KAYJAY INDUSTRIES (P) LTD. versus ASNEW DRUMS (P) LTD. & ORS.

Citation: [1974] 3 S.C.R. 678 · Decided: 20-03-1974 · Supreme Court of India · Bench: D.G. PALEKAR · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

KAYJAY INDUSTRIES (P) LTD. 
l'. 
ASNEW DRUMS (P) LTD. & ORS. 
March 20, 1974 
[D. G, PALEKAR, P. N. BHAGWATI AND V; R. KRISHNA IYER, JJ,] 
Code o/Civil Procedure (Act 5 of 1908), 0.21, r.90 and State Financial Corpo· 
ration Act, 1951, Sec. 31-Material irregularity in comluct of $a/e and s~bstfllltlaf 
.injury to judgment-debtor, what are. 
The State Finance Corporation lent a sum of Rs. 10 lacs to the first respondent 
on the security of a mortgage of its land etc. The first respondent having failed to 
repay, the Corporation applied to the District Court under the State Financial 
<Corporation Act, 1951, for recovering the amount by attachment and sale of the 
mortgaged properties. The sale proclamation was settled after notice to the parties, 
and after several adjournments, caused by the first respondent's dilatory tactics, 
the sale was held. The court felt that it was better to have some valuation report 
to serve as a basis and to gujde it in deciding whether the offer of Rs. 11,10,000 
was grossly unjust. The first respondent did not have the properties val uc-d but the 
Coq>oration had the properties valued and the mortgaged prop~rties Wfr~ valued at 
about Rs. 17 lacs. Thereafter an auction was again held and the appellant was the 
highest bidder. His offer was, less by about Rs. 40,000/- than the amount on the 
·previous occasion. He however agreed to raise the offer to Rs. 11,50,000/- and the 
court concluded the sale at that amount. The first respondent applied under 0. 21, 
r. 90, C.P.C. for setting aside the sale but the application was dismissed. His appeal 
•was allowed by the High Court. 
Allowing the appeal to this Court. 
HELD : Under s. 32(8) of the Act, the Civil Procedure Code is attracted to pro• 
ceedings for the realisation of the dues of the Corporation. Therefore, 0. 21, r. 90 
was applicable and if there was any material irregularity in the conduct of the sale 
and if it caused a substantial injury to the judsment-debtor, the sale could be set 
"aside. Where a court mechanically conducts the sale not bothering to see if the offer 
·is too low and a better price could have been obtained and if in fact the price is subs-
1antially inadequate, there is both irregularity and injury. But at the same time the 
court should not go on adjourning the sale till a good prtce is got as otherwise, decree-
·holders can never get the property of judgment debtors sold. There is always con-
siderable difference between the court sale price and market price. A court sale 
is a forced sale, and notwithstandi~ the competitive clement of a public auction, 
the best price is not always forthcommg. A valuer's repor.l though good as a basis, 
is not as good as an actual offer and there are bound to be variations within limit~ 
between such an estimate, however careful, and the real bids by seasoned business-
man. Mere inadequacy of price cannot demolish a court sale. Further, if court 
'Sales are too frequently adjourned with a view to obtaining a still higher price pros-
pective bidders will Jose fa1th in the actual sale taking place and may not attend at 
1he auction. Nor is it right to judge the unfairness of the price in the light of the 
'Subsequent events which were not within the knowledae of the executing court at 
·the time of the sale. What is expected of the court is to make a realisitic appraisal 
. or the factors in a pragmatic way and if satisfied that in the given circumstances the 
bid is acceptable it should conclude the sale. The court may consider the fair value 
of the property, the general economic trends, the larse sum required to be produced 
!by the bidder, the formation of a syndicate, the futility of postponements and the 
possibility of litigation and several other factors depending on the facts of each case. 
If the court has fairly applied its mind to the relevant considerations while accepting 
·the final bid it is not necessary to give a speaking order nor can its order be exa· 
•mined meticulously. [682 A-E; 683C; 684 A-F) 
J n the present case, the executing court had admittedly declined to affirm 
the highest bids on the previous occasions in its anxiety to secure a better price. 
Well known industrialists in the public and private sectors knew about it and bid 
at the auction. All interested parties were present at the a.uction and. no on4: raised 
any objection regarding the conduct of the sale. The Corporation could not be put 
off indefir1itely in recoverjn~ its dues on base

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