Karnataka HC Revives Auction Buyer’s Sale Certificate For Now, Sends Property Ownership Dispute Back For Hearing

The petitioner purchased property at a court auction conducted in execution of a decree.

Third-party respondents filed applications under Order XXI of the Code of Civil Procedure, 1908 (CPC), which the Executing Court rejected.

However, it also set aside the auction sale, cancelled the petitioner’s sale certificate, directed the decree-holder to refund the purchase price with interest, and dismissed the execution petition.

The Executing Court reasoned that the auctioned property belonged to a third party rather than the deceased judgment debtor, relying on a re-grant and mutation record.

The petitioner challenged the setting aside of the sale and cancellation of the certificate, arguing that the Executing Court had acted on its own under Order XXI Rule 90 without an application.

The proceedings concerned Order XXI CPC, including Rules 90, 97–104 and 58, and the execution court’s powers in relation to objections and court sales.

The Executing Court relied on Nani Gopal Paul v. P. Prasad Singh, (1995) 3 SCC 579, for the proposition that a court need not remain a “mute or helpless spectator” to an obvious illegality in a court sale and may set the sale aside suo motu.

The High Court did not determine the scope of that proposition; it held that the Executing Court had to identify the person said to own the property and afford that person an opportunity to be heard before making an appropriate order.

The Executing Court had concluded that the auctioned property belonged to someone other than the deceased judgment debtor, but its order did not identify that person or indicate that the person had received notice or raised an objection.

The applications filed by the objectors had been rejected, and the High Court found that the Executing Court had not adequately explained who owned the property or why it did not belong to the judgment debtor.

Accordingly, the High Court did not uphold the sale’s cancellation or the refund direction on the existing record; it remitted the matter for the ownership question to be addressed after hearing the person identified as the alleged owner.

The order was quashed insofar as it set aside the auction sale, cancelled the sale certificate, and directed the decree-holder to refund the purchase price.

The matter was remitted to the Executing Court to identify the person to whom the property was said to belong, hear that person, and pass an appropriate order within six months of receiving the certified copy of the High Court’s order.