P.S. Krishna Aiyar vs Savurimuthu Pillai

Abdur Rahim, J.—I have come to the conclusion that the plaintiff--respondent had no cause of action against the 2nd defendant in the suit.

The 1st defendant obtained a decree against one Antonia Pillai whose executor is the present plaintiff.

The decree amount was paid out of court by the judgment-debtor. The payment however was not certified as required by the law by the

decree-holder whose duty it was to do so in the first instance nor did the judgment-debtor inform the Court of the satisfaction as he was entitled to

do in default by the decree-holder. The decree was afterwards assigned to ''he 2nd defendant. A question was raised in the execution of the

decree as to whether it had been adjusted, and, if so, whether the adjustment could be recognized. The executing Court held that in the absence of

a certificate or record of satisfaction as required by Order 21, Rule 2, it remained an executable decree and it also found that adjustment had not

been proved. The 2nd defendant then proceeded to realize the decree amount by execution. The plaintiff, as executor of the judgment-debtor

thereafter instituted this suit claiming damages against the ''1st and 2nd defandants to the extent of the amount, which the 2nd defendant has

realized in execution. It has been well settled, and it can hardly be disputed, that so far as the 1st defendant, the original decree-holder, was

concerned, the plaintiff had a good cause of action. This was so laid down as far back as Viraraghava Reddi v. Subbakka ILR (1832) Mad 397

by a Full Bench of this Court and that is also the view of the other High Courts. In that case, it was held that such a suit would lie as for breach of a

promise on the part of the decree-holder either not to execute the decree or to enter satisfaction. It was also held that the judgment-debtor could

frame his claim against the decree-holder thus in default for damages on the basis of fraud or negligence in not certifying adjustment.

But the question whether there is a cause of action against the assignee of a decree which had been adjusted but the adjustment of which was

not certified to the Court, is bare of authority. It cannot be said that there was any sort of contractual relation between the 2nd defendant the

assignee in the case and the plaintiff and the mere fact that the 2nd defendant, as found, knew that the decree had been satisfied will not make him

guilty in law, either of fraud or of negligence in as much as he was under no obligation to certify adjustment, the decree amount having been

received b the original decree-holder before assignment. The executing Court was right in holding that it was bound to treat the decree as still

subsisting and to allow it to be executed, by virtue of Order 21, Rule 2. Clause 3 which enacts that ""a payment or adjustment, which has not been

certified or recorded as aforesaid, shall not be recognized by any Court executing the decree. The decree, therefore, on the date of its assignment

being one which according to law, the 2nd defendant could enforce, the only way in which the case of the plaintiff could be put is to base it on

Section 49 which enacts that ""every transferee of a decree shall hold the same subject to the equities, if any, which the judgment-debtor might have

enforced against the original decree-holder."" It is argued that we must hold that the decree was in this case subject to an equity which bound the

assignee who had knowledge of the adjustment before he obtained the assignment. In the first place Section 49 relates to the stage of execution,

that is to say, under it, it is the Court executing the decree that has to consider whether it was held subject to any equities which the judgment-

debtor could enforce against the original decree-holder. Now the cause of action in a case like this as laid clown in Viraraghava Reddi v.

Subbakka ILR (1882) Mad 397 is breach of a promise or contract and I am not aware of any general principles according to which the existence

of such a contract or promise would create an equity which would be enforceable against the transferee. In the case of sales of Immovable

property, no doubt, it is well established that the transferee is bound by a contract to convey the property in favour of another person of which he

had knowledge. But that rule, so far as I am a ware has not been extended either to the disposition of moveable properties or of money decrees.

We have been referred to a Full Bench decision of the Calcutta High Court in Goono Monee Dassia v. Pran Kishore Dosse (1869) 13 W.R. 69

where the cause of action against the original decree-holder who executed the decree in spite of adjustment out of Court is put on the ground that

after such adjustment he held the decree in trust for the judgment-debtor. But I do not think that Section 49 of the CPC or the corresponding

provision of the old Code ever contemplated such an inferential trust. The Full Bench of this Court in Viraraghava Reddi v. Subbakka ILR (1882)

Mad 397 does not base it on any such ground and if I may say so with respect the right way to regard the cause of action as laid down in that case

is either breach of a promise or of a statutory duty to certify adjustment to Court. The 2nd defendant as 1 have pointed out could, not be said to

have committed any breach of promise or having been guilty of violating any statutory duty. We have been also referred to another decision of the

Calcutta High Court in Monmohan Karmokar v. Dwarak Nath Karmokar (1910) 12 Cal. L.J. 312. But I do not think that the point decided there

throws much light on the principles applicable to this case. There the question arose in execution between the assignee of a decree who held it as

benamidar of the judgment-debtor and other creditors of the judgment-debtor and having regard to the conclusion of the learned Judges that in

those circumstances there was no executable decree, any observations regarding the liability of assignees of decree generally, cannot in my opinion

be of much help in the present case. Here there was undoubtedly an executable and subsisting decree and that decree was executed according to

law. I hold therefore that there was no cause of action against the 2nd defendant. I may mention that we had called for a finding as to whether the

2nd defendant at the time he obtained the assignment, had knowledge of the adjustment out of Court. The finding is that he had such knowledge,

but as I have already stated, that fact cannot make any difference as to his liability in the present suit.

The result is that the appeal must be allowed and the suit as against the 2nd defendant dismissed with costs throughout.

Oldfield, J.

I am not prepared to accept all the considerations adduced by my learned brethren. Rut 1 can give my reasons shortly for agreeing with the

conclusions that there is no cause of action against the 2nd defendant; and that is sufficient to justify concurrence in the decision that the suit must

be dismissed.

The main question is whether the plaintiff is entitled to recover, not only from the 1st defendant who has once recovered the decree amount (that

is not disputed) but also from the 2nd defendant who has recovered it again by execution. 1 agree with my learned brethren for the reasons given

by them that the claim must be regarded as for damages for injury caused by 1st defendant''s failure to certify satisfaction, as he ought to have done

after recovering the decree amount. Then the only ground, on which 2nd defendant can be held liable, is that he in some way subjected himself to

1st defendant''s liability by taking an assignment from him. There is only one basis put forward for this contention, namely, the terms of Section 49

of the Civil Procedure Code. But no authority has been cited to show that the section is intended to cover such cases as the present. Whether the

fact that it occurs in the chapter relating to execution is a reason against that construction of it, I do not wish to decide. It is at all events not

necessary in the present connection to hold that it is final; for there is another clear reason for the same conclusion.

The section provides that the transferee of a decree shall hold the same subject to the equities, which the judgment-debtor might have enforced

against the original decree-holder. It seems to me that the section is not intended to mean any more than it says explicitly. It is only intended to

make provision regarding the terms on which the decree is to be held; and it is not the contention of the plaintiff in this case, and could not be, that

the 2nd defendant''s holding of the decree in any way arose from or is connected with the 1st defendant''s wrongful conduct or was ever

conditional on his paying compensation for it. In fact, the claim against the 2nd defendant is entirely independent of his holding the decree in that

way. In these circumstances, I agree with the order proposed by Mr. Justice Abdur Rahim.

Seshagiri Aiyar, J.

I agree with the judgment of Abdur Rahim, J., just pronounced.

In O.S. No. 316 of 1905 the first defendant obtained a decree against the plaintiff. Subsequent to the decree, it was arranged that the plaintiff

should pay off the debts due from the 1st defendant to third parties and that he should enter up satisfaction of the decree obtained by him against

the plaintiff. The plaintiff''s case is that he did perform the agreement, but that the 1st defendant fraudulently failed to enter up satisfaction. An

application was made for execution by the 1st defendant which was opposed by the plaintiff. But it was allowed on two grounds (1) that as no

satisfaction was entered, the decree can be executed and (2) that the arrangement between the parties was not carried out by the plaintiff. After

this order permitting execution, the 1st defendant transferred the decree to the 2nd defendant. He executed it and recovered the money from the

plaintiff. This was on the 7th September 1908. Thereupon the present suit was instituted by the plaintiff for damages for wrongfully executing the

decree in contravention of the original arrangement. The courts below have found that the plaintiff did perform his part of the contract; and gave a

decree for damages against both the defendants. The 2nd defendant appealed to this Court in Second Appeal No. 389 of 1916. The two learned

Judges who heard the appeal differed in opinion. Sadasiva Aiyar, J., was for reversing the decree as against the 2nd defendant, but Phillips,]., was

for confirming the decree against him. Hence this Letters Patent Appeal.

Although I did not dissent from the opinion of my learned colleagues that a finding should be called for on the question whether the 2nd

defendant was aware that at the time the decree was transferred to him, the plaintiff had performed his part of the contract, in my opinion, there is

no cause of action at all against the 2nd defendant. There is no privity of contract between the plaintiff and the 2nd defendant. The suit for damages

is for the breach of the contract. That, is well settled. See Virarnghavn Raddi v. Subbakka ILR (1882) Mad 397 and In the matter of Medai

Kaliani Anni ILR (1907) Mad. 545. What gives the aggrieved party a right of action is the failure to carry out the terms of the contract to enter up

satisfaction. It is true that the measure of damages in such a suit is ordinarily the amount recovered by the wrong doer. But that is not because the

plaintiff is entitled to follow the amount recovered in whosever''s hands it may be found, but because the Courts for the sake of convenience have

enunciated the rule that the suffering must be estimated as the actual loss sustained by the aggrieved party. In all the four High Courts in ,this

country it has been held that where there is a wrongful sale of property in violation of the agreement to enter up satisfaction, the property

purchased at the execution-sale cannot be recovered by the injured party but that he is only entitled to damages. Yellappa v. Ramachandra ILR

(1896) Bom. 463, Rewa Mahton v. Ram Kishen Singh ILR (1886) Cal. 18, Jaikaran Bharti v. Ragunath Singh ILR (1898) All. 254 and

Krishnaswami Ayyangar v. Ranga Ayynngar ILR (1896) Mad. 369 : 7 M.L.J. 71 all enunciate this principle. Now the ground on which these

decisions proceed is that the execution proceedings are not invalid by themselves, although they had been taken in violation of the agreement;

because under the CPC so long as the decree is allowed to be outstanding without satisfaction having been entered in respect of it, it is an

enforceable decree, Parties deriving benefit there under should not be deprived of their right because of a pre-existing arrangement between the

judgment-debtor and the decree-holder, That being the provision of law, all the four High Courts have held that the right of the judgment-debtor

who has been deprived of property is to sue the decree-holder for damages caused by the deprivation, and not to sue the purchaser for the

restoration of the property taken from him. I think the principle of these decisions is applicable to the present case. The 2nd defendant obtained

execution in a proceeding, which was held to be subsistent and enforceable. The fact that it is not land but money that he recovered ought to make

no difference in the application of the rule of law. Therefore 1 am unable to hold that the 2nd defendant is bound to return the. money which he

recovered in execution against the plaintiff.

But it was suggested that the knowledge of the 2nd defendant that, at the time he obtained a transfer of the decree, the plaintiff had performed

his part of the contract entered into with the 1st defendant would make a difference in the case. Now there are some recognised principles on this

subject. For example, we have Section 27 of the Specific Relief Act which enables a party with whom a contract of sale has been entered into to

sue for specific performance not only against the person who agreed to sell the property to him but also against the person who has purchased that

property with knowledge of the agreement to sell. The principle of this section is borrowed from the well known rule in equity that "" equity regards

that as done which ought to have been done."" From this maxim, the rule has been deduced "" that from the time of the contract for the sale of the

land, the vendor, as to the land, becomes a trustee for the vendee; and the vendee, as to the purchase money, a trustee for the vendor who has a

lien upon the land therefor. And every one coming in by subsequent and representative title, and every subsequent purchaser from either with

notice, becomes subject to the same equities as the party would be to whom he succeeds, or from whom he purchased."" It is doubtful whether this

principle is applicable to contracts relating to money or moveable property. For the sake of argument, I shall assume that it covers such cases also.

What follows? The person with whom the contract not to execute the decree has been entered into can proceed to recover the amount wrongfully

levied from him not only from the promisor, but also from the party who has benefited by the breach. This assumes that the proceeding is wrongful

and void ab initio. But where legally the decree is executable, it is not open to argument that the party who recovered under such a decree is

compellable to refund what he has recovered. Moreover the four cases from the four High Courts to which 1 drew attention already, show that the

principle underlying Section 27 of the Specific Relief Act has no application to such cases. In my opinion when once it is conceded, that the

aggrieved party is not entitled to recover land or other property sold in execution contrary to the terms agreed upon between the judgment debtor

and the decree-holder, it is impossible to suggest any ground of liability on the part of a third party deriving benefit under the decree. This

conclusion derives further support from decisions like that reported in Bairagulu v. Bapanna ILR (1802) Mad. 302 : 2 Mad L J 112 where it was

held that no injunction will lie to prevent a party from executing a decree. The obvious reason is that the decree is legal and enforceable and the

right of action to the aggrieved party arises on the breach of the agreement and not upon the fact that the. decree has been executed. The decision

in Monmohan Karmokar v. Dwarak Nath Karuokar (1910) 12 Cal. L.J. 312 has been very much misunderstood. It is a case of a judgment-

debtor obtaining an assignment of decree nominally after it had been satisfied. The question related to the equities enforceable in execution against

the assignee. The observations about similar equities being available in suits are pure obiter. They really have no bearing on the present case.

However, if that judgment lays down the proposition contended for by their respondent''s vakil I am unable to agree with it. As regards Goonoo

Monee Dossia v. Prankishore Dossee (l869) 13 W.R.68 the question was between the original parties to the decree and no question of

assignment was Considered. With all respect I am unable to accept the proposition that the decree-holder is a trustee for the judgment-debtor. As

regards Section 49 of the CPC on which reliance was placed, it is enough to point out that that Section deals only with equities in the course of

execution, for example there may be cross-decrees or a question of a set off in respect of costs. In such matters, the transferee decree-holder is

bound by the equities subsisting between his assignor and the judgment-debtor. Vide Sinnu Pandaram v. Santhoji Row ILR (1902) Mad. 428.

That has no application to the cases of suits for damages. I therefore agree with Sadasiva Aiyar, J., that there is no cause of action against the 2nd

defendant. This being my view it is unnecessary to consider the question of limitation.

As I have held that there is no cause of action against the 2nd defendant, I would reverse the decree of the Courts below, and dismiss the suit

against the 2nd defendant with costs throughout.