Sakina Tashrifwala
Published on: 26 September 2022 at 17:11 IST
A Division Bench of the Supreme Court of India stated that an heir’s right to engage in licitation and claim a specific item of property “at the appropriate time-when owelty was to be claimed” was not just a personal right that would expire with the heir’s death under the Portuguese Civil Procedure Code.
The apex court stated that because a bid is provided by the heir in their role as a member of the family, a piece of property for which they had successfully bid but for which no owelty was claimed by the other heirs would be heritable. It was discovered-
“If all other items are heritable by his heirs and legal representatives, an entirely different conclusion is unsupportable in regard to the item of property for which he bid successfully, but for which no demand was made, for payment of any amount…”
“[The heir’s] position and right as a successful bidder, and his obligation to pay the concerned amount, when called upon to do so, were heritable by his heirs and legal representatives.”
Thus, the Supreme Court upheld the Bombay High Court’s ruling, which was challenged in the current appeal, stating that the property in issue will pass to the respondents, who were the heirs of the highest bidder (now deceased) in a licitation.
The court was made up of Justices S. Ravindra Bhat and Sudhanshu Dhulia. [Mrs. Ethel Lourdes D’Souza Lobo vs. Lucio Neville Jude De Souza and Others]
Facts in Context
The current issue stems from inventory procedures initiated in 1985 to divide the estate of Lt. Guilherme Caetano Souza and his wife, Maria Guilhermina Augusta Lourdes Aguiar Souza, after their deaths. Guilherme and Maria left six children. The contested property was included in the licitation (closed auction in which participants comprise the heirs of the deceased who are entitled to share in the estate).
The highest bidder was one of the heirs, Maria (now deceased), However, a new bid was ordered since she failed to pay the owelty amount, which is the sum paid by a member in partition proceedings in return for being awarded properties in excess of their share.
Another heir, Hermano, was victorious in the second round of auctions. Hermano died before the final partition chart was completed, and any amount may be requested from him as owelty. One of another heir’s successors (appellant above) filed an application for re-auction of the property, but Hermano’s heirs objected, arguing that they could continue the procedures and were entitled to the property.
The trial court ruled that the property had to be reauctioned, but the court of first appeal and the High Court disagreed, ruling that the heir’s responsibilities and rights, including the right to pay owelty, passed to his legal successors (respondents herein).
Argument Synopsis
For the appellant, Advocate Keane Sardinha claimed that the rights conferred on a successful bidder who is a party to inventory proceedings do not pass to his heirs upon his death. He said that neither a bid at an auction nor a contract between the bidders and any interested parties created any right or interest in the property.
As a result, no heritable or legally enforceable right would transfer to the heirs of a deceased licitation participant. It was argued that the right to claim an item through an auction could never be a heritable right and would expire at the death of the bidder.
In contrast, the respondents’ attorney, Vibha Dutt Makhija, claimed that there was no reason to overturn the concurrent conclusions of the appeal court and the High Court. Makhija claimed that the sum that had to be paid as owelty was not the highest offer, but the amount specified in the partition chart.
Because the partition chart was not developed while Hermano was alive, the step of final partition had not been reached in this case. It was further argued that Hermano’s estate encompassed not only his rights and responsibilities as a shareholder in the inventory procedures, but also his right as a successful bidder for the contested property.
Court’s Decision
The Court denied the appeal and affirmed the Bombay High Court, Goa Bench’s judgement to deny the motion for reauction of the contested property.
First, the Court reiterated, citing its decision in Baburao Karekar v. Vilas Atmaram Bandodkar [(2015) 12 SCC 659] as well as a number of Bombay High Court rulings, that the payment of owelty, or any amount, by any heir, including one who successfully bids for an item, is contingent on a demand by one or more heirs.The Court elaborated –
“The limitation period, so to say, is dependent upon the demand so made. The reasoning behind this rule is that until the amount in excess of such bidder’s share is computed, they are unaware of the amount to be paid.”
“In the present case, it is not disputed by the appellant that such a demand was not made; the parties were not notified as to the amounts they were entitled to; and the respondent did not make the demand. For this reason, this court is not persuaded by the submissions of the appellant.”
The Court next considered whether Hermano’s right to claim a specific object in exchange for owelty constituted ‘property’ or merely a personal right. Noting that the term “inheritance” was defined broadly in Article 1737 of the Code and included “all properties, rights, and obligations of the author, which are not merely personal, or which are otherwise excepted by the disposition…”, the Court eventually concluded that the right to bid in the licitation process was not a personal right.
As a result, like other heritable objects, the property for which a winning offer was made but no owelty requested and paid would pass to the author of the bid’s heirs. The Court decided-
“The final chart of partition containing the excess payments to be made by one or other members of the family had not been prepared; no demand for payment or deposit of owelty was concededly made by any member of the family.”
“However, that did not mean that the highest bid by Hermano was, in some inexplicable manner, effaced. His position and right as a successful bidder, and his obligation to pay the concerned amount when called upon to do so, were heritable by his heirs and legal representatives.”