Madras High Court
Rajendra Kumar vs K.N.V. Natarajan And Ors. on 12 March, 2004
ORDER M. Thanikachalam, J.
1. The third party-auction purchaser is the revision petitioner.
2. The third respondent herein as plaintiff had filed a suit against respondents 1 & 2 herein, arraying them as defendants, for recovery of certain amounts due on a promissory note. The suit was decreed exparte on 3.1.1995. Thereafter, a petition was filed by respondents 1 & 2/the defendants in the suit, to set aside the exparte decree, which was dismissed, for non compliance of certain conditions. After the dismissal of the petition to set aside the exparte decree, the decree holder filed E.P. No. 49/95, which was opposed by the judgment debtors, as if they have no saleable interest in the property. Overruling the objection, the Executing Court fixed the sale on 19.2.1996, since the conditional order in I.A. No. 243/1995, directing the respondents 1 & 2 to deposit the decree amount on or before 20.12.1995, was not complied with and the further fact being that there was no stay, property of the judgment debtors were brought for sale in E.P. NO. 49/95.
3. In the Court auction, the revision petitioner/third party purchased the property, for a sum of Rs. 2,00,100/- and he had also deposited a sum of Rs. 50,025/- as per the procedure, within the stipulated time. The auction purchaser deposited the balance of Rs. 1,50,075/- and also a sum of Rs. 14,010/-, towards non judicial stamps for sale certificate.
4. The defendants aggrieved by the dismissal of I.A. No. 243/95, preferred revision before this Court in C.R.P. No. 595/96. This Court, while allowing the C.R.P., passed a conditional order, that the judgment debtors should deposit 50% of the decree amount within the specified time. It seems, once again the judgment debtors had not complied with the conditional order and sought for extension of time in C.M.P. No. 9278/98 in C.R.P. No. 595/96. This Court taking a liberal view and exercising the discretionary power, extended the time, for payment by 13 days.
5. Before the orders passed in C.R.P. No. 595/96 on 8.11.1997 and thereafter on 31.7.1998 in C.M.P. No. 9278/98, the property of the judgment debtors was brought for sale in court auction, thereby executing the decree, in which the property was sold on 19.2.1996 and the stipulated conditions were complied with by the third party auction purchaser on 27.2.1996. This Court, while granting extension of time on 31.7.1998 had observed: "At this stage, I do not think the interest of the auction purchaser can be gone into". Then the learned Judge proceeded and condoned the delay, for the deposit of the amount. Though the order says, the interest of the auction purchaser cannot be gone into, the later portion of the order reads:
"the petitioner is directed to compensate the entire loss that would be caused to the auction purchaser in respect of the non use of the non judicial stamp papers and other incidental expenses".
Having observed so, this Court had not compensated the auction purchaser to the entire extent, since he had deposited a sum of Rs. 14,010/- towards the non judicial stamp for sale certificate. However, an order is passed which reads:
".... Considering the fact I am of the view that this petition can be ordered on condition that the petitioner shall pay a costs of Rs. 7500/- to the auction purchaser, who is the petitioner in C.M.P. No. 9724 of 1998 towards the expenses incurred by him. Accordingly, this petition is ordered on condition that the petitioner shall pay to the auction purchaser a sum of Rs. 7500/- within four weeks from today, failing which, this petition shall stand dismissed."
6. Thus it is seen, though this Court had observed that the interest of the auction purchaser need not be gone into, at later portion, the interest of the auction purchaser was taken into account and observed that the petitioners viz., the judgment debtors are directed to compensate the entire loss, that would be caused to the auction purchaser. But this is not given effect to, when the amount was quantified. In this view of the matter, after the deposit of the amount, as ordered by this Court in the revision petition, it seems, the exparte order against the defendants in O.S. No. 163/93 had been set aside.
7. The respondents 4 & 5 viz., sons of one of the judgment debtors, filed E. No. 57/96 under Order 21 Rule 90 C.P.C., to set aside the sale and the same was dismissed. Thereafter, the judgment debtors/respondents 1 & 2, filed E.A. No. 98/98 under Section 144 C.P.C. for restitution and the same was also dismissed on 16.9.1999. Not satisfied with the above proceedings initiated, in order to defeat a valid decree, once again the respondents 1 & 2 had filed E.A. No. 78/99 under Section 47 C.P.C., to set aside the sale held on 19.2.1996.
8. In the execution application filed under Section 47 C.P.C., the main contention of the judgment debtors are:
(1) all the matters relating to the execution can be decided independently, without prejudice to the other contentions raised in the E.P.;
(2) since the decree has been set aside, all other orders passed by the court, in pursuance of the ex parte decree also should be consequentially set aside; and (3) the auction purchaser is not a bona fide purchaser.
9. The auction purchaser opposed the application, that he is a bona fide third party court auction purchaser, who had parted with heavy amount, in participating the court auction and even in view of the fact that the decree has been set aside, his interest should be protected and in this view, the Court auction held on 19.2.1996 cannot be set aside. It is the further contention of the auction purchaser that, Section 47 C.P.C. petition, is barred by time.
10. The Executing Court, considering the rival claims of the parties, came to the conclusion, that the auction purchaser, who is the close relative of the decree holder, is not a third party auction purchaser, in the real sense and on that ground, his sale could not be protected. He had further concluded, that the Article applicable to calculate the period of limitation is Article 137 and the petition was filed within three years from the date when the right to apply accrues. In this view, considering the fact that the exparte decree was set aside, on which basis the property was brought for sale, the Executing Court set aside the sale in E.P. No. 49/95 held on 19.2.1996, which is under challenge in this revision.
11. Heard the learned Senior Counsel for the revision petitioner, Mr. K. Chandramouli and learned counsel for the respondents, Mr. S. Sounthar.
12. The learned counsel for the revision petitioner submits that, (1) the interest of the auction purchaser or the effect of sale which took place before the exparte decree was set aside, was not considered by this Court in the first revision;
(2) irrespective of the fact that the decree was set aside subsequently, the interest of the auction purchaser should be protected, as held by the Hon'ble Supreme Court; and (3) the petition filed under Section 47 C.P.C. is barred by limitation since, it aimed to set aside the sale, in its true sense.
On the above lines, the learned counsel submitted that the executing Court had not considered these points elaborately, thereby committed an error, which is to be set aside.
13. On the other hand, the learned counsel for the judgment debtors/defendants submits, that in the previous proceedings itself, the interest of the auction purchaser was taken into account and he was sufficiently ordered to be compensated for the loss sustained by him, that the question arising between the parties to the suit, relates to the execution, discharged or satisfied of the decree, should be determined by the executing Court and not by a separate suit and in this view, the petition filed under Section 47 C.P.C., is well maintainable and the same is not barred by limitation, since this claim comes under residuary Article 137, for which, no period of limitation is provided anywhere.
14. The admitted facts are: in pursuance of the exparte decree passed by the Sub Court, Madurai in O.S.No.163/93 on 3.1.1995, property of the judgment debtors was brought for sale, in which the revision petitioner purchased the same on 19.2.1996, that thereafter as per the order in C.R.P.NO.595/96, the exparte decree was set aside, thereby restoring the suit to its original position and that the attempt made by the judgment debtors, prior to the filing of E.A.No.78/99, ended in vain.
15. The crux of the matter in this case is, whether the setting aside of the ex-parte decree, after the court auction sale, would nullify the previous execution proceedings and the sale which was conducted, in which the auction purchaser had participated and bid the property for Rs. 2,00,100/-.
16. The contention of the learned counsel for the revision petitioner that Section 47 C.P.C. petition is barred by limitation, is not acceptable to me. No limitation is prescribed, specifically, for filing a petition under Section 47 C.P.C. and therefore, it should come only under the residuary article 137 which reads:
Description of application Period of limitation Time from which period begins to run Any other application for which no period of limitation is provided elsewhere in this division Three years When the right to apply accrues.
Therefore, we have to see when the right to apply accrues.
17. On the basis of the valid decree, whether it is ex- parte or otherwise, property of the judgment debtors was brought for sale. The attempt of the judgment debtors in the previous applications, to set aside the sale through their sons, ended in vain, which will not be a bar for judgment debtors, to move an application under Section 47 C.P.C., when the right to apply accrues.
18. According to the learned counsel for the judgment debtors the right to apply under Section 47 C.P.C. accrues to the judgment debtors, only after the order passed by this Court in C.R.P. No. 595/96. Now, the main contention of the judgment debtors is, that in view of the fact that exparte decree has been set aside, all orders passed by the Court in the E.P. also have to be consequentially set aside. Before that, admittedly, to move an application under Section 47 C.P.C., the respondents/judgment debtors had no chance. An order was passed in C.M.P.No. 9278/98 on 31.7.1998 and on complying the condition therein only, exparte decree might have been set aside. Therefore, the date viz., 31.7.1998 on which date, an order was passed by this Court in C.M.P. No. 9278/98 and the subsequent date, namely complying the condition alone should give cause of action or right to apply, seeking relief under Section 47 C.P.C. As seen from the records, within three years i.e. in the month of September 1999, the petition under Section 47 C.P.C. is filed. Therefore, I am of the considered opinion that the application is in time.
19. The contention of the learned counsel for the revision petitioner, that only Article 127 is applicable, not acceptable to me. Article 127 would be applicable, if a petition is filed, to set aside a sale or execution of a decree, on the basis of any irregularity or fraud etc. as contemplated under Order 21 Rule 90 C.P.C., which is supported by a decision of the Hon'ble Apex Court in Ramanna v. Nallaparaju , wherein it is observed :
"Article 166 applies only when the sale is one which has under the law to be set aside as for example, under O.21, Rr.89, 90 and 91, Civil P.C., but it has no application when the sale is inoperative and void"
Here no such ground had been taken, for setting aside the sale, whereas the only ground alleged is, because of the fact, that exparte decree was set aside, the consequential acts, followed in the execution proceedings, also should go, in the sense, the sale taken place on the basis of a decree, which was set aside later on should go. In the above ruling itself, the Hon'ble Apex Court has observed:
"When a sale in execution is inoperative and void, an application by a judgment debtor to have it declared void and for appropriate reliefs is governed by Art.181 and not Art.166."
The Articles mentioned by the Hon'ble Apex Court, correspond to new Articles 137 and 127 respectively.
20. For setting aside the sale or to nullify the execution proceedings, the cause of action had arisen only on the date of the order setting aside the exparte decree, as aforementioned and admittedly this petition is filed within three years. In this view, I conclude, on the ground of question of limitation, the petition cannot be thrown out.
21. The question raised in this case, between the parties to the suit, relates to the execution, such as, whether the property brought for sale, in pursuance of a decree, which was later on set aside, could be maintained or not, and in this view, the claim should come under Section 47 C.P.C. No acceptable argument was placed before me, to say empathetically, that the petition filed under Section 47 C.P.C. is not maintainable. Therefore, the question which had arisen between the parties to the suit viz., relating to the execution and satisfaction of the decree, in pursuance of the sale, can be decided in this proceedings. An authoritative pronouncement is also relied on as laid down by the Apex Court in the above said ruling viz., Ramanna's case, wherein it is ruled, when a sale in execution of a decree is impugned on the ground that it is not warranted by the terms thereof, that question could be agitated, when it arises between parties to the decree, only by an application under S. 47, and not in a separate suit.
22. In this case, though the sale was held on 19.2.1996, in which the property is said to have been sold to the auction purchaser/the revision petition, still the sale is not confirmed. When the E.P. was posted for confirmation of sale on 24.2.1996, it seems, stay was granted and thereafter, till the order is passed on 27.7.2000, there is no order of confirmation of the sale. Thus, it is seen, the sale certificate is also not issued to the auction purchaser, which should follow necessarily, he had also not taken possession of the same. At this stage alone, Section 47 petition is filed.
23. The learned counsel for the revision petitioner submitted, that the right of third party auction purchaser should be protected, though the decree, which was put into execution, has been set aside, subsequently. The Hon'ble Supreme Court in Janak Raj v. Gurdial Singh , considering the facts and circumstances of the case, as well as the interest of the third parties, involved and also considering the absence of any provision under Order XXI Rule 89 to 91 C.P.C., to set aside the sale, on the ground, that the decree, which was put into execution has been set aside, it is ruled as follows:
"The result is that the purchaser's title relates back to the date of sale and not the confirmation of sale. There is no provision in the Code of Civil Procedure of 1908 either under O.XXI or elsewhere which provides that the sale is not to be confirmed if it be found that the decree under which the sale was ordered has been reversed before the confirmation of sale. It does not seem ever to have been doubted that once the sale is confirmed the judgment debtor is not entitled to get back the property even if he succeeds thereafter in having the decree against him reversed. The question is, whether the same result ought to follow when the reversal of the decree takes place before the confirmation of the sale"
The Apex Court answered:
"it must be held that the appellant-auction purchaser was entitled to a confirmation of the sale not withstanding the fact that after the holding of the sale the decree had been set aside. 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 detriment 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"
Thus, it is evident that the ratio laid down in that case is, the third party auction purchaser's interest must be protected, irrespective of the fact, whether the decree which was put into execution, was later on set aside or not. On the basis of the above decision, a submission was made that the order of the executing Court is against the ratio laid down by the Supreme Court and in this view, it requires setting aside.
24. The learned counsel for the judgment debtors as an answer to the above submission, invited my attention to a decision in Chinnammal v. P. Arumugham . In the case involved in the above decision, in pursuance of a money decree, property was brought for sale pending appeal and the property was sold in the auction also. In appeal, the decree was set aside and thereafter, the judgment debtor had filed a petition for restitution of the property. When it was urged before the Apex Court on the basis of Janak Raj's case, the Hon'ble Supreme Court has held that the purchaser, who was aware of pending appeal against decree, cannot resist restitution, on the ground that he being the bona fide auction purchaser, entitled to retain possession. It is ruled:
"The person who purchases property in court auction with the knowledge of the pending appeal against the decree cannot resist restitution after the decree is set aside in appeal. His knowledge about the pending litigation would make all the difference in the case. He may be a stranger to the suit, but he must be held to have taken calculated risk in purchasing the property. Indeed, he is evidently a speculative purchaser and in that respect he is in no better position than the decree holder purchaser. The need to protect him against restitution, therefore, seems to be unjustified. Similarly the auction purchaser who was a name lender to the decree holder or who has colluded with the decree holder to purchase the property could not also be protected to retain the property if the decree is subsequently reversed"
25. The above ratio laid down by the Apex Court, could be made applicable, to our case also, provided it is shown that the auction purchaser, purchased the property, knowing fully well about the pendency of the proceedings viz., the petition filed by the defendants, to set aside the exparte decree and its connected proceedings, before the High Court. Knowing the pendency of the connected proceedings, if the auction purchaser had purchased the property, as observed by the Apex Court in Chinnammal's case, he should be construed as a speculative purchaser, and in that event, he cannot get the protection of a bona fide purchaser, and if at all, he could be compared with the position that of the decree holder/purchaser
26. In paragraph 9 of the judgment in Chinnammal's case, the Apex Court has analysed the view taken in Janak raj's case and observed:
"He exploits the helpless situation of the judgment debtor and hastens the execution of the decree. The Court, therefore, should not lend its assistance to him to retain the property purchased if the decree is subsequently reversed."
Then, affirming the ratio laid down in Janakaraj's case, it is observed:
"The innocent purchaser whether in voluntary transfer or judicial sale by or in execution of a decree or order would not be penalised. The property bona fide purchased ignorant of the litigation should be protected. The judicial sales in particular would not be robbed of all their sanctity. It is a sound ruled based on legal and equitable considerations. But it is difficult to appreciate why such protection should be extended to a purchaser who knows about the pending litigation relating to the decree. If a person ventures to purchase the property being fully aware of the controversy between the decree holder and judgment debtor, it is difficult to regard him as a bona fide purchaser. The true question in each case, therefore, is whether the stranger auction purchaser had knowledge of the pending litigation about the decree under execution. If the evidence indicates that he had no such knowledge he would be entitled to retain the property purchased being a bona fide purchaser and his title to the property remains unaffected by subsequent reversal of the decree. The Court by all means should protect his purchase. But if it is shown by evidence that he was aware of the pending appeal against the decree when he purchased the property, it would be inappropriate to term him as a bona fide purchaser."
Because of this settled position, now we have to see whether this auction purchaser comes within the meaning of a bonafide auction purchaser or he is a tool in the hands of the decree holder.
27. The decree holder is one Mangilal Jain and the auction purchaser/revision petitioner is one Rajendra Kumar S/o. Mangal Chand. He is not a stranger to the decree holder. It is an admitted fact, that he is the husband of the decree holder's sister. Such a close relation of the decree holder, had participated in the execution proceedings. By going through the oral evidence of R.W.1, the auction purchaser, it is evident that he had full knowledge about the proceedings, initiated by the judgment debtors, in order to set aside the decree, which came to High Court by way of revision. In the revision also, he was a party, whether the revision was filed after the sale or before the sale. Before the execution proceedings started, a petition was filed to set aside the exparte decree in I.A.No.243/95. The continuation of the proceedings, is C.R.P.NO.595/96. Therefore, it could be easily inferred, from the attending circumstances, as well as considering the relationship between the auction purchaser and decree holder, that this revision petitioner, was fully aware of the fact viz., the steps taken by the judgment debtors, to set aside the decree, which is supported by the evidence also. The evidence would disclose, that the auction purchaser had consulted a lawyer before participating in the auction. If a lawyer had been consulted, a prudent lawyer would have advised, on seeing the records, that he should be participating in the auction, at his risk, since a petition is filed to set aside the exparte decree and the fact being, there may be a chance, to set aside the same. It is in evidence, that he had consulted the lawyer and the lawyer also informed that the connected proceedings are pending in the High Court. He had also admitted, about the orders passed by this Court in C.R.P.No.595/96. Though he would contend, that he had paid the amount, as well deposited the amount, for the purchase of non judicial stamps. It is brought to surface, during the cross examination, that he knew nothing about the sale and the payments, and in fact he had no means also, to pay such a huge amount. He admits during the cross examination "Vyk; vLg;gjw;F gzk; vt;thW fpilj;jJ vd;gJ jw;nghJ epidtpy;iy/ fld; th';fp fl;ondd;/ vd; kidtpapd; rnfhjhp nkhfd; gha; kw;Wk; vd; kfs; Mfpnahhplk; ,Ue;J fld; th';fpndd; vd;gJ epidtpy;iy. mth;fsplk; fhnrhiy K:yk; jhd; gzk; fld; th';fpndd;/@ This evidence would go to show, that he might not have deposited the sale amount, and the wire puller must be the man, behind the screen viz., decree holder and that is why the petitioner who claims that he is the bona fide purchaser, is unable to say, how he got the source of income, for the purchase of the property. If he had borrowed the same, as said above, then he ought to have produced the document, which he did not do so.
28. Considering the close relationship between the decree holder and the judgment debtors, as well as the interested oral testimony of R.W.1, which fails to inspire me, about his bonafide, I am constrained to hold, that the third party auction purchaser viz., the revision petitioner is not a bonafide purchaser, in the auction and he is a tool in the hands of his brother in law/decree holder and such a person, as held by the Apex Court in Chinnammal's case, cannot claim protection and applying the above ratio, the sale is liable to be set aside.
29. As aforementioned, the interest of the auction purchaser was considered by this Court, while disposing C.R.P. No. 595/96, though there is no order expressly setting aside the court sale. If this Court had thought fit, that the right of the auction purchaser should be protected, there would not have been any necessity, for this Court to observe in the judgment, that the entire loss that would be caused to the auction purchaser, in respect of non use of non judicial stamps and other incidental expenses have to be compensated. The compensation awarded by this Court, may be inadequate, in the sense this Court has not directed the judgment debtors, to pay the entire value viz., the value of the non judicial stamps. However, the judgment debtors were directed to deposit a sum of Rs. 7500/-, which, in a way would go to show that the interest of the auction purchaser was also taken into consideration, and protected to certain extent, irrespective of the previous observation that "I do not think the interest of the auction purchaser could be gone into". Despite the above observation, this Court protected the interest of the auction purchaser and therefore, there cannot be any loss, to the auction purchaser also in this case. It appears the sale is not confirmed and therefore, no question of engrossing the sale certificate by purchasing the non judicial stamps, would arise. In this view, the amount should be available in the executing court and the auction purchaser can withdraw the said amount, in addition to Rs.7500/-, ordered by this Court in C.R.P. No. 595/96. The other amounts are also available and therefore, practically, there may not be any loss to the auction purchaser, though he may be deprived of the interest, if the amount had not been invested by the Court till date. In this view also, by setting aside the sale, no prejudice will be caused to the auction purchaser, the further fact being, he is not a bona fide purchaser.
30. The learned District Munsif, considering the facts and circumstances of the case, as well as the oral evidence of R.W.1, came to an irresistible conclusion, which is purely a fact, that the auction purchaser is not a bona fide purchaser and not entitled to the protection, as contemplated in Janak raj's case, which is well acceptable to me. In this view, the revision is devoid of merits and the same is liable to be dismissed.
In the result, the revision is dismissed. No costs.