity. The auction-purchaser admitted an agreement with the judgment-debtor to resell the property at a profit, indicating collusion. The Court concluded that the auction-sale was a result of a well-planned fraud to keep the property's price low, thereby defrauding the decree-holder.5. Inherent Powers of the Court to Set Aside the Sale:The Court emphasized its inherent powers to set aside a sale procured by fraud. It cited various precedents affirming the Court's duty to ensure that its process is not abused and that justice is served. The Court held that even if Dharam Singh had no locus standi, it could exercise its inherent powers to set aside the auction-sale suo motu upon discovering the fraud. The Court decided to set aside the auction-sale and ordered a re-auction, ensuring compliance with the requirements of Order 21, rule 66.Conclusion:The Court dismissed both applications (L.M. 42 of 1962 and L.M. 85 of 1962) but set aside the auction-sale suo motu due to the fraud and irregularities discovered. It ordered the re-auction of the house with proper publicity and detailed information about the property, allowing Dharam Singh's deposit to be treated as his first bid. The official liquidator was directed to make a fresh application under Order 21, rule 66, within three weeks. The case was scheduled to come up on 19th October 1962, with no order as to costs.