Order 21 Rule 90 CPC | Undervaluation or Procedural Lapses Constitute ‘Material Irregularity’, Not ‘Fraud’; Separate Suit to Bypass Limitation Impermissible: Supreme Court

“A litigant cannot be permitted to circumvent the law of limitation by artful drafting or by alleging fraud where only irregularity exists to maintain a separate suit.”— Clarifying the distinction between procedural lapses and actual fraud, the Supreme Court of India has held that allegations regarding the undervaluation of property or the manner of conducting an auction sale fall within the ambit of "material irregularity" under Order XXI Rule 90 of the Code of Civil Procedure (CPC) and cannot be branded as "fraud" merely to bypass the statutory limitation period for challenging a sale.

The Bench, comprising Justice J.B. Pardiwala and Justice R. Mahadevan, set aside a judgment of the Punjab and Haryana High Court, ruling that a separate civil suit filed years after an auction sale is not maintainable when the grievances raised could have been adjudicated by the Executing Court within the prescribed limitation period.

The Thin Line: Irregularity vs. Fraud

The core controversy arose when the Plaintiffs (Respondents) challenged a 1988 auction sale via a separate suit filed in 1989. To overcome the bar under Order XXI Rule 92(3)—which prohibits a separate suit to set aside a sale—the Plaintiffs alleged that the auction was vitiated by "fraud." Specifically, they claimed the property was sold for a "throwaway price" and the proceedings were conducted in camera without proper publicity.

The Supreme Court rejected this characterization, holding that such defects relate to the "publishing or conducting" of the sale.

“The grievance that the property was undervalued or that the sale was not properly published falls squarely within the domain of Order XXI Rule 90 CPC as a material irregularity, not fraud.”

The Court observed that the term "fraud" in civil litigation cannot be used loosely. For a sale to be considered void ab initio due to fraud, there must be evidence of deception that goes to the root of the decree. Procedural errors in the execution process, such as undervaluation, render a sale voidable upon application, not void.

The Limitation Hurdle: Article 127

The judgment emphasized the sanctity of limitation periods in execution proceedings. Under Article 127 of the Limitation Act, 1963, an application to set aside a sale in execution of a decree must be filed within 60 days from the date of the sale.

In this case, the Plaintiffs failed to file an application under Order XXI Rule 90 within the 60-day window. Instead, they filed a separate suit a year later, labeling the irregularities as fraud to escape the limitation bar.

“Law favors finality to litigation. The limitation provided under Article 127 is strict and cannot be extended by filing a separate suit under the guise of a declaratory relief.”

The Bench noted that allowing such suits would render the limitation period under the Limitation Act nugatory and keep auction purchasers in a state of perpetual uncertainty regarding their title.

Order XXI Rule 90 is a Complete Code

The Court reiterated that Order XXI Rule 90 is a self-contained code for addressing grievances related to auction sales. It allows any person whose interests are affected by the sale to apply to the Court to set it aside on the grounds of "material irregularity or fraud" in publishing or conducting it.

However, Rule 92(3) explicitly states that no suit to set aside an order confirming the sale shall be brought by any person against whom such an application is made or could have been made.

“When a specific remedy is provided under the Code with a specific limitation period, a party cannot abandon that remedy and resort to a separate suit.”

The Court held that since the Plaintiffs' grievances (undervaluation and lack of publicity) were grounds specifically covered under Rule 90, they were mandatorily required to approach the Executing Court within 60 days. Having failed to do so, they were barred from filing a fresh suit.

Undervaluation Alone is Not Fraud

Addressing the specific allegation of the property being sold at a low price, the Court referred to established precedents stating that mere undervaluation does not amount to fraud. The Court noted that the Executing Court had followed the procedure, and the Appellants were the highest bidders.

The Court concluded that the lower courts erred in treating "material irregularity" as "fraud" to grant relief to the Plaintiffs, thereby unsettling a sale confirmed decades ago.

Date of Decision: December 15, 2025