JITESWARI DASSI Vs. SUDHA KRISHNA MUKHERJEE

JUDGEMENT

(1.) The question which has to be considered in this appeal is whether an execution sale at which a decree-holder who was also the receiver in respect of the property sold, made a purchase of the properties should be set aside. The receiver was appointed under Order 40, Rule 1 of the Code. He took the permission of the Court to bid for and purchase the properties as required by Order 21, Rule 72 of the Code. But it is not disputed that he did not apply for or obtain any leave from the Court, informing the Court that he was a receiver appointed in respect of the property. It may be conceded that the fact that he was a receiver was not unknown to the Court as he appears to have previously made an application in that capacity for an order for sale, and the said order had been made expressly stating that the application which he had made as receiver was granted. It however does not appear that the Court ever felt called upon to consider the question whether although he was a receiver he should be permitted to purchase the property which was under his management and in his possession as such receiver. The District Judge in reversing the order of the Subordinate Judge, who had set aside the sale observed thus: The gist of the matter is that a trustee for sale is absolutely debarred from purchasing the property himself, because as seller his interest or rather his duty would be to got the highest price and as buyer his interest would be to get the lowest price, and the merging of the two positions is prohibited. The question is whether in this case the decree-holder as receiver was in the position of the seller. The learned Subordinate Judge has hold that as receiver his duty is to pay off the decree money or to got as high a price as possible for the property. It is argued however that the receiver had really no duties in connexion with the sale. He was appointed merely to keep the property [intact and to preserve it for sale in execution of his own decree. "The sale was held in the usual way by the Court itself and the receiver had no duties in connexion therewith. He was not a trustee for sale. At the sale therefore he had no duties to see that the property fetched the highest possible price; there was therefore no conflict between duty and interest at the sale itself, This seems to me to be the correct view of the matter. I do not think it would be right to vacate the sale merely on the ground that the property was purchased by the decree- holder who was already in possession as receiver though of course being in the position of a trustee he has to show that the transaction was strictly fair and that ho did not use his position as trustee to the disadvantage of the judgment-debtor.

(2.) The learned District Judge went into the question of adequacy of the price fetched at the sale, and being of opinion that the price fetched was not inadequate and that there was no substantial loss, he upheld the sale. The case of Nugent V/s. Nugent [1908] 1 Ch. 546 is an authority which directly covers the question. In that case the rule of the Court was affirmed that a person in a fiduciary position having special means of knowledge ought not to be allowed to buy or bid for the property without the leave of the Court, and it was further held that this doctrine of the Court does not depend on the fact of undue knowledge but merely on the probability of it. It was also said in that case that the general principle which actuates the Court in deciding its procedure in matters of this kind is that nobody must allow himself to get into a position where his interest conflicts with his duty, and that the Court carries out this principle not by examining each particular case and weighing the details of the conflict between interest and duty, but by certain prohibitions with regard to persons who hold positions in which a conflict might arise. The receiver in that case was not a trustee for sale, but he was a defendant in a partition action and was in possession when the sale was held at the instance of a mortgagee outside the action. Two earlier decisions to the same effect were referred to and approved. Alven V/s. Bond Fl & F. 196 and Boddington V/s. Langford [1845] 2 Ir. Ch. 558n. The disability of a receiver in this respect is well-recognized in England (Kerr on Receivers, Edn. 9, pp. 264 and 285) as well as in America (High on Receivers, Edn. 4, para. 193.) In Woodroffe on Receivers, Edn. 4, pp. 211 and 213, is given the report of two cases from which it would appear that on the Original Side of this Court the practice is for a receiver to take the special leave of the Court if ho intends to bid at the sale. It is quite clear that if special leave has to be given or refused the facts of each particular case have to be considered with care and the expediency or inexpediency of the course to be adopted would have to be carefully weighed.

(3.) The question that next arises is whether the absence of the leave makes the sale void. Now if a decree holder purchases without taking the permission contemplated by the Code, the words of Sub-section 00, Section 294 of the Code of 1882, and Rule 72, Order 21 of the present Code, themselves show that the sale is not void nor a nullity, but is only to be avoided on the application of the judgment debtor or some other person interested. This is so even if permission was asked for and refused and considering the question whether the sale should be set aside or not it will have to be seen whether the property has been realized to the best advantage; see Radha Krishna V/s. Bisheshar Sahay A.I.R. 1922 P.C. 336. The case of Kanhaya Lal V/s. National Bank of India A.I.R. 1923 P.C. 114 upon which the respondent has relied, does not touch the present question, because their Lordships, while affirming the proposition that when -anyone is in a fiduciary position he cannot sell to himself, held that as a matter of fact no such position arose in the case. If Nugent V/s. Nugent [1908] 1 Ch. 546 should be held to apply to this country there can be no question of upholding the sale on the ground that the omission to take the special leave of the Court was merely an irregularity and that such irregularity would not vitiate the sale unless there was substantial injury-