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Case Number

S.A No. 2660 of 1947.

Attorney(S)

Mr. V. Rangachari for Appt.
Mr. A.V Krishna Rao for Respt.

Judges

Govinda Menon, J.

Acts

provisions of Order 21, Rule 91 and 92, C. P. C.,
provisions of Order 21, Rule 91 to 93, C. P. C.,
Article 166, Limitation Act,
Order 21, Rule 91, C. P. C.
Order 21, Rule 91

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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The decree in O. S. No. 154 of 1931 against Ramabrahmam led the decree-holder (the appellant) to sell certain properties in court auction. The respondent purchased two separate lots: Lot 1 knocked down for Rs. 625 and Lot 2 for Rs. 1,340, the total being Rs. 1,965 (noted in the opinion as Rs. 1960). Subsequently, one Vecrabrahmacharlu filed O. S. No. 156 of 1935 claiming that Ramabrahmam had no title to some of the properties; the present respondent (the auction purchaser) was a party to that suit. The decision in O. S. No. 156 of 1935 held that, in respect of the first lot, the judgment-debtor Ramabrahmam had no title, and those properties were delivered from the possession of the respondent to the plaintiff in O. S. No. 156 of 1935.

Thereafter the respondent (the purchaser) filed the suit that led to this appeal seeking (1) refund of the purchase money for Lot No. 1 with interest from the date of payment and (2) costs incurred by him in defending O. S. No. 156 of 1935. The District Munsif awarded a refund of the purchase money only, allowing interest only from the date when O. S. No. 156 of 1935 was decreed by the Court of Appeal and refusing costs. The defendant (decree-holder) appealed; the plaintiff filed cross-objections. The lower appellate Court dismissed the defendant's appeal and allowed the plaintiff's cross-objections, awarding the purchaser (respondent) the purchase money, costs incurred in defending O. S. No. 156 of 1935, and interest on the purchase money from the date of deposit. The decree-holder appealed to this Court in second appeal.

Legal Issues Presented

Whether, under the provisions of Order 21, Rules 91 to 93, C. P. C., and Article 166 of the Limitation Act, a purchaser at a court auction who loses possession because a third party establishes superior title is barred from filing a separate suit for refund of the purchase money and is limited to applying under Order 21, Rule 91 within the limitation period.
Whether the Full Bench decision in Macha Koundan v. Kottara Koundan (AIR 1936 Mad 50 (FB)) — which held that an auction purchaser who loses possession due to a third party suit may sue the decree-holder in a separate suit to recover purchase money — is binding and applicable to the facts of the present case, or whether it should be reconsidered or restricted to cases of total failure of consideration.
Whether the present facts constitute a total failure of consideration or only a partial failure of consideration (given that properties were sold in separate lots and the purchaser lost only one lot), and whether a suit for refund lies accordingly.
Whether the purchaser is entitled to interest on the refunded purchase money from the date of payment (or earlier than the date of the present suit) and whether he is entitled to recover the costs incurred in defending O. S. No. 156 of 1935.

Arguments of the Parties

Appellant's (Decree-holder) Arguments

Relying on Order 21, Rules 91 to 93, C. P. C., and Article 166 of the Limitation Act, Mr. V. Rangachari (for the decree-holder) contended that a purchaser in a court auction whose property had been taken away by a person with superior title cannot, under the general law, file a fresh suit for recovery of the purchase money; the only remedy is an application under Order 21, Rule 91 within the period allowed by law under Article 166 of the Limitation Act.
He further sought reconsideration or limitation of the Full Bench decision in AIR 1936 Mad 50 (FB), arguing that if that decision is not overruled, its dicta should be restricted to cases where there was a total failure of consideration (i.e., judgment-debtor had no right in any of the properties sold).

Respondent's (Purchaser) Arguments and Contentions

The respondent relied on the Full Bench decision in Macha Koundan v. Kottara Koundan (AIR 1936 Mad 50 (FB)) which held that an auction purchaser who loses possession of the property as a result of a suit by a third party has a right to recover the purchase money from the decree-holder by a separate suit and not only by execution proceedings.
Regarding the nature of failure of consideration, the respondent relied on Nagalinga Chettiar v. Guruswami Aiyar (AIR 1930 Mad 856) to argue that because the properties were sold in separate lots and each lot was separately purchased, there was a complete failure of consideration in respect of Lot No. 1, entitling recovery of the purchase money for that lot.
The respondent sought refund of purchase money, interest (from date of payment), and costs incurred in defending the third-party suit (O. S. No. 156 of 1935).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Macha Koundan v. Kottara Koundan, AIR 1936 Mad 50 (Full Bench)	Held that where an auction purchaser in execution of a mortgage decree loses possession as a result of a suit filed by a third party, he has a right to recover the purchase money from the decree-holder by a separate suit (not only by execution).	The Court treated this Full Bench decision as settling the point and held its principles applicable to the present case; the Court stated it was bound by the Full Bench observations unless dissented from or overruled by a Full Bench.
Narasingi Vannechand Firm, Guntur v. Suryadevara Narasayya, AIR 1945 Mad 363 (B)	Distinguished the Full Bench decision and held that, in view of Order 21, Rules 91 and 92, a suit for refund of purchase money paid in respect of a court-sale does not lie unless there is a total failure of consideration or a total want of title in the judgment-debtor.	The Court considered this decision but concluded that it could not overrule the Full Bench; instead, it analyzed whether the present facts constituted a total failure of consideration in respect of Lot No. 1 and applied the Full Bench principle where appropriate.
Butchi Reddi v. Venkata Suryaprakasarao, AIR 1945 Mad 40	Considered by Somayya J. in his analysis of the Full Bench decision and related discussion on reconsideration.	The Court noted Somayya J.'s consideration of the Full Bench ratio but stated it would be bound by the Full Bench and would not re-open those points.
A. S. No. 90 of 1942 (Mad) (D)	Referred to in the context of considerations for re-examining the Full Bench decision.	The Court reviewed that authority but concluded it could not doubt the Full Bench principles and therefore would not reconsider them.
Nagalinga Chettiar v. Guruswami Aiyar, AIR 1930 Mad 856 (E)	Support for the proposition that when properties are sold in separate lots and separate purchases are made, failure of consideration can be complete as to one lot even if not as to another.	The Court applied this principle to hold that each lot must be judged separately and that Lot No. 1 involved a complete failure of consideration because the judgment-debtor had no interest in that lot.
Ramalinga Mudaliar v. Muthuswami Aiyar, AIR 1927 Mad 99 (Full Bench)	Held that where there is no contractual obligation and the Interest Act does not apply, and absent any custom, usage or liability as damages, interest cannot be allowed; in a suit based on money not received, the plaintiff is not entitled to interest as of right.	The Court relied on this Full Bench principle to deny the respondent interest on the refunded amount up to the date of the suit and to deny recovery of costs incurred in defending the third-party suit.

Court's Reasoning and Analysis

The Court proceeded in a stepwise manner:

Binding Force of Full Bench: The Court observed that the Full Bench decision in Macha Koundan v. Kottara Koundan (AIR 1936 Mad 50 (FB)) had settled the point that an auction purchaser who loses possession due to a third-party suit can sue the decree-holder in a separate suit for recovery of purchase money. The Court stated it was bound by the Full Bench decision unless it was dissented from or overruled by a Full Bench, and therefore it declined to reconsider that holding.
Distinguishing and Scope of Authorities: Although the appellant sought to limit the Full Bench decision by relying on Narasingi Vannechand Firm v. Suryadevara Narasayya (AIR 1945 Mad 363 (B)), which suggested that a suit lies only where there is total failure of consideration, the Court analyzed whether the present facts amounted to total failure as to Lot No. 1. The Court considered the argument that because only one lot was successfully challenged in the third-party suit, only a partial failure of consideration occurred.
Lot-by-lot Analysis: The Court adopted the approach that where properties are sold in separate lots and each lot is separately purchased, each lot must be judged independently. It stated the test is whether the judgment-debtor had an interest in each lot. If the judgment-debtor had no interest in a particular lot, that lot could amount to a complete failure of consideration for the purchaser in respect of that lot.
Application to Present Facts: Applying that test, the Court concluded that in respect of Lot No. 1 the judgment-debtor had no interest at all (as held in O. S. No. 156 of 1935). Accordingly, the failure of consideration for Lot No. 1 was complete, and the purchaser's suit for refund in respect of that lot was maintainable under the Full Bench principle.
Interest and Costs: The Court then examined whether the purchaser was entitled to interest on the refunded purchase money (from an earlier date) and to costs incurred in defending O. S. No. 156 of 1935. Relying on the Full Bench in Ramalinga Mudaliar v. Muthuswami Aiyar (AIR 1927 Mad 99 (FB)), the Court held that in a suit founded on money not received, absent contractual obligation, statutory interest, custom, usage or an award of damages, interest is not allowable. Accordingly, the purchaser was not entitled to interest on the amount until the date of the suit, and was also not entitled to the costs incurred in the earlier suit.
Final Decree Adjustment: The Court modified the lower appellate decree to award the refund of the purchase money for Lot No. 1 with interest only from the date of the present suit, and apportioned costs so that each party would bear their own costs in this Court and in the lower appellate Court.

Holding and Implications

Holding: The Court modified the lower appellate Court's decree and held that the plaintiff-respondent (the auction purchaser) is entitled to a refund of the purchase money paid for Lot No. 1, with interest on that amount only from the date of the suit. The respondent is not entitled to interest from an earlier date nor to costs incurred in O. S. No. 156 of 1935. Both parties must bear their own costs in this Court and in the lower appellate Court.

Implications:

Direct effect on the parties: The purchaser receives refund of the purchase money for the lot in which the judgment-debtor had no title, but interest is awarded only from the date of the present suit; no earlier interest or costs of the third-party litigation are recoverable from the decree-holder. Each party bears their own appellate costs in this Court and the lower appellate Court.
Precedential effect: The Court expressly treated the Full Bench decision in AIR 1936 Mad 50 (FB) as binding and declined to reconsider it. The judgment applies the Full Bench principle to a case involving separate lots by analyzing failure of consideration on a lot-by-lot basis; it did not overrule the Full Bench nor lay down a new, broader rule beyond the application to these facts.

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Alapati Subbarayudu v. Jallipalli Lakshmayya.

1. In execution of the decree in O. S. No. 154 of 1931 against one Ramabrahmam, the appellant, who was the decree-holder, brought certain items of properties to sale, and in court auction, they were purchased by the respondent. The sale certificate shows that two items were, sold in two separate lots, the first lot having been knocked down for Rs. 625 and the second lot for Rs. 1340, the entire purchase money being Rs. 1960, Subsequently, one Vecrabrahmacharlu, filed O. S. No. 156 of 1935 on the ground that this Ramabrahmam had no title to some of the properties sold tO that suit, the present respondent, who was the purchaser, was a party. The decision therein was that in the first lot, the "judgment-debtor, Ramabrahmam, had no title and, therefore, the properties were delivered over from the possession of the respondent to the plaintiff therein. Thereafter, the present respondent-plaintiff filed the suit out of which this second appeal srises, for the refund of the purchase money of lot No. 1 with interest thereon from the date when he paid the money, as well as the costs incurred by him in defending O. S. No. 156 of 1935.

2. The learned District Munsif found that the plaintiff-respondent was entitled to refund of the purchase money alone and that he was not entitled to recover the costs or the interest from the earlier date, but only from the date when O. S. No. 156 of 1935 was decreed by the Court of appeal. Against that decision, there was an appeal by the defendant, who was the decree-holder in O. S. No. 154 of 1931. A memorandum of cross-objections was filed by the plaintiff, who was the purchaser in court auction. The lower appellate Court dismissed the appeal and allowed the memorandum of objections, and thereby gave the purchaser in court auction, not only the purchase money deposited by him, but also the costs which he had incurred in defending O. S. No. 156 of 1935, as well as interest on the purchase money from the date of the deposit.

3. The decree-holder, at whose instance the items of properties were sold, comes to this Court to second appeal, and it is contended on his behalf by Mr. V. Rangachari that in view of the provisions of Order 21, Rule 91 to 93, C. P. C., it is not open, under the general law, for a purchaser in court auction, whose property had been taken away from him by a person with superior title, to file a fresh suit for recovery of the purchase money. The learned counsel urges that the only remedy open to such a defeated purchaser is to apply under Order 21, Rule 91, C. P. C. for a refund of the purchase money within the period allowed by law under Article 166, Limitation Act, and if no such application has been filed in time, a suit under the general law is not sustainable. Unfortunately for the learned counsel, the point at issue has been set at rest by a Pull Bench of this Court in -- 'Macha Koundan v. Kottara Koundan', AIR 1936 Mad 50 (FB) (A) where it is held that where an auction purchaser in execution of a mortgage decree loses possession of the property as a result of a suit filed by a third party, then, he has a light to recover back the purchase money from the decree-holder by a separate suit and not by proceedings in execution. The principles decided in that case apply to the facts of the present case.

4. But Mr. Rangachari wants, first of all, to contend that the decision of the Full Bench requires reconsideration and secondly, even if that is not to be allowed, the dicta contained in the Full Bench decision ought to be restricted to the facts of the case, namely, where it has been held that the Judgment-debtor had no kind of right whatever in all the properties sold. For this, reliance is placed upon a decision in -- 'Narasingi Vannechand Firm, Guntur v. Suryadevara Narasayya', AIR 1945 Mad 363 (B) where Leach C. J. and Lakshmana Rao J. distinguished the decision in -- 'AIR 1936 Mad 50 (A)'. The learned Judges held that having regard to the provisions of Order 21, Rule 91 and 92, C. P. C., a suit for refund of purchase money paid in respect of a court-sale does not lie unless there is a total failure of consideration or a total want of title in the judgment-debtor in regard to the property Bold. At p. 334 the learned Judges observe as follows:

"We Will now turn to -- ' AIR 1936 Mad 50 (FB) (A)'. There the property was sold in execution of a mortgage decree and it was subsequently discovered that the mortgagor had no interest at all in the mortgaged property. The question was whether the auction purchaser had, in addition to the right given to him by Order 21, Rule 91 a rignt to file a suit to recover what he had paid. The Pull Bench (Beasley C. J., Ramesam and King JJ.) held that a suit did lie. In delivering the judgment of the Court, Ramesam J. pointed out that the Legislature had recognised a right in the auction purchaser to a refund of the money paid if the Judgment-debtor's interest in the property turned out to be nothing. The right having been recognised and there being nothing in the Code to prohibit a suit for the recovery of the purchase money when there had been a total failure of consideration, a suit lay under the general law. The Court was considering a case where there had been a total failure of consideration and the Judgment cannot, in our opinion, be read as laying down that there is a right of suit in a case of partial failure of consideration."

5. Somayya J. considered the 'ratio decidendi' of the Full Bench decision in -- 'Butchi Reddi v. Venkata Suryaprakasarao', AIR 1945 Mad 40 (C). The learned Judges observed that there were weighty considerations for re-considering the Full Bench decision adverted to above. Those considerations were those enumerated by himself and Krishnaswami. Aiyangar J. in -- 'A. S. No. 90 of 1942 (Mad) (D)'. I have perused the judgment in -- 'A. S. No. 90 of 1942 (Mad) (D) and it seems to me that, with due deference to the learned Judges the principles laid down in the decision of the Full Bench cannot be doubted in the way in which the learned Judges have done. Whatever that might be, I am bound by the observations of the Full Bench, unless it is dissented from or overruled by a Fuller Bench. I do not, therefore, propose to discuss or reconsider the points considered by Somayya J.

6. Such being the case, the question is whether the principles enunciated in -- 'A. I. Rule 1945 Mad 363 (B)' regarding failure of partial consideration should be applied to the facts of the present case. It is urged by Mr. Rangachari that there has been a partial failure of consideration and not a total failure of consideration, because a third party, at whose instance O. S. No. 156 of 1935 was filed, claimed only one of the items of properties, and the respondent has been deprived of only that item. If that is so, it has to be held that there was only a-partial failure of consideration, with the result that the observations in -- 'AIR 1945 Mad 363 (B)' must be held to apply. On the other hand, it is urged by the respondent relying upon -- 'Nagalinga Chettiar v. Guruswami Aiyar', AIR 1930 Mad 856 (E) that since the properties were sold in separate lots and that there was a separate purchase for each of the lots, the result is that there has been complete failure of consideration for one of the lots. The learned District Munsif discussed the matter in paragraph 13 of his judgment and in his opinion, the failure of consideration mentioned in --'A. I. Rule 1945 Mad 363 (B)' can be separated as regards each of the items and that, if there was failure of consideration regarding one of the items and no failure as regards the other item, then it has to be held that there was complete failure of consideration only so far as one item alone is concerned. The distinction is this in my opinion: If the judgment-debtor has full interest in the property that is, all the totality of the bundle of rights are in him and it only some of the rights were taken from the judgment-debtor, while other rights still remain in him; in such a case it cannot be said that there has been a complete failure of consideration. The principle is inapplicable to a circumstance like this, where, so far as one item is concerned, the Judgment-debtor had complete title in him. That being the case, each of the lots has to be judged by itself and the test is whether the judgment-debtor had interest in each of the lots It cannot be said that so far as the first lot is concerned, the judgment-debtor has any interest at all, I am, therefore, of opinion, that the observations of the learned Judges in -- 'AIR 1930 Mad 856 (E)' should be applied to the present case. In that view, the suit as framed is maintainable and the decision-of the lower Court is correct on that point.

7. The next question is whether the lower Court was justified in decreeing in favour of the respondent the costs incurred by him in O. S. No. 156 of 1935. as well as the interest on the purchase money. A Full Bench of this Court has laid down in -- 'Ramalinga Mudaliar v. Muthuswami Aiyar', AIR 1927 Mad 99 (FB) (P) that where there is no contractual obligation and when the Interest Act does not apply, in the absence of any custom or usage or any liability as damages, no interest cart be allowed. Here is a case where the basis of the suit is on the footing of money not received, in such a suit, it cannot be said that the plaintiff is entitled to any kind of interest. The English law on the point, as observed by the Chief Justice in the Referring Order in -- 'A. I. B. 1927 Mad 99 (PB) (F)' is explicit and clear. There is no difference so far as the Indian law is concerned. I would, therefore, hold that the respondent is not entitled to the interest on the amount till the date of the suit, Nor is he entitled to the costs incurred toy him in O. S. No. 156 of 1935.

8. Therefore, in modifications of the decree of the lower appellate Court, it is ordered that the plaintiff-respondent will be entitled to the refund of the purchase money paid by him with interest thereon from the date of the suit. As both parties have succeeded and failed partially, each party will bear his own costs in this Court and in the lower appellate Court.

Alapati Subbarayudu v. Jallipalli Lakshmayya.

Structured Summary of the Provided Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's (Decree-holder) Arguments

Respondent's (Purchaser) Arguments and Contentions

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Alapati Subbarayudu v. Jallipalli Lakshmayya.

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