Kerala High Court
Karassery Service Co-Operative Bank ... vs Amrutha Anupam Kumar on 31 July, 2025
2025:KER:57637
EX.SA NO. 5 OF 2025
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE EASWARAN S.
THURSDAY, THE 31ST DAY OF JULY 2025 / 9TH SRAVANA, 1947
EX.SA NO. 5 OF 2025
AGAINST THE JUDGMENT DATED 18.01.2025 IN AS NO.105 OF
2022 OF ADDITIONAL DISTRICT COURT-I, KOZHIKODE ARISING OUT
OF THE ORDER DATED 21.02.2022 IN EA NO.307/2022 IN EP NO.257
OF 2018 IN OS NO.95/2017 OF I ADDITIONAL SUB COURT, KOZHIKODE
APPELLANT(S)/APPELLANT IN AS/PETITIONER IN EA/3RD PARTY IN
EP:
KARASSERY SERVICE CO-OPERATIVE BANK LIMITED
(REG. NO. D 2628), MUKKAM POST, THAZHEKKODE
AMSOM DESOM, KOZHIKODE, REPRESENTED BY ITS
GENERAL MANAGER, PIN - 673602
BY ADVS.
SRI.R.SUDHISH
SHRI.TENISON THOMAS
SMT.M.MANJU
RESPONDENT(S)/RESPONDENTS IN AS/DECREE HOLDERS & JUDGMENT
DEBTORS IN EP:
1 AMRUTHA ANUPAM KUMAR
AGED 45 YEARS
W/O. DR. T.V. ANUPAM KUMAR, 2/101 B, KAILAS,
EAST HILL, KARAPARAMBA ROAD, KACHERY AMSOM AND
DESOM, KARAPARAMBA, KOZHIKODE, PIN - 673010
2025:KER:57637
EX.SA NO. 5 OF 2025
2
2 DR. T.V. ANUPAM KUMAR
2/101 B, KAILAS, EAST HILL, KARAPARAMBA ROAD,
KACHERY AMSOM AND DESOM, KARAPARAMBA, KOZHIKODE,
PIN - 673010
3 P.V. BUILDERS & DEVELOPERS
A REGISTERED PARTNERSHIP FIRM, 4/436, 2ND FLOOR,
SITHARA COMPLEX, P.T. USHA ROAD, KOZHIKODE,
REPRESENTED BY ITS CHAIRMAN & PARTNER, PRASANTH.
V., PIN - 673001
4 PRASANTH V.
AGED 45 YEARS
S/O. PUTHIYAPARAMBATH PRABHAKARAN NAIR, SREYAS,
5/40, ERANHIPALAM P.O, KACHERY AMSOM AND DESOM,
KOZHIKODE, PIN - 673005
BY ADVS.
FOR R1 & R2 SHRI.V.V.SURENDRAN
SRI.P.A.HARISH
SMT.SANIKA.V.S.
THIS EXECUTION SECOND APPEAL HAVING COME UP FOR
ADMISSION ON 31.07.2025, THE COURT ON THE SAME DAY DELIVERED
THE FOLLOWING:
2025:KER:57637
EX.SA NO. 5 OF 2025
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EASWARAN S., J.
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Ex.SA No.5 of 2025
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Dated this the 31st day of July, 2025
JUDGMENT
Karassery Service Co-operative Bank Ltd. has come up with this appeal against the rejection of their claim over the decree scheduled property on the basis of a 'Gehan' executed by the judgment debtor in their favour. The courts below have concurrently found against the appellant.
2. The brief facts necessary for the disposal of the appeal are as follows:
OS No.95/2017 was instituted before the I Addl. Sub Court, Kozhikode by respondent Nos.1 and 2 herein for recovery of the amount due from respondent Nos.3 and 4. Along with the suit, I.A.No.1984/2017 was filed, which is an application seeking interim attachment of the property of the defendants therein as a security for the plaint claim. On 22.8.2017, the application for interim attachment was allowed. Ultimately, the suit was decreed. For execution of the decree, respondent Nos.1 and 2 preferred EP No.257/2018 before the Addl.Sub Court-I, Kozhikode. One of the prayers 2025:KER:57637 EX.SA NO. 5 OF 2025 4 sought for in the execution petition is to proceed against the property attached, which has been made absolute in the judgment and decree in OS No.95/2017. Prior to the respondents 1 and 2 seeking attachment of the property of the defendants in the suit, it appears that the defendants had created a Gehan (mortgage) in favour of the appellant on 30.07.2015. Notwithstanding the creation of Gehan, it appears that, the decree holders, being unaware of the creation of Gehan, proceeded with the execution proceedings. However, later, finding that there exists a Gehan over the attached property, EA No.633/2019 was filed seeking to serve notice of sale on the appellant. On receipt of the summons from the executing court, the appellant appeared and preferred their objections, producing the details regarding the execution of the Gehan and also the other loan documents. It appears that the executing court did not touch the objections preferred by the appellant. Thereafter, the entire property was proclaimed for sale. However, finding that there were no bidders for the entire extent, the decree holders filed an application, IA No.633/2020, seeking to demarcate the property into plots and thereafter to sell the same in blocks. IA No.633/2020 was allowed, pursuant to which the proclamation of sale was drawn up and the property was sold in auction on 2.12.2021 for a sum of Rs.20,50,000/-, whereas the 2025:KER:57637 EX.SA NO. 5 OF 2025 5 decree debt was around Rs.24,00,000/-. Finding that the property is sold dehors their first charge, the appellant preferred EA No.153/2022, wherein the executing court held that since the appellant has got a first charge over the property, there is no requirement of creating a fresh charge over the same and accordingly, the said EA was dismissed. Thereafter, the appellant preferred EA No.307/2022 seeking for cancellation of the sale dated
3.12.2021 and also for lifting of attachment. The ground on which the application was sought to be sustained is based on the prior mortgage over the property sold in the public auction. By order dated 21.2.2021, the application was dismissed. Aggrieved, the appellant preferred an original petition before this Court. Pursuant to the judgment of this Court in OP(C) No.1355/2022, the appellant preferred AS No.105/2022 before the Addl. District Court-1, Kozhikode. By judgment dated 18.01.2025, the appeal was dismissed. Hence, the present second appeal.
3. Heard Sri.R.Sudhish, the learned counsel appearing for the appellant and Sri.P.A.Harish, the learned counsel appearing for respondent Nos.1 and 2.
4. Sri.R.Sudhish, the learned counsel appearing for the appellant, submitted that admittedly, the Bank has got first charge over the property.
2025:KER:57637 EX.SA NO. 5 OF 2025 6 He pointed out that in terms of Section 36A of the Kerala Co-operative Societies Act, 1969, a mortgage would create a special charge over the property and that the charge in the decree cannot override the statutory charge of the mortgage. In support of his contention, relied on the Division Bench decision of this Court in Nahala v. Adish and Others [2019 (1) KHC 221]. He further pointed out that, as soon as the appellant was impleaded in the execution petition, they had specifically raised an objection regarding the entitlement of the decree holders to proceed against the attached property because even before the attachment by the civil court, there exists already a statutory charge in favour of the appellant Bank by virtue of the Gehan (mortgage). Therefore, the executing court miserably failed to adjudicate the rival claim even before proclaiming the property for sale and thus erred egregiously in dismissing EA Nos.153/2022 and 307/2022. Even assuming for argument sake, that EA No.307/2022 will not come under the purview of Order-XXI Rule-58 of the Code of Civil Procedure, 1908 the application ought to have been treated under Order-XXI Rule-90 or Order-XXI Rule-99 or 101, as the case may be, and the subject matter of the lis ought to have been adjudicated.
2025:KER:57637 EX.SA NO. 5 OF 2025 7
5. Sri.P.A.Harish, the learned counsel appearing for the decree holders, respondents 1 and 2 herein, would submit that the appellant was a party to the entire proceedings before the executing court and failed to raise any objection as regards the entitlement of the decree holders to proceed against the attached property. Though the appellant may claim a superior right over the property by virtue of the mortgage, in the light of the order passed in EA No.153/2022, the appellant could still claim first charge, notwithstanding the purchase by the decree holders, and therefore, the court below was justified in dismissing the application.
6. I have considered the rival submissions raised across the bar and perused the records and the judgments rendered by the courts below.
7. On consideration of the rival submissions raised across the bar, this Court finds that the following substantial questions of law arise for consideration:
(i) Interpretation of Section 36A of the Kerala Co-operative Societies Act, wherein a charge was created on the entire 10.15 cents of land in favour of the appellant Bank and this charge had the legal characteristics of a valid mortgage can be ignored 2025:KER:57637 EX.SA NO. 5 OF 2025 8 by the Court at the time of sale in another execution petition for satisfaction of the decree?
(ii) Whether the dictum laid down in Nihala v. Adish 2019 (1) KLT 255, that when Section 36A provides for a special charge, it is obvious that a charge by a decree cannot prevail over Gehan/Mortgage.
(iii) Whether the courts below erred in law in ignoring the statutory first charge of the appellant under Section 35 of the Kerala Co-operative Societies Act, 1969, thereby violating the appellant's rights as a secured creditor?
(iv) Whether the courts below failed to consider that the execution sale should have been subject to the Bank's first charge, and that the sale proceeds ought to have been first applied to settle the bank's dues before allowing the set-off by decree holders?
(v) Whether the courts below erred in dismissing the appellant's claim under Order-XXI Rule-58 CPC on the sole ground that the property had already been sold, without 2025:KER:57637 EX.SA NO. 5 OF 2025 9 considering that the sale itself was illegal as it disregarded the appellant's superior charge?
8. Before proceeding to answer the above questions, this Court must notice one compelling fact which the executing court had completely missed. When EA No.633/2019 was filed to serve notice of sale on the Bank, it had resisted the execution petition on the ground that the appellant had a primacy of charge over the decree-scheduled property by virtue of a superior right of mortgage. Therefore, as on the date of the order of attachment, what remained in the hands of the judgment debtors is only an equity of redemption. Therefore, before proceeding to consider the question as to whether the property attached could be sold for realization of the amount covered by the decree, it was incumbent upon the executing court to have decided on the entitlement of the decree holders to proceed against the property, dehors the right of the appellant Bank. When a credit facility sanctioned by the appellant Bank is secured by a mortgage, any attachment over the property can only be subject to the right of the mortgagee to realise the dues to the Bank. Thus, the decree holders had no right to proceed in primacy over the rights of the appellant.
2025:KER:57637 EX.SA NO. 5 OF 2025 10
9. Coming to the maintainability of the applications filed before the executing court, it must be remembered that the essence of the request before the executing court was to lift the order of attachment as well as cancel the sale held on 3.12.2021. In the application under Order-XXI Rule-58 CPC, the appellant claimed a right over the property by virtue of a superior right, namely, mortgage. The fact remains that as on the date of the application, the sale was not confirmed. It must be remembered that, notwithstanding the plea in the application under Order-XXI Rule-58 CPC, the appellant had in its objection, raised a question of first charge over the property. Hence, it was incumbent upon the executing court to have finally pronounced upon the superior right of the appellant by virtue of the mortgage. Instead of doing so, the executing court disposed of EA No.153/2022 by a non-speaking order stating that, no fresh charge is required to be created. Therefore, the finding is not only perverse, but is vitiated by total non-application of mind.
10. Coming to EA No.307/2022, this Court cannot but notice the lackadaisical approach shown by the executing court in approaching the entire issue. A Co-operative Sector Bank, which claims a superior right under Section 36A of the Kerala Co-operative Societies Act, 1969, has been 2025:KER:57637 EX.SA NO. 5 OF 2025 11 simply non-suited on the ground that the application under Order-XXI Rule- 58 CPC is not maintainable after the sale of the property had occurred. It is true that the property was sold on 3.12.2021. However, it remains a fact that, the sale was not confirmed on the date of the application under Order XXI Rule 58 CPC. When a paramount charge over the property is claimed, it was incumbent upon the executing court to have adjudicated the right because when a claim is lodged by the appellant for recovery of the amount due under the mortgage, the existence of an encumbrance over the property by virtue of the sale in favour of respondents 1 and 2 can obviously act as a clog in getting the appropriate market value for the property. The entitlement of the decree holders to proceed against the attached property must be viewed in the above perspective.
11. A cursory reading of the order of the executing court shows that one of the prime considerations of the executing court was regarding the maintainability of the application after the property is sold. Order-XXI Rule- 58 of CPC reads as under:
"58. Adjudication of claims to or objections to attachment of, property.--
(1) Where any claim is preferred to, or any objection is made to the attachment of, any property attached in execution 2025:KER:57637 EX.SA NO. 5 OF 2025 12 of a decree on the ground that such property is not liable to such attachment, the Court shall proceed to adjudicate upon the claim or objection in accordance with the provisions herein contained:
PROVIDED that no such, claim or objection shall be entertained--
(a) where, before the claim is preferred or objection is made, the property attached has already been sold; or
(b) where the Court considers that the claim or objection was designedly or unnecessarily delayed. (2) All questions (including questions relating to right, title or interest in the property attached) arising between the parties to a proceeding or their representatives under this rule and relevant to the adjudication of the claim or objection, shall be determined by the Court dealing with the claim or objection and not by a separate suit.
(3) Upon the determination of the questions referred to in sub-rule (2), the Court shall, in accordance with such determination,--
(a) allow the claim or objection and release the property from attachment either wholly or to such extent as it thinks fit; or
(b) disallow the claim or objection; or
(c) continue the attachment subject to any mortgage, charge or other interest in favour of any person; or 2025:KER:57637 EX.SA NO. 5 OF 2025 13
(d) pass such order as in the circumstances of the case it deems fit.
(4) Where any claim or objection has been adjudicated upon under this rule, order made thereon shall have the same force and be subject to the same conditions as to appeal or otherwise as if it were a decree.
(5) Where a claim or an objection is preferred and the Court, under the proviso to sub-rule (I), refuses to entertain it, the party against whom such order is made may institute a suit to establish the right which he claims to the property in dispute; but, subject to the result of such suit, if any, an order so refusing to entertain the claim or objection shall be conclusive."
It may appear on a reading of the provision that an application for lifting of attachment cannot be maintained once the property is sold. However, it is not so. A reading of Rule 59 shows that, a claim under Rule 58 is maintainable even if the property attached is advertised for sale. The only requirement is to stay the sale until the objection is adjudicated. It must be remembered that the appellant can only approach the executing court for adjudication of its claim because a separate suit is barred. Therefore, the scope of Order XXI Rule 58 must be read along with Order XXI Rule 101 2025:KER:57637 EX.SA NO. 5 OF 2025 14 of CPC. It is unfortunate that the executing court failed to comprehend the niceties of law and proceeded to dismiss the claim petition.
12. In Kancherla Lakshminarayana Vs Mattaparthi Syamala and others [(2008)14 SCC 258], the Supreme Court held that the word "sold" appearing in the proviso to Order XXI Rule 58 can only mean when the sale is confirmed. Therefore, an objection under Order XXI Rule 58 is tenable before the sale is confirmed and that the executing court is bound to consider the objection to the attachment. Paras 15 & 16 of the decision reads under:
"15. This Court had held the decisions by the Bombay High Court in Rango Ramchandra Kulkarni v. Gurlingappa Chinnappa Muthal [AIR 1941 Bom 198] and Yeshvant Shankar Dunakhe v. Pyaraji Nurji Tamboli [AIR 1943 Bom 145] and the High Court of Travancore- Cochin in Kochuponchi Varughese v. Ouseph Lonan [AIR 1952 TC 467] to the same effect to be the good law.
16. On the basis of these two judgments, the learned counsel urged that the objection application in the execution petition could not have been, therefore, thrown away by the trial court and the High Court as not being maintainable. Considering the law laid down in Magunta Mining case [AIR 1983 AP 335] it must be said that mere holding of the auction does not bar the objections thereto. It is our considered opinion that in this case the sale was not confirmed and that made a substantial difference. The word "sold" in clause (a) of the proviso to Rule 58 has to be read meaning thereby a complete sale including the confirmation of the auction. That not having taken place, it cannot be said that the objection by the appellant was ill-founded or untenable as 2025:KER:57637 EX.SA NO. 5 OF 2025 15 has been held by the High Court and the trial court."
13. In this case, the records show that the sale was confirmed only on 21.2.2022 on the same date of dismissal of EA No 307 of 2022. Therefore, the executing court committed a serious irregularity in the conduct of proceedings. It is imperative for this Court to notice that, the decree holders had no right to proceed against the property of the judgment debtors, when there is an existing mortgage over the same. The executing court ought to have adjudicated the right of the appellant over the attached property before proclaiming the same for sale. Having not done, the executing court has clearly abdicated its duties and completely ignored the settled principles of law and proceeded with extraneous consideration.
14. Be that as it may, the point that arises for consideration is, the extent of relief to which the appellant is entitled to. The learned counsel appearing for respondent Nos.1 and 2 would vehemently oppose this Court granting any relief to the appellant, since, according to him, it is only because of the dereliction on the part of the appellant Bank, the property happened to be sold. However, this Court cannot subscribe to the aforesaid argument. It is true that the Bank was a party in the execution proceedings. It may also be true that, some infirmities have crept into the manner in which the 2025:KER:57637 EX.SA NO. 5 OF 2025 16 proceedings were conducted. But, this Court cannot remain oblivious of the fact that the executing court has clearly abdicated its powers in adjudicating the entitlement of respondent Nos.1 and 2 to proceed with the sale of the property when there was already a prior charge in favour of the appellant. Therefore, this Court is inclined to hold that the application, preferred under Order-XXI Rule-58 CPC, was maintainable and ought to have been entertained by the executing court. It is informed to this Court that, an award has already been passed in favour of the appellant Bank under the provisions of the Kerala Co-operative Societies Act, 1969 by the Joint Registrar and for execution of the decree in ARC No.761/2019, EP No.124/2024 has been filed and the same is pending consideration of the Sub Court (I-A), Kozhikode. Therefore, the appellant bank is entitled to enforce its charges without any fetters and the conduct of sale on the basis of attachment is clearly detrimental to its interest. Thus, this Court is of the view that the appellant is entitled to succeed.
15. Accordingly, this Execution Second Appeal is allowed as follows.
a. Orders of the executing court in EA Nos.307/2022 and 153/2022 in EP No.257/2018 as confirmed in AS No 105 of 2022 are set aside.
2025:KER:57637 EX.SA NO. 5 OF 2025 17 b. Resultantly, EA No 307 of 2022 will stand allowed and the sale dated 3.12.2021 in favour of respondent Nos.1 and 2 is set aside. c. Consequent to the allowing of EA No.307 of 2022, the order of attachment dated 22.8.2017 in IA No.1984 of 2017 in OS No.95 of 2017 will stand lifted.
d. The appellant is given liberty to communicate this order to the concerned SRO and Village office for consequential action. e. The executing court shall refund to respondent Nos.1 and 2 the entire sale consideration along with the requisite stamp duty paid by them within a period of one month from the date of receipt of a copy of this judgment.
f. EP No.257 of 2018 in OS No.95/2017 shall stand restored to the file of the Additional Sub Court-I, Kozhikode, enabling respondents 1 and 2 to proceed against the judgment debtors, in accordance with law.
g. EP No.257 of 2018 shall be tried along with EP Nos.124/2024 in ARC No.761/2019. The executing court shall implead respondent Nos.1 and 2 as additional respondents in the execution petition (EP Nos.124/2024). The learned counsel appearing for the appellant also 2025:KER:57637 EX.SA NO. 5 OF 2025 18 undertakes to make necessary application for impleading respondents 1 and 2, the decree holders in OS No.95/2017, as additional respondents.
h. The executing court shall also further endeavour to expedite consideration of EP No.124/2024 in ARC No.761/2019 and proceed for the sale of the property, and shall try to fix the maximum value for the sale and proceed to proclaim the property for sale. i. On the successful completion of the sale, if it is found that residue amount is left after satisfying the mortgage in favour of the appellant Bank, it shall immediately release the balance amount to the decree holders in OS No.95/2017.
The parties are directed to appear before the executing court on 13.08.2025 to work out the directions in the Judgment. Parties are directed to suffer their respective costs.
Sd/-
EASWARAN S. JUDGE jg