Source: Supreme Court

Why in News?

Recently the Supreme Court held that in auction sale this is obligatory on court that only such portion of property as would satisfy decree is sold and not the entire property.

What was the Background of Bhikchand S/O Dhondiram Mutha (Deceased) through LRs. v. Shamabai Dhanraj Gugale (Deceased) through LRs. Case?

• Dhanraj husband of Shamabai Dhanraj Gugale (original plaintiff/decree holder) give loan of Rs. 8000/- to the defendant (appellant/judgment debtor) in 1969.
• The appellant was failed to repay the loan amount.
• The original plaintiffs instituted a civil suit for the recovery of loan amount with Rs. 2880/- as interest, along with interest @ 12% per annum pendente lite and post decree and for other ancillary reliefs and costs.
• The joint Civil Judge, Senior Division, Pune partly decreed the suit.
• The plaintiffs filed an appeal against rejection of part of the claim. In the same appeal judgment debtor preferred cross objections.
• During the pendency of this appeal, he also preferred execution application, which was transferred to Civil Judge, Senior Division, Ahmednagar because the property of judgment debtor against which the decretal amount was to be recovered was situated in Ahmednagar.
• In the execution proceedings, the court ordered the attachment and sale of three properties of judgment debtor.
• But the appeal was dismissed by the District Court and allowed defendant’s cross objections.
• The appellate court also reduced the interest rate from 12% per annum to 6% per annum for both pre-suit and pendente lite/future interest. The total decretal amount of Rs.27694/- thus stood reduced to Rs. 17120/-.
• Before the decision of appellate court, the plaintiffs executed the decree, and the properties of judgment debtor were put to auction and purchased by the original plaintiffs themselves for Rs. 34000/-.and one property was sold to respondent no.3 for Rs. 3.9 lakhs.
• In 1990 the judgment debtor filed an application for restitution under Section 144 of Code of Civil Procedure, 1908 (CPC) on the ground that the original decree having been varied, substantially, the execution sale deserves to be set aside and reversed by way of restitution. And he also deposited the entire decretal amount.
• The appellate court (High Court) rejected the application of restitution because judgment debtor had not deposited any amount in court.
• The present appeal was filed by the judgment debtor before the Supreme Court (SC).

What were the Court’s Observations?

• The SC convinced with the contention of judgment debtor that this is a case where the decree is subsequently modified/varied, and the decretal amount was reduced from Rs. 27,694/- to Rs. 17,120/-, and the sale of all three attached properties was not at all required.
• The SC stated that the Executing Court did not discharge its duty to ascertain whether the sale of a part of the attached property would be sufficient to satisfy the decree. The Court has caused great injustice to the judgment debtor by auctioning his entire attached property and the sale of all the three attached properties.
• In the facts and circumstances of the case variation of the decree read together with the sale of the properties at a low price has caused huge loss to the judgment debtor where restitution by setting aside the execution sale is the only remedy available.
• The SC was not convinced with the argument that the execution sale cannot be set aside at this stage when the judgment debtor has not paid any amount to satisfy the original decree or the modified decree nor he has challenged the legality of the auction sale on any permissible ground as contemplated in Order XXI of CPC.
• The SC held that the Court may make any order, as provided under Section 144 of CPC. It is in exercise of this power that we have considered the aspect of execution of the decree by attachment of whole property when part of the property could have satisfied the decree.
• Hence, the SC set aside the order of High Court and allowed the application of appellant under Section 144 of CPC and set aside the sale of attached properties belonging to the judgment debtor.
• The parties are restored back to the position where the execution was positioned before the attachment of the immovable properties of the judgment debtor.

What are the Landmark Judgments Cited in this Case?

• South Eastern Coalfields Ltd. v. State of M.P. & Ors (2003):
  • In this case the Supreme Court explained the meaning of the word “restitution” in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order, what has been lost to him in execution of decree or order of the court or in direct consequence of a decree or order.
  • The Court held that even away from Section 144, it has inherent jurisdiction to order restitution to do complete justice between the parties.
• Chinnamal & Ors. v. Arumugham & Anr (1990):
  • In this case the Supreme Court held that the person who purchases the property in court auction with the knowledge of the pending appeal against the decree cannot resist restitution.
  • It is well to remember that the Code of Civil Procedure is a body of procedural law designed to facilitate justice and it should not be treated as an enactment providing for punishments and penalties.
• Binayak Swain v. Ramesh Chandra Panigrahi & Anr. (1966):
  • The Supreme Court held that the obligation for restitution arises automatically on the reversal or modification of the decree and necessarily carries with it the right to restitution of all that has been done under the erroneous decree.
  • The Court in making restitution is bound to restore the parties, so far as they can be restored to the same position they were in at the time when the Court by its erroneous action had displaced them from.

What is the Legal Provision Involved in this Case?

• Section 144 of CPC: Application for restitution. —

(1) Where and in so far as a decree or an order is varied or reversed in any appeal, revision or other proceeding or is set aside or modified in any suit instituted for the purpose, the Court which passed the decree or order shall, on the application of any party entitled to any benefit by way of restitution or otherwise, cause such restitution to be made as will, so far as may be, place the parties in the position which they would have occupied but for such decree or order or such part thereof as has been varied, reversed, set aside or modified]; and for this purpose, the Court may make any orders, including orders for the refund of costs and for the payment of interest, damages, compensation and mesne profits, which are properly consequential on such variation, reversal, setting aside or modification of the decree or order.

Explanation. —For the purposes of sub-section (1), the expression “Court which passed the decree or order” shall be deemed to include, —

(a) where the decree or order has been varied or reversed in exercise of appellate or revisional jurisdiction, the Court of first instance;

(b) where the decree or order has been set aside by a separate suit, the court of first instance which passed such decree or order.

(c) where the Court of first instance has ceased to exist or has ceased to have jurisdiction to execute, it, the Court which, if the suit wherein the decree or order was passed were instituted at the time of making the application for restitution under this section, would have jurisdiction to try such suit.

(2) No suit shall be instituted for the purpose of obtaining any restitution or other relief which could be obtained by application under sub-section (1).