Deputy Shankar (Decree-Holder) v. Mangal Sen And Another (Auction Purchasers).

1. This defendant's appeal arises out of an application for the refund of purchase money by Mangal Sen and Ram Prasad, the purchasers of immovable-property sold in execution of a mortgage decree. Briefly the relevent facts are as follows: One Mathura Prasad on 7th April 1919 mortgaged a shop at Chandausi, the mortgagee being Babu Gokul Chand, the father of Deputy Shankar, minor, opposite party 1 in the application. Gokul Chand who is now deceased, in respect of the mortgage, obtained a final decree for sale on 5th March 1924. The property was put up for sale under the decree and was sold to Mangal Sen and Ram Prasad; the applicant, on 4th September 1924. The proceeds of the sale were distributed eventually amongst opposite party 1 (the son of the mortgagee), opposite party 2 (the mortgagor Mathura Prasad)' and opposite party 3, (Pandit Bhoj, Raj, a creditor of No. 2), by virtue of attachment in execution of a decree against' him. Between the date of the final decree and the sale one Digambar Singh filed Suit No. 6 of 1924 in the Court of the 3rd Sub-Judge of Morada-bad against the mortgagor and the mortgagee for a declaration that he was the true owner of the property in. question and for recovery of possession. After being successful in the first Court, his suit being decreed on 23rd December 1924, unsuccessful on appeal,, his suit was decreed on "second appeal" by the High Court on 21st December 1927. He obtained possession of the-property on 19th September 1928. In the present application therefore the original purchasers Mangal Sen and" Ram Prasad seek the return of the purchase money which they paid from those amongst whom it was distributed. In this appeal we are concerned only with their claim for recovery so far as directed against opposite party No. 1, the son of Gokal Chand, the mortgagee, and decree-holder. As against him the applicants have been successful in both the Courts below.

2. The trial Court took the view that the final decree for sale was reversed. or nullified result of the decree ad-judging Digambar Singh the true owner of the property in question. The lower appellate Court took the view that the applicants must have a remedy, as considerations of equity make it right and just that they should have the purchase money refunded to them. In our opinion the applicants are not entitled to succeed upon either of these grounds. It is argued, for the appellant that under the present Civil P.C. (1908) an auction purchaser has been given a statutory right, under. Order 21, Rule 93, to recover his purchase money when the sale has been set aside on the ground that the- judgment-debtor had no saleable interest in the property sold (in accordance with the provisons of Order 21, Rules 91 and 92) and that he has no right to obtain a refund upon any other ground. In other words the auction purchaser has no right to recover his purchase money unless the sale has! been set aside under Order 21, Rule 92. We J. have come to the conclusion that this contention is correct. Under Section 315 of the Code of 1882 the auction-purchaser was given a right to receive back his purchase money not only when the sale was set aside, but also

"when it is found that the judgment-debtor had no saleable interest in the property which was purported to be sold, and the purchaser is for that reason deprived of it."

3. Under the Code of 1882 therefore the auction purchaser would in the present case have been entitled to a refund. But in the Code of 1908 the law was substantially altered. In Order 21, Rule 93, the clause quoted has been deliberately omitted, and the auction purchaser is only entitled to a refund when the sale has been set aside under Rule 92. The deliberate omission of the clause quoted certainly suggests that the legislature did not intend that the auction-purchaser could claim a refund on the ground stated therein but could only claim a refund when the sale is set aside under Rule 92. This interpretation of the existing law has been adopted by most of the High Courts in India. In Nannu Lal v. Bhagwan Das [1917] 39 All 114 the effect of the statutory amendment was fully discussed and it was held that under the present Civil Procedure Code an auction-purchaser who has been deprived, by means of a suit against the judgment-debtor, of the property purchased by him cannot obtain a refund of the purchase money without getting the auction sale set aside. That ruling was followed by another Bench of this Court in Ram Sarup v. Dalpat Rai A.I.R. 1921 All 377. It was also followed by the Bombay High Court in Balwant Raghunath v. Bala A.I.R. 1922 Bom 205 and it may be noted that the property in that case had been sold in execution of a mortgage-decree, as in the present case. The allahabad rulings cited above were also followed by the Lahore High Court in Habibuddin v. Hatim Mirza A.I.R. 1925 Lah 467. The Madras High Court took the same view in Parvathi Ammal v. Govinda Sami Pillai [1916] 39 Mad 809. Their Lordships remarked:

The right of action to obtain a refund consequent on the want of saleable interest in the judgment-debtor is not a right inhering in a purchaser, but is the creature of a statute, and the right thus conferred can only be exercised within the limitations prescribed. Consequently, with-out getting the sale set aside through Court the purchaser has no right of action.

4. The Calcutta High Court has also held in Rishikesh v. Manik Molla A.I.R. 1926 Cal 971 that the auction-purchaser cannot obtain a refund of purchase money, when the sale has not been set aside under Rule 92, unless he can bring himself within the equitable principles which justify a suit for money had and received to his use, e.g. by establishing fraud or breach of duty on the part of the decree-holder or collusion between the decree-holder and the judgment-debtor. In the present case, no such fraud, collusion or breach of duty are suggested. As against all these authorities, the respondent relies upon a Full Bench decision of the Chief Court of Oudh in Bahadur Singh v. Ramphal A.I.R. 1930 Oudh 148. Here it was held by a majority of two learned Judges (Srivastava, J., dissenting) that when a person purchases immovable property at an auction sale in execution of a decree of Court and subsequently loses the same under a decree passed in a suit brought by a third party against the purchaser, the decree-holder and the judgment-debtor, such a purchaser is entitled to bring a suit for recovery of his purchase money as against the decree-holder. Stuart, C. J., held that as the statute law was silent on the subject, an auction-purchaser who loses the property under a decree passed in favour of a third party, has a right to a refund of the purchase money under the general principles of equity. This decision is based upon the view that there is a warranty by the decree-holder that the property belongs to the judgment-debtor. We think it unnecessary to discuss this proposition, as this Court at least (not to mention other High Courts) has clearly taken the view that as regards sales under a decree of a Court there is no warranty of title either by the decree-holder or the Court": see Shanto Chander Mukerji v. Nainsukh [1901] 23 All 855:

and the two, Allahabad rulings already cited. The trial Court relied upon the Full Bench ruling in Bindeshri Prasad v. Badal Singh A.I.R. 1923 All 394, but that ruling is clearly distinguishable. In that case the decree under which the property had been sold was set aside. The auction-purchaser is entitled to assume that the decree is a valid decree. He is not entitled to assume that the property sold under the decree really belongs to the judgment-debtor. The principle "caveat emptor" is applicable to auction sales.. In the present case the decree under which the property had been sold was never set aside, so the ruling is not applicable. It may seem hard that the auction-purchaser should have no remedy when he has been deprived of property for which he paid cash. Before the confirmation of sale he did not know that the judgment-debtor's title would prove defective although he knew that the title had been impeached. It would also be hard on the decree-holder to be deprived of his share of the sale proceeds when he believed in good faith that the property belonged to his judgment-debtor and he had advanced a loan to the judgment-debtor on the strength of his belief. However much we may sympathise with the auction-purchaser, the law seems to be clear that he has no remedy. It is unnecessary to consider the subsidiary question of procedure whether he should have proceeded by a regular suit or by an application under Section 47

5. In our opinion the appellant's contention is clearly supported by the Allahabad rulings on which he relies. They do not appear to have been doubted or dissented from by any Bench of this Court. They are also supported by the authority of other High Courts and we have no hesitation in following them. We therefore allow the appeal, set aside the decree of the Court below and dismiss the application with costs throughout.