The Supreme Court set aside the Madhya Pradesh High Court’s 15 May 2009 order, upheld the auction of a Delhi residential property, and clarified that the exemption under Section 60(1)(ccc) of the Code of Civil Procedure is personal to the judgment-debtor and cannot be claimed by legal representatives.
Background & Facts
The Dispute
The dispute arose out of the recovery of a debt owed by M/s. Sterling Malt & Foods Pvt. Ltd. (the Company) to Punjab & Sind Bank. The Company’s factory was located at 34, Industrial Area, Banmore, District Morena, MP. The Bank created a charge over the factory land, building, plant and machinery and obtained personal guarantees from the two directors - the judgment-debtor (the husband of Mohini Hardayal Singh) and Mr. N.S.S. Rao. The Delhi residential house (S-246, Panchsheel Park, New Delhi) was not mortgaged.
Key Facts
- 15 Oct 1991: Compromise decree passed by the Morena Court requiring the L.K. Trust and its trustees to pay Rs 1.80 crore in half-yearly instalments over seven years.
- 17 Nov 1994: Judgment-debtor died.
- 1992-1998: Trust paid approximately Rs 82,00,000 before defaulting, alleging the Bank’s failure to hand over possession of the factory.
- 12 Sep 1995: Execution petition filed before the Morena Court, impleading the widow (respondent 1) and her children.
- 19 Sep 1995 - 24 Jan 1997: Multiple notices under Order XXI Rule 22 issued but could not be served.
- 15 Dec 1998: Execution proceedings transferred to the Debts Recovery Tribunal (DRT), Jabalpur, under Section 31 of the Recovery of Debts and Bankruptcy Act, 1993.
- 20 Sep 2004: Recovery Officer ordered auction of the Delhi property.
- 24 Oct 2004: Respondent 1 applied to recall the auction order, citing lack of notice and the exemption under Section 60(1)(ccc).
- 13 Jul 2006: Factory premises (including 14 acres) auctioned for Rs 40,51,111.
- 27 Nov 2006: Delhi property auctioned; bid of the auction-purchaser (Sheela Gehlot) accepted.
- 22 Nov 2006: High Court interim order allowed auction to proceed but required leave for finalisation.
- 15 Jan 2007: High Court disposed of the writ petition, directing parties to appear before the DRAT.
- 29 May 2007: DRT allowed appeal of respondent 1, set aside the 2004 and 2006 orders, holding non-issuance of a recovery certificate was an irregularity, not a jurisdictional defect.
- 1 Feb 2008: Debts Recovery Appellate Tribunal (DRAT) set aside the DRT order, reinstating the auction.
- 15 May 2009: Madhya Pradesh High Court set aside the DRAT order, remitted the matter to DRT for fresh inquiry into notice defect and exemption claim.
- 14 Aug 2026: Supreme Court delivered the present judgment.
Procedural History
- 15 Oct 1991: Compromise decree (Morena Court).
- 12 Sep 1995: Execution petition (Morena Court).
- 07 Apr 1998: DRT established in Jabalpur.
- 15 Dec 1998: Transfer of execution to DRT.
- 20 Sep 2004: Recovery Officer ordered auction of Delhi property.
- 24 Oct 2004: Application by respondent 1 to recall auction.
- 13 Jul 2006: Auction of factory premises.
- 10 Oct 2006: DRT rejected recall application, ordered auction of Delhi property.
- 19 Oct 2006: Appeal (No. 31 of 2006) filed before DRT; stay application rejected (13 Nov 2006).
- 27 Nov 2006: Auction of Delhi property; bid of Sheela Gehlot accepted.
- 15 Jan 2007: High Court order directing appearance before DRAT.
- 29 May 2007: DRT allowed appeal, set aside earlier orders.
- 01 Feb 2008: DRAT set aside DRT order, reinstated auction.
- 15 May 2009: Madhya Pradesh High Court set aside DRAT order, remitted to DRT.
- 14 Aug 2026: Supreme Court allowed Civil Appeals No. 182 and 190 of 2016, dismissed No. 191, and quashed the High Court judgment.
Parties' Positions
- Appellants (Sheela Gehlot, Punjab & Sind Bank, Jagminder Singh) argued that:
- The mandatory notice under Order XXI Rule 22, while required, is only a procedural safeguard; its non-issuance is an irregularity that does not invalidate the auction.
- The DRT, operating under the 1993 Act, supersedes the Code of Civil Procedure; therefore, Rule 2 of the Second Schedule to the Income-Tax Act, 1961, governs notice, and its non-service does not void the sale.
- Section 60(1)(ccc) exemption is personal to the judgment-debtor and cannot be claimed by his legal representatives.
- Respondent 1 (Mohini Hardayal Singh) contended that:
- Failure to serve notice under Order XXI Rule 22 and Rule 2 of the Second Schedule rendered the auction void.
- As the Delhi house was her main residential dwelling, it was exempt from attachment under Section 60(1)(ccc).
- The DRT lacked jurisdiction to attach property situated outside its territorial limits.
Relief Sought
- Appellants sought confirmation of the auction sale, setting aside the High Court’s remand order, and declaration that the auction was valid.
- Respondent 1 sought recall of the auction, declaration of exemption under Section 60(1)(ccc), and direction that the Delhi property be released from attachment.
The Legal Issue
The central questions were: (i) whether the failure to issue a notice under Order XXI Rule 22 of the Code of Civil Procedure or under Rule 2 of the Second Schedule to the Income-Tax Act, 1961 renders an auction sale under the Recovery of Debts and Bankruptcy Act, 1993 void; and (ii) whether the exemption under Section 60(1)(ccc) of the Code of Civil Procedure is available to the legal representatives of a deceased judgment-debtor.
Arguments Presented
For the Appellant/Petitioner
The appellants relied on the mandatory language of Order XXI Rule 22, arguing that non-issuance constitutes an irregularity, not a jurisdictional defect, and that the 1993 Act expressly places the DRT’s procedure above the Code. They cited Satyanarain Bajoria v. Ramnarain Tiberwal and Sadhana Lodh v. National Insurance Co. to support the view that procedural lapses do not invalidate a sale where substantive rights are unaffected. They further relied on the settled interpretation of Section 60(1)(ccc) in Yogesh Sharma v. Devi Dayal that the exemption is personal to the judgment-debtor.
For the Respondent/State
The respondent argued that the statutory requirement of notice is mandatory and its omission defeats the jurisdiction of the executing authority. She invoked Yogesh Sharma v. Devi Dayal to claim that the main residential house of the widow should be protected. She also contended that the DRT lacked territorial jurisdiction over a Delhi property and that the 1993 Act could not override the specific notice provisions of the Code and the Income-Tax Act.
The Court's Analysis
The Court began by outlining the statutory framework. Section 31 of the Recovery of Debts and Bankruptcy Act, 1993, transfers execution proceedings to the DRT, which then applies Section 29 of the same Act, incorporating the procedural provisions of the Second Schedule to the Income-Tax Act, 1961. The Court noted that the DRT is a civil court for purposes of the Code but is not bound by its procedural rules; it must, however, observe the mandatory safeguards embedded in those rules.
"The requirement contained in Order XXI Rule 22 is mandatory and the use of the word ‘shall’ admits of no ambiguity; the executing court is under an obligation to issue notice…"
The Court held that the mandatory nature of the notice does not elevate a mere omission to a jurisdictional defect. Citing Satyanarain Bajoria and the principle that “irregularities that do not affect substantive rights are not fatal,” the Court concluded that the non-issuance of the notice was an irregularity, not a defect that vitiates the auction.
Turning to the notice under Rule 2 of the Second Schedule to the Income-Tax Act, the Court observed that the respondent-1 and her children were already parties to the execution proceeding and had actual knowledge of the auction, as evidenced by the filing of M.A. No. 65 of 2003 and the 24 Oct 2004 application. Consequently, the Court found no substantial injury within the meaning of Rule 61, and therefore the absence of the notice could not render the sale void.
Regarding Section 60(1)(ccc), the Court reiterated the long-standing view that the exemption is personal to the judgment-debtor. The provision expressly protects “one main residential house … belonging to a judgment-debtor … occupied by him.” The Court emphasized that a legal representative is a distinct juridical entity and cannot invoke the exemption merely by residing in the deceased’s house. This interpretation aligns with the decisions of the Delhi High Court and the Punjab & Haryana High Court.
Finally, the Court addressed the jurisdictional argument. By virtue of Section 31 of the 1993 Act, the DRT acquired authority to enforce the decree irrespective of the property’s location. The Court rejected the contention that the DRT lacked territorial jurisdiction, holding that the special enactment supersedes the territorial limits prescribed under the Code.
In sum, the Court answered the three questions affirmatively for the first (notice irregularity does not void sale), negatively for the second (failure of Rule 2 notice does not void sale), and negatively for the third (exemption not available to legal representatives).
The Verdict
The Supreme Court quashed the Madhya Pradesh High Court’s judgment dated 15 May 2009, set aside the remand order, and allowed Civil Appeals No. 182 of 2016 (Sheela Gehlot) and No. 190 of 2016 (Punjab & Sind Bank). Civil Appeal No. 191 of 2016 (Jagminder Singh) was dismissed. No order as to costs was made. The auction of the Delhi property stands confirmed, and the exemption under Section 60(1)(ccc) was held inapplicable to the widow and her children.
What This Means For Similar Cases
Irregular Notice Does Not Void Sale
- Practitioners must distinguish between a procedural irregularity and a jurisdictional defect. Non-issuance of a notice under Order XXI Rule 22, while mandatory, will not invalidate an auction unless it causes substantial injury.
- The burden shifts to the aggrieved party to demonstrate actual prejudice; mere allegation of non-service is insufficient.
Exemption Under Section 60(1)(ccc) Is Personal
- The protection is confined to the judgment-debtor himself. Legal heirs or representatives cannot claim the exemption, even if they occupy the same dwelling.
- Counsel should advise heirs to seek alternative reliefs, such as filing a fresh application under Rule 61 of the Second Schedule, rather than relying on Section 60(1)(ccc).
1993 Act Trumps the Code in Debt Recovery
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Once a case is transferred to the DRT under Section 31 of the 1993 Act, the tribunal’s procedure, governed by Section 29 and the Second Schedule to the Income-Tax Act, prevails over the Code of Civil Procedure.
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Lawyers must ensure compliance with the notice requirements of Rule 2 of the Second Schedule; however, failure to comply does not automatically render the execution void.
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Actionable takeaways:
- Verify whether the DRT or a civil court is the appropriate forum before invoking Code-based procedural safeguards.
- Document any actual prejudice caused by non-service of notice to satisfy the substantial injury test under Rule 61.
- Avoid raising a fresh exemption claim under Section 60(1)(ccc) on behalf of legal representatives; instead, focus on procedural remedies available under the 1993 Act.
