Order XXI Rule 72A CPC: Mortgagee Not to Bid Without Court Leave
Order 21 Rule 72A governs when a mortgagee may bid for or purchase immovable property at a court sale held in execution of a mortgage decree. It requires prior court leave and ordinarily a court-fixed reserve price applicable to the mortgagee.
Meaning and scope of Rule 72A
A mortgagee is the person in whose favour an interest in immovable property is transferred as security for a debt or obligation. A mortgage decree is a court decree concerning enforcement of rights under that mortgage. The executing court is the court implementing the decree through processes such as attachment and judicial sale.
Rule 72A is a special safeguard for mortgage-related execution sales. It operates notwithstanding the general decree-holder bidding rule under Order XXI Rule 72.
Order XXI Rule 72A: Statutory provisions explained
Sub-rule (1): Prior leave of the court
A mortgagee of immovable property must obtain the court's permission before bidding for or buying property sold in execution of a decree on the mortgage. The restriction applies to bidding as well as purchase.
Sub-rule (2): Court-fixed reserve price
Where leave is granted, the court must fix a reserve price as regards the mortgagee. Unless the court directs otherwise, the following benchmarks apply:
- Sale in one lot - clause (a): The reserve price must not be less than the principal, interest and costs then due in respect of the mortgage.
- Sale in separate lots - clause (b): For each lot, the reserve price must not be less than the amount the court considers properly attributable to that lot by reference to the total mortgage dues.
Sub-rule (3): Application of Rule 72(2) and Rule 72(3)
The provisions concerning set-off of the purchase price against decree dues and the consequences of purchasing without permission apply, as provided in Rule 72(2) and (3).
Why the reserve price matters
The reserve price is the minimum benchmark fixed by the court for the mortgagee's bidding, subject to a contrary judicial direction. It helps address the risk of a mortgagee acquiring the security for an unduly low bid while continuing to claim a balance of the debt. It is not necessarily the general auction reserve price applicable to every bidder.
Illustration: If the outstanding mortgage principal, interest and costs total Rs. 18 lakh and the mortgaged property is sold as one lot, the ordinary Rule 72A(2)(a) benchmark for the mortgagee is at least Rs. 18 lakh, unless the court directs otherwise. If the property is sold in lots, the court attributes an appropriate amount to each lot.
How a mortgagee may seek permission to bid
- Apply to the executing court before the proposed auction, identifying the decree, property and intention to bid.
- Disclose the outstanding principal, interest and costs and relevant mortgage accounts.
- Request express leave to bid or purchase and a determination of the applicable reserve price.
- Comply with the court's directions and the applicable sale proclamation and auction procedure.
- If a purchase is made, seek appropriate adjustment of the purchase money against decree dues where legally available.
The precise application procedure, documentary requirements and auction conditions depend on the executing court's orders and applicable local rules.
What happens if a mortgagee purchases without permission?
By virtue of Rule 72A(3), Rule 72(3) applies. On an application by the judgment-debtor or another person whose interests are affected, the court may set aside a purchase made by the decree-holder directly or through another person without the required permission. The decree-holder may also be liable for application costs, any deficiency on resale and expenses attending resale, as the rule provides.
Setting aside a sale is subject to judicial determination; it should not be described as automatically void in every case. Applicable High Court amendments and procedural requirements should also be checked.
Related CPC provisions
- Order XXI Rule 64 - Sale of attached property to satisfy the decree.
- Order XXI Rule 66 - Proclamation of sale by public auction.
- Order XXI Rule 67 - Mode of making the proclamation.
- Order XXI Rule 68 - Minimum interval before sale.
- Order XXI Rule 69 - Adjournment or stoppage of sale.
- Order XXI Rule 72 - Decree-holder bidding restrictions.
Frequently asked questions
Can a mortgagee bid at a court auction?
Yes, but where the auction is in execution of a decree on the mortgage, Rule 72A requires leave of the court before bidding or purchase.
Must the court fix a reserve price?
Yes. When granting leave to the mortgagee, the court fixes a reserve price as regards that mortgagee, with the statutory default benchmarks applying unless the court directs otherwise.
Can mortgage dues be adjusted against the purchase price?
Rule 72A(3) applies Rule 72(2), which permits a set-off subject to Section 73 CPC and the executing court recording satisfaction of the decree in whole or part.
Official legislation and source
Read the Code of Civil Procedure, 1908 - official India Code PDF and the India Code legislation record. Refer to the First Schedule, Order XXI, Rule 72A. State-specific amendments, if applicable, should be checked separately.
Editorial note: This article explains the central CPC provision for general legal information and does not replace advice based on the facts of a particular execution proceeding.