Case: H.S. Goutham and Anr Vs. Rama Murthy and Anr. Etc

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 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 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 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 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 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 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 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 objection raised by the judgment debtors, the original defendants as well as the successful auction purchaser have preferred the present appeals.

Court's reasoning:
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 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 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.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 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 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. 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 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 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 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.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 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.