Sale of property in execution of a decree

One of the modes of execution of a decree of a civil court is either by attachment and sale, or by sale without attachment, of any property.

The provisions relating to sale of property in an execution proceeding are Sections 65 to 73, and the Rules 64 to 94 of the Order 21, of the Civil Procedure Code, 1908 (CPC). The Chapter VIII of the Civil Rules of Practice Kerala state the procedural matters relating to execution. The provisions cover both movable and immovable properties.

Court can attach and sell

The Section 64 of the CPC empowers any court executing a decree to order attachment of a property and put the sufficient portion of it for sale, and pay the sale proceeds to the Decree Holder (DH) to satisfy the decree.

The sale shall be confined to the sufficient portion of the property. The court shall, in its discretion, examine and determine whether the whole of the attached property or a portion of it alone needs to be put on sale to satisfy the decree. The court must sell only such portion which is necessary to satisfy the decree. It is a matter of obligation, but not of discretion. Excessive execution is unwarranted and unlawful.

The sale should be done by public auction by an officer of the court or someone else appointed by the court.

Court should issue proclamation of sale

The DH can apply for sale of the property along with an affidavit stating the particulars of the property and other required details and an encumbrance certificate for 12 years ( Order 21 Rule 66).

Along with the application the DH should produce a Drat Sale Proclamation (DSP) to be settled and approved by the court. The DSP should carry the following details:-

  • Time and place of sale
  • Property to be sold
  • Revenue arising upon the property
  • Encumbrances to the property
  • Amounts to be recovered
  • Other relevant material particulars the purchaser must know

The court should cause to issue notices to the Judgment Debtor (JD) and DH. The service of notice on the JD is an indispensable basic step, the failure of which will make the sale a nullity.

On hearing the DH and other parties and admitting the evidence the parties produce, the court should settle and approve the Sale Proclamation. The judge should then sign the proclamation of sale and make order for sale fixing the time, date and place.  

Within a week, the DH should pay the expenses of the sale and the fee for the proclamation and warrant to the court, along with the number of copies of proclamation as required. In case of failure the court may dismiss the petition.

The proclamation of sale shall be made by beat of drum or other customary practices. A copy of the proclamation must be affixed on a conspicuous part of the property, the Courthouse, the District Collector’s office and the office of the Gram Panchayat. If the court so directs, the proclamation should also be published in the Official Gazette or in a local news paper. Single proclamation is enough for a property consisting of divided plots unless it is impractical.

The purpose of issuing proclamation is to protect the interest of both the intending purchasers (by making all material facts available) and the JD (by exploring a better sale price). A sale conducted without publication of such a proclamation is not a mere irregularity but a nullity.

Sale to be concluded within 15/7 days

The sale shall not be conducted before 15 days in case of immoveable property and before 7 days in case of moveable properties, from the date of proclamation of notice, without the written consent of the JD. But the sale will be stopped then and there, if the JD pays the decree amount and other costs to the court or tendered to the officer conducting the sale.

The court has the discretion to adjourn the sale to a later date. If the adjournment is for more than 30 days a fresh proclamation is necessary if the JD does not consent to waive it.

The court sales in Kerala State shall commence at 1.45 pm and will come to a close at 3.15 pm. If any sale is not concluded it shall be adjourned to 1.45 pm on the next court day.

Sale of moveable property

The sale of all moveable properties shall be held within the jurisdiction of the court.  In case of agricultural produce the sale shall be generally held on or near the land on which the crop is standing or lying after harvest. In case of a negotiable instrument or a share in a company the court can order sale through a broker.

The payment shall be paid at the time of the sale. On payment of price, the sale becomes absolute. In case of default by the purchaser the property will be resold. The defaulting purchaser will be liable for the deficiency in price if any on resale and all the expenses of such resale (Order 21 rule 71).

Sale of moveable property cannot be set aside

Sale of a moveable property cannot be set aside on the ground of irregularity in publishing or conducting the sale. If there is substantial injury the person causing irregularity can be sued for compensation by the other person.

Sale of immoveable property

The execution court, at its discretion, can postpone sale for a reasonable period to enable JD to raise the decretal amount by private alienation such as sale mortgage, lease etc.

In such a case the court shall grant a certificate to the JD to do the proposed alienation of property.  All the moneys under the alienation shall be paid to the court. Such a sale by the JD to raise decretal amount will become complete only when it is confirmed by the court. The JD cannot claim this as a matter of right.

Immediately after the sale, the auction purchaser will have to deposit 25 per cent of the purchase money. The balance amount must be paid within 15 days. Not only balance of sale amount but also the amount required for general stamp for certificate should also be deposited within 15 days.

In case of failure in depositing the balance amount, no specific order is required to set aside the sale. It will automatically come into force just by efflux of time. The court has no jurisdiction to extend the time for payment of balance amount. It has discretion to forfeit the advance already paid by the purchaser as well.

Co owners can bid

If the property is sold is a share of an undivided immobile property a co-sharer has a right to bid and has a preference over the other when the bid amount is the same (Rule 88).

But a decree holder cannot purchase the property without permission of the court by applying its mind. If the court intends to grant permission it is necessary that a notice should be given to the JD, so as to ensure natural justice.

In execution of a mortgage property, a mortgagee needs to obtain permission of the court. When such permission is given in a mortgage sale, the court shall fix a reserve price (Reserve price is the price announced at an auction as the lowest that will be entertained) to avoid the mortgagee take undue advantage by purchase.

Highest bidder to be declared the purchaser

The highest bidder in an auction shall be declared to be the purchaser. The judge shall note the sale price and the name of the purchaser in the Sale Warrant under his signature.

The purchaser shall acknowledge his purchase by subscribing to a Sale Memorandum by noting the property, sale price and name & description of the purchaser.

Setting aside sale of immoveable property

When a property is sold in execution of a decree an application for setting aside sale can be made within 60 days, on grounds such as material irregularity, fraud substantial injury or the debtor has no saleable interest in the property.

In any application for setting aside, the applicant shall give five days notice, stating the objections to the sale, to the parties/auction purchaser. In case of failure in serving notice, the court may impose cost of adjournment to the applicant.

Setting aside on deposit of purchase money

The sale can be set aside by the court on receipt of deposit of purchase money. The application for setting aside the sale can be made by either the JD or any person having any interest in the property at the time of the sale.

The person applying for setting aside shall deposit 5 per cent of purchase money to the court for payment to the auction purchaser, and the entire amount in the proclamation for payment to the DH (Rule 89).

This must be made within sixty days. The order setting aside a sale is appealable.

For irregularity or fraud

A sale of property in execution can be set aside on the ground of material irregularity or fraud in publishing or conducting the sale, causing substantial injury to the party.

The term material irregularity refers to an irregularity on the part of the court or its offices in the procedure to be followed before the property is put up for sale. There is a distinction between irregularity and material irregularity.

The term fraud refers to dishonest and morally wrong things. The exercise of fraud must be in publishing and conducting the sale. The auction purchaser need not be a party to the fraud. Fraud must be established beyond doubt by the party alleging it, but vague allegations are not enough. The onus of proving substantial injury is also on the party alleging it.

A sale cannot be set aside unless material irregularity or fraud is shown to have resulted in substantial injury to the JD. Inadequacy of price or non-serving of notice is no ground to set aside sale. The irregularities mentioned in this context are post sale irregularities. JD or any person where interest is affected can apply for this. The burden of proving substantial injury is on the part of the applicant.

Omission to issue notice under Rule 22 of Order 21, publish sale proclamation mentioned prior encumbrances, state the rent payable, hold sale at the stated time and place etc are material irregularities. It must also be established that the JD has sustained substantial injury (Rule 90).

JD having no saleable interest

The sale can be set aside, if the JD has no saleable interest in the property. Auction purchaser alone can apply for setting aside the sale under this provision (Rule 91).

The rule is intended to protect the innocent auction purchaser. It is not possible to attribute no saleable interest when the JD has some saleable interest but not full interest (Rule91).

Effect of setting aside sale

When sale is set aside the purchaser is entitled to refund of the purchase money from the person to whom it has been paid, with or without interest as the court directs.

Similarly the defaulting party may be asked to pay the cost and expenses of the sale. The court may authorize anyone else having entitlement to the property, to conduct resale of the property.

An application for this purpose can be filed within three years from the date of the order (Rule 93).

Confirmation of sale

A sale of property will become absolute only when no application is made for setting aside the sale or the court confirms it.  The court will confirm the sale only when any claim to or objection to the attachment of the property in any pending case is disposed of.

When it is confirmed the title of the auction purchaser related back to the date of sale (Rule 92).

Certificate of sale

After the sale has become absolute, the court shall grant a certificate in favour of the purchaser.

The certificate shall bear the date on which the sale has become absolute. It should also specify the property and the name of the purchaser. The copy of the sale certificate shall be transmitted to the registering officer within the limits of whose jurisdiction the property situate.

Such certificate is merely a formal declaration by the court to avoid any controversy regarding the identity of the property. After the sale has become absolute the property shall be vested in the purchaser from the date when it is sold.

Issuance of such a certificate is just a ministerial act. It does not create or extinguish any title of its own (Rule 94).

Additional Reading

  1. The Code of Civil Procedure, 1908
  2. The Civil Rules of Practice Kerala
  3. The Limitation Act, 1963
  4. Takwani, C K: Civil Procedure with Limitation Act 1963. Lucknow, Eastern Book Company, 2015
  5. The Law of Civil Procedure & Limitation, published by the Academy of Legal Publications, Thiruvananthapuram

The author is an advocate at Thrissur. He can also be reached at rajankila@gmail.com

 

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