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Jai Behram v. Kedar Nath Marwari

Bombay High Court

Jun 19, 1922

Judgment

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Structured Summary of the Opinion (L.R.41 I.A. 38)

Factual and Procedural Background

The appeal arises from an order of His Majesty in Council dated 19 December 1913 setting aside an auction sale held on 27 July 1904 in execution proceedings from the Court of the Subordinate Judge of Godda. The reported case is in L.R.41 I.A. 38.

Rajah Thakoor Burma (since deceased), predecessor-in-title of the appellants (judgment-debtors), owned a full sixteen annas share of the village Patsanda. Ten annas were encumbered; six annas were said to be unencumbered, except for two bonds (purported to charge a three annas share) in favour of Gobardhan Das for Rs. 23,965 and Rs. 532.

Six annas of the encumbered property were attached in execution for a judgment debt and sold on 27 July 1904. The respondents (first and second parties) are representatives of the original auction purchasers. The purchase price was Rs. 1,12,000, paid into Court and distributed to various mortgagee decree-holders and other creditors, thereby discharging debts to the extent of those payments.

On 21 December 1904 a sale certificate was granted to the auction purchasers stating their interest in the six annas share and declaring the share subject to the charge created by the bonds but outside the ten annas encumbered property. The auction purchasers were put into possession on 26 December 1904 and paid off the two bonds on 7 February 1905.

The Rajah appealed to the High Court of Calcutta against the Subordinate Judge's order confirming the sale; that appeal was dismissed. He then appealed to His Majesty in Council. On 25 November 1913 the Board advised allowing the appeal and setting aside the Subordinate Judge's order of confirmation and the sale certificate of 21 December 1904, observing that "this will, of course, have the effect of setting aside all subsequent proceedings on the part of the auction purchasers based thereon."

Following that order, the judgment-debtors applied to the Subordinate Judge for restoration of the six annas share and for mesne profits. The auction purchasers resisted the claim and advanced specific contentions. The Subordinate Judge ordered restitution on 20 August 1916. The auction purchasers appealed to the High Court of Judicature at Patna, which, by order dated 14 December 1916, set aside the Subordinate Judge's order and directed the Subordinate Judge to make certain factual and accounting inquiries (see paragraph 10 of the opinion).

The judgment-debtors appealed to His Majesty in Council against the High Court's judgment; the auction purchasers filed a cross-appeal relating to payments made to Gobardhan Das. Their Lordships of the Board considered these appeals and gave the advice summarized in this opinion.

Legal Issues Presented

Whether the auction purchasers are entitled to repayment of the deposit paid into Court as a condition precedent to restoring possession of the six annas share to the judgment-debtors.
Whether sums voluntarily paid by the auction purchasers to Gobardhan Das (to discharge bonds said to charge part of the property) are repayable or can be made a condition of restoration to the judgment-debtors.
Whether mesne profits and/or the deposit should carry interest under the High Court's order.
What effect, if any, the alleged death of Chaturi Ram (one of the auction purchasers) pending the Privy Council appeal has on the Board's order as to his half-anna share.

Arguments of the Parties

Auction Purchasers' Arguments

The auction purchasers contended they should not be required to restore the property until they had been repaid: (a) the amount they had deposited in Court to complete the sale, and (b) the sums they paid to discharge the two bonds given by the Rajah to Gobardhan Das.
They further contended that Chaturi Ram, who was one of the auction purchasers and a respondent before the Privy Council, had died before the hearing; therefore, they argued the Board's order could not affect his half-anna share because his heir or representative had not been brought on record.

Judgment-Debtors' (Appellants') Position

The judgment-debtors (appellants) applied for restoration of the six annas share to themselves and for mesne profits following the setting aside of the sale by His Majesty in Council. The opinion records this application but does not set out a detailed pleading of further arguments by the judgment-debtors.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rodger v. Comptoir D' Escompte de Paris (1871) L.R. 3 P.C. 465, 475	To illustrate the duty of courts generally "to take care that the act of the Court does no injury to any of the Suitors" and that the act of the court as a whole should not operate unfairly.	The Board relied on the principle to support the proposition that the Court must place parties in the position they would have occupied but for the decree reversed or varied; it underpinned the equitable obligation to compensate the auction purchasers for sums applied to creditors before restoring property to the judgment-debtors.

Court's Reasoning and Analysis

The Board's analysis proceeds from statutory duty and equitable principle to the practical consequences of setting aside a sale which has already been acted upon by third parties and a Court. The main strands of reasoning recorded in the opinion are as follows:

Statutory and general duty: The Board affirmed the High Court's view that under Section 144 of the Civil Procedure Code the Court must "place the parties in the position which they would have occupied, but for such decree or such part thereof as has been varied or reversed." The Board further invoked the general jurisdiction of the Court to act fairly so as not to cause injury to suitors, citing Rodger v. Comptoir D' Escompte de Paris to illustrate that this duty extends through the various courts handling the matter.
Equitable consequences of payment into Court and distribution: The auction purchasers had paid the purchase money into Court and that money had been distributed among the judgment-debtor's creditors, who thereby obtained the benefit of those sums. The Board found it would be inequitable and contrary to justice to restore the property to the judgment-debtors without making good to the auction purchasers the moneys applied for the auction purchasers' benefit.
Rejection of suggested remedies for auction purchasers: The auction purchasers argued alternatives — obtaining a certificate of sale of the unencumbered property or seeking repayment from the judgment-creditors who received the distributed funds. The Board expressly disagreed with those suggestions and accepted the reasoning of the High Court rejecting them.
Treatment of payments to Gobardhan Das: The sums the auction purchasers paid to Gobardhan Das to discharge bonds over the property were distinguished from the deposit paid into Court. Those payments were optional, made without any Court order, and entitled the payers to stand in Gobardhan Das's shoes as bond-holders; accordingly, such payments could not be made a condition precedent to restoration of the property to the judgment-debtors.
Interest on mesne profits and deposit: The Board observed that the High Court's order was silent on whether mesne profits and the deposit should carry interest. The Board concluded that, in equity, neither should carry interest, and that this disposition met the equities of the case.
Rights of Chaturi Ram (alleged death): The Board noted allegations that Chaturi Ram died during the pendency of the Privy Council appeal and that his heir or legal representative had not been brought on record. The Board had no evidence before it and no claim was presented on his behalf; thus, their Lordships directed that their order be made without prejudice to any rights he or his legal representative might have.
Ultimate disposition derived from these points: The Board agreed with and affirmed the High Court's principal direction (as to repayment of deposit as a condition of restoration and the procedure to be followed by the Subordinate Judge), subject to the modification preserving the rights of Chaturi Ram or his representatives, and dismissed both the appeal and cross-appeal with costs.

Holding and Implications

Holding: Their Lordships affirmed the judgment and directions of the High Court of Judicature at Patna (subject to a modification preserving the rights, if any, of Chaturi Ram or his heir or legal personal representative), and advised that the appeal and cross-appeal be dismissed with costs.

Implications and direct effects:

The High Court's order that the Subordinate Judge should ascertain (1) whether Chaturi Ram died before the Privy Council hearing, (2) the amount of mesne profits due, and (3) to set off mesne profits against sums due to the auction purchasers in recovery of their deposit, is affirmed (subject to the modification regarding Chaturi Ram's rights).
The auction purchasers must be repaid the deposit paid into Court as a condition precedent to restoration of the property to the judgment-debtors (i.e., the judgment-debtors should not be restored to the property until the auction purchasers' deposited sums are made good, following the set-off procedure directed by the High Court).
Payments voluntarily made by the auction purchasers to Gobardhan Das (to discharge bonds) are not to be made a condition of restoration; those payments are treated differently from the deposit paid into Court and were optional, made without Court order, placing the payers in the position of Gobardhan Das as bond-holders.
Neither the mesne profits payable nor the deposit repayment will carry interest, in the Board's view.
The Board's order is expressly made without prejudice to any rights of Chaturi Ram or, if deceased, his heir or legal personal representative, because no claim or evidence regarding his death or representation had been presented to the Board.
Costs: The appeal and cross-appeal are dismissed with costs. In the case of the appeal, costs include those of a petition to add certain documents to the record as originally printed.
No new legal principle beyond the application of established equitable duties and statutory Section 144 was announced; the decision applies those principles to the facts before the Board to determine fair restitution and accounting between parties affected by the setting aside of a sale.

Show all summary ...

1. The question to be decided in this appeal arises out of an order on appeal made by His Majesty in Council dated December 19, 1913, which set aside an auction sale o-certain landed property held on July 27, 1904, in execution proceedings in the Court of the Subordinate Judge of Godda.

2. The case before this Board is reported in L.R.41 I.A. 38.

3. Rajah Thakoor Burma, since deceased, the predecessor-in-title of the appellants 1-5 (hereinafter referred to as the judgment-debtors) was the owner of a full sixteen annas share of a village called Patsanda. Ten of the said shares were encumbered and six were unencumbered, save that two bonds had been executed by the Rajah in favour of one Gobardhan Das and others, which purported to create a charge on a three annas share in the said mahal as security for the said Gobardhan Das for Rs, 23,965 and Ra 532.

4. Six annas share of the encumbered property was attached for a judgment debt in execution of a decree obtained by the respondents third party, and sold on July 27, 1904. The respondents first and second parties are the representatives of the original auction purchasers and are hereinafter referred to as the auction purchasers.

5. The purchase money was a sum of Rs. 1,12,000, and this sum was paid into Court and eventually distributed to various mortgagee decree-holders and others holding money decrees against the judgment-debtor whose debts were thereby discharged to the extent of such payments.

6. The auction purchasers claimed to have purchased for the sum aforesaid the six unencumbered annas share, and on December 21, 1904, a sale certificate was granted to the auction purchasers, which declared the respective interest of the auction purchasers in the nix annas share, and also declared that such share was subject to the charge created b the aforementioned bonds, but was outside the ten annas share hereinbefore described as the encumbered property.

7. On December 26, 1904, the auction purchasers were duly put into possession of the said six annas share and paid off on February 7, 1905, the amounts covered by the two bonds. An appeal was subsequently made by the Rajah to the High Court of Calcutta against the order of the Subordinate Judge of December 21, 1904, granting the said sale certificate, and when this appeal was dismissed he appealed further to His Majesty in Council, and this Board, on November 25, 1913, advised that the appeal should be allowed and that the order of the Sub-ordinate Judge confirming the sale, together with the said certificate of sale of December 21, 1904, should be set aside, and added

"this will, of course, have the effect of setting aside all subsequent proceedings on the part of the auction purchasers based thereon."

In consequence of this order setting aside the sale the judgment-debtors applied to the Subordinate Judge claiming restoration to them of the said six annas share of the property, together with mesne profits.

8. The auction purchasers resisted the said claim, and contended (1) that the auction purchasers could not be asked to restore the property until (a) the amount which they had deposited in Court to complete the sale; and (b) the sum paid by them to satisfy the bonds given by the Rajah to Gobardhan Das had been refunded and they also claimed that Chaturi Bam Marwari, one of the auction purchasers, who was a respondent in the appeal before the Privy Council, had died before the hearing, and that therefore the order of His Majesty in Council could not affect his share, viz., half an anna of the sixteen annas.

9. The Subordinate Judge overruled all the contentions of the auction purchasers, and by an order dated August 20, 1916, ordered restitution to the judgment-debtors of the said six annas share, together with the mesne profits from the date of delivery of possession of the said property, after the auction sale on July 27, 1904.

10. From that order the auction purchasers appealed to the High Court of Judicature at Patna, who, by order dated December 14, 1916, set aside the order of the Subordinate Judge, and in lieu thereof, ordered that the Subordinate Judge should ascertain:

(1) Whether Chaturi Ram died before the hearing of the appeal by the Judicial Committee; (2) that he do ascertain the amount of mesne profits due on the share in respect of which restoration is to he made; and (3) that he set off the sum due to the judgment-debtors as mesne profits against the sum due to the auction purchasers in recovery of their deposit and in the event of the sum due to the judgment-debtors being in excess of the sum due to the auction purchasers he do restore possession of the property forthwith to the judgment debtors and in the event of the sum due to the auction purchasers being in excess of the sum due to the judgment-debtors he do refuse to restore possession of the property until the deficit due to the auction purchasers has been made up either of the decree holders or by the judgment) debtors themselves.

11. It is to be observed that the Court made no order as to the claim of the auction purchasers to be paid as a preliminary to restoring possession the sum paid to Gobardhan Das in respect of the two bonds, creating a charge on three annas share of the unencumbered property sold to the auction purchasers.

12. The appellants (the judgment-debtors) have appealed to His Majesty in Council against the said judgment and decree of the High Court, dated December 14, 1916, and the auction purchasers (respondents first and second parties) have entered a cross appeal relating to the payments to Gobardhan Das as aforesaid. On the main question, viz., whether the auction purchasers are entitled to repayment of the deposit paid into Court as a condition precedent to their handing over possession to the judgment-debtors, their Lordships are in agreement with the judgment of the High Court, and think the order already referred to should on this point be affirmed. It is the duty of the Court under Section 144 of the Civil Procedure Code to

"place the parties in the position which they would have occupied, but for such decree or such part thereof as has been varied or reversed."

Nor indeed does this duty or jurisdiction arise merely under the said section. It is inherent in the general jurisdiction of the Court to act rightly and fairly according to the circumstances towards all parties involved As was said by Lord Cairns L.C. in Rodger v. Comptoir D' Escompte de Paris ( 1871) L.R. 3 P.C. 465 475:

One of the first' and highest duties of all Courts is to take care that the Mt 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.

13. The auction purchasers have parted with their purchase money which they paid into Court on the faith of the order of confirmation and certificate of sale already referred to. This money has been distributed amongst creditors of the judgment-debtor who had attached the unencumbered property in question and could have realised their judgment debts by a sale of this property in execution and it would be inequitable and contrary to justice that the judgment-debtor should be restored to this property without making good to the auction purchaser the moneys which have been applied for his benefit.

14. It was argued that the remedy of the auction purchasers was either to apply for a certificate of sale of the unencumbered property or to obtain from the judgment-creditors repayment of the sums paid out to them under the orders of the Court. Their Lordships cannot agree with either of these suggestions, and for the reasons stated by the Judges of the High Court.

15. As regards the sums paid by the auction purchasers to Gobardhan Das to clear off the bonds charged on the property they had intended to purchase, their Lordships are in agreement with the decision of the High Court that this payment stands on a different footing from the deposit of the purchase money. It was an optional payment, made without any order of the Court, and as it entitled them to stand in the shoes of Gobardhan Das as holders of the bonds, it entails no hardship : but however that may be, these payments cannot be made a condition of restoration to the judgment-debtors.

16. A question was raised before this Board as to whether the "mesne proffts" on the one hand, and "the deposit" on the other, should under the order of the High Court carry interest. The order is silent upon this point, but in their Lordships' opinion, the equities of the case will be met by not allowing interest in either case.

17. There only remains the question as to the rights of Chaturi Ram who was one of the auction purchasers at the said sale of the one-half anna share of the mahal. It is alleged that he had died pending the hearing of the appeal before the Privy Council and that as his heir or personal representative was not brought upon the record, the order on the advice of their Lordships in the Privy Council cannot affect the half anna share in his possession or that of his heir.

18.Their Lordships have no evidence before them of the facts alleged and no claim was presented on behalf of the said Chaturi Ram or his representative and they are of opinion that under the circumstances, the order in this case should be made without prejudice to the rights, if any, of Chaturi Ram, or if he is deceased, of his heir or legal personal representative.

19. Their Lordships are of opinion that the order of the High Court, subject to the modification last hereinbefore mentioned, should be affirmed, and that the appeal and cross appeal should be dismissed with costs, including in the case of the appeal the costs of the petition to add certain documents to those set out in the record as originally printed, and they will humbly advise His Majesty accordingly.