Facts
M/s. Sterling Malt & Foods Pvt. Ltd. had defaulted on bank dues, resulting in a compromise decree dated 15.10.1991. After further default, execution proceedings were initiated. The judgment-debtor died in 1994, and his wife and children were impleaded in the execution proceedings. The proceedings were subsequently transferred to the DRT under S.31 Recovery of Debts and Bankruptcy Act, 1993.
The Recovery Officer ordered auction of the Delhi residential property. The property was auctioned on 27.11.2006 and the sale was confirmed. The High Court subsequently set aside the DRAT order and remitted the matter for determining whether non-service of notice caused prejudice and whether the property was exempt under S.60(1)(ccc) CPC.
Issues Framed
(i) Whether non-compliance with Order XXI Rule 22 CPC affected the validity of the auction sale.
(ii) Whether failure to serve notice under Rule 2 of the Second Schedule to the Income-tax Act, 1961 rendered the execution or sale void.
(iii) Whether the Delhi property was exempt from attachment under Rule 10 of the Second Schedule read with S.60(1)(ccc) CPC. — Para 26.
Court’s Reasoning
(a) Order XXI Rule 22 CPC. The requirement of notice under Order XXI Rule 22 CPC is mandatory. However, the property was ultimately attached and sold by the Recovery Officer under the special mechanism of the 1993 Act, not in execution before the Morena Court. After transfer under S.31 Recovery of Debts and Bankruptcy Act, 1993, recovery was governed by S.29 Recovery of Debts and Bankruptcy Act, 1993 read with the Second Schedule to the Income-tax Act, 1961. Consequently, Order XXI Rule 22 CPC had no impact on the validity of the auction sale. — Paras 31–37.
(b) Non-service under Rule 2 of the Second Schedule. Rule 2 incorporates principles of natural justice by requiring notice of demand. However, Rule 61 specifically provides the remedy for non-service or material irregularity and requires substantial injury before a sale can be set aside. The respondent had actual knowledge of the execution proceedings and auction and had filed objections challenging the auction. She nevertheless did not invoke Rule 61 after the sale. Therefore, non-service did not render the execution or sale void. — Paras 38–40.
(c) S.60(1)(ccc) CPC. The protection of one main residential house under S.60(1)(ccc) CPC is expressly confined to a house “belonging to and occupied by” the judgment-debtor. The Court held that the protection is personal to the judgment-debtor and does not extend to his legal representatives. — Paras 41–44.
(d) Plea raised belatedly. The exemption was not pleaded before the Recovery Officer, DRT or in the earlier appellate proceedings. It was raised for the first time in writ proceedings. A mixed question of law and fact requiring factual foundation and evidence cannot ordinarily be raised for the first time in a writ petition. The High Court therefore erred in remitting the matter for a fresh inquiry. — Paras 45–46.
Held
The High Court judgment was quashed and set aside. C.A. Nos.182 and 190 of 2016 were allowed, while C.A. No.191 of 2016 was dismissed. No order as to costs was made.
Conclusion
The Supreme Court held that non-service of notice under Rule 2 of the Second Schedule to the Income-tax Act, 1961 did not invalidate the auction sale where the legal representatives had actual knowledge and suffered no substantial injury; the exemption under S.60(1)(ccc) CPC is personal to the judgment-debtor and unavailable to legal representatives.
Relevant Para
40. Admittedly, no notice under Rule 2 of the Second Schedule was served either on respondent no. 1 or on her children. However, it is pertinent to note, respondent no. 1 and her children were already parties to the execution proceedings. The respondent no. 1 had notice about the auction of Delhi property as she had filed M.A. No. 65 of 2003 before DRT, Delhi seeking release of original title deeds of the Delhi property. In the said M.A. respondent no.1 had stated about pendency of execution proceeding. The respondent no.1 had also filed an application seeking recall of the order dated 20.09.2004 directing an auction. Therefore, the question of substantial injury being caused to respondent no. 1 and her children on account of non-service of notice under Rule 2 of the Second Schedule to the 1961 Act, does not arise. It is also pertinent to note that even after the sale, the legal representative did not take recourse to the remedy provided under Rule 61 of the Second Schedule of the 1961 Act. Therefore, in the facts and circumstance of the case, absence of notice under Rule 2 of the Second Schedule to the 1961 Act, does not render either the execution or the sale void. Accordingly, the second question is answered in the negative.
Case Details
Citation: 2026 INSC 863
Decided on: 14 August 2026
Case Title: Sheela Gehlot v. Mohini Hardayal Singh & Ors.
Court: Supreme Court of India
Bench: Pamidighantam Sri Narasimha J.; Alok Aradhe J.