Ramathal and Another vs Nagarathinammal and Others

Ramakrishnan, J.—These connected appeals are directed against the order of the learned Subordinate Judge of Coimbatore in Execution Application Nos. 80 and 525 of 1963 in Original Suit No. 37 of 1955. The prior facts necessary for the consideration of these appeals are briefly the following:

The schedule property was made the subject of a simple mortgage executed on 7th July 1949, by Naga rathinammal and Chandrasekharan, Respondents 1 and 2 in the appeals. R. K. Kandaswami, the fourth Respondent, obtained a preliminary decree on the mortgage on 14th August 1956, and thereafter, a final decree on 2nd March 1957, for the sale of the hypotheca. The property was sold in Court auction on 2nd April 1958, and purchased by Dhandayuthapani Chettiar, the Appellant in Appeal Against Order Nos. 232 of 1964 and 410 of 1964. On 14th June 1958, Nagarathi-nammal, Chandrasekharan and one Ramaswami Goun-dar who had obtained an agreement for sale of the hypotheca, in his favour from the mortgagors, filed an application under Order XXI, Rule 90, Code of Civil Procedure, for setting aside the sale, on account of the material irregularities in the conduct of the sale. They also furnished security required under the rules. But on account of some alleged default, this application was dismissed on 26th July 1958. The sale was confirmed on 26th July 1958 itself, and the auction-purchaser took possession on 19th November 1958. Thereafter, Chandrasekhara Iyer, Nagarathinamma1 and Ramaswami Goundar filed appeals, Appeal Against Order Nos. 105 and 106 of 1959, in the High Court. In Appeal Against Order No. 105 of 1959, a Bench of this Court, consisting of Ramachandra Ayyar C. J. and one of us, passed an order on 8th February 1962, holding that the learned Subordinate Judge was under a misapprehension, in finding that the Appellants were in default, and, thereafter, the order of the lower Court dismissing the application under Order XXI, Rule 90, CPC was set aside, and the lower Court was directed to dispose of that application in accordance with law. The appeal which was simultaneously heard, Appeal Against Order No. 106 of 1959 was against the order confirming the sale, and, therein, the Bench observed, that no separate orders were necessary, in view of the allowance of the appeal, Appeal Against Order No. 105 of 1959, and the restoration and remand of the application under Order XXI. Rule 90, Code of Civil Procedure, for fresh disposal.

During the pendency of the aforesaid two appeals in the High Court, the auction-purchaser conveyed the property to one Ramathal on 19th November 1958, and she is now the Appellant in Appeal Against Order Nos. 370 of 1963 and 207 of 1964 before us. After the restoration of the petition under Order XXI, Rule 90, Code of Civil Procedure, Chandrasekharan,Nagarathinam-mal and Ramswami Goundar filed, on 27th November 1962, an application under Order XXXIV, Rule 5, Code of Civil Procedure, Execution Application No. 80 of 1963, for leave to deposit the mortgage money and the other statutory charges and solatium to the auction-purchaser, and prayed for treating the mortgage security as discharged, and for getting back possession of the property both from the auction-purchaser as well as the purchaser from him. Simultaneously, they filed Execution Application No. 525 of 1963, under Sections 47 and 151, Code of Civil Procedure, to set aside the confirmation of the sale, in view of the orders passed in Appeal Against Order No. 105 of 1959 and Appeal Against Order No. 106 of 1959. These applications were strenuously opposed by the decree-holder, the auction-purchaser in the Court auction sale, and the private purchaser from the auction-purchaser.

The learned Subordinate Judge held that the effect of the restoration of the petition filed under Order XXI, Rule 90, CPC by the appellate order of this Court, was, by implication, to set aside the confirmation of the sale. Therefore, the application, Execution Application No. 525 of 1963, for setting aside the confirmation of the sale was treated as unnecessary and as one filed merely by way of abundant caution. The learned Subordinate Judge also held in Execution Application No. 80 of 1963, that, in view of the restoration of the petition under Order XXI, Rule 90, Code of Civil Procedure, the mortgagors had a right to get the appropriate reliefs under Order XXXIV, Rule 5, Code of Civil Procedure, and that they could obtain those reliefs both as against the Court auction-purchaser as well as the purchaser from the auction-purchaser. Further, since the latter had purchased the property during the pendency of the appeals, Appeal Against Order Nos. 105 and 106 of 1959, the purchase was hit by the doctrine of lis pendens, and no equities available to a purchaser in good faith, would be available to Ramathal. Regarding the correctness of the quantum of money in deposit, it was urged that the interest subsequent to the date of the Court-sale, had not been deposited, but the lower Court repelled that argument, and held that the correct amount had been deposited. In the result, both the applications were allowed, and the learned Subordinate Judge passed a decree setting aside the sale, directing the Respondents to deliver the documents of title to the mortgagors, directing them to transfer the mortgaged property to the third Petitioner therein, namely Ramaswami Goundar, and directed them also to deliver possession. Respondents 1 and 2 in the petition, or the one or the other of them, were given the right to withdraw the amount deposited by the Petitioners. As mentioned already, the present two appeals are filed by the court-sale auction purchaser and the purchaser from the auction-purchaser.

The principal points that arise for consideration in these appeals are (i) whether, by reason of the confirmation of the sale in Court-auction, the auction-purchaser got a valid title to the schedule property, and whether that title became void by the subsequent orders in Appeal Against Order Nos. 105 and 106 of 1959 and the consequent restoration of the application under Order XXI, Rule 90, Code of Civil Procedure, (ii) whether, Ramathal, the Appellant in Appeal Against Order Nos. 370 of 1963 and 207 of 1964, is a bona fide purchaser for value from the Court auction-purchaser, and whether her title can be defeated by the aforesaid proceedings; in any event, is she entitled to equities in her favour, by reason of improvements to the property which she made in good faith; and (iii) does the amount deposited by the mortgagors and Ramaswami Goundar represent the correct amount payable under the provisions of Order XXXIV, Rule 5,Code of Civil Procedure, and, if not, are they entitled to have the auction sale set aside and the mortgage security discharged?

Points (1) and (2): The arguments urged before us by learned Counsel, for dealing with these points, cover a wide range of ground, besides reference to a considerable volume of authorities, but, before we consider them, it will be useful to set down briefly the prior history of Order XXXIV, Rule 5 Code of Civil Procedure, the scope of which we have to consider in these appeals.

The old Transfer of Property Act (IV of 1882), provided for analogous reliefs, in Section 89, whose terms were very brief, and stated that, if the Defendant paid to the Plaintiff or into Court on the day fixed, the amount due under the mortgage together with costs and subsequent costs, the Defendant should, if necessary, be put in possession of the mortgaged property; but if such payment was not so made, the Plaintiff or the Defendant might apply to the Court for an order absolute for sale of the mortgaged property, and the Court should then pass an order that such property be sold, and thereupon the Defendant''s right to redeem and the security should both be extinguished. This provision gave rise to several difficulties in its working. For instance, there were difficulties as to the time-limit for application for the passing of a final decree for sale and the correct provision of the Limitation Act which would be applicable--See Mulla''s Code of Civil Procedure, twelfth edition, page 1097. Again, the provision in Section 89 for extinguishing the right of redemption on the passing of an order for absolute sale, also gave rise to difficulties. Thus irregularities might exist in the conduct of the sale which might lead to setting aside of the sale on the proof of such irregularities, but, by that time, the right to redeem and the security might have been extinguished. For the purpose of avoiding these and other difficulties, when the CPC was amended by Act v. of 1908, Section 89 and the succeeding sections in the Transfer of Property Act were deleted, and they were embodied in the new CPC with substantial amendments, in the form of the) several rules of Order XXXIV, Code of Civil Procedure. The main effect of these changes was that the mortgagors or any other person interested in the hypotheca obtained the right to apply and get an order treating the mortgage security as extinguished, and to get back possession of the hypotheca if necessary, after depositing a certain prescribed amount in the Court, either before the sale directed under the preliminary decree, or, if the sale had been held under a final decree for sale, at any time before the confirmation of the sale. There is no time-limit for making such an application and the right is available, as long as the sale is not confirmed. The new provision in Order XXXIV, Rule 5, CPC also provided for relief to be given to the auction-purchaser at the sale by payment of the sale price and a solatium of 5 per cent as his sale becomes vacated. For this purpose, he is made a necessary party to the Order XXXIV, Rule 5 proceedings. In Madras, there is a further amendment which requires that, on the application made by the Plaintiff for passing a final decree, notice shall be given to all the parties.

The first and perhaps the most important question for consideration in this case is the effect which the order restoring the petition under Order XXI, Rule 90, CPC by the appellate Court in Appeal Against Order Nos. 105 and 106 of 1959, will have on the prior proceedings in the trial Court which had already taken place following the confirmation of the sale, namely the sale and delivery of possession of the hypotheca to the auction purchaser, followed by the subsequent private sale and delivery of possession to Ramathal. The prior decisions of this Court cited at the bar on this point, hold that, on the restoration of the petition under Order XXI, Rule 90, Code of Civil Procedure, the confirmation of the sale becomes automatically void. The authorities are Nidamarti Venkata Narasimham Vs. Pogaku Nagojirao, (Horwill and Koman JJ.; Varadarajan v. Venkatapathi ILR (1953) Mad. 880 (Satyanarayana Rao and Krishnaswamy Nayudu, JJ). In the latter decision, the learned Judges, in an elaborate judgment, in which they followed the earlier decision, held that the restoration of the application under Order XXI, Rule 90, CPC automatically operated to vacate or render ineffective, the earlier order confirming the sale under Order XXI, Rule 92, Code of Civil Procedure. This decision deal with a final decree for sale of the mortgaged property followed by a petition under Order XXI, Rule 90, CPC for setting it aside; therefore, it must be treated as on all fours with the present case: Satyanarayana v. Ramamurthi (1960) 2 An W.R. 431 which followed the above two earlier decisions of this Court; Valli Ammal Vs. Subramania Iyer and Another, a decision of Ramachandra Ayyar C.J.; and an unreported decision of Ganapatia Pillai J., in Civil Revision Petition No. 1526 of 1961. (S. A. Ramaswami Gounder v. Manager, Kasturi Rangappa Ghettiar and Anr.) Following the above line of authorities, we uphold in this case, the decision of the trial Court, that on the restoration of the petition under Order XXI, Rule 90, Code of Civil Procedure, the confirmation of the sale became automatically vacated.

The next question for consideration is the position of the auction-purchaser, when the confirmation of his sale got automatically vacated, on the subsequent restoration of the petition under Order XXI, Rule 90 Code of Civil Procedure. The title of the auction purchaser under an unconfirmed sale must be treated as a conditional one, which becomes absolute only on confirmation. u/s 65 of the Code of Civil Procedure, such confirmation acts retrospectively from the date of sale, but, till the confirmation, the title remains inchoate, and, in the absence of confirmation, no title passes to the purchaser. The position will be the same, when there is a confirmation, but such confirmation becomes vacated by reason of a subsequent order restoring the petition under Order XXI, Rule 90, Code of Civil Procedure. This result has been succinctly described by the Privy Council in Chandramani Shaha v. Anarjan Bibi ILR (1934) Cal. 945 (that case also dealt with an auction sale, in execution of mortgage decree followed by an application under Order XXI, Rule 90, Code of Civil Procedure) as follows:

Again, take a case In which the Subordinate Judge disallowed the application to set aside the sale; there would then be confirmation of the sale by the Subordinate Judge and the sale would become absolute as far as his court was concerned. If the High Court allowed an appeal, and set aside the sale, there would then be no sale, and, of course, no confirmation and no absolute sale.

Apart from these cases, as pointed out by the learned Counsel for the Respondent, if the Court sale is vitiated by fraud, the auction purchaser cannot set up good faith to defend his title when challenged, if the sale is set aside on a petition under Order XXI, Rule 90, Code of Civil Procedure--Vide Bireswar Ghose v. Pctnchkouri Ghose (1923) 27 C.W.N. 587.

There is another line of authority cited by the learned Counsel Sri Venugopalachari for Ramathal. They deal with cases where in pursuance of the decree of the trial Court the property is sold in execution and purchased by a stranger and thereafter the decree is set aside in appeal, or an ex parte decree is passed and the property is sold in execution and purchased by a stranger, and subsequently the ex parte decree is set aside or the appellate Court sets aside the lower Court''s decree, and thereafter restitution is applied for. In such cases, it is observed that it is necessary to protect the interest of the auction purchaser who had purchased in good faith especially when he is a stranger; the decisions also hold that there can be no restitution in such cases. The reasoning, in these cases proceed on the basis that, otherwise there will be less inducement to intending purchaser to buy at execution sales and less chance of the property fetching proper price at such sales. Typical of such oases are Zainul Abdin Khan v. Muhammad Asgar Ali Khan ILR (1887) All. 166 (P.C.) and Rewa Mehton v. Ram Kishen Singh ILR (1886) Cal. 18 followed by Mukhoda Dassi v. Gopal Chunder Dutta ILR (1889) Cal. 734 Shivlal Bhagvan v. Shambhu Prasad ILR (1905) 29 Bom. 435 (doctrine of lis pendens will not apply to such cases): Sheik Ismail Rowther v. Rajab Rowther ILR (1906) Mad. 295 and Chockalingam v. Krishna ILR (1964) 1 Mad. 923. These decisions proceed on the broad principle that the reversal of the decree of the trial Court in appeal, or the setting aside of the ex parte decree does not per se render the Court sale in execution of the former decrees void, but they only give rise to certain equities which can be granted in proper cases. But the restoration of a petition under Order XXI, Rule 90, CPC after the earlier confirmation of the Court sale results in an entirely different situation. It renders the Court sale itself void and ineffective, and that is the reason why in proceedings under Order XXXIV, Rule 5, Code of Civil Procedure, the position of the auction purchaser and the purchaser from the auction purchaser is entirely different from the situation visualised in the case cited above by Sri Venugopalachari which justifies restitution on the setting aside or the modification of the trial Court''s decree by the appellate Court or the setting aside of an ex parte decree.

The decision in Irulayee Ammal v. Murwgiah (1950) 2 M.L.J. 17 cited by Sri Venugopalachari appearing for Ramathal dealt with a different state of affairs and can have no application to this case. There, after a preliminary decree on a mortgage, pending an application for scaling down under Act IV of 1938, there was stay of further proceedings for sale of the property. But there was no stay asked for in respect of one item of the hypotheca which was sold in Court auction, and then repurchased by a stranger. It was held that the interest of this auction purchaser alone would be saved, because there was no stay in regard to the sale of the property in which he became interested. Raman Kunjukrishnan Vs. Raman Viswanathan and Others, a decision of a single Judge referred to by Sri Venugopalachari also dealt with a different state of affairs. There, after the dismissal of a petition under Order XXI, Rule 90, Code of Civil Procedure, the sale was confirmed. The petition under Order XXI, Rule 90, CPC was restored in appeal, and, after rehearing, it was again dismissed. It was held that the right of the auction purchaser revived on the dismissal of the Order XXI, Rule 90, petition for the second time. That case has no application here. On the other hand, a purchaser of the hypotheca, in pursuance of a decree for sale, is put on notice of the statutory provision regarding the provisional nature of his title, which remains inchoate and conditional as long as the sale is not confirmed, and an application under Order XXI, Rule 90, CPC is pending. If after such confirmation, there is an appeal against the order dismissing the petition for setting aside the sale under Order XXI, Rule 90, Code of Civil Procedure, the Issue of the title of the auction purchaser is set at large, pending the decision in the appeal. If this appeal is allowed and the petition under Order XXI, Rule 90, CPC is restored, the confirmation of the sale is vacated, and the title of the auction purchaser again becomes inchoate and conditional. Such a situation has no analogy to a decree of the first Court being reversed in appeal or an ex parte decree being set aside. Questions relating to restitution -whether under the specific provision of Section 144 of the CPC or under general principles of restitution and as to how far the interests of the auction purchaser will be protected in such circumstances will arise only in the latter type of cases. Decisions dealing with the latter type of cases cannot be relied upon, as authority for considering the position of an auction purchaser whose sale is vacated in proceedings under Order XXXIV, Rule 5, Code of Civil Procedure. First of all, in such cases, through the setting aside of the confirmation, the title of the auction purchaser disappears. Secondly, the statute has made him a necessary party to the proceedings, and has also prescribed the reliefs to which he will be entitled, by reason of his sale proving infructuous and his failure to obtain a title thereunder. The very fact that the person who makes the deposit is required also to deposit the solatium payable to the auction purchaser shows that it was intended to relieve the property of whatever interest which the auotion purchaser might have acquired, in it by reason of his purchase, and to compensate him for the loss of that interest by giving him the solatium besides the purchase price. He cannot claim anything else, in addition to the reliefe which the law has thus prescribed.

The further question is the position of a private purchaser from the auction purchaser, the position which Ramathal occupies. In the earlier part of this judgment, we have given a sequence of dates, which shows that the purchase of Ramathal, though no doubt after the confirmation, was during the pendency of the earlier appeals before this Court. Learned Counsel Sri T. R. Srinivasan appearing for the Respondents, referred to the explanation u/s 47, Code of Civil Procedure, which states that every purchaser at a sale in execution of a decree is a necessary party for the purpose of deciding all questions arising u/s 47 relating to the execution, discharge or satisfaction of the decree. The amendment of the Code of Civil Procedure, in 1908 has made the auction purchaser a necessary party to the proceedings under Order XXXIV, Rule 5, Code of Civil Procedure. The issues about the extinction of the mortgage security, the payment of the mortgage money to the person entitled to it and the restoration of possession in appropriate cases where it is called for, have to be decided in the presence of the auction purchaser. Learned Counsel Sri T. R. Srinivasan referred to Section 146 of the CPC which provides that, where any proceeding may be taken or application made by or against any person, such proceeding may be taken or application may be made by or against any person claiming under him. Ramathal is obviously claiming under the auction purchaser. Therefore, every remedy which Order XXXIV, Rule 5 has provided against the auction purchaser can also be claimed against Ramathal, the purchaser from the auction purchaser, in the same proceedings, because she stands squarely in the shoes of the auction purchaser.

Further, it is urged by the Respondent that she cannot also claim any relief in the proceedings, so as to affect the rights of the mortgagor and mortgagees over the hypotheca, as they stood on the date of the preliminary decree, and which formed the subject-matter of the sale, are concerned and for this purpose, the doctrine of lis pendens was also relied upon by the Respondents. Explanation to Section 52 of the Transfer of Property Act states that the pendency of a suit or proceedings for the purpose of applying that doctrine . as stated in Section 52 will continue until the suit or proceeding has been disposed of by a final decree or order, and complete satisfaction or discharge of the decree or order has been obtained. In the case of a mortgage decree, the lis will continue till the proceedings under Order XXXIV, Rule 5, CPC come to an end and the mortgage security is finally discharged. The doctrine of lis pendens will apply to the private sale by the auction purchaser; such a sale cannot be relied upon by the vendee, to defeat the rights to which the statute has granted to the Defendant, against the auction purchaser in proceedings under Order XXXIV, Rule 5, CPC . Learned Counsel Sri T. R. Srinivasan for the Respondents referred in this connection to the decision of the Privy Council in Parmeshari Din v. Earn Charan (1937) 2 M.L.J. 359 (P.C.). In that case, the mortgagor had executed a usufructuary mortgage to one Parmeshari Din, who also purchased the equity of redemption during the execution of a money decree against the mortgagor, and came into possession during the pendency of the Plaintiff-mortgagee''s (Respondent before the Privy Council) suit for foreclosure, and the Plaintiff, relying upon the rule of lis pendens sought to recover possession of the property from the transferee, and the lower Court granted the relief to the Plaintiff. Parmeshari Din appealed to the Privy Council. Sir Shadi Lal, who gave the judgment of the Privy Council, observed at page 361:

But he (the Appellant) took the property from the Defendant (mortgagor) pendente lite and must be treated as his representative in interest. He is bound by the result of the decree. If he had not obtained possession of the property from the Defendant, the latter would have been required to deliver it to the Plaintiffs. And the mere circumstance that he got possession from the Defendant in pursuance of a transfer, which was invalid as against the Plaintiffs, cannot detract from their rights under the decree (words in brackets ours).

It was held, therefore, that the decree-holders were entitled to execute the decree against the Appellant who was the representative of their judgment-debtor and consequently to recover possession from him. The words claiming under used in Section 146 of the CPC would include devolution and assignment of interest--mentioned in Order XXII, Rule 10, Code of Civil Procedure, and these words should be construed liberally so as to advance justice and not in a restricted or technical sense--See Saila Bala Dassi Vs. Sm. Nirmala Sundari Dassi and Another, followed in Brahm Dutt Sharma Vs. Life Insurance Corporation of India, .

Learned Counsel Sri S.V. Venugopalachari appearing for Ramathal, urged that, in any event, during the proceedings under Order XXXIV, Rule 5, Code of Civil Procedure, this Court cannot direct delivery of possession and that this Court, should stop with declaring the title, leaving it to the parties to obtain possession in execution proceedings, and, in such proceedings, Ramathal may be entitled to make a counter-claim for reliefs like the value of improvements and so on. With this contention also, we are unable to agree. Order XXXIV, Rule 5, CPC is intended to provide for a final settlement of all the claims arising under the mortgage including those arising under the Court-sale in pursuance of the preliminary decree. The statute has made the auction purchaser, in such a sale, a necessary party to the adjudication and by application of the principle of Section 146, Code of Civil Procedure, the auction purchaser''s purchaser pendente lite will also become a necessary party to the adjudication. Now, the title as well as possession which Ramathal obtained from the auction purchaser was the very same title and possession which the auction purchaser obtained in pursuance of the Court-sale, and, if she could, standing in the shoes of the auction purchaser, take the mortgage money and the solatium as she is entitled to under Order XXXIV, Rule 5, Code of Civil Procedure, she could be equally required by an order in the course of the same proceedings to surrender the possession which she obtained in pursuance of the sale from the auction purchaser. Such a direction will be within the scope of Order XXXIV, Rule 5, Code of Civil Procedure. Further, learned Counsel Sri T. R. Srinivasan contends that it may be plausibly argued, if independent proceedings are taken later, that the relief against Ramathal not having been obtained in the proceedings under Order XXXIV, Rule 5, Code of Civil Procedure, would be barred. We, therefore, confirm also the order of the lower Court regarding the direction for delivery of possession both against the auction purchaser as well as Ramathal.

Learned Counsel Sri Venugopalachari appearing for Ramathal urged that she had made valuable improvements to the property, believing in the validity of the transfer. Since there is no evidence on this point, we do not wish to say anything about it here. In fact, she has not even filed her sale-deed. We would leave this question open to be adjudicated in independent proceedings, so that Ramathal may get the value of the improvements, if she is able to establish her claim to it.

Point (3): Learned Counsel appearing for the auction purchaser stated that the amount deposited in the Court was not the correct amount as required under Order XXXIV, Rule 5, Code of Civil Procedure. The learned Subordinate Judge has, in his order, observed that the money to be deposited will be the money that is specified in the preliminary decree and that the question as to whether mesne profits or interest would be claimable did not require consideration. The order of the learned Subordinate Judge under appeal shows that only a question of interest subsequent to the date of the Court-sale was pressed before him. But as against this it was urged by learned Counsel, Sri T. R. Srinivasan on the opposite side that the auction purchaser and the purchaser from the auction purchaser obtained possession of the property and were in enjoyment of the property and got benefit out of it which might exceed even the amount of interest payable on the property and that in such a contingency, the Respondents might be entitled to claim mesne profits. In such circumstances the learned Subordinate Judge was inclined to disallow interest. We see no grounds to interfere with that finding.

The appeals are dismissed with costs.