Karnataka High Court
Rama Murthy S/O. Late Iyyakannu ... vs H.S. Goutham S/O. Late Shanthilal Major ... on 16 September, 2006
Equivalent citations: AIR 2007 (NOC) 130 (KAR.), 2007 A I H C 214 2006 (6) AIR KAR R 458, 2006 (6) AIR KAR R 458, 2006 (6) AIR KANT HCR 458, 2007 A I H C 214, (2000) 5 SCALE 256, (2000) 7 SUPREME 37, (2000) 8 JT 159 (SC)
Author: V.G. Sabhahit
Bench: V.G. Sabhahit
ORDER V.G. Sabhahit, J.
1. These three cases are disposed of by this common order as they arise out of the same proceedings and involve common question of law and foot and to avoid repetition.
2. RFA. No. 274/2001 is filed being aggrieved by the order and decree dated 1.6.95 passed by the court of XV Addl. City Civil Judge, Bangalore in O.S. No. 3376/95. MFA. No. 3934/2000 is filed being aggrieved by the order dated 30.10.99 rejecting the application I.A.IV filed by the petitioner-appellant under Order 21 Rule 90 r/w. 47 and Section 151 CPC., in Execution Case No. 232/96 on the file of XIX Addl. City Civil Judge and CRP. No. 3297/2000 is filed being aggrieved by the order passed by the Court of XV Addl. City Civil Judge dated 3.3.98 on I.A.III.
2. The essential foots of the case leading upto these appeals and revision with reference to the rank of the parties before the trial court are as follows:
O.S.No. 3376/95 was filed by Sri. H.S. Goutham S/o. late Sri. Shanthilal against defendants 1 and 2 seeking for recovery of Rs. 2,50,000/- together with court costs and current interest at 21% from the date of suit (30.5.95) to the date of payment. The plaint was presented before the City Civil Court on 30.5.95. It is averred in the plaint that plaintiff's father has mortgaged the property of the defendants and he expired during 1993 and after his death, plaintiff who is the son has continued the said business in the proprietorship. It is averred that defendants have mortgaged the premises No. 4 C Street, Ilpe Thope Ulsoor, Bangalore-8 for a sum of Rs. 1 lakh under a mortgage deed dated 11.7.90 agreeing to repay the amount with interest at 18% p.a. and delivered original documents of the said property. It is further averred that defendants have also borrowed a sum of Rs. 50,000/- on 13.12.92 by executing a promissory note agreeing to repay the amount with interest at 21% per annum by creating further charge on the property and thus defendants have borrowed a sum of Rs. 1,50,000/- from the plaintiff under simple mortgage deed. Defendants did not pay the loan amount as such legal notice was issued to them on 12.9.2003. Despite legal notice, defendants have not cleared the debt and wherefore the suit for recovery of Rs. 2,50,000/-under the following heads:
Mortgage amount. Rs. 1,00,000 Promissory note Rs. 50,000 and Interest Rs. 1,00,000/-
Total Rs. 2,50,000/-.
3. The plaint was registered as O.S.No. 3376/95 and made over to the Addl. City Civil Judge sitting in CCH-18 for disposal according to law. It is averred in the written statement alleged to have been by the defendants and defendants admitted borrowing of Rs. 1,50,000/- and averred that they are only to pay the amount in lumsum and agreed to repay the same in installment of Rs. 5,000/- per month and agreed to pay the whole debts within three years from the date of written statement and wherefore prayed that the suit may be decreed as prayed for in the written statement. The written statement is dated 26.5.95 and filed before the court on 31.5.95 as per the order sheet maintained by the trial court. On 1.6.95 when the suit was posted before the court a compromise petition was filed and a consent decree was passed directing the defendant to pay the decreetal amount at the rate of Rs. 5,000/- per month with single default clause and accordingly, decree was drawn. Being aggrieved by the said judgment and decree RFA.274/2001 is filed. There was delay in filing the appeal and delay was condoned by consent of the counsel appearing for the respondent us.
4. In the meanwhile, the decree holders filed Execution Petition No. 232/96 seeking for execution of the decree passed in O.S.No. 3376/95 dated 1.6.95. In the said execution petition, the judgment debtors-the defendants in the suit appeared and filed I.A.Nos. 3 and 4. I.A.3 was filed under Section 151 CPC., praying for stay of further proceedings with regard to the sale of property which is the subject matter of the execution and I.A.4 was filed under Order 21 Rule 90 r/w. 47 and Section 151 CPC., praying the court to set aside, the court auction sate in respect of schedule property in the interest of justice. In the execution, mortgage property was sold and I.As. 3 and 4 were filed by the judgment debtors for setting aside the auction. The Executing Court dismissed I.A.4 filed under Order 21 Rule 90 r/w, 4 and Section 151 of CPC., by order dated 30.10.99. Being aggrieved by the some, CRP.No. 3699/2000 was filed before this Court on 19.11.99 and in view of the decision of this Court that CRP is not maintainable and the same was rejected by order dated 27.3.99. The revision was permitted to be converted into RFA and numbered as RFA.268/2000 and again by order dated 11.10.2000 in view of the decision of this Court holding that miscellaneous first appeal lies against the order rejecting the application under Order 21 Rule 90, the regular first appeal was converted into MFA and numbered as MFA.3134/2000. CRP.No. 3297/2000 is filed against the order passed by the Executing Court in Execution case No. 232/96 dated 3.3.98 over ruling the objections raised by the judgment debtors that the decree has been obtained by exercising fraud as alleged in the objections by order dated 3.3.98. The regular first appeal and miscellaneous first appeal and civil revision petition have been clubbed and heard together. During the pendency of the proceedings, having regard to the fact that certain allegations have been made regarding the fraud exercised by the plaintiff in obtaining the compromise decree, a finding was called for from the Prl.City Civil Judge by order dated 19.9.2005 and Prl.City Civil Judge was directed to hold an enquiry after affording opportunity to the parties to adduce evidence to substantiate their contention whether decree in O.S.No. 3376/95 dated 1.6.95 is obtained by fraud. The Prl.City Civil Judge as per the direction, registered the said case as Mis.648/ 2006 and afford opportunity to the parties to adduce evidence on the question as to whether the decree in O.S.No. 3376/95 dated 1.6.95 has been obtained by fraud.
5. On behalf of the appellants, appellant No. 1 was examined as PW. 1 and also examined PW.2 and the counsel who is alleged to have appeared as defendant as PW.3 and got marked Exs.P1 to P10. On behalf of the respondent-plaintiff, plaintiff was examined as DW. 1 and he also examined the junior counsel who appeared for the plaintiff as DW.2 and got marked Exs.D1 to D30 and the Prl.City Civil Judge, Bangalore, by order dated 6.12.2005 recorded the finding to the effect that the decree in O.S.No. 3376/95 has been obtained by fraud on 1.6.95 and accordingly, submitted his report. The respondent-plaintiff in the suit has filed objections to the said report.
6. I have heard the learned Counsel appearing for the appellants-defendant, learned Counsel appearing for the respondent-plaintiff and the learned Counsel appearing for the auction purchaser who has been impleaded as R2 in MFA.No. 3297/2000.
7. Having regard to the contentions urged, the points that arise for consideration in these appeals and revision are:
1) Whether the compromise decree passed in O.S.No. 3376/95 dated 1.6.95 is obtained by fraud?
2) Whether the order dated 3.3.98 rejecting the objections of the judgment debtors that the decree has been obtained by fraud and is not executable calls for interference in CRP.3297/2000?
3) Whether the rejection of I.A.4 filed in Execution Petition No. 232/96 rejecting the application filed under Order 21 Rule 90 calls for interference in MFA.No. 3934/2000?
4) What order?
and I answer the above points as follows:
Point No. 1: In the affirmative.
Point No. 2 : In the affirmative.
Point No. 3 :In the affirmative.
Point No. 4 : as per the final order for the following:
REASONS
8. POINTS 1 to 3: These points are considered together since they are interconnected and to avoid repetition. The learned Counsel appearing for the appellants defendents/judgment debtors submitted that the compromise decree has been obtained by fraud and the decree passed in O.S.No. 3376/95 is liable to be set aside as the signatures of the defendants were taken on blank papers and the same has been used as written statement, caveat and vakalat and the defendants were not present before the court nor have consented for compromise. The finding of the Prl.City Civil Judge that the compromise has been obtained by practicing fraud is justified and in view of the same, the order dated 3.3.98 passed in execution is liable to be set aside and when once the decree is set aside, all further proceedings in execution are also liable to be set aside as the decree is vitiated on the ground of fraud which would vitiate all proceedings. The learned Counsel further submitted that since the auction purchaser is related to the decree holder and is one of the partners of Shanthilal and Company the auction is also liable to be set aside and wherefore, the Regular first appeal. Civil revision petition and Miscellaneous first appeal are entitled to be allowed.
9. On the other hand, the learned Counsel appealing for the respondent-plaintiff submitted that the material on record clearly shows that the defendants have admitted the execution of the mortgage deed as also the borrowing of the amount from the plaintiff. The amount has not been repaid and the material on record clearly shows that they have voluntarily entered into a compromise and compromise petition is recorded by the court and decree is passed in accordance with law. The learned Counsel further submitted that the finding of the Prl.City Civil Judge is vitiated as the Prl.City Civil Judge has not considered the oral and documentary evidence on record in the proper perspective and has failed to consider the documents and the evidence adduced by the plaintiff to substantiate the contention that the compromise has been ordered in accordance with law and the Prl.City Civil Judge has also failed to note that the execution of the mortgage deed is admitted and the compromise was entered into voluntarily and has erred in giving a finding against the plaintiff.
10. I have considered the contention of the learned Counsel appearing for the parties.
11. It is clear from the perusal of the material on record that Ex.P2 is the plaint dated 26.5.95 which was filed before the City Civil Court on 30.5.95. Ex.P1 is the written statement which is also dated 26.5.95 which is filed in court on 31.5.95. Ex.P3 is the caveat which is also dated 26.5.95 it is not signed by the Advocate for the caveator and the said material on record shows that the said caveat was posted on 30.5.95 and compromise petition Ex.P4 does not bear any date.
12. I have perused the oral and documentary evidence adduced by the parties before the Prl.City Civil Judge who was directed by this Court to give a finding as to whether the compromise decree has been obtained by fraud as averred by the defendants and I have also gone through the finding given by the Prl.City Civil Judge holding that the compromise petition has been obtained by fraud.
13. It is clear from the perusal of the material on record that the fact that plaint, written statement and caveat were prepared on the same day 26.5.95 is not in dispute as it is clearly evidenced by Exs. P1 to P3. There is also not dispute that defendant No. 1 and his wife were taken by the plaintiff to the office of Sri. Paras Jain, Advocate who was appearing for the plaintiff and there, the signatures of the first defendant-Ramamurthy was obtained. The material on record also shows that indisputably the plaint was presented before the court on 30.5.95. the matter was posted to 31.5.95 on which date the vakalat is alleged to have been filed for defendants 1 and 2 and thereafter the matter was posted, Ex.P4 was filed. The compromise petition does not bear any date. It is also clear from the perusal of the material on record that the evidence of PW.1-the plaintiff would clearly show that he does not remember as to whether he was present before the court when the compromise was recorded. The order sheet maintained by the court dated 1.6.95 also docs not show as to whether parties were present in court and admitted execute on the compromise petition. Admittedly, defendants were not present in court when the compromise petition was filed and accepted by the court on 1.6.95. The material on record also shows that though it is alleged by the plaintiff that defendants had engaged a counsel and filed vakalat, written statement and caveat through the Advocate Smt. Yasmin Sulthana Begum. The said Advocate has been examined as PW.3 and she has clearly stated in her evidence that she has not appeared for defendants 1 and 2 nor filed any written statement or vakalat on behalf of defendants 1 and 2 in O.S.No. 3376/95 and she has also not signed the compromise petition and the signatures found on the vakalat compromise petition and the written statement are not her signature. Nothing has been elicited in her cross examination to disbelieve her evidence that the signatures found in the vakalat filed on behalf of defendants 1 and 2 are not her signature and signature on the written statement is also not her signature and signature on the compromise petition is also not the signature of the Advocate-PW.3 who is alleged to have appeared for the defendants in the suit and PW.3 has clearly stated in her evidence that she never appeared for defendants 1 and 2 nor filed any compromise petition. She has denied the signature on the written statement, compromise petition and the vakalat and wherefore, it is clear that the signatures found in the written statement, vakalat and the compromise petition alleged to be that of the Advocate for the defendant is not the signature of PW.3 who is said to have signed the said documents. Nothing has been elicited in the cross examination of PW.3 to disbelieve her evidence. Further, it is also clear that though the admitted signature of PW.3 had been taken and application was filed for referring the signature to the Handwriting expert, the said application was rejected as proper affidavit had not been filed and farther, application for referring the matter to the finger print expert to find out as to whether the signature found on the vakalat, written statement and compromise petition alleged to be that of PW.3 is her signature and therefore, the Prl.City Civil Judge has rightly held that the defendants have never executed any vakalat and the Advocate did not repay the defendants and the written statement is not signed by the Counsel alleged to have been engaged by the defendants and signature in the compromise petition is also not that of PW.3 who is said to have signed as the counsel appearing for defendants 1 and 2. Further, the material on record clearly shows that the first defendant who is examined as PW.1 his wife PW.2 and Gouthan-the plaintiff DW.1 went to the office of Sri. Paras Jain and signatures were obtained on certain documents and thereafter signature of defendant No. 2 was obtained at the residence stating that he should sign the document and the question for determination is whether said signatures were obtained after knowing the contents of the documents and as to whether defendants 1 and 2 voluntarily entered into a compromise petition as per Ex.P4 or whether the signatures were taken on the blank papers and have been concocted as written statement, caveat petition and compromise petition. In the evidence of PW. 1 before the Prl.City Civil Judge, the first defendant has clearly reiterated the averments made in the appeal memo to the effect that signatures were taken without explaining the contents and they were threatened that they would be dispossessed from the house if they do not sign the documents. It is clear from the facts elicited in the cross examination of PW. 1 that nothing has been elicited in his cross examination to show that his signature was taken after explaining the contents of the documents to him and infact the facts elicited in the cross examination of PW.1 would clearly show that his signature were taken on certain documents on 26.5.95 in the office of Sri. Paras Jain. PW.1 has denied the suggestion in the cross examination that he has voluntarily signed the written statement, caveat petition and vakalat and there was a discussion and himself and his son agreed to repay the amount in installment of Rs. 5,000/- per month. However, the facts elicited in the cross examination of PW.1 would clearly corroborate the evidence of PW.1 that his signatures were taken on certain papers and contents of which were not known to him. It is elicited in the cross examination of PW.1 that if he reached the office of the Advocate of Sri. Paras Jain, the said Goutham and Ravindra Kumar asked him to sit there saying that they would get the papers typed and he did not talk to the Advocate. At this time, he did not call him and did not talk to him and after papers were typed, he was asked by the Advocate Sri. Paras Jain, Goutham and Ravindra Kumar to put the signature on the said papers at the places where 'X' marks were made. Accordingly, he put his signature on the documents. It is also elicited in his cross examination that his son Ravichandran had not come to the office of the Paras Jain on that day and he does not know the meaning of the word decree and signature of his son has been taken forcibly in the house by Goutham and Ravindra Kumar and they have forcibly obtained the signature of his son Ravichandran saying that being the son he should also sign the same and if he has not signed the same, Shanthilal and Company would deceive them and they would loose the property. It is also elicited in the cross examination that he had not filed any caveat petition in City civil court against the respondent-Goutham.
14. PW.2 is the wife of PW. 1. Her evidence is helpful only to show that she accompanied PW.1 to the office of Sri Paras Jain on 26.5.95 along with Goutham and Ravindra Kumar and facts elicited in her cross examination would show that she is not personally aware of the discussion that took place and as to what had happened in the office of Paras Jain as she was sitting outside the office and her husband PW1 was inside the office. However, her evidence is helpful to show that herself, PW.1, Goutham and Ravindra Kumar had been to the office of Sri. Paras Jain and signatures were taken on the said day. Her evidence is also helpful to show that the signatures of the second defendant were taken that the second defendant had not accompanied the first defendant and his signature were taken on the next day. PW.3 is the Advocate who according to the plaintiff had appeared for defendants 1 and 2 in the suit O.S.No. 3376/96 and I have already referred to her evidence and held that she has not appeared for defendants nor signed vakalat for the defendants, written statement on behalf of the defendants nor filed compromise petition would also clearly corroborate the contention of the defendants that they did not voluntarily agree for the compromise and signature were taken on certain papers and would clearly belie the case of the plaintiff that defendants appeared through counsel, filed the written statement and the compromise petition. The evidence of DW.1 and his witness DW. 2-Junior counsel of Sri. Paras Jain is also not of much help to prove that defendants appeared through counsel, filed the written statement and the compromise petition and compromise petition was recorded in accordance with law as DW.1-the plaintiff has stated in the affidavit filed by way of examination-in-chief that compromise petition was filed voluntarily executed by the defendants, defendants appeared through counsel and the same was recorded and decree has been passed in accordance with law. However, the facts elicited in the cross examination of this witness would clearly belie the contention that defendants have voluntarily appeared though counsel and filed the compromise petition in view of facts clearly elicited in his cross examination. As there is inconsistency in the evidence of DW.1 and DW.2 regarding the date on which the written statement, vokalat and compromise petition was signed by the defendants. As according to DW.2 the counsel who was working in the office of Sri. Paras Jain Advocate, it is elicited in his cross examination that in the Month of June 1995 when Ramamurthy-the petitioner, his son Ravichandran visited the office of Sri. Paras Jain Advocate along with Sri. Goutham and according to the averments made in the affidavit filed in lieu of examination in chief it is averred that in the month of May, 1995 Ramamurthy and his son Ravichandran along with Goutham visited the office of Sri, Paras Jain and stated that Mr. Ramamurthy and his son have mortgaged the property and owed a sum of Rs. 1,50,000/- and they have agreed to pay in installments of Rs. 5,000/- per month. The said proposal was accepted by Goutham and parties discussed the whole terms of repayment at length and after arriving at a consensus regarding the court decree in the matter, Mr. Ram murthy and his son Ravichandran agreed for the compromise petition whereas it is clear from the perusal of the contents of the written statement, caveat petition and vakalat filed on behalf of the respondents that the same is prepared on 26.5.95 which is also the case of the plaintiff whereas the facts elicited in the cross examination of DW.1 would show that himself, Ramamurthy, his son Ravichandran and Smt. Neelavathi wife of Ramamurthy together went to the office of Sri. Paras Jain, he does not remember the date in the Month of June, 1995 on which date himself, Ramamurthy, Ravichandran and Smt. Neelavathi went to the office of the Advocate Paras Jain and on that way no document is prepared in the office of the Advocate and on the next date, caveat petition, compromise petition, vakalat were prepared and then Ramamurthy put the signature on all the said papers and it is further elicited that it is true that Exs.P1 to P3 the date is mentioned as 26.5.95 and Ex.P4 compromise petition does not bear the date. It is true that he was not physically present in court when the suit is filed by the Advocate, he does not remember as to whether he was present in the court when compromise petition was filed and he cannot say as to who are all were present in the court when the compromise petition was filed in the said suit. There is no merit in the contention of the learned Counsel appearing for the plaintiff that the Prl.City Civil Judge has not referred to the material documents on record as it is clear that the documents produced by the respondents before the Prl.City Civil Judge arc not at all helpful to substantiate the contention that the written statement, vakalat and compromise petition were executed by defendants voluntarily and mere fact that defendants might have admitted the execution of the mortgage deed dated 11.7.90 in respect of which amount is claimed in the suit and also there is a talk of settlement and defendants have agreed to pay certain amount and the fact that they have deposited Rs. 2 lakhs as a condition to set aside the same would not be helpful to decide as to whether the compromise petition was obtained by practicing fraud as the said contentions relates to the merits of suit and does not in any way affect the material on record referred to by the Prl.City Civil Judge in arriving at the finding and wherefore, the finding arrived at by the learned Prl.City Civil Judge holding that the compromise has been obtained by fraud is justified and the same is entitled to be accepted and when once it is accepted that the compromise petition has been obtained by fraud, it is clear that the order passed on said Petitioners is liable to be set aside. It is well settled that when compromise petition has been obtained by fraud and the same cannot be said to have been obtained in accordance with law and the same is liable to be set aside in appeal and provisions of Section 96 would not be a bar for setting aside the compromise decree which is obtained by exercising fraud in view of the decision of the Hon'ble Supreme Court in the case of Banwari Lal v. Chando Devi wherein it is observed as follows:
9. Section 96(3) of the Code says that no appeal shall lie from a decree passed by the court with the consent of the parties. Rule 1A(2) has been introduced saying that against a decree passed in a suit after recording a compromise, it shall be open to the appellant to contest the decree on the ground that the compromise should not have been recorded. When Section 96(3) bars an appeal against decree passed with the consent of parties, it implies that such decree is valid and binding on the parties unless set aside by the procedure prescribed or available to the parties. On such remedy available was by filing the appeal under Order 43 Rule 1(m). If the order recording the compromise was set aside, there was no necessity or occasion to file an appeal against the decree. Similarly a suit used to be filed for setting aside such decree on the ground that the decree is based on an invalid and illegal compromise not binding on the plaintiff of the second suit. But after the amendments which have been introduced, neither an appeal against the order recording the compromise nor remedy by way of filing a suit is available in cases covered by Rule 3-A of Order 23. As such a right has been given under Rule 1A(2) of Order 43 to a party, who challenges the recording of the compromise, to question the validity thereof while preferring on appeal against the decree. Section 96(3) of the Code shall not be a bar to such an appeal because Section 96(3) is applicable to cases where the factum of compromise or agreement is not in dispute.
15. In view of the above said reasoning, I hold that the order and decree passed by the court of XV Addl. City Civil Judge, Bangalore in O.S.No. 3376/95 impugned in RFA.274/2001 is liable to be set aside and the matter is liable to be remitted to the trial court for disposal of the suit in accordance with law by permitting the defendants to file written statement within the time limit stipulated by this Court and accordingly, point No. 1 is answered in the affirmative.
16. In view of the finding on point No. 1, it is clear that point No. 2 is also to be answered in the affirmative as objections that were taken in the execution petition is to the effect that the compromise petition is obtained by fraud and the said contention has been rejected by order dated 3.3.98 and the some has been challenged in MFA.No. 3934/2000 and in view of answer to point No. 1 the said order is also liable to be set aside By allowing the MFA., and accordingly, I answer point No. 2 in the affirmative. The next point for consideration is as to whether the auction sale conducted in execution of judgment and decree which has now been set aside is also liable to be set aside and the same has to be considered with reference to the contention of the counsel appearing for the parties. The learned Counsel appearing for the auction purchaser has submitted that mere fact that decree which was sought to be executed and sale has been conducted and when sale has been conducted in execution of a decree and auction purchaser has purchased the property bonafide, mere fact that decree is set aside would not be a ground to set aside the auction also. The learned Counsel submitted that rights of the bonafide purchaser-the auction purchaser in this case has to be protected. In support of his contention, he has relied upon the decision of the Hon'ble Supreme Court in Janak Raj v. Gurdial Singh wherein while considering the question whether the sale of immovable property in execution of a money decree has to be confirmed when it is found that exparte decree which was to be in execution has been set aside subsequently. Hon'ble Supreme Court has said that witness of the stranger should be protected and sale can be confirmed even if an exparte decree is set aside. He has also relied upon the decision of the Supreme Court in Hirabai v. Hanumanth Krishnaji Bhide wherein the Hon'ble Supreme Court has observed in paragraph-4 of the judgment as follows:
A reading thereof would clearly indicate that opportunity was given to the petitioner to establish whether the sale was vitiated by any material irregularity or fraud in publishing or conducting the proclamation of sate by the decree-holder. Except repeating the averment and raising a contention in the written arguments, no evidence was adduced to prove them. Under those circumstances, the material conditions required under Order 21 Rule 90 CPC., are not proved. It is contended for the petitioners that they are prepared to pay the amount if an opportunity is given to them. The High Court in fact gave the opportunity to pay the amount with interest at the rate of 15% on the sate amount but the petitioners have not availed of the opportunity. The High Court has observed that the petitioners intended to prolong the finalisation of the sale. We think that the observations mode by the High Court is justified on the facts. We do not think that it is a case warranting interference by further extension of time.
17. The learned Counsel has also relied upon the decision of the Hon'ble Supreme Court in Bombay Dueing And Manufacturing Co. Ltd., v. Bombay Environmental Action Group and Ors. (2006) AIR SCW 1392 wherein Hon'ble Supreme Court while considering the public interest litigation has held that delay in filing can be fatal when parties have altered their position and third parties interest has been created.
17. On the other hand, learned Counsel appearing for defendants-judgment debtors submitted that the auction purchaser is not a stranger to the proceeding he was one of the partners of M/s. Shanthilal and Company and mortgage deed was executed in favour of the such firm of which auction purchaser is a partner as on the date of the suit as per the material on record and he is the plaintiff's senior uncle's son and wherefore, he is not a stranger to the proceedings, he was aware of the proceedings and he has also colluded with the decree holder-plaintiff in purchasing the property and when once it is held that the decree is set aside on the ground that it was obtained by fraud, same would vitiate the entire proceedings in execution petition as decree itself has to be set aside on the ground of fraud as fraud vitiates all solemn auctions.
18. I have considered the contention of the learned Counsel appearing for the parties with reference to the material on record and the decisions relied upon by the learned Counsel in support of their contentions.
19. Hon'ble Supreme Court in the case of Sardar Govindrao Mahadik v. Devi Sahai has considered the question as to whether auction purchaser would be affected fi the decree pursuant to which auction was held is set aside and Supreme Court has observed as follows in the said decision:
The question, however, is what happens if at an intermediate stage pursuant to the decree of the trial court the attached property is sold at a court auction? How would the rights and obligations of the auction purchaser be adversely affected if the appeal is allowed and the suit is dismissed ordinarily where the appeal is preferred an attempt should be made to obtain stay of the execution of the decree of the trial court. However, it is notorious that the appellate court is loath or reluctant to grant stay of a money decree and the judgment debtor may not be in a position to deposit the decretal amount and in this situation more often the execution proceeds and before the appeal is disposed of an equity in favour of a third person as auction purchaser who purchases the property at a court auction may come into existence. If afterwards the appeal is allowed and the suit is dismissed, would the auction purchaser be adversely affected? The emerging situation in this case clearly demonstrates the dilemma.
Ordinarily, if the auction purchaser is an outsider or a stranger and if the execution of the decree was not stayed of which he may have assured himself by appropriate enquiry, the court auction held and sate confirmed and resultant sale certificate having been issued would protect him even if the decree in execution of which the auction sole has been held is set aside. This proceeds on the footing that the equity in favour of the stranger should he protected and the situation is occasionally reached on account of default on the part of the judgment debtor not obtaining stay of the execution of the decree during the pendency of the appeal.
But what happens if the auction-purchaser is the decree holder himself? In our opinion, the situation would materially alter and this decree holder-auction purchaser should not be entitled to any protection. At any rate, when he proceeds with the execution he is aware of the fact that an appeal against the original decree is pending. He is aware of the fact that the resultant situation may emerge where the appeal may be allowed and the decree, which he seeks to execute may be set aside. He cannot force the pace by executing the decree taking advantage of the economic disability of a judgment debtor in a money decree and make the situation irreversible to the utter disadvantage of the judgment debtor who wins the battle and loses the war. Therefore, where the auction-purchaser is none other than the decree holder who by pointing out that there is no bidder at the auction, for a nominal sum purchases the property, to wit in this case for a final decree for Rs. 500/- Motilal purchased the property for Rs. 300/- an atrocious situation, and yet by a technicality he wants to protect himself. To such an auction purchaser who is not a stranger and who is none other than the decree holder, the court should not lend its assistance. The view which we are taking is not unknown and to some extent it will be borne out by the observations of this Court in Janak Raj v. Gurdial Singh . This Court made a pertinent observation which may be extracted:
The policy of the legislature seems to be that unless a stranger auction purchaser is protected against the vicissitudes of the fortunes of the suit, sales in execution would not attract customers and it would be to the deteriment of the interest of the borrower and the creditor alike if sales were allowed to be impugned merely because the decree was ultimately set aside or modified.
20. It has also been held by the Hon'ble Supreme Court in the case of Bhanwar Lal v. Smt. Prem Lata that when the decree passed against a person is set aside, execution sale would not be binding on them and as a result they became entitled to restitution.
21. I have already held while answering the points 1 and 2 that the compromise decree was obtained by exercising fraud by the plaintiff and wherefore the decree is liable to be set aside. It is well settled that when decree its set aside on the ground of fraud, fraud would vitiate even the solemnest of the solemn proceedings and in the present case, it is clear that auction purchaser is not a stranger, he is the partner of M/s. Shanthilal and Company and is related to the decree holder. The material on record shows that the suit is based upon the mortgage deed executed in favour of M/s. Shanthilal and Company and the material on record shows that Ravindra Kumar-the second respondent in the MFA., the auction purchaser was a partner in the firm-M/s. Shanthilal and Company. It is admitted by DW.1 in his evidence before the Prl.City Civil Judge that along with his father Shanthilal, C.H. Madanlal, H.M. Jasavathraj and H.M. Ravindra Kumar were partners of M/s. Shanthilal and Company, Madanlal and Ravindra Kumar are father and son and Madanlal is his senior uncle being the brother of his father and Ex.P9-mortgage deed is executed in favour of M/s. Shanthilal and Company and wherefore, it is clear that auction purchaser is not a stranger to the proceedings, he is related to the decree holder and in fact he was a partner of M/s. Shanthilal and Company in whose favour mortgage deed was executed and on the basis of which suit is filed for recovery of money. Further, it is also clear from the perusal of the material on record that though the judgment debtors have filed an application raising objections that a decree was not executable as it is obtained by fraud, the same was rejected by order dated 3.3.98 which has been set aside while answering point No. 2 by holding that compromise decree is vitiated dye to fraud committed by the plaintiff. It should also be noted that though the sale was confirmed on 17.11.1999 and safe certificate has been issued on 23.11.1999. the possession of the property is still with the judgment debtors and the same has not yet been handed over to the auction purchaser and further, the material on record shows that what was notified for sale was the site and not the residential house and therefore, it is clear that in view of the finding that the decree which is sought to be executed is liable to be set aside on the ground of fraud and auction purchaser is not a stranger and he is related to the plaintiff and was one of the partners of M/s. Shanthilal and Company in whose favour mortgage deed was executed and on the basis of which suit is filed for recovery of money against the defendants and the auction purchaser has not produced any material to show that he is a bonafide purchaser of the property. Under the circumstances, it is clear that the confirmation of sale and issuance of sale certificate are liable to be set aside as the decree which was sought to be executed is set aside on the ground of fraud. However, it is open to the auction purchaser to make an application for refund of the amount deposited by him and for reimbursement of the amount spent by him for registration and other expenses by making appropriate application before the trial court, in accordance with law and trial court shall consider the said application and dispose of the same, in accordance with law. According, I answer point No. 3 in the affirmative.
22. In view of my finding to points 1 to 3, it is clear that Regular First Appeal. Miscellaneous First Appeal and Civil Revision Petition are entitled to be allowed and accordingly, I pass the following order:
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. 3934/2000 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.