H.S.Goutham vs Rama Murthy And Anr. Etc. on 12 February, 2021


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Supreme Court of India

H.S.Goutham vs Rama Murthy And Anr. Etc. on 12 February, 2021

Author: M.R. Shah

Bench: Hon’Ble Dr. Chandrachud, M.R. Shah

                                                       1


                                    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:

2

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
3

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
4

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
5

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
6

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
7

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
8

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
9

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
10

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.
11

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
12

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
13

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
14

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
15

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,
16

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
17

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.

18

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
19

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
20

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
21

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.
22

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
23

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
24

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
25

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
27

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
28

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.

29

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.
32

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.

36

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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