# P. SRINIV ASA NAICKER v. SMT. ENGAMMAL AND ANOTHER - **Citation:** [1962] Supp. 1 S.C.R. 690 - **Court:** Supreme Court of India - **Decided:** 1962 - **Case number:** Civil Appeal No. 274 of 1959 - **Bench:** K. N. Wanohoo, J. C. Shah - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/p-sriniv-asa-naicker-v-smt-engammal-and-another-2564 - **Pages:** 10 ## Headnote ln•oli .. ncg-Sak of iMol•enl'a properly bv offeial Rtui•ier -.A.ppeat-Grouncia /or aetting aaicie IM aa/e-Reoiaio,.__lfigh Courl'1 juriaciiclion to inlave from the judgment and order dated July 27,1956, of the Madras High Court, in C.R.P. No. 90of1955. N. 0. Chatterjee, R. Ganapathy Iyer and G. Gopalakrishnan for the appellant. K.N. Rajagopala Sastri, R. MahaliniJa Iyer and M. 8. IL Aiyengar, for respondent No. I. 1960. November, 28. The Judgment of the Court was delivered by WANCHOO, J.-This is an appeal by special leave in an insolvency matter. The brief facts necessary for present purposes are .these. S. V. N. Nanappa Naicker and his sons were adjudged insolvents on an application of Smt. Engamma! (hereinafter referred to as the respondent). They had preferred an appeal before the High Court of Madras but it was dismissed on April 17, 1953. Thereafter the official receiver took steps to sell the property of the insolvents, which con~isted of two lots, the first lot comprising 145 aores 10 cents of dry land and masonry house, and the second lot, 8 acres and odd of dry l1md. Both these properties were subject to mortgage. The official receiver fixed September 28, 1953, for sale of the properties by auction. Fifteen of the creditors were present when the sale by auction took place, including the son of the respondent. No request was made on that day by anyone for postponing the sale and consequently bids were made. The highest bid for lot 1 wllB of Jf!Ol P. Srinirxuo Naiektt v. Bmt. Enl4fllmal WatkhooJ. JHJ P.BritrUJOS4 N~eUt Y. Sml. Entammal Wcwhoo J. , 692 SUPREME OOURT REPORTS (1~2] SUPP. Ra. 4500/· and the highest bid for lot 2 was of Rs.70/-. Both these hids were made by the appellant who is a brother-in-law of Nana ## Text Iill Birajmoha o .. Gup14 •• n. St.,. •I Ori= W-4H J. IHI 690 SUPREME COURT REPORTS [1962] SUPP. of fact, we are not prepared to allow the pe itioners to raise this point in arguments before us. In the circumstances we rcjl!ct this contention also . . . The I>l;titions therefore fail and are hereby d1em1BBed with costs-one set of hearing costs. Petition# di8mi81ed. P. SRINIV ASA NAICKER v. SMT. ENGAMMAL AND ANOTHER (K. N. WANOHOO and J. C. SHAH, JJ.) ln•oli .. ncg-Sak of iMol•enl'a properly bv offeial Rtui•ier -.A.ppeat-Grouncia /or aetting aaicie IM aa/e-Reoiaio,.__lfigh Courl'1 juriaciiclion to inlave from the judgment and order dated July 27,1956, of the Madras High Court, in C.R.P. No. 90of1955. N. 0. Chatterjee, R. Ganapathy Iyer and G. Gopalakrishnan for the appellant. K.N. Rajagopala Sastri, R. MahaliniJa Iyer and M. 8. IL Aiyengar, for respondent No. I. 1960. November, 28. The Judgment of the Court was delivered by WANCHOO, J.-This is an appeal by special leave in an insolvency matter. The brief facts necessary for present purposes are .these. S. V. N. Nanappa Naicker and his sons were adjudged insolvents on an application of Smt. Engamma! (hereinafter referred to as the respondent). They had preferred an appeal before the High Court of Madras but it was dismissed on April 17, 1953. Thereafter the official receiver took steps to sell the property of the insolvents, which con~isted of two lots, the first lot comprising 145 aores 10 cents of dry land and masonry house, and the second lot, 8 acres and odd of dry l1md. Both these properties were subject to mortgage. The official receiver fixed September 28, 1953, for sale of the properties by auction. Fifteen of the creditors were present when the sale by auction took place, including the son of the respondent. No request was made on that day by anyone for postponing the sale and consequently bids were made. The highest bid for lot 1 wllB of Jf!Ol P. Srinirxuo Naiektt v. Bmt. Enl4fllmal WatkhooJ. JHJ P.BritrUJOS4 N~eUt Y. Sml. Entammal Wcwhoo J. , 692 SUPREME OOURT REPORTS (1~2] SUPP. Ra. 4500/· and the highest bid for lot 2 was of Rs.70/-. Both these hids were made by the appellant who is a brother-in-law of Nana.ppa Naicker. The reason why the two lots were sold for Rs. 4570/· wa.s that there was an encumbrance on the entire property of Rs. l 7,2CO/-. The official receiver did not close the sale on that day in the hope that some higher offer• might be made by the creditors and postponed it to various dates upto Oct-0ber 26, 1953. On all thrnm dates, the respondent's son wa.s present but no higher offer was made on behalf of tho respondent. On October 26, 1953, an application was made on behalf of the respondent praying that the sale he postponed for another three months apparently on the ground that there hAd been •drought in that area for some years past and agricultural lands were not fetching good price. The official ;ceiver, however, saw no reason to postpone t..c sale, particularly when no higher offer was forthcoming from the side of the respondent and decided to knock down the properties in favour of the appellant. Later, an application wa.s made on behalf of the respondent on November 18, 1953 under s. 68 of the Provincial Insolvency Act, No. V of 1920 (herein· after referred t-0 as the Act). The case of the respondent w11s that the sale had been made for a very inadequate price and there had been drought in the village for several years in the past and there was very great stringency in the money market and it wa.s hoped that if the sale was postponed for three or four months, the properties would fetch a good price of not less than Rs.15,000/-, exclusive of the sum due on the encumbrances. The respondent also stated that if the sale was postponed for three months she would be prepared to bid more than Rs. 7500/- for the properties. There were B-Ome other allegations in the petition suggesting collusion between the official receiver on the one side and the . (1) S.C.R. SUPREME COURT REPORTS 693 insolvent and the appellant on the other. The respodent therefJre prayed that the official receiver should be ordered not to sell the propertit>s to the appellant at the price bid by him. The application was opposed by the official receiver as well as by the appellant. The official receiver contended that he had done his best and that no higher bid could be obtained. He also denied the allegation made against him in the nature of collusion and also about the manner of conducting the sale. The Subordinate Judge allowed the application on the ground that the price fetched was low and that the general body of creditors to whom debts to the extent of Rs.30,000/- were payable woul,d be considerably prejudiced if the sale was allowed to stand. Thus the only ground on which tho application under s. 68 was allowed was that the price fetched was low. Thereupon there was an appeal to the District Judge under s. 75 of the Act. The District Judge allowed the appeal. He pointed out that there was nothing to show that there was any irregularity in the conduct of the sale. He also pointed out that there was no reason to hold that the official receiver was in any way in collusion with th'3 insolvent and the appellant. He also pointed out that the respondent's son was all along present and if he really thought that the price fetched at the auction sale was low he could offer · a higher price on behalf of the respondent. Finally, the District Judge held that the Subordinate Judge was not right in his view that the property had been sold for a low price and gave various reasons for coming to that conclusion. The matter was then taken in revision under the proviso to s. 75 of the Aot, which lays. do:wn that "the High Court for.the purpose of s~tlBfymg itself that an order ma.de in any appeal declded by the District Court was according to law, may call fo; the case and pass such order with respect thereto as it 1961 P. S rinivasa N aick1 v. Smt. -Engammal WanehooJ. lNl P. Bri,.Woso Noitkn •• Brnl. E.,...,..1 w-hooJ. 694 SUPREME OOURT REPORTS [1962) SUPP. r thinks fit". The High Court however did not consider the question whether the order of the District Judge W811 according to law. It appears that before the High Court an offer was made by the respondent that she was prepared to deposit Rs. 9,000/- if a fresh auction was held and would start the bid at Rs. 9,000/- and also that she would pay Rs. l,000/- to the appellant for any loBB- caused to him. The High Court accepted this offer, though it was of opinion that it could not be said that the price fetched at the auction was unconscionably low ; it however held that the price was low considering the extent and nature of the properties, and if Rs. 9,000/- or more could be got for the properties the creditors would receive appreciably more as dividend. It therefore allowed the revision on the terms offered by the respondent. It is this order of the High Court which has been brought before us by speoial leave and the only qu~stion that h811 been urged on behalf or the appellant is that the High Court ha:l no juris· diction to interfere with the order of the District Judge unless it came to the conolusion that that order was not aocording to law. It is contended at the High Court's order does not show that it applied its mind to the question whether the order of the District Judge was according to law or not and that the High Court seems to have been carried a.way by the offer made by the respondent to make minimum bid of Rs. 9,000/- for those properties. It is pointed out however that thia offer was made three years after the auction and is no ind ica.tion that the price fetched in the auction in 1953 was inadequate, for prices may have risen during this period of three years. On the other hand, it is contended on behalf of the respondent that the court'a power under s. 68 in appeal from an act of the receiver is muoh wider than the power of the court in dealing with • I ( 1) S.C.R. SOPREME OOURT REPORTS 695 auction sales in execution proceedings and therefore the Subordinate Judge was right in ~etting aside the act of the receiver in knowing down the proper· ties to the appellant and the High Court was consequently right in setting aside the order of the District Judge and restoring that of the Subordinate Judge. It may be accepted that the power of the court under s. 68 in not hedged in by those considerations which apply in cases of auction sales in execution proceedings. Even so, the power under s. 68 is a judicial power and must be exercised on well recognised principles, justifying interference with an act of the receiver which he is empowered to do under s. 59 (a) of tbe Act. The fact that the act of the receiver in selling properties under s. 59 (a) is subject to the control of the court under s. 68 does not me;m that the court c11n arbitrarily set aside a sale decided upon by the· official receiver. It is true that the court has to look in insolvency proceedings to the interest in the first place of the general body of creditors ; in the second place to the interest of the insolvent, and lastly, where a sale has been decided upon by the official receive'!' to the interest of the intending purchaser in that order. Even so; 'the decision of the official receiver in favour of a sale should not be set aside unless there are good grounds for interfering with the discretion exercised by the official receiver. These grounds may be wider than the grounds envisaged in auction sales in execution proceedings. Even so, there must be judicial grounds on which the court will act in setting aside the sale decided upon by the official receiver. These grounds may be, for example, that there was fraud or collusion between the receiver and.the insolvent or the intending purchaser ; the court may be also interfere if it is of opinion that there were irregularities in the conduct of the aale which might have affected the 1961 P. Srinfoasa Nai&I' v. Sm1. Entammal WanclrooJ. 1961 P. Srinioa.Ja JVaicklr •• Smt. Engammal U'anchoo J. 596 SUPREME COURT REPORTS [1962] SUPP. price fetched at the sale ; again, even though there may be no collusion, fraud or irregularity, the price fetched may still be so low as to justify the court to hold that the property should not be sold at that price. These grounds and similar other grounds dP.pcnding upon particular circumstances of each case may justify a court in interfering with the act of the official receiver in the case of 11ale by him under s. 59 (a) of the Act. The High Court had therefore to see w hethcr the Subordinate Judge's order was justified on these grounds and whether the District Judge made any mistake in law in reversing thi.t order. If the Suh· ordinate Judge's order was not justified on these grounds or if the District Judge made no mistake in law in interfering with that order, the High Court cannot interfere in revision under the proviso to s. 75, for the High Court's jurisdiction to interfere arises only if it is of opinion that the District Judge'H order was not according to law. If the High Court comes to that conclusion, it can then pass such order a.s it may think fit. Let us therefore turn first to tho order of the Subordinate ,Judge and see if it is justified on the ground mentioned a.hove. Now both the Subordinate Judge and the District Judge found that there was no rca,on to hold that there wa.s a.ny fr&ud or collusion on the pa.rt of the official reooiver in this case. Further, the Subordinate Judge did not find that there was any irregularity committed by the oflicial receiver !n conducting the sale and the District Judge has definitely found that there was no such irregularity. The only ground on which the Subordinate Judge held that the ea.le should be set aside w&s that the price fetched was low. Now if that ground is justified, the Subordinate Judge would have een right in interfering with the sale proposed by the official recPiver. That matter has been considered by the District Judge and he has ! (1) S.C.R. SUPREME COURT REPORTS 697 hold that there is no mason to hold that the properties were being sold for a low price. The Subodinate Judge in dealing with the question of price has pointed out that the insolvent had valued the properties at Rs. 80,000/-, though he was conscious of the fact that this. was properly an exaggeration. He therefore did not bold that thr properties were worth Rs. 80,000/-. He came to the conclusion that the properties would be worth at least Rs. 40,000/- and the ma.in reason why he said so was that the properties had been mortgaged for over Rs. 20,000/- in 1936. According to him there seems to be some infallible rule that one must double the mortgaged money in order to arrive at the valuation of the properties mortgaged. The Diijtrict Judge has pointed out-and we think, rightlythat there can be no such rule. Therefore. the main basis on which the Subordinate Judge held that the properties were worth Rs. 40,000/- and therefore the hid of the appellant was low, falls to the ground as pointed out by the District Judge. The Subordinate Judge also pointed out that the insolvents were in possession of the properties during the pendency of the insolvency appeal and had been depositing Rs. 2000/- annually on the order of the High Court in order to remain in possession. The Subordinate Judge however did not calculate the value of the properties on the basis that their annual income was Rs. 2,000/-and rightly so-because the amount deposited by a litigant on the order of a court in order to retain possession of some prope;ty cannot necessarily lead to the inference that that was the annual income of the property. It seems therefore that the District Judge was.right when he held that there was no evidence on the record which would juatify the finding of the Subordinate Judge that the price fetched by the sale in this case was inadequate or unreasonable. We may add that it was open to the respondent to show to the Subordinate Judge by well recognised methods P. Srinivara l'laicker '· Smt. Entammal Wanchoo J. Ilf l P. Sriftivaso NaKl:,, v. Sml. En1ammal ~ ....... J. 698 SUPREME COURT REPORTIS (1962) SUPP. of valuation as to what the value of the properties was. The Subordinate Judge should have then taken into account the total amount of the encumbrance on tbeae propertie8. The mortgage deed is not on the n cord and we do not know what interest, if any, the mortgage money carried. Before the Subordinate Judge could come to the conclusion thn.t the price offered by the appellant was low, he had first to find out the price of the properties by some recognised method. He ha.d then to find what was the total amount of encumbrance on the properties. If on finding these things it appeared that the difference between the two was much larger than the price bid by the appellant, the Subordinate Judge would have been justified in interfering with the order of the official receiver, even if there was no question of fraud, oollusion or irregularity in the present oase. But no such findin~s have beon given by the Subordinate Judge and the District J udga consequently was right when he said that the view of the Subordinate Judg11 that the price fetched was inadequate Rnd unreasonable is incorrect. Unfortunately, the High Court did not addreSB itself to the question whether the order of the Di8trict Judge was according to law or not. It seems to have been impressed by the offer made by the respondent, overlooking the fact ·that the offer of Rs. 9,000/· as the minimum bid and Rs. 1000/· for tho appellant was being made three years after the auction during whioh, for all that we know, the prices might have risen. Further, the High Court has remarked tha.t the prioe offered by the appellant was not unconscionably low but it fe It that it was still low on a comparison with the offer made by the respondent in 1956. As the High Court did not consider the question whether the order of the District Judge was acoordingto law or not and did not come to the conclusion that that order was not according to law, the High Court would have no jurisdiction to interfere with tha.t order. -- (1) S.C.R. SUPREME COURT REPORTS 699 Learned counsel for the respondent urged that even though the High Court may not ha"l'.e considered the matter from this aspect, we should not interfere with the order of the High Court if we are satisfied that in faot the price offered by the appellant , was low, in the circumstances prevailing in 1953. We agree that if it was possible for us to come to the conclusion that the price offered by the appellant was low, there would be no reason to interfere with the order of the High Court, even though it might not have considered what was necessary for it to do for interfering under the proviso to s. 75; but as we have pointed earlier, there is no sufficient material on the record on which we can say that the price offered by the appellant is low. As we have already pointed out, no attempt was made in the Subordinate Judge's coun to value the properties by any of the well recognised methods by which properties are valued. Further no o.ttempt was ma.de to show the total encumbrance on· the property. Unless the valuation was properly made and the encumbrance was found out, it is not possible to say that the offer made by the appellant was low,. for that would depend upon the difference between the value of the properties and the a.mount of enoumbrance. In these circumstances, it is not possible for us to say that the order of the District Judge when he held that the Subordinate Judge was not right in holding that the price fetched was inadequate or un· reason& ble, is not according to law. We therefore allow the appeal, set aside the order of the High Court and restore the order of the District Judge. The appellant will get his costs· in this Court from the first respondent. · Appeal allowed. IllH P. 8 rittivasa N .;&,, v. Smt. Eng«rnmal WancliooJ,