N.S. Krishna Iyer vs Subramania Mooppanar and Others

S. Ramachandra Iyer, C.J.—This appeal arises out of proceedings initiated by the appellant for restitution by way of delivery of possession

of a house in Madurai town purchased by the first respondent and subsequently transferred by him to the third respondent. The facts are these: The

first respondent instituted in the Court of the Subordinate Judge of Madurai a suit O. S. No. 37 of 1951 for recovery of a sum of nearly Rs. 9060

as due to him in respect of two loans for Rs. 6000/- and Rs. 2000/-. A decree for that sum together with subsequent interest was passed on 18-

11-1952. The debtor-appellant filed an appeal against the decree to this Court in A. S. No. 174 of 1953.

In the meantime the decree of the trial Court was put in execution. The appellant was trying his best to avoid the Court sale of his properties by

making payment towards the decree. It is admitted that he had paid on various dates sums amounting to about Rs. 3500/-, but as the amount

under the decree then outstanding was considerably more than the sums paid the first respondent pursued the execution petition and brought the

debtor''s property to sale. At the court sale that took place on 21-6-1954, the decree-holder himself became the purchaser for a sum of Rs.

8015/-.

The appeal by the debtor came up for hearing before this Court subsequent to the date of sale. By its judgment, this court held that the first

respondent was entitled to a decree only in respect of the promissory note for Rs. 2000/- and that the larger claim for Rs. 6000/- had to fail. The

decree of the lower court was, therefore, varied with the result that the appellant succeeded to a substantial extent in the High Court. Just a few

days before this court delivered the judgment, the first respondent transferred the property purchased by him in court auction to the third

respondent. The sale deed itself was registered compulsorily long after the decree of this court. The tower court has held that the third respondent

is a bona fide purchaser for value, but there can be little doubt that he must have been aware of the pendency of the appeal in this court. The lower

courts have not investigated the question as to why even the vendor refused to register the document. It is, however, unnecessary for me at the

present stage to consider whether the finding of the lower courts that the third respondent is a bona fide purchaser from the first respondent is well

founded or not.

The appellant on the termination of the appeal in this court applied to the lower court for restitution. His case was that if credit were given to the

payments made by him, nothing would be due under the decree in respect of the promissory note and that there was really no necessity for the

sate. The respondents contested the application stating that if due credit were given to the payments there would still be a balance of Rs. 190 due

to the decree-holder in respect of the Rs. 2000/- claim and that the sale of the property was therefore inevitable and even justified and what all the

appellants could be entitled to will be to obtain a refund of the moneys from the decree-holder. The third respondent put forward a further

objection that he being a bona fide purchaser for value from the decree-holder auction purchaser, no relief in respect of the property in his hands

could be sought.

Both the courts below have accepted the respondent''s contention and hence this appeal. There can be no doubt, on the principle to be applied,

viz., that it will be the duty of the court when restitution is sought to place the applicant in the position in which he would have been, if the erroneous

decree which had subsequently been set aside or varied has not in fact been made. When the entire decree is set aside as a result of the appeal this

principle is not difficult of application. For example, where a property is sold in execution of a decree and the same has been purchased by the

decree-holder the judgment-debtor would be entitled to recover possession of the property from the decree-holder on the reversal of the decree

of the trial court. Where, however, in the execution of the erroneous decree, a third party bona fide purchases the property in court auction,

restitution re not granted against the third party but the judgment-debtor is compensated by directing the decree-holder to refund the purchase

money. The application of this principle is fraught with difficulty when the appellate court only modifies or varies the decree of the trial court. In

such a, case, if a stranger is the purchaser at the auction the remedy of the judgment-debtor would be only to obtain refund of that portion of the

purchase money from the decree-holder as he would be entitled to, by reason of the modification of the decree.

But where the decree-holder is the purchaser of the property and the decree is modified or set aside only in part, difficult questions of adjustment

of the rights of the parties will arise. The principle in such a case is however the same, namely, the parties are to be put in the position which they

would have occupied had it not been for the wrong decree had been passed. In Sri Sri Sri Nandakishore Ananga Bhima Dev Kesari Gajapathi,

Zamindar of Sannokhemedi represented by power-of-attorney holder Sriman Viswanadha Das Mahasayo Vs. Susi Iamala Patta Mahadevi and

Others, , Wadsworth, J., enunciated the correct procedure as follows:

The correct, procedure seems to me to be to take the position as it stood immediately before the wrong decree, to find out what would be the the

position of the ultimately successful party as on that date, having regard to the fact that the proceedings terminated and to award to the successful

party restitution in the shape of .........

The learned Judge had to consider this matter again in Maganti Venkataswami Naidu Vs. Annapareddi Nagireddi alias Mutyalu Reddi, , where he

laid down the principle in the following words:

The true criterion seems to be to consider what would be the position had the appellate Court''s decree been passed by the court of first instance.

If the sale which has been held is one which would have been held even if the court of first instance had decreed the amount eventually found due in

appeal, there is no legal or equitable reason for setting aside that sale or ordering restitution.

It goes without saying that when that is not the case the sale will have to be set aside. This has been so laid down by Rankin, J. (as he then was) in

Doyal Sarkar Vs. Tari Deshi and Others, ,

If the judgment-debtor could, and would, have paid what was due, and thus prevented a sale, it seems to me to be clear enough that he can get

the sale set aside as against the decree-holder by way of restitution.

The question then for consideration in this appeal is whether on the date of the sale, the judgment-debtor could have paid the amount that was

due under the decree. The respondents have filed a Memorandum of calculation of the amount due according to which a sum of Rs. 190-7-5

would be due to the decree-holder inclusive of interest and of costs of execution till the date of sale. Normally speaking it would not have been

difficult for the judgment-debtor who had paid a sum of Rs. 3500/-within a period of five months to pay a sum of Rs. 190 and odd if really that

was the only obligation he had under the decree. It is true that there is no evidence in this case that he would have been able to pay the amount; but

having regard to the fact that the sum due was very small, one can reasonably conclude that he would have been able to pay the entire amount, if

the decree-holder had executed the decree only in respect of the amount due under the promissory note.

Learned counsel for the appellant has filed a Memorandum of Calculation which shows that on the date of the sale, far from there being any

deficiency, he had really paid a sum of Rs. 231-8-0 in excess. Besides that, it is said that as the High Court has awarded costs to the appellant

which should possibly go in reduction of the amount decreed in favour of the first respondent there was really nothing due to the decree-holder on

the date of the sale. It is, however, unnecessary for me to consider whether for purposes of restitution the court will be entitled to take the costs

awarded by the appellate court into consideration as I am satisfied that applying the test laid down by Rankin, J., in Doyal Sarkar Vs. Tari Deshi

and Others, , the judgment-debtor should be held to have proved that he would have paid the outstanding amount if really the execution was

restricted to the amount as decreed by the appellate court.

Learned counsel for the third respondent then contended that as his client was a bona fide purchaser for value from the auction purchaser,

restitution should not be granted by way of delivery of the property purchased by him. Normally speaking the third respondent cannot have higher

rights in the property than what the first respondent his vendor had. If by applying the rule of restitution the first respondent was liable to deliver

back the property to the appellant, the third respondent would have an equal obligation to do so. The circumstance that he is a bona fide purchaser

from the first respondent would not alter or improve his title to the property in this respect.

In this connection, learned counsel for the third respondent placed considerable reliance on the decision of the Patna High Court in Gopi Lal and

Another Vs. Jamuna Prasad and Others, . That was a case of restitution coming within Section 151 of the CPC and not as in the present case

under the statutory provisions contained in Section 144 of the Civil Procedure Code. The learned Judge held that the doctrine of restitution based

as it was on the equitable principle that on the reversal or modification of the previous order the party affected should as far as possible be placed

in the same position which he would have occupied but for such a decree as it was the duty of the court to act rightly and fairly according to

circumstances towards all the parties involved. But this principle, it was held, could not be applied to a case where it conflicts with another rule of

equity viz., protecting a bona fide purchaser for value who should not be allowed to suffer on account of the mistakes or irregularities committed in

a court of law. We are, with great respect, unable to share the view expressed by the learned Judges. In addition to the two principles recognised

in that case there is yet another principle, namely, that no purchaser of property bona fide or otherwise could have a higher title to it than what his

vendor had himself or could give. Restitution is one of the highest duties of the court and it cannot be allowed to be defeated by the decree-holder

purchaser, simply by selling away the property to a stranger. Apart from that consideration we are satisfied that the rule as stated by the Patna

High Court will not apply to a case like the present where restitution is one u/s 144 of the CPC and not merely the inherent powers of the court.

We find that in Sagore Mandal v. Mofijuddin, AIR 1920 Cal 550 the Calcutta High Court has held that where a decree-holder himself purchased

the land in execution of his decree he must lose the benefit of the purchase on the reversal of the decree under which the sale took place and that

an assignee from such a decree-holder or a person with whom the land is settled by such a decree-holder, is in no better position. In a still earlier

case before the same High Court, Sir Lawrence Jenkins, C. J., and N.R. Chatterjee, J., in Satis Chandra v Rameswari Dasi, 31 Ind Cas 894 :

AIR 1915 Cal 363 laid down that the defeasibility of the decree-holder''s title to the property purchased in execution of decree would not be

affected by the decree-holder transferring the property in favour of another. The learned Judges observed:

The court as a matter of policy has a tender regard for honest purchasers at sales held in execution of its decrees though the sales may be

subsequently set aside, where those purchases are not parties to the suit and the decree has not been passed without jurisdiction. But the same

measure of protection is not extended to purchasers who are themselves, the decree-holders, nor can the purchasers from such decree-holders

claim that the court owes them any duty, or to be within the policy which prompts the extension of protection to strangers. They have brought from

one whose title is liable to be defeated and if the decision in Zain-ul-abdin Khan v. Muhammad Asghar Ali Khan, ILR 10 All 166 (PC) bears the

meaning I have attributed to it, the title acquired by the purchaser from the decree-holder is similarly defeasible.

I am in respectful agreement with the foregoing observations. It follows that the appellant will be entitled to obtain delivery of the property by

way of restitution; but he will be allowed to do so only on condition of his paying some amount that may still be due to the decree-holder under the

decree as passed by the High Court. The executing court will investigate into the matter and pass suitable orders. The appeal succeeds. The

appellant will be entitled to his costs from the respondents. Leave granted.