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Supreme Court of India
H.S.Goutham vs Rama Murthy And Anr. Etc. on 12 February, 2021Author: M.R. Shah
Bench: Hon’Ble Dr. Chandrachud, M.R. Shah
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICITON
CIVIL APPEAL NO. 1844 OF 2010
H.S. Goutham .. Appellant
Versus
Rama Murthy and Anr. Etc. .. Respondents
with
CIVIL APPEAL NO. 1845 OF 2010
H.M. Ravindra Kumar .. Appellant
Versus
Rama Murthy &Ors. .. Respondents
JUDGMENT
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 16.09.2006 passed by the High Court of
Karnataka at Bangalore in RFA No. 274 of 2001, MFA No. 3934 of
2000 and CRP No. 3297 of 2000, the original plaintiff and the
Signature Not Verified
Digitally signed by
Sanjay Kumar
subsequent auction purchaser who purchased the property in
Date: 2021.02.12
15:16:32 IST
Reason:
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question in the Court auction in execution proceedings, have
preferred the present appeals.
2. The facts leading to the present appeals in nutshell are as
under:
2.1 That, as per the case of the original plaintiff, the respondents
herein – original defendants (hereinafter referred to as the ‘original
defendants’) borrowed a sum of Rs.1,00,000/- from the father of the
appellant herein – original plaintiff (hereinafter referred to as the
‘original plaintiff’) in the year 1990 by way of a simple mortgage
deed and then further Rs.50,000/- by way of a promissory note in
the year 1992. The deed of simple mortgage was executed on
11.07.1990. The mortgage deed was executed between the original
defendants as Mortgager and one partnership firm namely C.H.
Shantilal & Co. as Mortgagee. The original plaintiff is the son of
Shri C.H. Shantilal who was one of the partners of the firm which
was dissolved on 17.12.1994. That, as per the case of the original
plaintiff, the mortgager borrowed a loan of Rs.1,00,000/- from
mortgagee in order to clear their earlier debt in lieu of mortgage of
property – suit property. That the mortgager was to repay
Rs.1,00,000/- to the mortgagee within a period of 5 years from the
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day the deed was entered into along with interest at the rate of
1.5% per mensem or 18% per annum. That the interest was
required to be paid by the mortgagers to the mortgagee every month
on or before the 10th of each month. According to the original
plaintiff, in the event of failure to pay the principal or interest
within the period, the mortgagee will be entitled to enforce the said
mortgage and cause the property or any portion sold and
appropriate the proceeds towards the satisfaction of the mortgage
deed. A promissory note was also executed by the original
defendants while taking a further sum of Rs.50,000/- on
13.12.1992 and created a further charge in the mortgaged property.
That, as the defendants-mortgagers did not pay the aforesaid
amount, the plaintiff filed a suit being O.S. No. 3376 of 1995 on
30.5.1995 before the Court of learned City Civil Judge at Bangalore
for a sum of Rs.2,50,000/- together with interest thereon. It was
also further prayed that on failure of the defendants to pay the
decretal amount, the plaintiff shall be at liberty to sell the
mortgaged property and the sale considerations so realized to be
adjusted over the decretal amount. According to the plaintiff, the
defendants filed a written statement on 31.05.1995 and admitted
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borrowing of Rs.1,50,000/-. According to the plaintiff, the
defendants were represented by an Advocate. A
Compromise/Settlement was entered into between the plaintiff and
the defendants on 01.06.1995. The defendants agreed to pay to the
plaintiff a sum of Rs.2,50,000/- in a monthly installment of
Rs.5,000/- within three years. Learned Trial Court accordingly
decreed the suit in terms of the compromise vide judgment and
decree dated 01.06.1995. That the plaintiff filed an execution
petition being Execution Petition No. 232 of 1996 before the Court
of City Civil Judge, Bangalore on 28.02.1996. The judgment
debtor-defendant entered appearance through an advocate on
21.06.1996 in the execution petition. That the judgment debtor-
defendant filed objections in the execution petition and contended
that the decree dated 01.06.1995 was obtained by fraud. By order
dated 03.03.1998, the Executing Court overruled the objections of
the judgment debtor-defendant and specifically observed that the
objections of the judgment debtor that the decree has been obtained
by fraud, mis-representation etc., are overruled. By overruling the
objections raised by the judgment debtor, learned Executing Court
specifically observed that the judgment debtor has failed to lead any
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evidence in support of his objections that the decree was obtained
by fraud or mis-representation. That, thereafter, learned Executing
Court issued sale proclamation of the mortgaged property on
21.11.1998. The mortgaged property was put to sale by the
Executing Court. The appellant in Civil Appeal No. 1845 of 2010
was declared the highest bidder. He deposited 25% of the bid
amount on 11.02.1999 itself on the day on which the sale was
conducted. The auction purchaser offered Rs.4,50,000/- and his
bid was accepted by the Executing Court. After the bid of the
auction purchaser was accepted, the judgment debtors filed I.A. No.
03 of 1999 on 19.02.1999 in the Execution Petition under Section
151 C.P.C. before the learned Additional City Civil Judge (Executing
Court) to stay further proceedings with regard to sale of the subject
mortgaged property. On 22.02.1999, the judgment debtors filed
another I.A. No. 04 of 1999 in the Execution Petition under Order
XXI read with Rule 90 and Order XXI read with Rule 47 and Section
151 CPC to set aside the court auction/sale dated 11.02.1999 and
18.02.1999 with respect to the subject mortgaged property. By
order dated 30.10.1999 the learned Executing Court dismissed both
the aforesaid applications. While dismissing I.A. No. 3 of 1999, the
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learned Executing Court observed that the earlier order dated
03.03.1998 was a speaking order and the objections raised by the
judgment debtors were overruled and the same had attained the
finality as the same has not been assailed by the judgment debtor
before any competent Appellate Forum. Learned Executing Court
also further observed that the Executing Court cannot go behind
the decree so as to decide the question of correctness and validity of
the decree, when the decree has become final. The learned
Executing Court dismissed I.A. No. 04 of 1999 on the ground that
the judgment debtors have not deposited the decretal amount of
Rs.4,50,000/- together with interest in terms of Order XXI Rule 90
and therefore it does not entitle them to any relief for setting aside
the sale as per the requirement of Order XXI Rule 90. That,
thereafter, the sale of the mortgaged property came to be confirmed
in favour of the auction purchaser on 17.11.1999. Sale certificate
was issued by the Court in favour of the auction purchaser and the
sale was registered with the Sub-Registrar on 23.11.1999. That the
judgment debtors thereafter on 24.11.1999 filed Civil Revision
Application No. 3699 of 1999 before the High Court against the
order dated 30.10.1999 passed by the learned Executing Court in
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I.A. No. 4 of 1999 which was thereafter converted into MFA No.
3934 of 2000. The judgment debtors thereafter filed another Civil
Revision Application No. 3700 of 1999 in the High Court against the
order dated 30.10.1999 passed by the learned Executing Court in
I.A. No. 3 of 1999. The High Court vide its order dated 06.01.2000
dismissed Civil Revision Application No. 3700 of 1999 by observing
that the issue regarding fraud has attained finality as the order
dated 03.03.1998 passed by the learned Executing Court overruling
the objections of the judgment debtor had attainted finality and the
same remained unchallenged. Having realized that the judgment
debtors were required to challenge the order dated 03.03.1998
overruling the objections, thereafter, after a period of two years from
date of the order dated 03.03.1998, the judgment debtors filed Civil
Revision Application No. 3297 of 2000 before the High Court.
Thereafter and having realized that non-challenging of the judgment
and decree dated 01.06.1995 passed by the learned Trial Court in
O.S. No. 3376 of 1995 shall come in their way, after a period of five
years from the date of passing the judgment and decree dated
01.06.1995, the judgment debtors filed an appeal being RFA no.
274 of 2001 in the High Court. The said appeal was preferred in
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the year 2001. It is the case on behalf of the plaintiff that before
the High Court a Compromise Petition was prepared on 10.06.2004
wherein the judgment debtors agreed to pay Rs.6,96,062/- in full
and final settlement of the decree passed by the learned Trial Court.
However, at the time of filing of the Compromise Petition, the
judgment debtors withdrew from the compromise agreed by them.
Thereafter, the aforesaid first appeal proceeded further. The High
Court vide order dated 19.09.2005 called for a finding/report from
the Principal City Civil Judge and directed him to hold an enquiry
as to whether the decree passed in O.S. No. 3376 of 1995 was
obtained by fraud. The propriety and legality of the said order of
calling for a report/finding from the learned Principal City Civil
Judge shall be dealt with hereinafter at an appropriate stage. That
the learned Principal City Civil Judge submitted the report dated
06.12.2005 before the High Court wherein he recorded the finding
that the decree in O.S. No. 3376 of 1995 had been obtained by
fraud. Relying upon the report submitted by the Principal City
Civil Judge dated 06.12.2005 and having opined that the decree in
O.S. No. 3376 of 1995 was obtained by fraud, the High Court vide
its impugned judgment and order dated 16.09.2006 has allowed the
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appeals being RFA No. 274 of 2001, MFA No. 3934 of 2000 and CRP
No. 3297 of 2000 and the operative part of the impugned common
judgment and order passed by the High Court is as under:
“RFA No. 274/2001 is allowed with cost. The order and
decree passed by the Court of XV Addl. City Civil Judge,
Bangalore in O.S. No. 3376/1995 dated 1.6.1995 is set
aside and suit is remitted to the Addl. City Civil Judge,
Bangalore, for fresh disposal, in accordance with law.
Defendants are permitted to file written statement within
sixty days from today before the trial court.
MFA No. 3394 /2000 is allowed. Order dated
30.10.1999 is set aside. However, it is open to the
auction purchaser to make an application before the trial
court for refund of the amount deposited by him and
reimbursement of the amount spent by him for
registration of the sale deed and other expenses incurred
by him and trial court shall consider the said application
and dispose of the same, in accordance with law.
CRP No.3297/2000 is allowed. Order dated 3.3.98
is set aside.”
2.2 Feeling aggrieved and dissatisfied with the impugned common
judgment and order passed by the High Court in allowing the
appeals and quashing and setting aside the judgment and decree
dated 01.06.1995 passed in O.S. No. 3376 of 1995; quashing and
setting aside the order dated 30.10.1999 passed by the learned
Executing Court and quashing and setting aside the order dated
03.03.1998 passed by the learned Executing Court in overruling the
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objection raised by the judgment debtors, the original defendants as
well as the successful auction purchaser have preferred the present
appeals.
3. Shri Rahul Arya, learned advocate appearing on behalf of the
original plaintiff has vehemently submitted that the High Court has
committed an error in quashing and setting aside the consent
decree and also in quashing and setting aside the orders dated
01.06.1995 and 30.10.1999. It is vehemently submitted that the
High Court has materially erred in relying upon the report
submitted by the learned Principal City Civil Judge that the decree
in O.S. No. 3376 of 1995 has been obtained by fraud. It is
vehemently submitted that as such even the defendants admitted in
the proceedings before the Principal City Civil Judge that he had
mortgaged the property for Rs.1,00,000/- under the registered
mortgage deed and that he took a further sum of Rs.50,000/- from
Shantilal by executing a pro-note in his favour. It is submitted that
he also admitted that the amount was not repaid. It is submitted
that in fact and as an after-thought, the defendant came up with a
case that he repaid the money. However, even as observed by the
learned Principal City Civil Judge, he could not prove the payment.
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It is submitted that the conduct on the part of the defendant that
he has come up with a case that the consent decree in O.S. No.
3376 of 1995 was obtained by fraud is dishonest attempt to get out
of the consent decree.
3.1 It is submitted that in fact the original defendant No. 1 had
put his signature on the Vakalatnama, written statement and the
compromise deed. It is submitted therefore that it is not a case of
forged signature. It is further submitted that calling the report from
the Principal City Civil Judge and directing him to hold an enquiry
as to whether the decree was obtained by fraud itself was contrary
to the provisions of the CPC and such a procedure is unknown to
law. It is submitted that as such by referring the matter to the
learned Principal City Civil Judge, the High Court gave ample
opportunity to the defendants to fill in the lacuna. It is submitted
that as such the learned Executing Court by passing the order
dated 03.03.1998 specifically observed that the judgment debtors
have failed to prove by leading cogent evidence that the decree was
obtained by fraud. It is submitted that as such after two years of
the order dated 03.03.1998 overruling the objections raised by the
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judgment debtors, a revision was filed belatedly and as an after-
thought.
3.2 It is submitted that as such the first appeal itself before the
High Court against the consent decree was not maintainable in view
of the provisions of Section 96 read with Order XXIII of the CPC. It
is submitted that the High Court has not properly appreciated and
considered the fact that against the consent decree, the appeal shall
not be maintainable. It is submitted that the High Court has
materially erred in holding that the appeal would be maintainable.
3.3 It is further submitted that the High Court has failed to
appreciate that the judgment debtors – original defendants
challenged the consent decree dated 01.06.1995 only in the year
2001. It is submitted that in between number of proceedings were
initiated before the Executing Court and the orders were passed by
the Executing Court dated 03.03.1998, 30.10.1999 and even the
mortgaged property was auctioned and the sale certificate was
issued in favour of the auction purchaser in the month of November
1999 itself and the judgment debtors-original defendants did not
challenge the consent decree on the ground that it was obtained by
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fraud till 2001. It is submitted therefore that the conduct of the
respondents suffers from delay and laches.
3.4 It is further submitted that the High Court has failed to
appreciate that pursuant to the compromise decree, execution
proceedings were filed, sale notice had been issued, immovable
property was sold, sale came to be confirmed in favour of the
auction purchaser and the auction purchaser paid the sale
consideration in the court and even thereafter the sale certificate
was issued and registered before the Sub-Registrar in the year 1999
itself.
3.5 It is further submitted by the learned advocate appearing on
behalf of the original plaintiff that the judgment debtors failed to
deposit the amount of sale consideration before the Executing
Court, which was required to be deposited under Order XXI Rule 90
of the CPC. It is submitted that therefore the High Court has
materially erred in quashing and setting aside not only the consent
decree, but also the orders dated 01.06.1995 and 30.10.1999.
3.6 It is submitted that the learned Principal City Civil Judge erred
in believing the plea of the judgment debtors-original defendants
that as the compromise process and the written statement were in
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English and he was knowing only the vernacular language, he did
not know what was there in the written statement and the consent
compromise deed. It is submitted that the original defendants have
signed the mortgage deed which was in English and was also signed
by them on each and every page, it cannot be construed that the
defendants were familiar only with the vernacular language.
4. Learned counsel appearing on behalf of the auction purchaser-
appellant in Civil Appeal No. 1845 of 2010 has further submitted
that the appeal itself before the High Court challenging the consent
decree was not maintainable at all in view of the bar contained in
Order XXIII Rule 3 and Section 96(3) CPC. In support of the above
submission, he has heavily relied upon the decision of this Court in
Pushpa Devi Bhagat v. Rajinder Singh (2006) 5 SCC 566.
4.1 It is further submitted by the learned counsel appearing on
behalf of the auction purchaser that as such the auction purchaser
purchased the property in the execution proceedings after he was
declared the highest bidder. It is submitted that in the year 1999
itself the auction purchaser deposited the entire amount of sale
consideration before the Executing Court and even a sale certificate
was also issued in favour of the auction purchaser. It is further
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submitted that therefore in view of the Order XXI Rule 92 read with
Rule 94 once the sale has become absolute and as held by this
Court in the case of Chinnammal v. P. Arumugham(1990) 1 SCC
513, subsequent reversal of the decree shall not affect the auction
purchaser who is not a party to the decree. It is submitted that as
held by this Court in the aforesaid decision, the property bona fidely
purchased ignorant of litigation should be protected. It is
submitted that despite the fact that in the year 1999 the auction
purchaser deposited the entire amount, because of the subsequent
initiation of proceedings by the judgment debtors, the auction
purchaser is not in a position to enjoy the property which the
auction purchaser has purchased on payment of full sale
consideration purchased in an auction in the execution
proceedings.
4.2 It is further submitted that the High Court has failed to
consider the conduct on the part of the judgment debtors-original
defendants. It is submitted that even before the High Court a
compromise petition was prepared wherein the judgment debtors-
original defendants agreed to pay Rs.6,96,062/- in full and final
settlement of the decree passed by the learned Trial Court, however,
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at the time of the compromise petition, the respondents withdrew
from the compromise agreed by them. It is submitted that before
the learned Principal City Civil Judge, the judgment debtor- original
defendant admitted the said compromise petition and admitted that
he put his signature on the compromise petition voluntarily and
with free consent. It is submitted that therefore all through-out the
conduct on the part of the defendants as original debtor is dis-
honest and to delay the proceedings and deprive the auction
purchaser from using the property purchased in the year 1999.
5. Shri P.R. Ramasesh, learned advocate appearing on behalf of
the original defendants-judgment debtors has supported the
impugned judgment and order passed by the High Court.
5.1 It is vehemently submitted that the learned Principal City Civil
Judge in its report, which was called for by the High Court, has
specifically observed that the consent decree was obtained by fraud.
It is submitted that therefore relying upon the report/finding by the
learned Principal City Civil Judge and when the High Court has
also come to the conclusion that the consent decree was obtained
by fraud, the High Court has rightly set aside the consent decree
and has rightly quashed and set aside the judgment and decree
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dated 01.06.1995 and order dated 30.10.1999 passed by the
Executing Court and has rightly remanded the matter to the
learned trial court to decide the suit on merits.
5.2 It is submitted that the High Court has rightly held that the
first appeal against the consent decree would be maintainable.
5.3 It is submitted that the findings recorded by the learned
Principal City Civil Judge that the consent decree obtained by fraud
is on re-appreciation of evidence. It is submitted that the High
Court rightly directed the Trial Court to hold an enquiry whether
the decree was obtained by fraud, mis-representation. It is
submitted that once it is observed and held that the consent decree
was obtained by fraud, mis-representation right from the beginning
and even prior to the filing of the suit, such consent decree is not a
decree in the eye of law and therefore the High Court has rightly set
aside the consent decree and remanded the matter to the Trial
Court to decide the suit on merits. It is submitted that therefore all
other subsequent orders passed in the executing proceedings would
be nullity and therefore the same are rightly set aside by the High
Court.
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5.4 Making the above submissions, it is prayed to dismiss the
present appeals.
6. Heard learned counsel appearing on behalf of the parties at
length.
6.1 At the outset, it is required to be noted that by the impugned
common judgment and order, the High Court has allowed the first
appeal preferred by the original defendants and has quashed and
set aside the consent decree passed by the learned Trial Court in
O.S. No. 3376 of 1995 dated 01.06.1995, much after the mortgaged
property came to be sold in the execution proceedings and much
after the sale in favour of the auction purchaser was confirmed and
the sale certificate was also issued. By the impugned judgment and
order, the High Court has also set aside the order dated 30.10.1999
passed by the learned Executing Court in I.A. No. 4 of 1999, by
which the learned Executing Court dismissed the application
preferred by the judgment debtors under Order XXI Rule 90 read
Section 47 C.P.C. praying for setting aside the Court auction sale.
By the impugned judgment and order, the High Court has also
allowed the Revision Application being CRP No. 3297 of 2000 and
has also quashed and set aside the order dated 03.03.1998
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overruling the objections raised by the judgment debtors, more
particularly, overruling the objection raised by the judgment
debtors that the consent decree was obtained by fraud. As
observed hereinabove, both the judgment creditor-original plaintiff
and the auction purchaser in whose favour the sale deed was
confirmed and the sale certificate was issued in his favour as far
back as on 17.11.1999/23.11.1999, have preferred the present
appeals.
7. Therefore, the short question which is posed for consideration
of this Court in the present appeals is whether in the facts and
circumstances of the case, more particularly, when the mortgaged
property was sold in the court auction in the execution proceedings
and the sale was confirmed in favour of the auction purchaser and
the sale certificate was issued and sale was confirmed after
overruling the objections raised by the judgment debtors, more
particularly, the objection that the consent decree was obtained by
fraud and that initially the consent decree was not challenged at all
and not only that, even order dated 03.03.1998 overruling the
objections raised by the judgment debtors was also not challenged
at the earliest, the High Court is justified in quashing and setting
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aside the consent decree on the ground that the same was obtained
by fraud, relying upon the report submitted by the Principal City
Civil Judge which was called for in the appeal.
8. While considering the above-said questions, as such, the
conduct/inaction on the part of the judgment debtors after the
consent decree was passed are required to be considered, which are
referred to hereinabove and which are again reiterated as under:
8.1 That the learned Trial Court passed the consent decree on
01.06.1995 and decreed that the defendants shall pay to the
plaintiff a sum of Rs.2,50,000/- in a monthly installment of
Rs.5,000/- within three years from that day. At the outset, it is
required to be noted that the execution of the simple mortgage
deed, execution of the promissory note and taking the amounts of
loan, have not been disputed by the judgment debtors. That, after
the consent decree was passed on 01.06.1995, the judgment
creditor-original plaintiff filed an execution petition before the
Additional City Civil Judge, Bangalore, being Execution Petition No.
232 of 1996 on 28.02.1996. The judgment debtors entered
appearance through an Advocate in the execution petition on
21.06.1996. Therefore, at least, it can be said that the judgment
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debtors were aware of the consent decree at least on 21.06.1996.
Instead of challenging the said consent decree on the ground that it
was obtained by fraud, the judgment debtors filed their objections
in the execution petition contending that it was obtained by fraud.
Such objections were filed on 04.10.1996. Learned Executing
Court by a reasoned order dated 03.03.1998 overruled the
objections of the judgment debtors that the decree has been
obtained by fraud, mis-representation etc., by specifically observing
that after filing of the objections, the matter was being posted for
hearing, but the judgment debtors did not either adduce any
evidence in that behalf nor have they addressed any arguments also
and, therefore, in the absence of any proof of the allegation of fraud
etc. made by the judgment debtors, the objections have to be
overruled. That the judgment debtors did not challenge the order
dated 03.03.1998 before the higher forum. Thereafter, after a
period of eight months from the passing of the order dated
03.03.1998, the learned Executing Court issued the sale
proclamation of the mortgaged property on 21.11.1998. The spot
sale was held on 11.02.1999. The auction purchaser-appellant in
Civil Appeal No. 1845 of 2010 was declared as the highest bidder.
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He deposited 25% of the bid amount. After his bid was accepted
being the highest bidder, the Executing Court confirmed the
sale/bid on 18.02.1999. Thereafter, judgment debtors filed I.A. No.
03 of 1999 before the Executing Court for stay of further
proceedings in respect of sale of the subject mortgaged property.
Judgment debtors also filed I.A. No. 4 of 1999 under Order XXI
Rule 90 read with Rule 47 CPC before the Executing Court for
setting aside Court sale in respect of the subject mortgaged
property. The learned Executing Court dismissed both the
aforesaid applications. Learned Executing Court dismissed I.A. No.
3 of 1999 by observing that the order dated 03.03.1998 overruling
the objections filed by the judgment debtors has attained the
finality as the same has not been assailed before any appellate
forum and that the Executing Court cannot go behind the decree so
as to decide the question of correctness and validity of the decree,
when the decree had become final. The learned Executing Court
dismissed I.A. No. 4 of 1999 on the ground that the judgment
debtors have not deposited the decretal amount of Rs.4,50,000/-
together with interest in terms of Order XXI Rule 90 and therefore
the judgment debtors are not entitled to seek for setting aside of the
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sale as per the requirement of Order XXI Rule 90. That, thereafter
the learned Executing Court confirmed the sale in favour of the
auction purchaser on 17.11.1999. On 23.11.1999, the sale
certificate was issued by the court in favour of the auction
purchaser and the sale was registered with the Sub-Registrar.
That, after the sale was confirmed and the sale certificate was
issued in favour of the auction purchaser and after the sale was
registered with the Sub-Registrar, the judgment debtors filed Civil
Revision Petition No. 3699 of 1999 in the High Court of Karnataka
against the order dismissing I.A. No. 4 of 1999, which was
thereafter converted into MFA No. 3934 of 2000. Thereafter the
judgment debtors also filed Civil Revision Petition No. 3700 of 1999
in the High Court of Karnataka at Bangalore against the order
dated 30.10.1999 passed by the Executing Court. Civil Revision
Petition No. 3700 of 1999 came to be dismissed by the High Court
by an order dated 06.01.2000 holding that the issue that the decree
was obtained by fraud has attained finality in view of order dated
03.03.1998 rejecting the objections of the judgment debtors
remained unchallenged. That, thereafter, after the lapse of around
two years, the judgment debtors challenged the order dated
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03.03.1998 by filing CRP No. 3297 of 2000. At this stage, it is
required to be noted that till this time judgment debtors did not
challenge the decree dated 01.06.1995 before the High Court. That,
after a period of five years from the date of passing of the judgment
and decree dated 01.06.1995 the judgment debtors preferred RFA
No. 274 of 2001 challenging the decree dated 01.06.1995 passed by
the learned Trial Court on the ground that the same has been
obtained by fraud and mis-representation. After a period of five
years from the date of filing of the appeal, the High Court called for
a finding/report from the learned Principal City Civil Judge and
directed him to hold an enquiry as to whether the decree dated
01.06.1995 was obtained by fraud. The legality and propriety of the
said order shall be dealt with hereinbelow at an appropriate stage.
Before the learned Principal City Civil Judge, the judgment debtors
led the evidence in support of their claim that the judgment and
decree was obtained by fraud and mis-representation, which
evidence was not led by them before the Executing Court when they
submitted the objections and contended that the decree was
obtained by fraud. That, thereafter, the learned Principal City Civil
Judge submitted the report that the decree was obtained by fraud
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and on the basis of the report submitted by learned Principal City
Civil Judge mainly, the High Court has set aside the judgment and
decree by the impugned judgment and order. Thus, from the
aforesaid it is crystal clear that all through-out there was a delay
and negligence on the part of the judgment debtors in not initiating
the appropriate proceedings at appropriate stage. Order dated
03.03.1998 overruling the objections submitted by the judgment
debtors to the effect that the judgment was obtained by fraud and
mis-representation was not challenged by the judgment debtors till
the mortgaged property was auctioned; sale of the mortgaged
property was confirmed in favour of the auction purchaser and even
the sale certificate was issued in favour of the auction purchaser
and sale was registered with the Sub-Registrar and even also the
dismissal of I.A. No. 3 of 1999 and I.A. No. 4 of 1999. Not only that,
till that time even no appeal was assailed/challenged before the
higher forum. The first appeal was filed in the year 2000 and by
that time the mortgaged property was already sold in the execution
proceedings and the sale was confirmed in favour of the auction
purchaser and even the sale certificate was issued in favour of the
auction purchaser.
26
9. At this stage, it is required to be noted that as per the relevant
provisions of the Code of Civil Procedure, more particularly, Order
XXI Rule 92 read with Order XXI Rule 94, once the sale is
confirmed and the sale certificate has been issued in favour of the
purchaser, the same shall become final.
10. Now, so far as the procedure adopted by the High Court calling
for the report from the learned Principal City Civil Judge on whether
the decree was obtained by fraud or not is concerned, at the outset,
it is required to be noted that at the time when the High Court
passed such an order, there was already an order passed by the
learned Executing Court dated 03.03.1998 overruling the objections
raised by the judgment debtors that the decree was obtained by
fraud and mis-representation. As observed by the learned
Executing Court in the order dated 03.03.1998, the judgment
debtors except the averments that the decree was obtained by
fraud, mis-representation, neither any further submissions were
made on that nor even the judgment debtors led any evidence in
support of the same. Therefore, as such, learned Executing Court
was justified in overruling the objection that the decree was
obtained by fraud, mis-representation etc. As per the settled
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principle of law, when the fraud is alleged the same is required to
be pleaded and established by leading evidence. Mere allegation
that there was a fraud is not sufficient. Therefore, subsequent
order passed by the High Court calling for the report from the
learned Principal City Civil Judge on the question whether the
decree was obtained by fraud or not, can be said to be giving an
opportunity to the judgment debtors to fill in the lacuna. Therefore,
the course adopted by the High Court calling for the report from the
learned Principal City Civil Judge cannot be approved.
10.1 Even otherwise, it is required to be noted that as per the
provisions of Order XLI, the appellate court may permit additional
evidence to be produced whether oral or documentary, if the
conditions mentioned in Order XLI Rule 27 are satisfied after the
additional evidence is permitted to be produced in exercise of
powers under Order XLI Rule 27. Thereafter, the procedure under
Order XLI Rules 28 and 29 is required to be followed. Therefore,
unless and until the procedure under Order XLI Rules 27, 28 and
29 are followed, the parties to the appeal cannot be permitted to
lead additional evidence and/or the appellate court is not justified
to direct the court from whose decree the appeal is preferred or any
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other subordinate court, to take such evidence and to send it when
taken to the Appellate Court. From the material produced on
record, it appears that the said procedure has not been followed by
the High Court while calling for the report from the learned
Principal City Civil Judge.
10.2 Even otherwise, it is required to be noted that at the time
when the learned Principal City Civil Judge permitted the parties to
lead the evidence and submitted the report/finding that the decree
was obtained by fraud, there was already an order passed by the
Executing Court-Co-ordinate Court overruling the objections made
by the judgment debtors that the decree was obtained by fraud.
Therefore, unless and until the order dated 03.03.1998 was set
aside, neither the High Court was justified in calling for the report
from the learned Principal City Civil Judge nor even the learned
Principal City Civil Judge was justified in permitting the judgment
debtors to lead the evidence on the allegation that the decree was
obtained by fraud, mis-representation, when the judgment debtors
failed to lead any evidence earlier before the Executing Court when
such objections were raised.
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11. From the impugned judgment and order passed by the High
Court, it appears that the High Court has heavily relied upon the
report submitted by the learned Principal City Civil Judge and
thereafter has come to the conclusion that the decree was obtained
by fraud, mis-representation. Therefore, in the facts and
circumstances of the case and for the reasons stated above, the
High Court has committed an error in relying upon the report
submitted by the learned Principal City Civil Judge holding that the
decree was obtained by fraud.
11.1 Even otherwise, on perusal of the evidence led before the
learned Principal City Civil Judge and even the findings recorded by
the learned Principal City Civil Judge and the reasoning given by
the High Court while holding that the decree was obtained by fraud,
we are of the opinion that, in the facts and circumstances of the
case, and even on the evidence led, the High Court has erred in
holding that the decree was obtained by fraud. The judgment
debtors-original defendants have put their signatures on the written
statement or on the consent terms. The mortgaged property and
the promissory note are not in dispute. Therefore, when the suit
was filed and the judgment debtors wanted to get more time to
30
repay the amount and when it was agreed to pay Rs.4,50,000/-
(suit claim) in a monthly installment of Rs.5,000/- within three
years, nothing was unnatural.
12. Now, so far as the objection raised on behalf of the appellant
herein that the appeal before the High Court against a consent
decree was not maintainable is concerned, the same has no
substance. The High Court has elaborately dealt with the same in
detail and has considered the relevant provisions of the Code of
Civil Procedure, namely, Section 96, Order XXIII Rule 3, Order XLIII
Rule 1 (m) and order XLIII Rule 1A(2). It is true that, as per Section
96(3), the appeal against the decree passed with the consent of the
parties shall be barred. However, it is also true that as per Order
XXIII Rule 3A no suit shall lie to set aside a decree on the ground
that the compromise on which the decree is based was not lawful.
However, it is required to be noted that when Order XLIII Rule 1(m)
came to be omitted by Act 104 of 1976, simultaneously, Rule XLIII
Rule 1A came to be inserted by the very Act 104 of 1976, which
provides that in an appeal against the decree passed in a suit for
recording a compromise or refusing to record a compromise, it shall
be open to the appellant to contest the decree on the ground that
31
the compromise should or should not have been recorded.
Therefore, the High Court has rightly relied upon the decision of
this Court in Banwari Lal v. Chando Devi AIR 1993 SC 1139 (para
9) and has rightly come to the conclusion that the appeal before the
High Court against the judgment and decree passed in O.S. No.
3376 of 1995 was maintainable. No error has been committed by
the High Court in holding so.
13. Now, so far as the dismissal of I.A. No. 4 of 1999 by the
learned Executing Court in the Execution Petition No. 232 of 1996
which was filed by the judgment debtors to set aside the court
auction/sale dated 11.02.1999 and 18.02.1999 with respect to the
subject mortgaged property is concerned, it is not in dispute that
the judgment debtors as such did not deposit the amount of
Rs.4,50,000/- i.e. sale consideration together with interest in terms
of Order XXI Rule 90 CPC. Where any immovable property has
been sold in execution of a decree, the decree-holder, or the
purchaser, or any other person entitled to share in a rateable
distribution of assets, or whose interests are affected by the sale,
may apply to the Court to set aside the sale on the ground of a
material irregularity or fraud in publishing or conducting it.
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Therefore, as per Order XXI Rule 90, an application to set aside the
sale on the ground of irregularity or fraud may be made by the
decree holder on the ground of material irregularity or fraud in
publishing or conducting it. It is required to be noted that in the
present case, as such, it is not the case of the judgment debtors
that there was any material irregularity or fraud in publishing or
conducting the sale. No such submissions have been made before
this Court. Their objection is that the decree was obtained by
fraud. Therefore also, the application submitted by the original
judgment debtors under Order XXI Rule 90 i.e. I.A. No. 4 of 1999
was required to be dismissed and was rightly dismissed by the
learned Executing Court.
14. Now, so far as the impugned judgment and order passed by
the High Court in CRP No. 3297 of 2000 quashing and setting aside
the order passed by the Executing Court dated 03.03.1998 is
concerned, from the impugned judgment and order passed by the
High Court, it appears that the sale has been set aside by the High
Court in view of the finding on Point No. 1 i.e. the decree was
obtained by fraud and mis-representation and considering the
33
report filed by the learned Principal City Civil Judge. However, it is
required to be noted that at the time when learned Executing Court
passed the order dated 03.03.1998 no evidence was led by the
judgment debtors. The allegation that the decree was obtained by
fraud and mis-representation was not substantiated. The High
Court ought to have appreciated that even the order dated
03.03.1998 was not challenged by the judgment debtors till the
year 2000 and, in the meantime, two applications being I.A. 3 of
1999 and I.A. No. 4 of 1999 were submitted by the judgment
debtors under Order XXI Rule 90, which came to be dismissed and
the mortgaged property was sold in the court auction and even the
sale was confirmed and the sale certificate was issued and the same
was registered with the Sub-Registrar. As observed hereinabove,
as per Order XXI Rule 92, where an application is made under
Order XXI Rule 89, Order XXI Rule 90 and Order XXI Rule 91 and
the same is disallowed, the Court shall make an order confirming
the sale and thereafter the sale shall become absolute. As per
Order XXI Rule 94, where a sale of immovable property has become
absolute, the Court shall grant a certificate specifying the property
34
sold and the name of the person who at the time of sale is declared
to be the purchaser. Such certificate shall bear the date on which
the sale became absolute. Therefore, when after the order dated
03.03.1998 overruling the objections raised by the judgment
debtors and thereafter the order was passed in I.A. No. 4 of 1999
and thereafter when the sale was confirmed and the sale certificate
was issued, the High Court ought not to have thereafter set aside
the order dated 03.03.1998 overruling the objections raised by the
judgment debtors, which order was not challenged by the judgment
debtors before the High Court till the year 2000. Under the
circumstances, the impugned judgment and order passed by the
High Court in CRP No. 3297 of 2000 quashing and setting aside the
order dated 03.03.1998 cannot be sustained and the same deserves
to be quashed and set aside.
15. Now, so far as the impugned judgment and order passed by
the High Court in MFA No. 3934 of 2000 quashing and setting aside
the order dated 30.10.1999 dismissing I.A. No. 4 of 1999 which was
filed by the judgment debtors under Order XXI Rule 90 is
35
concerned, the High Court has set aside the same observing that
the auction purchaser cannot be said to be the bona fide purchaser
as he was related to the judgment creditor and that he was a
partner of the firm in whose favour the mortgage was executed.
However, it is required to be noted that I.A. No. 4 of 1999 was not
filed to set aside the sale on the aforesaid grounds. The said
application was submitted on the ground that no proper publication
was made to get the adequate market value. Therefore, the High
Court has gone beyond the case of the judgment debtors in I.A. No.
4 of 1999. Even on merits also and factually, the High Court is not
correct in observing that the auction purchaser was not a bona fide
purchaser. According to the judgment creditor, the partnership
firm was already dissolved much before and thereafter the plaintiff
inherited the assets, claims and liabilities of the firm. Even as
observed by the learned Executing Court while passing the order in
I.A. No. 4 of 1999 the judgment debtors even did not deposit the
entire amount. Under the circumstances, the High Court therefore
committed an error in quashing and setting aside order dated
30.10.1999 passed in I.A. No. 4 of 1999.
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16. In view of the above and for the reasons stated above, both
these appeals succeed. The impugned common judgment and
order passed by the High Court in RFA No. 274 of 2001, MFA No.
3934 of 2000 and CRP No. 3297 of 2000 is hereby quashed and set
aside. However, there shall be no order as to costs.
…………………………………J.
(ASHOK BHUSHAN)
……………………………….J.
(R. SUBHASH REDDY)
…………………………………J.
(M. R. SHAH)
New Delhi,
February 12, 2021
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