P L CHAKRAPANI NAIDU Vs. T GOPAL MUDALIAR

JUDGEMENT

(1.) THESE two appeals arise out of two suits which were heard and tried together and disposed of by a common judgment of the City Civil Court, Madras, as the subject-matter in dispute and the points in controversy are the same and identical. The suit property involved is door no. 78 Paper Mills Road, Perambur and the main question in controversy relates to the truth and validity and the legality of the auction sale said to have been held by the auctioneer on behalf of the motgagee exercising the powers under Section 69 of the Transfer of Property Act. The suit, O. S. No. 2701 of 1959 has been filed by the three plaintiffs the mortgagors impeaching the auction sale. The first defendant, Rajeswari Ammal is the assignee from the original mortgagee Lokambal, the second defendant Chandramani and co. , is the auctioneer the third defendant Chakrapani Naidu is the successful bidder and purchaser in the auction and the fourth defendant Natesa Mudaliar is a subsequent mortgagee. The other suit O. S. 992 of 1959 has been filed by the auction purchaser to establish his rights and to recover possession of the property as the mortgagors would not surrender possession of the property. The three mortgagors are the three contesting defendants in this suit. The learned City Civil judge accepted the contentions of the mortgagors and held that there was really no auction sale on 12-2-1959. The result was that O. S. 2701 of 1959 was decreed as prayed for and O. S. 992 of 1959 was dismissed. The auction purchaser has preferred the App. No. 737 of 1963 against the decision dismissing the suit O. S. 992 of 1959 and he has also preferred the appeal no. 132 of 1965 against the decision decreeing the mortgagors' suit O. S. 2701 of 1959 aforesaid. For purposes of convenience in the trial Court, the parties were referred to according to their array in O. S. 2701 of 1959 (the suit by the mortgagors) and we are adopting the same course in these two appeals. The point for decision lies in a very narrow compass, the only point arising for decision being a pure question of fact whether any auction was held as a fact on 12-2-1959, and whether the third defendant became the highest and successful bidder. The trial of both the suits has been very protracted and a lot of useless and irrelevant material had been let in the trial of both the suits. In the course of the appeal we noticed that the oral evidence is unnecessarily voluminous and the result was that the irrelevant portion of the evidence has clouded the relevant portion of the evidence resulting in the learned Judge himself getting involved in a discussion of unnecessary details and irrelevant particulars.

(2.) THE brief facts which led to this litigation may be stated:- -. . . . . . . . . . . . . . . . . . . . . . . . . . . . (His Lordship discussed the facts and evidence in the case and proceeded ). The only question is whether there was a sale on 12-2-1959 and whether the sale was conducted in a valid and proper manner in accordance with the provisions of section 69 of the Transfer of Property Act. The burden of proof of establishing that a sale actually took place on 12-2-1959 is upon the mortgagee and the auction purchaser. But the burden of proving that the sale is invalid by reason of any infirmity or by reason of any fraud or collusion is, undoubtedly, on the mortgagors. As we gather from the judgment, the three circumstances on the basis of which the trial judge mainly held that there was no sale and everything was vitiated by fraud and collusion, are as follows:-1. The property is a valuable property worth about Rs. 12,000 to Rupees 13,000. The property has been sold for a grossly inadequate price of Rs. 5,000/- and that itself is evidence of fraud and collusion. 2. There is no proof that the 3rd defendant had the means to pay the bid amount of Rs. 5,000/ -.

(3.) THE evidence of the auctioneer and the entries in his records, the day books and the ledger, and the concerned receipts and the concerned counterfoils indicate that there was really no sale on 12-2-1959, but that later on the auctioneer had made some entries so as to make it appear that there was an auction sale on 12-2-1959. 3. On the question of the alleged inadequacy of the price, the learned Judge has completely misdirected himself and he did not draw the proper interference from a crucial circumstance, though he has adverted to the same in paragraph 44 of his judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (After dealing with the facts his Lordship proceeded ). The plaintiff having created all the obstacles and having threatened the prospective purchasers, it ill becomes them (and they cannot obviously take advantage of their own wrong ). to make a complaint that the property has been sold for an inadequate price. We have not the slightest hesitation in holding that the all the reasons mentioned above, the price fetched cannot be said to be so inadequate as to raise any inference of fraud and collusion. We are also of the opinion that the background of the case does not admit of any theory of fraud and collusion, because even according to the plaintiff, the third defendant was present in the City Civil Court, and as soon as the application for injunction was dismissed, he too went to the premises, where the auction was held under his very nose. Nothing is established to show that the first defendant colluded with the third defendant and held the auction in a clandestine manner. Mere use of the words "fraud and collusion" means nothing and there must be positive proof that there was collusion between the first defendant and the third defendant. On the other hand, everything was done openly and nothing was done in secrecy. The first defendant had clearly manifested her intention that she was bent upon the auction being held on 12-2-1959. Some argument was advanced that the mortgagee was actuated by a bad motive and that would also afford some evidence of fraud and collusion. We see no substance in this contention. It is settled law that a mortgagee is not a trustee for the mortgagor as regards the exercise of the power of sale, Power of sale is given to the mortgagee for his own benefit to enable the latter to realise his debt. The court will not interfere merely to prevent its exercise contrary to the wishes or interests of the mortgagor, or even, if the mortgagee is seeking some collateral objects and not merely the payment of his debt. The mortgagee is not a trustee for the mortgagor of his power of sale and the court will not enquire into his motives for exercising it, so long as he acts with bona fields (vide the settlement of the law in Fisher and lightwood's Law of Mortgage, 8th Edition. page 310 (Edn 1969)--and also the statement of the law in 27 Halsbury at page 302 Para 567 ). We may first refer to the decision in Colson v. Williams. (1889) 61 LT 71 in which it is observed that a mortgagee is not a trustee for the mortgagor of his power of sale, and the Court has nothing to do with the motives of the mortgagee in exercising it even though he (the mortgagee) is guilty of spite in so doing. In that decision it is observed that the mortgagee was the sole judge for deciding when it is necessary for him to realise the security and that he can do so without any hesitation after giving a requisite notice to the mortgagor. In the case of a private sale, the mortgagee must act fairly and with bona fides and reasonable care and try his best to secure the maximum price, but in the case of an auction sale there is no question of the mortgagee taking any particular care or making special efforts to secure a good price, because, so long as he does not interfere with the auction and entrusts the sale of the property to an auctioneer and if there is a free auction, the mortgagor must take the risk of whatever price the property fetches in the auction. We may next refer to the decision in Belton v. Bass. Ratcliff and Gretton Ltd. 1992-2 Ch D 449. The following head-note in that decision brings out that in exercising the power of sale, the mortgagee can himself advance money to the purchaser to purchase the property on the security of the mortgaged property and that the fact that the mortgagee was actuated by bad motive, by itself, would not vitiate the sale:-