Thathu Naick and Others vs Kondu Reddi and Others

Miller, J.—The 1st plaintiff sues for the recovery of property purchased by him at a Court-sale in execution of a mortgage decree obtained

by himself. The principal money due being Rs. 750 he obtained permission to bid at the sale to an amount not less than Rs. 1,500. The sale was

held but neither he nor any one else made any bid: a month or two later another sale was held but again the property was not sold: at the third sale

without asking for permission to bid he purchased in the name of the 2nd plaintiff for a sum considerably less than the principal money due on the

mortgage. The sale was confirmed and possession delivered to the 2nd plaintiff u/s 319, Civil Procedure Code. The plaint alleges that delivery was

u/s 318, and the delivery order and receipt are not on the record, but I take it for the purposes of this judgment, paragraph 12 of the plaint being

ambiguous, that the 4th and 5th defendants are purchasers from the judgment-debtors pending the plaintiff''s suit on his mortgage and have retained

actual possession of the land ever since their purchase. The 1st plaintiff now sues to recover the land from them, and they resist him on several

grounds of which one only has been dealt with by the Courts below. They have dismissed the suit, holding that the sale to the 1st plaintiff is void by

reason of his having fraudulently purchased the property through the 2nd plaintiff for a smaller sum than he must have paid had he, acting on the

permission given him by the Court, bid at the auction in his own name or openly by an agent.

I must assume that the 4th and 5th defendants did not know the truth before the institution of the present suit, and that the Court executing the

decree was equally in the dark.

These being the facts I may clear the ground by stating that I do not think the fact that the sale has been confirmed affects the case. At the time

of confirmation neither the judgment-debtors nor the Court had notice of any fact which would have caused the latter to refuse confirmation, and

their ignorance was due to deceit practised by the decree-holder purchaser.

The purchase being effected in contravention of the provisions of Section 294, the sale is voidable, in the discretion of the Court, on the

application of any person interested in it, and I have no doubt that the 4th and 5th defendants, who are, ex-hypothasi, bound by the decree, are

persons interested in the sale.

The appellants contend that u/s 294 the execution Court alone can exercise the powers conferred by the section and as the sale has not been set

aside by that Court the respondents have no defence. It is also contended that Section 244 of the Code bars the defence; and that the decision on

the ground of fraud is bad in the absence of an allegation of fraud in the written statement of the 4th and 5th defendants.

The second contention is I think unsound. Bhiram Ali Shaik Shikdar v. Gopi Kanth Shaha 24 C.k 355., and Second Appeal No. 616 of 1903

in this Court are authorities to the contrary, and I am unable to accept the view pressed upon us in the able argument addressed to us on behalf of

the appellants that the words, ''by a separate suit'' in Section 244 are equivalent to in a separate suit whether the question is raised by the plaintiff

or the defendant."" I prefer the view taken by the Calcutta High Court that the section ""bars a suit brought for the determination of certain questions,

but does not bar the trial of an issue involved in those questions, if the issue is raised at the instance of a defendant in a suit brought against him."" As

was pointed out in Second Appeal No. 616 of 1903 this view tends to prevent multiplicity of proceedings, and it also avoids the necessity of

compelling a defendant to raise in the execution Court questions which it may be entirely unnecessary to agitate so long as he is left in peaceable

possession of his property. In the present case it is obviously more convenient to try the question in the present suit, than to stay proceedings and

refer the 4th and 5th defendants to an application to the execution Court, the execution of the decree having been, so far as they are concerned,

closed long ago with the delivery of possession to 2nd plaintiff.

The first contention amounts to this: though the execution Court could, if it thought fit, set aside the sale, the Court trying this suit cannot do so,

and cannot, therefore, refuse to enforce it. In Mahomed Gazee Chowdhry v. Ram Loll Sen 10 Cl 757 the Court did refuse to enforce a sale in

similar circumstances but, it is argued that decision ought not to be followed.

It seems to me, however, that that decision is right: assuming fraud on the part of the 1st plaintiff what he in effect asks the Court to do is to aid

him in bringing his fraud to a successful issue. By deceiving the execution Court and the judgment-debtors he has obtained for himself an advantage

over the latter which he would not have obtained had the Court known the truth: and because he has been able ever since to keep the truth from

the knowledge of the judgment-debtors and the 4th and 5th defendants, the Court must, he claims, give him a decree now. I cannot believe that it

is the duty of the Court knowingly to accept the position of an instrument of fraud, and that too when the fraud has been practised upon itself or

upon another Court which is practically the same thing. We might no doubt stay proceedings and give the judgment-debtors an opportunity of

applying to the execution Court, but that would be, I think, an unnecessarily circuitous method of procedure.

But it has to be remembered that fraud means more than mere trickery. The 1st plaintiff has deceived the execution Court: knowing that that

Court would not give him permission to buy the land for Rs. 436, he has set up the 2nd plaintiff to buy it for him: he has thus by his deceit obtained

an advantage for himself, but at whose expense? If he has paid its full value for the land no one is the loser by his trick and the sale will be

maintained. Mathura Das v. Nathuni Lall Mahta 11 C.k 731. It matters not to the judgment-debtors who buy the land provided it fetches its full

value at the sale.

This brings me to the third contention that no fraud was alleged or proved. In the written statement of the 4th and 5th defendants, and in the

additional written statement of the 4th defendant all that is said is that the sale is invalid because the 1st plaintiff was the real purchaser through the

2nd plaintiff, and had no permission to bid. It is nowhere alleged that the price realised was insufficient.

Nevertheless the District Munsif taking into consideration the fact that the purchase price was less than the amount lent on mortgage on the land

has held that the 1st plaintiff has defrauded the judgment-debtors by purchasing at an undervalue benami. No other injury to the judgment-debtors

is suggested. The 8th issue, the only one decided, does not raise this question, but having regard to the undoubted facts, the fact that the 4th and

5th defendants are not the actual debtors (though it may be that they are bound by the decree) and may possibly not have been aware of the

amount realized at the sale, the fact that the 1st plaintiff must have known that except by a trick he could not have obtained leave to bid for so little

as Rs. 436, and the fact that that sum is but little more than half the principal mortgage money--having regard to all these facts I have come to the

conclusion that we ought to allow the issue to be tried now.

I would frame it thus and ask the Lower Appellate Court to return a finding on it: ""Has the 1st plaintiff by deceiving the Court and the judgment-

debtors become the purchaser of the land in question, for less than its true value at the date of the sale?"" If he has, it seems to me, he has been

guilty of a fraud upon the Court and the judgment-debtors and the Court will not lend him its assistance.

As my learned brother differs, and neither of us is prepared to dismiss the appeal, we will lay the case before the learned Chief Justice for

reference to a third Judge.

Abdur Rahim, J.

The first plaintiff in the suit in which this second appeal has arisen bought at a Court auction sale held on the 8th March 1901 the property

which he now seeks to recover from the defendants, in the name of the 2nd plaintiff but for his own benefit. The sale which was effected in

execution of a mortgage decree for Rs. 1,682-7-0 obtained by the 1st plaintiff in Original Suit No. 368 of 1899 on the file of the District Munsif''s

Court of Satur against the defendants Nos. 1 and 2 was confirmed on the 12th April 1901 and the 2nd plaintiff the apparent purchaser also

obtained symbolical delivery of possession but did not succeed in obtaining actual possession of the property. Before the sale of the 8th March

1901, there had been two infructuous attempts at sale one on the 12th October 1900 and the other on the 18th January 1901, on both of which

occasions there was no bidder. At the third sale the 2nd plaintiff was the only bidder and the property was knocked down to him for Rs. 436. On

the 1st September 1900 that is before the first infructuous sale the 1st plaintiff had applied u/s 294, Civil Procedure Code, for leave to bid and

obtained it on condition that he was to commence his bids at Rs. 1,500, namely twice the principal amount secured by his mortgage. So far as it

appears this limit was fixed without any reference to the value of the property. The defendants Nos. 4 and 5 bought the property from the

defendants Nos. 1 and 2 during the pendency of the mortgage suit, Original Suit No. 368 of 1899, and are, therefore, bound by the decree in that

suit and would have the same right to impeach the sale as defendants Nos. 1 and 2.

Both the lower Courts dismissed the plaintiff''s suit holding on the authority of Mahomed Gazee Chowdhry v. Ram Loll Sen 10 C.k757. that

the plaintiff purchased the property by means of fraud practised on the Court and, therefore, his purchase was void and of no effect in law. The

learned pleader for the plaintiffs, who are the appellants in, this Court, argues that in the first place the lower Courts were not entitled to find a case

of fraud as no fraud was at all alleged in the written statements, nor was any issue framed raising the question. There can be no doubt, it seems to

me, that the rule is well established that a party relying upon fraud either as the basis of his action or as defence to a suit must plead it in distinct

terms so that the party whose act is impeached as fraudulent may have full notice of the charge he has to meet. This proposition is emphatically

enunciated in Mahomed Mira Ravuthar v. Savvasi Vijaya Raghunadha Gopalar 23 M.k 227 where their Lordships of the Privy Council strongly

protest against the propriety of the Appellate Court entertaining a case of fraud other than the one specifically alleged in the pleadings. Here though

the question of fraud is discussed in the judgment of the Munsif it does not appear that the plaintiffs were invited to go to trial on that question and

in their grounds of appeal to the Lower Appellate Court they protested against the Munsif considering any case of fraud. But it is said that the facts

which are found in this case to constitute fraud are all admitted and as fraud has been inferred from those facts merely as a conclusion of law the

plaintiffs can have nothing to complain of. But I am not sure that this is so. In my opinion the admitted facts of this case such as they are did not

preclude the necessity of pleading fraud in express terms because the 1st plaintiff might for instance be able to show if a proper opportunity were

given to him that the judgment-debtors agreed to his bidding for the property in the name of the 2nd plaintiff for Rs. 436 or that the judgment-

debtors subsequently to the sale and with full knowledge of the facts ratified or acquiesced in the purchase made by the 1st plaintiff. All that was, in

fact, pleaded was that the purchase was made without permission of the Court and, therefore, could not be enforced.

Now do the facts which I have stated make out that there was fraud vitiating the sale? The fact that the 1st plaintiff bought the property through

the 2nd plaintiff does not in itself constitute fraud even although he did so without disclosing it to the Court holding the sale and with the object of

evading the necessity of obtaining the Court''s leave u/s 294, Civil Procedure Code. What he did no doubt amounted to a violation of the Statutory

rule as enacted in Section 294, Civil Procedure Code, and that section itself lays down the penalty for his so buying the property, namely, that the

Court may, if it so chooses, set aside the sale on an application being made to that effect by the judgment-debtor. The restriction imposed on a

decree-holder buying the property of the Judgment-debtor in execution of his decree is the creation of a Statute and when we find that the same

Statute has provided a penalty for the violation of such restriction, I think, it is according to a sound canon of construction that the penalty should

be regarded as co-extensive with the disobedience of the restriction. What I mean is, that the Court cannot attach to the disregard of a rule like this

consequences other than that contemplated by the Legislature by converting such a disregard into fraud. In Mahomed Mira Ravuthar v. Savvasi

Vijaya Raghunadha Gopalar 23 M.k 227 the Judicial Committee of the Privy Council point out that in this country, where the responsibility for

conducting the sale devolves entirely on the Court, the necessity for obtaining its permission to bid cannot be said to impose the same obligations

on the decree-holder, wanting to buy the property, as in England where the decree-holder has generally the conduct of the sale. The cases referred

to, namely Javherbai v. Haribhai 5 B.j 575., Chintamanrav Natu v. Vithabai 11 B.k 588, Paramsiva v. Krishna 14 M.k 498, Martand v. Dhondo

22 B.k 624 and Mathura Das v. Nathuni Loll Mahta 11 C.j 731, are clear authorities, if any such were needed, showing that such a purchase, as

is under consideration, is not void but creates a good legal title in the buyer unless and until the sale is set aside according to the provisions of

Section 294, Civil Procedure Code.

The next question is, does the fact that the first plaintiff had applied, before the first infructuous sale, for leave to bid and obtained it on

condition that he was not to bid less than Rs. 1,500--make any difference? In my opinion it does not. In this connection I would suppose that the

conditional leave continued in force at the time of the third sale (See Coaks v. Boswell 11 App. Cas. 232 at which he actually bought the property

for Rs. 436--a sum considerably less than Rs. 1,500. But the leave which was granted to the 1st plaintiff cannot be said to have the effect of a

binding agreement on his part to buy the property for at least Rs. 1,500. If he was then at liberty to avail himself or not of the leave, as granted, his

buying the property for Rs. 436--would only show that he bought it without availing himself of such leave. I fail to see, therefore, why the 1st

plaintiff buying the property at the third sale for a sum less than Rs. 1,500--should be in a worse legal position than he would be if he had obtained

no leave at all.

I may again refer to Mahomed Mira Ravuthar v. Savvasi Vijaya Raghunadha Gopalar 23 M. 227as showing that the Court should not be hasty

in inferring fraud but should, on the other hand, construe strictly and narrowly all charges of fraud. Here the Court holding the sale was quite willing

to conclude the bargain for Rs. 436--with the 2nd plaintiff and the fact that the latter bought really for the 1st plaintiff, who had not obtained leave

of the Court to buy for that amount, cannot be said to vitiate the contract itself. In Mahomed Gazee Chowdhry v. Ram Loll Sen 10 C.k 757.,

however, a different view prevailed and that case was subsequently followed in Srimati Sarat Kumari Debi v. Nimai Charn Dey Sircar 5 C.W.N.

In both these cases, the circumstances of which were similar, the learned Judges were of opinion that the conduct of the decree-holder who

bought the judgment-debtor''s property amounted to an abuse of the process of the Court and, therefore, disentitled him to the assistance of the

Court in enforcing that purchase. But with the greatest deference to the learned Judges who decided those cases I do not see how, if the Court

sale passed a legal title subject to its being defeated by an order of the executing Court setting aside the sale, the Court can refuse to recognize his

legal title. It is not the case of a plaintiff seeking an equitable relief so that the Court may refuse to grant it in the exercise of its discretion upon one

of the well-known principles which guide the exercise of equity jurisdiction. I may also remark that, so far as I am aware, the phrase abuse of the

process of the Court'' is generally used in connection with actions for using some process of the Court, such, as for instance, a writ of attachment

taken out maliciously to the injury of another person and I do not think that the employment of that phraseology helps in any way to indicate the

legal effect of a purchase, such as this, or the legal force of the judgment-debtor''s plea in resisting a suit for ejectment.

I am thus of opinion, that the sale not having been set aside u/s 294, Civil Procedure Code, the plaintiffs are entitled to recover possession of

the property from the defendants. But it has been argued on the authority of the case of Bhiram Ali Shaik Shikdar v. Gopi Kanth Shaha 24 C.k

355., that, if on an application to the executing Court, the sale could be set aside, the defendants are entitled, if in possession, to resist a suit for

ejectment on the same grounds. This it is urged would save a multiplicity of proceedings. I can quite understand that in cases where the sale

conveyed no title the defendant should not be compelled by reason of Section 244, Civil Procedure Code, to take any step to set it aside. But if I

am right in the view that the sale in this case passed an effective title, subject to its being defeated at the discretion of the executing Court, the

decision in Bhiram Ali Shaik Shikdar v. Gopi Kanth Shaha 24 C.k 355 cannot be said to be in point. And if my appreciation of the legal position

of the parties in this suit be correct the argument based on convenience has no force, Nor do I see how questions bearing upon the exercise of the

discretion vested in the executing Court u/s 294, Civil Procedure Code, can be properly determined as a matter of defence to a suit like this. The

only course open to the defendants was, when the facts of the purchase by the 1st plaintiff in the name of the 2nd plaintiff came to their knowledge,

to apply to the Court, which held the sale, to set it saide u/s 294, Civil Procedure Code.

In the view I take the appeal should be allowed and the judgments of the Subordinate Courts reversed, but as there are other issues raised

which have not been tried the suit must be remanded to the Munsif for the trial of those issues. Costs will follow the result.

Sankaran Nair, J.

It is unnecessary for me to recapitulate the facts as they are fully stated in the judgments of my learned colleagues. Section 294 of the CPC is

quite clear. It says distinctly that no decree-holder shall bid for or purchase the property ""without the express permission of the Court."" This

provision precluded the 1st plaintiff from purchasing the property in the name of the 2nd plaintiff. It is enacted in the interests of the judgment-

debtor and other persons interested in the property. They need not, therefore, impeach the sale. But it is open to them to apply to the Court to set

it aside and the Court may ""if it thinks fit"" set it aside.

As the defendants Nos. 4 and 5 were not aware, before the confirmation of the sale, that the second plaintiff was not the real purchaser and

that it was the first plaintiff decree-holder who purchased the property in the name of the 2nd plaintiff, the confirmation of the sale obviously cannot

be a bar to enforcing their right to set aside the sale. My learned colleagues also take the same view. The only question then is, whether the

defendants may apply to set it aside in this suit in answer to the plaintiff''s claim. On this point my learned colleagues differ, Mr. Justice Abdur

Rahim taking the view that the executing Court alone can set aside the sale and that the proper course which should have been adopted by the

respondents when the fact of the purchase by the first plaintiff came to their knowledge was to apply to the Court which held the sale to set it aside

u/s 294, while Mr. Justice Miller held following the decisions, referred to in his judgment, that it was open to the Court which tried this suit to set it

aside.

It does not appear to have been brought to the notice of my learned colleagues, at any rate they have not noticed the fact, that the Court which

executed the decree is also the Court which tried this suit.

It has been held, and in my opinion rightly, that in such cases Section 244 is not a bar to the determination of the questions, therein referred to,

by separate suit. The plaint in the suit is, or will be treated as, the application u/s 244, Civil Procedure Code. Nor is there anything to prevent the

Court, for the fame reasons, from treating a written statement containing a prayer to set aside a sale, as an application to set it aside under Sections

244 and 294. If a defendant would, in a suit brought or application made by him, be entitled to a relief, which would be a complete answer to a

plaintiff''s claim, then as a defendant he is entitled to put forward his claim, unless he is estopped or otherwise barred by any rule of law. I can find

no such bar in this case. I agree with the decision in S.A. 616 of 1903, (Venkataramana v. Meenat 19 M.L.T.R.I 1, which follows the case of

Bhiram Ali Shaik Shikdar v. Gopi Kanth Shaha 24 C.k 355.

The next question is whether the sale should now be upheld. Where a decree-holder purchases property in contravention of the provisions of

Section 294 and the judgment-debtor seeks to set aside the sale, I am of opinion that it is unnecessary for the latter to allege fraud or that the

property has not been sold for its proper value; it is for the decree-holder to satisfy the Court that the sale should be confirmed. The decree-holder

is in a more advantageous position than any other intending purchaser. However that may be, in this case, the burden of proving that the sale

should be upheld is clearly on the plaintiff, as the purchase price was less than the amount lent on the land, less than the amount below which he

was not to bid for the property under the order obtained by him and also as the purchase was made benami for the purpose of concealing the

matter from the Court or the defendants. Secrecy prima facie implies fraud. I do not think it necessary, therefore, to call for any finding. I confirm

the decree and dismiss the second appeal with costs.