BRIEF FACTS

 The Appellant (“Borrower”), in the said matter, borrowed money from the husband of the original Plaintiff therein (“Lender”). The original Plaintiff being the legal representative of the Lender filed a Suit to recover the loan, which was partially decreed in her favour whereby the Court of Civil Judge, Senior Division (“Civil Judge”) awarded the principal amount along with interest. Aggrieved by the rejection of part of the claim, the Lender preferred an appeal before the Appellate Court against the order of the Civil Judge (“Appeal”). The Borrower also filed cross objections in the Appeal.

During the pendency of the Appeal, the Lender filed execution proceedings and sought attachment and sale of the properties of the Borrower. The properties were put to auction and purchased by the Lender in auction proceedings, which was also confirmed by the executing court.

Subsequently, the Appeal was dismissed by the Appellate Court and the objections filed by the Borrower were allowed to the extent of interest and cost. Consequently, the total decretal amount passed by the Civil Judge was reduced by the Appellate Court.

Thereafter the Borrower filed an application for restitution under Section 144 of the Code of Civil Procedure, 1908 (“CPC”) on the ground that the original decree passed by the Civil Judge was varied by the Appellate Court (“Restitution Application”). The Borrower also deposited the entire decretal amount before the Civil Judge. The Restitution Application was dismissed by the Civil Judge, Appellate Court and the High Court on the ground that (i) the Borrower did not deposit any amount in Court when the Suit was originally decreed by the Civil Judge and the decree was put into execution and; (ii) not even a part of the amount which was finally decreed by the Appellate Court was deposited by the Borrower, therefore the principle of restitution cannot be invoked.

The Lender also sold one of the properties to a third party (“Purchaser”) for consideration vide a sale deed wherein it was recorded that if the Lender loses the litigation, the consideration for the sale will be paid back to the Purchaser without interest.

It was contended on behalf of the Borrower that (i) the Lender being the decree holder and auction purchaser himself, is not entitled to any equity, which a bonafide auction purchaser with no knowledge of the litigation, or the pending appeal would have; (ii) the assignee of the Lender i.e. the purchaser cannot be equated with a bonafide purchaser for value without notice; (iii) where a decree holder himself is an auction purchaser, the sale cannot stand not only in the case of reversal of a decree but also in case of any variation or modification of it; (iv) the Borrower / judgment debtor’s right for restitution is immediately ignited after reversal or modification of the decree.

OBSERVATIONS AND FINDINGS BY THE SUPREME COURT

The Supreme Court referred to the principle behind the order of restitution made after the original decree is reversed or varied or modified as explained in the judgment passed by it in the matter of South Easter Coal Fields^[1] and Jai Berham v. Kedar Nath Marwari^[2]. The Supreme Court also analyzed the judgment in Chinnamal wherein the distinction between the decree holder who purchased the property in execution of his own decree, which is afterwards modified or reversed, and a person who is not a party to the decree is explained. Further, relying on the judgment in Padanathil Rugmini Ama vs. P.K. Abdulla^[3] the Supreme Court arrived at the conclusion that the purchaser or the assignee from the decree holder is not entitled to object restitution on the ground that he is not a bona fide purchaser.

During the course of arguments, the Supreme Court enquired the reason why all the properties of the Borrower were sold when a sum of part of sale proceeds had to be realised for discharge of the debt. After analyzing the provisions of CPC regarding attachment, valuation, sale proclamation and sale, the Court arrived at the conclusion that when sale of only one of the attached properties was sufficient to satisfy the decree there was no requirement for effecting the sale of all the attached properties.

The court held that “the execution of a decree by sale of the entire immovable property of the judgment debtor is not to penalise” the judgement debtor, but “the same is provided to grant relief to the decree holder and to confer him the fruits of litigation“. Further, the court held that “the right of a decree holder should never be construed to have bestowed upon him a bonanza” only “because he had obtained a decree for realisation of a certain amount“. A decree for realisation of a sum in favour of the plaintiff should not amount to “exploitation of the judgment debtor by selling his entire property“.

Accordingly, the Supreme Court set-aside the order passed by the High Court and allowed the Restitution Application. The Supreme Court also set-aside the sale of the attached properties of the Borrower. The Court allowed execution of the modified decree, if not already satisfied, to be proceeded in accordance with law.

CONCLUSION

Although the judgement reiterates existing jurisprudence on the subject, nonetheless, there are several instances where part of a property cannot be sold, and it is must that entire property be sold in an execution of a decree. Most of the properties in the urban areas cannot be sub-divided or fragmented, and therefore, a part sale is not possible. Similarly, properties forming part of a single license or allotments or leasehold basis, too, cannot be part sold. The existing jurisprudence also amplifies that any excess amounts so received by a decree holder from sale of properties should be returned to the judgement debtor. Therefore, a balance approach needs to be found based on facts and circumstances of every case. The need of the hour shall remain to ensure very efficient & seamless process for execution of the decrees, in the absence of which fruits of litigations cannot be conferred !  Watch this space for more …

Footnotes:

[1] (2003) 8 SCC 648

[2] AIR 1922 PC 269

[3] (1996) 7 SCC 668