& Ors Vs. P. Arumugham & Anr  INSC 13 (17 January 1990)
K.J. (J) Shetty, K.J. (J) Thommen, T.K. (J)
1990 AIR 1828 1990 SCR (1) 78 1990 SCC (1) 513 JT 1990 (1) 51 1990 SCALE (1)43
of Civil Procedure: Section 144 and Order 21 rules 89-91: Setting aside court
auction sale--Decree holder who purchases the property and auction purchaser
who is not party to the decree--Rights and liabilities of.
No. 1 obtained a money decree against the original appellant, who has been
substituted by legal heirs, on the basis of a promissory note. The appellant
appealed to the High Court but could not get the decree stayed because he was
unable to furnish security for the decretal amount.
decree was put into execution notwithstanding the pend- ency of the appeal, and
two items of appellant's properties were purchased by respondent No. 2 at the
court sale. Later, the High Court allowed the appellant's appeal on merits and
set aside the decree.
the appellant moved the executing court for setting aside the court sale inter alia
on the ground that (1) the sale was vitiated by material irregularities and
properties were deliberately sold for under value; (2) the sale was collusive
between decree holder and the auction purchaser; the latter, being the sambandhi
of the former, was just a name lender; and (3) since the decree had been
reversed, the sale should be nullified and restitution should be ordered. The
executing court rejected these con- tentions and held that subsequent reversal
of the decree could not be depended upon since the sale had been confirmed in favour
of the auction purchaser who was a stranger to the litigation. The learned
Single Judge of the High Court, however, allowed the appellant's appeal and
held inter alia that (a) the sale was vitiated by material irregularities
resulting in fetching a low price; and (b) the decree holder and auction
purchaser were close relatives and the sale seemed to be collusive. But on
appeal, the Division Bench reversed the decision of the learned Single Judge.
the appeal, this Court,
distinction is maintained between the decree holder who purchases the property
in execution of his own decree which is 79 afterwards modified or reversed, and
an auction purchaser who is not party to the decree. [84E]
Where the purchaser is a decree holder, he is bound to restore the property to
the judgment debtor by way of restitution but not a stranger auction purchaser.
The latter remains unaffected and does not lose title to the property by
subsequent reversal or modification of the decree, and could retain the
property since he is a bona fide purchaser.
principle is also based on the premise that he is not bound to enquire into
correctness of the judgment or decree sought to be executed. He is thus
distinguished from an eonomine party to the litigation. [84E-F] Janak Raj v. Gurdial
Singh,  2 SCR 77 and Sardar Govindrao Mahadik v. Devi Sahai,  2 SCR
186, referred to.
true question in each case is whether the stranger auction purchaser had
knowledge of the pending litigation about the decree under execution. If it is
shown by evidence that he was aware of the pending appeal against the decree
when he purchased the property, it would be inappropriate to term him as a bona
fide purchaser. Indeed, 'he is evidently a speculative purchaser and in that
respect he is in no better position than the decree holder purchas- er. [85B-C]
Chhota Nagpur Banking Association v. C.T.M. Smith,  Patna 325 and Jamnomal Gurdinomal v. Gopaldas,
AIR 1924 Sind 101, referred to.
v. M.A. Pekkiri Mahomed Rowther, AIR 1917 Mad 250, overruled.
Similarly, the auction purchaser who was a name lender to the decree holder or who
has colluded with the decree holder to purchase the property could not also be
protected to retain the property if the decree is subse- quently reversed.
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 punishment
and penal- ties. The laws of procedure should be so construed as to render
justice wherever reasonably possible. [87A-B] Rodger v. The Comptoir De Paris,
[1869-71] LR 3 PC. 465 at 475 80 and A.R. Antulay v. R.S. Nayak,  2 SCC
602, referred to.
The evidence on record is sufficient to hold that the auction purchaser was not
a bona fide purchaser. The auction sale in his favour must, therefore, fall for
resti- tution. The Court cannot lend assistance for him to retain the property
of the judgment-debtor who has since succeeded in getting rid of the unjust
APPELLATE JURISDICTION: Civil Appeal No. 140 of 1990.
the Judgment and Order dated 8.2.89 of the Madras High Court in L.P.A. No. 131
N.D.B. Raju, K. Rajeshwaran and N, Ganapathy for the Appellants.
and V. Balachandran for the Respondents.
Judgment of the Court was delivered by K. JAGANNATHA SHETTY, J. Special Leave
appeal is from a decision of the Madras High Court which denied the appellants
claim for setting aside a judi- cial sale.
facts giving rise to the appeal, as found by the Courts, may be summarised as
obtained money decree on the basis of a promissory note from the Subordinate
Judge, Salem, in O.S. No. 388/1968. Sethuramalingam
the judgment debtor appealed to the High Court but could not get the decree
stayed. He could not furnish security for the decre- tal amount which was a
condition for stay. The decree was put into execution notwithstanding the pendency
of the appeal. In February 1973, his two items of properties; (i) three houses
and (ii) 10.93 acres of land were brought to court sale. They were purchased by
Kuppa Goundar, respondent No. 2 for Rs.7550 and Rs.15,050 respectively. In
October 1975, the High Court allowed the appeal on merits. The promissory note
which was the basis of the suit was disbe- lieved and rejected. The trial court
judgment was set aside and the plaintiff was non-suited. Thereupon the judgment
debtor moved the executing court for setting aside the sale.
alleged inter alia, that the sale 81 was vitiated by material irregularities
and properties were deliberately sold for under value. The sale was collusive
between decree holder and the auction purchaser. The latter was sambandhi of
the former and just a name lender. It was also his contention that since the
decree has been reversed, the sale should be nullified and restitution should
be ordered. The Court rejected all the contentions relating to material
irregularities for want of satisfactory evidence.
Court also held that subsequent reversal of the decree could not be depended
upon since the sale has been confirmed in favour of the auction purchaser who
was a stranger to the litigation. The judgment debtor appealed to the High
Court and succeeded at first instance, before learned single Judge. The learned
Judge found in effect that (a) the sale was vitiated by material irregularities
resulting in fetch- ing a low price to properties; (b) the decree holder and
auction purchaser are close relatives and the sale seems to be collusive; and
(c) after the Court sale they seemed to have entered into an agreement for
selling the second item of properties for Rs.96,000. With these conclusions the
sale was set aside. But on appeal, the Division Bench of the High Court has
expressed contrary views on all those points and reversed the decision of
learned single Judge.
judgment debtor died during the pendency of the appeal before the High Court.
His legal representatives have now appealed.
A.K. Sen, learned counsel for the appellants raised a number of questions. The
important and central issue, however, relates to the underlying jurisdiction of
the Court to set aside the confirmed sale upon subsequent reversal or
modification of the decree. The question is whether the auction purchaser's
interest should be protected as against the judgment debtor who has since
succeeded in getting rid off the decree against him. There are two authorities
of this Court bearing on the question: (i) Janak Raj v. Gurdial Singh and Anr.,
 2 SCR 77 and (ii) Sardar Govindrao Mahadik and Anr. v. Devi Sahai &
Ors.,  2 SCR 186. In Janak Raj case, the appellant was a stranger to the
suit in which there was an ex-parte money decree. In the execution of the
decree, the immovable property of the judgment debtor was brought to sale in
which the appellant became the high- est bidder. The judgment-debtor filed an
application for setting aside the ex-parte decree and the court allowed it
before confirming the sale. Thereupon the judgment-debtor objected to the
confirmation of sale on the ground that the auctionpurchaser was in conspiracy
and collusion with the decree-holder and as such not entitled to have the sale
confirmed. The execution court, 82 however, overruled the objection and
confirmed the sale, Mitter, J., agreed with that view and observed (at 79):
result is that the purchaser's title relates back to the date of sale and not
the confirmation of sale. There is no provision in the Code of Civil Procedure
of 1908 either under O. XXI or elsewhere which provides that the sale is not to
be confirmed if it be found that the decree under which the sale was ordered
has been reversed before the confirmation of sale. It does not seem ever to
have been doubted that once the sale is confirmed the judgmentdebtor is not
entitled to get back the property even if he succeeds thereafter in having the
decree against him reversed. 'The question is, whether the same result ought to
follow when the reversal of the decree takes place before the confirma- tion of
does not seems to be any valid reason for making a distinction between the two cases.
It is certainly hard on the defendant-judgment-debtor to have to lose his
property on the basis of a sale held in execution of a decree which is
"not ultimately upheld. Once however, it is held that he cannot complain
after confirmation of sale, there seems to be no reason why he should be
allowed to do so because the decree was reversed before such confirmation. The
Code of Civil Procedure of 1908 contains elaborate provisions which have to be
followed in cases of sales of property in execu- tion of a decree. It also lays
down how and in what manner such sales may be set aside. Ordinarily, if no
application for setting aside a sale is made under any of the provisions of rr.
89 to 91 of O. XXI, or when any application under any of these rules is made and
disallowed, the court has no choice in the matter of confirming the sale and
the sale must be made absolute. If it was the intention of the Legis- lature
that the sale was not to be made absolute because the decree had ceased to
exist, we should have expected a provi- sion to that effect either in O. XXI or
in Part II of the Code of Civil Procedure of 1908 which contains ss. 36 to 74
(inclusive) ..... " Finally, the learned judge rounded off the judgment
thus (at 86):
..... The policy of the Legislature seems to be that 83 unless a stranger
auction-purchaser is protected against the viccissitudes of the fortunes of the
suit, sales in execu- tion would not attract customers and it would be to the
detriment of the interest of the borrower and the creditor alike if sales were
allowed to be impugned merely because the decree was ultimately set aside or
modified. The Code of Civil Procedure of 1908 makes ample provision for the
pro- tection of the interest of the judgment-debtor who feels that the decree
ought not to have been passed against him. ' ' In Sardar Govindrao Mahadik,
D.A. Desai, J., while referring to the principle in Janak Raj case said (at
if the auction purchaser is an outsider or a stranger and if the execution of
the decree was not stayed of which he may have assured himself by appropriate
enquiry, the court auction held and sale confirmed and resultant sale
certificate having been issued would protect him even if the decree in
execution of which the auction sale has been held is set aside. This proceeds
on the footing that the equity in favour of the stranger should be protected
and the situa- tion is occasionally reached on account of default on the part
of the judgment debtor not obtaining stay of the execu- tion of the decree
during the pendency of the appeal." The learned Judge further said:
what happens if the auction-purchaser is the decree holder himself? In our
opinion, the situation would materi- ally alter and this decree holder-auction
purchaser should not be entitled to any protection. At any rate, when he
proceeds with the execution he is aware of the fact that an appeal against the
original decree is pending. He is aware of the fact that the resultant
situation may emerge where the appeal may be allowed and the decree which he
seeks to execute may be set aside. He cannot force the pace by exe- cuting the
decree taking advantage of the economic disabili- ty of a judgment debtor in a
money decree and made the situation irreversible to the utter disadvantage of
the judgment debtor who wins the battle and loses the war.
where the auction purchaser is none other than 84 the decree holder who by
pointing out that there is no bidder at the auction, for a nominal sum
purchases the property, to wit, in this case for a final decree for Rs.500, Motilal
purchased the property for Rs.300, atrocious situation, and yet by a
technicality he wants to protect himself. To such an auction purchaser who is
not a stranger and who is none other than the decree holder, the court should
not lend its assistance." In Janak Raj case, a stranger auction purchaser
was protected against vicissitudes of fortunes of the litiga- tion. In S.G. Mahadik
case such protection was not afforded to auction purchaser who happens to be
the decree holder himself. The reason seems to be that the decree holder is not
a stranger to the suit. Indeed, he is not since he is eonomine party to the
appeal against the decree which he seeks to execute. He is aware of the fact
that due to eco- nomic hardship the judgment debtor was unable to have the
decree stayed. He however, does not wait for final outcome of the litigation
which he has initiated. He exploits the helpless situation of the judgment
debtor and hastens the execution of the decree. The Court, therefore, should
not lend its assistance to him to retain the property purchased if the decree
is subsequently reversed.
is thus a distinction maintained between the decree holder who purchases the
property in execution of his own decree which is afterwards modified or
reversed, and an auction purchaser who is not party to the decree. Where the
purchaser is the decree holder, he is bound to restore the property to the
judgment debtor by way of restitution but not a stranger auction purchaser. The
latter remains unaf- fected and does not lose title to the property by
subsequent reversal or modification of the decree. 'The Courts have held that
he could retain the property since he is a bona fide purchaser. 'This principle
is also based on the premise that he is not bound to enquire into correctness
of the judgment or decree sought to be executed. He is thus distin- guished
from an eonomine party to the litigation.
cannot be any dispute on this proposition and it is indeed based on a fair and
proper classification. 'The innocent purchaser whether in voluntary transfer or
judicial sale by or in execution of a decree or order would not be penalised.
The property bona fide purchased ignorant of the litigation should be
protected. 'The judicial sales in particular would not be robbed off all their
sanctity. It is a sound rule based on legal and equitable considerations.
is 85 difficult to appreciate why such protection should be ex- tended to a
purchaser who knows about the pending litigation relating to the decree. If a
person ventures to purchase the property being fully aware of the controversy
between the decree holder and judgment debtor, it is difficult to regard him as
a bona fide purchaser. The true question in each case, therefore, is whether
the stranger auction purchaser had knowledge of the pending litigation about
the decree under execution. If the evidence indicates that he had no such
knowledge he would be entitled to retain the property purchased being a bona
fide purchaser and his title to the property remains unaffected by subsequent
reversal of the decree. 'The Court by all means should protect his purchase.
it is shown by evidence that he was aware of the pending appeal against the
decree when he purchased the property, it would be inappropriate to term him as
a bona fide purchaser. In such a case the Court also cannot assume that he was
a bona fide or innocent purchaser for giving him protection against
restitution. No assumption could be made contrary to the facts and
circumstances of the case and any such assumption would be wrong and uncalled
High Court in Chhota Nagpur Banking Associa- tion v. C.T.M. Smith & Anr.,
 Patna 325 expressed a similar view. Fazl
Ali, CJ., as he then was, said (at 327) that where there is clear and cogent
evidence that a strang- er purchaser was fully aware of the merits of the controver-
sy in regard to the property purchased by him and was also aware that the
validity of the decree was under challenge, there is no room for presumption
that he was a bona fide purchaser. Reference may also be made to the decision
of the Sind Judicial Commissioner's Court in Jamnomal Gurdinornal v. Gopaldas
and Anr., AIR 1924 Sind 101 where similar com- ment was made.
Madras High Court in R. Raghavachari v.M.A.Pakkiri Mahorned Rowther and Ors.,
AIR 19 17 Mad 250 has however, taken a contrary view. It was held that
restitution under Section 144 CPC cannot be demanded as against a bona fide
purchaser who was not a party to the decree. 'The High Court also remarked that
the reversal of the decree by the appel- late Court or the knowledge of the
purchaser about the pendency of the appeal makes no material difference to the
operation of that rule.
proposition, we are, however, unable to accept. In our opinion, the person who
purchases the property in court auction with the knowledge of the pending
appeal against the decree cannot resist restitution. His knowledge about the
pending litigation would make all 86 the difference in the case. He may be a
stranger to the suit, but he must be held to have taken calculated risk in
purchasing the property. Indeed, he is evidently a specula- tive purchaser and
in that respect he is in no better posi- tion than the decree holder purchaser.
The need to protect him against restitution therefore, seems to be unjustified.
the auction purchaser who was a name lender to the decree holder or who has
colluded with the decree holder to purchase the property could not also protected
to retain the property if the decree is subsequently reversed.
is one other aspect which is more important than what we have discussed
hitherto. It was emphasized by Lord Cairns in Rodger v. The Comptoir D' Escompte
De Paris, [1869-71] LR 3 P.C. 465 at 475:
that one of the first and highest duties of all Courts is to take care that the
act of the Court does no injury to any of the suitors, and when the expression
"the act of the Court", is used, it does not mean merely the act of
the Primary Court, or of any intermediate Court of Appeal, but the act of the
Court as a whole, from the lowest court which entertains jurisdiction over the
matter up to the highest Court which finally disposes of the case. It is the
duty of the aggregate of those Tribunals, if I may use the expres- sion, to
take care that no act of the Court in the course of the whole of the
proceedings does an injury to the suitors in the Court." This is also the
principle underlying Section 144 of the Code of Civil Procedure. It is the duty
of all the Courts as observed by the Privy Council "as aggregate of those tribu-
nals" to take care that no act of the court in the course of the whole of
the proceedings does an injury to the suitors in the Court. The above passage
was quoted in the majority judgment of this Court in A.R. Antulay v.R.S. Nayak
and Ors.,  2 SCC 602 at 672. Mukherjee, J., as he then was, after
referring to the said observation of Lord Cairns, said (at 672):
man should suffer because of the mistake of the Court.
should suffer a wrong by technical procedure of irregularities. Rules or
procedures are the handmaids of justice and not the mistress of the justice. Ex
debito justitiae, we must do justice to him. If a man has been wronged so long
as it lies within the human machinery of administration of justice that wrong
must be remedied." 87 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.
'he laws of procedure should be so construed as to render justice wherever
reasonably possi- ble. It is in our opinion, not unreasonable to demand resti- tution
from a person who has purchased the property in court auction being aware of
the pending appeal against the de- cree.
have carefully considered the evidence in the case.
judgment debtor who has been examined in the case has stated that the auction
purchaser is a sambandhi of the decree holder. 'the decree holder's daughter
has been given in marriage to the son of auction purchaser. That evidence
remains unchallenged. The evidence further indicates that after the purchase
both of them have entered into an agree- ment with a third party for sale of
the second item of properties for Rs.96,000 and a case seems to be pending on
the basis of that agreement. The evidence also discloses that the auction
purchaser had no money of his own to pur- chase the property. These
circumstances are sufficient to hold that the auction purchaser was not a bona
fide purchas- er.The auction sale in his favour must, therefore, fall for
restitution. 'he Court cannot lend assistance for him to retain the property of
the judgment-debtor who has since succeeded in getting rid of the unjust
result the appeal is allowed, the judgment of the Division Bench of the High
Court is reversed and that of learned single Judge is restored. The appellants,
however, must pay the costs of this appeal to the auction purchaser which we
quantify at Rs.5,000.