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  • Khwaja Mohamad Noor
  • Scroope, JJ.
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  • Khwaja Mohamad Noor
  • Scroope, JJ.
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Smart Summary

Concise Analytical Summary of the Opinion (Khwaja Mohamad Noor, J., with Scroope, J. concurring)

Factual and Procedural Background

The applicant (decree-holder) obtained a simple money decree for about Rs. 5,300 from the Original Side of the Calcutta High Court against the judgment-debtors (opposite parties no. 6–14) and transferred it for execution to the Subordinate Judge of Monghyr. The execution petition was filed on 19 July 1927; attachments were issued on 18 August 1927; and a sale proclamation fixing 14 May 1928 was made on 14 March 1928. Before that sale took place the judgment-debtors applied to be declared insolvent; the executing court granted a stay and the execution case was dismissed. The applicant appealed to this Court (Misc. Appeal No. 119 of 1928), which was allowed on 2 May 1929, upon which the execution proceedings were revived.

The property was sold on 14 August 1929 and purchased by the applicant. However, another decree against the same judgment-debtors had been obtained on 5 December 1928 by opposite parties no. 1–5, who executed it on 23 March 1929; those properties (including those later proceeded against by the applicant) were sold on 24 June 1929 and purchased by opposite parties no. 1–5, who set off the purchase-money against their decree. The judgment-debtors sought to set aside the 24 June sale: that application was dismissed for default on 7 September 1929, and subsequent attempts (including under the Insolvency Act) were rejected; the earlier sale was confirmed on 12 November 1930 while the applicant's sale was confirmed on 14 September 1929.

The applicants filed an application under section 73 of the Civil Procedure Code (for rateable distribution of assets realized by the 24 June 1929 sale) on 7 September 1929. The Subordinate Judge nevertheless confirmed both sales and, after about 15 months, rejected the section 73 application (on 15 December 1930) on the ground that the applicants' decree had been satisfied. The applicants moved this Court in revision challenging that refusal.

Legal Issues Presented

  1. Whether, on the day of the application for rateable distribution (filed 7 September 1929), there existed an unsatisfied decretal debt in favour of the applicants.
  2. Whether there were assets "in the hands of the court" or otherwise under its control that could be rateably distributed under section 73 of the Civil Procedure Code.

Arguments of the Parties

Opposite party no. 1–5 (Respondent) — Advocate's contentions

  • The sale in favour of the applicants having been held (even if the property turned out to be valueless) meant that the applicants' decree stood satisfied; consequently they could not claim rateable distribution.
  • If the applicants believed that the sale was ineffective (e.g., because the judgment-debtors had no saleable interest), their remedy was to apply under Order XXI, rule 91 of the Code of Civil Procedure to set aside that sale; they did not do so.
  • As long as a sale remains on the record, the decree is to be treated as satisfied and the Court should not interfere in the absence of a specific application under Order XXI, rule 91.

Applicants (Decree-holders) — Represented by Mr. S. N. Bose

  • The property sold to the applicants had already been sold earlier (on 24 June 1929) in execution of another decree; therefore on the day of the applicants' sale the judgment-debtors had no saleable interest to convey, and the subsequent "sale" could not lawfully satisfy the applicants' decree.
  • Accordingly, the applicants' decretal debt was not satisfied by the later sale and could be revived and executed; the applicants were therefore entitled to seek rateable distribution under section 73 of the Civil Procedure Code.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Harnandan Marwari v. Prannath Roy When a property under attachment is sold in execution of another decree, the first attachment falls to the ground and proceedings under it fall along with it. The court applied this principle to conclude that after the sale in favour of opposite parties no. 1–5 (24 June 1929) the steps taken in execution of the applicants' decree were of no avail; the later purported satisfaction of the applicants' decree was therefore illegal and must be ignored.
Moti Lal v. Karrabuldin (Judicial Committee) If a property is sold in execution of two decrees, the earlier sale prevails and the second sale confers no right on the later purchaser; a decree is only satisfied if paid or if the decree-holder receives property in lieu of money. The court relied on this to hold that the applicants' decree was not satisfied (they had received no property in fact) and that the second sale could not be treated as effecting satisfaction.
Radha Kishan Lal v. Kashi Lal (Division Bench) If a decree-holder purchases property in execution and a third person's claim is subsequently established, the effect is to set aside the sale and revive the decretal debt ipso facto; no formal order to set aside the sale is necessary. The court used this authority to justify treating the applicants' sale as having been set aside ipso facto and the applicants' decretal debt as revived.
Bihari Lal Misr v. Jagarnath Pershad Support for the principle that a sale to a later purchaser is ineffective where an earlier valid execution sale has already divested the judgment-debtors of an interest. Cited as corroborative authority for reviving the applicants' decretal debt and disregarding the later sale.
Thakur Barmha v. Jiban Ram Marwari Subdivision court has power to cancel an order of confirmation of sale (i.e., power to undo confirmation where appropriate). The court noted the Subordinate Judge had the power to cancel the second sale's confirmation and should have done so when the rateable distribution application was disposed of, to avoid abuse of process.
Sree Krishna Doss v. Chandook Chand If the court permits a decree-holder to bid and set off purchase-money, it may later withdraw that permission and order deposit of the purchase-money for rateable distribution; the High Court can make such direction in revision. The court relied upon this to conclude that, although purchase-money had been set off by opposite parties no. 1–5, the court retained power to require deposit for rateable distribution under section 73.
Bijoy Kumar Addya v. Rama Nath Barman (Calcutta High Court) The court can order refund of purchase-money and enforce that order by execution; even where money remains with the purchasing decree-holder the court can direct payment into court and thereby bring it within the court's disposal under section 73. Applied to support the proposition that the funds (although set off) were effectively under the court's control and could be ordered to be made available for rateable distribution.
Shrinivas v. Radha Bai (Bombay High Court) Similar view to Bijoy Kumar Addya: the court can, in appropriate cases, require repayment or treat set-off amounts as subject to court's control for distribution. Cited as a corroborative authority that the court could treat set-off/purchase-money as available for rateable distribution under section 73.

Court's Reasoning and Analysis

The court proceeded in two main analytical steps corresponding to the two issues framed.

1. Whether the applicants' decree was unsatisfied on the date of the s.73 application:

  1. The court rejected the respondent's contention that the mere existence of a later sale in favour of the applicants meant their decree was satisfied. The court reasoned that a sale cannot operate to satisfy a decree where, at the time of that sale, the judgment-debtors had no saleable interest because the same property had already been validly sold in execution of an earlier decree.
  2. Relying on Harnandan Marwari v. Prannath Roy, the court accepted that where a property under attachment is sold in execution of another decree, the earlier attachment and the proceedings taken under it fall away; hence steps taken subsequently under the applicant's execution were of no effect.
  3. Invoking Moti Lal v. Karrabuldin, the court reiterated that where two sales are made in execution of rival decrees the earlier sale prevails and the later sale confers no title; more generally, a decree is not satisfied unless the decree-holder has actually received payment or property in lieu of payment. The applicants had not received any effective property in satisfaction.
  4. Drawing on Radha Kishan Lal v. Kashi Lal and other authorities, the court held that the later sale in favour of the applicants was ipso facto set aside by reason of the prior valid sale and that the applicants' decretal debt was thereby revived.

2. Whether assets were available for rateable distribution under s.73:

  1. Although no cash remained in court (because opposite parties no. 1–5 had been permitted to bid and had set off the purchase-money against their decree), the court concluded that assets were effectively under its control because the earlier sale had not been confirmed at the time the s.73 application was filed and because the court retained the power to require repayment or deposit of purchase-money.
  2. The court relied upon the principles in Sree Krishna Doss v. Chandook Chand and Bijoy Kumar Addya v. Rama Nath Barman (and a similar Bombay decision Shrinivas v. Radha Bai) to hold that a court which permitted set-off could subsequently order the purchaser to deposit the purchase-money for rateable distribution, and that the High Court could enforce such a direction in revision.

Taken together the court found that (a) the applicants' decretal debt had not in fact been satisfied by any lawful sale, and (b) the court had the requisite control over assets (including the power to require return/deposit of purchase-money) to order a rateable distribution under section 73. The learned Subordinate Judge should not have confirmed the second sale while the s.73 application was pending, and had he previously confirmed the sale he should have cancelled the confirmation when the application was determined.

Holding and Implications

Core Ruling: The Court allowed the revision and ordered that the applicants' rights be restored and appropriate distribution or accounting be carried out.

Specific orders and direct consequences for the parties:

  • The sale held in favour of the applicants on 14 August 1929 is ordered to stand cancelled because the property had already been sold in execution of the decree in favour of opposite parties no. 1–5 on 24 June 1929.
  • Any order of satisfaction of the applicants' decree made by the Subordinate Judge is set aside and the applicants' decretal debt is revived.
  • The Subordinate Judge is directed to call upon opposite parties no. 1–5 to exercise, within a time to be fixed by that court, the option to either (a) retain the earlier sale of 24 June 1929 in their favour, or (b) ask to have that sale set aside provided they satisfy the court that they have not created any right in favour of any third party.
  • If opposite parties no. 1–5 elect to have the earlier sale set aside and satisfy the court as required, the sale will be set aside and the parties will be free to pursue realization of their respective decrees and revive execution proceedings as they think fit.
  • If opposite parties no. 1–5 do not exercise the option within the fixed time or fail to satisfy the court, the Subordinate Judge will take accounts of the applicants' and opposite parties no. 1–5's decrees and will rateably distribute the proceeds of the 24 June 1929 sale between the two decree-holders. The opposite parties no. 1–5 will be directed to pay to the applicants any sum in excess of their own quota which they may have set off towards the satisfaction of their decree.
  • In case of failure to comply, the applicants are at liberty to execute the Subordinate Judge's order by the normal process of execution.
  • Any sum realized by the applicants pursuant to these directions will go to satisfy their revived decree and to that extent the decree of opposite parties no. 1–5 will stand satisfied.
  • Parties were directed to bear their own costs in this Court.
  • Final notation: Scroope, J. agreed and the rule was made absolute.

Broader implication: The court applied established authorities to enforce the proposition that an apparently completed sale does not necessarily operate to satisfy a decree if an earlier valid execution sale has already divested the judgment-debtors of any saleable interest; the court also confirmed its power to require deposit/refund of set-off purchase-money and to order rateable distribution under section 73 CPC. The opinion did not purport to establish a novel legal principle beyond these applications of existing precedent.

Show full summary ...

    Firm Ganga Ram Gulraj Ram v. Muktiram Marwari

    Khwaja Mohamad Noor, J.:— By this application we are invited to revise an order of the learned Subordinate Judge of Monghyr refusing to allow rateable distribution under section 73 of the Civil Procedure Code. The facts are these:—The applicant obtained from the Original Side of the Calcutta High Court a simple money decree for a sum of about Rs. 5,300 against the opposite party no. 6-14 and brought it on transfer for execution to the court of the Subordinate Judge of Monghyr. The petition for execution was filed on the 19th July, 1927, attachments were issued on the 18th August and a sale proclamation fixing 14th May, 1928, for sale on 14th March, 1928. In the meantime the principal judgment-debtors applied for being declared insolvents and applied to the executing court for the stay of the execution which was granted and the execution case was dismissed. The applicant (decree-holder) preferred an appeal to this Court which was numbered as Miscellaneous Appeal 119 of 1928, and was allowed on 2nd May, 1929. The execution proceeding before the Subordinate Judge of Monghyr was thereupon revived. The property of the judgment-debtors was sold on the 14th August, 1929, and purchased by the applicant (the decree-holder) himself. In the meantime on 5th December, 1928, another decree was obtained against the same judgment-debtors by opposite party no. 1-5. They took out its execution on 23rd March, 1929, and the properties of the judgment-debtors including those which were being proceeded against by the applicant were sold on the 24th June, 1929, about 7 weeks prior to the sale held in execution of the applicant's decree and purchased by the opposite party no. 1-5 themselves who set off the purchase-money towards the satisfaction of their decree. It is obvious that the properties having already been, sold in execution of the decree of the opposite party no. 1-5 there was nothing left which could be sold in the decree of the applicants. The judgment-debtors (the opposite party no. 6-14) applied for the setting aside of the first sale, viz., the sale in favour of the opposite party no. 1-5: that application was dismissed for default on 7th September, 1929, There was again an attempt to set aside that sale under some provisions of the Insolvency Act which was rejected and the sale was confirmed on 12th November, 1930. In the meantime the applicants realising that the properties which they had purchased on the 14th August, 1929, had already been sold on the 24th June in execution of another decree and consequently on the day of their sale the judgment-debtors had no saleable interest in them, applied on the very day that the judgment-debtors application for setting aside the sale was dismissed (7th September, 1929) for rateable distribution of the assets realised by the sale in execution of the decree of opposite party no. 1-5. It is to be noted that, while, this application was pending the learned Subordinate Judge ignoring it confirmed not only the sale in favour of the applicant but also the sale in favour of opposite party no. 1-5. In my opinion he ought not to have done so till the application for rateable distribution was disposed of by him. However the application under section 73 remained pending for about 15 months and on the 15th December, 1930, it was rejected on the ground that the decree of the applicants having been satisfied, they were not entitled to claim rateable distribution. Against this order the applicants have moved this Court in revision.

    There are two questions which require, consideration. One is whether there was on the day of the application for rateable distribution an unsatisfied decree in favour of the applicants; and the second is whether there were assets in the hands of the court which could be so distributed. The learned Advocate for the opposite party no. 1-5 asks us to hold both these points in his favour. He contends that the sale in favour of the applicants haying been held (though it might have been for a valueless property), their decree stands satisfied. He argues that if the applicants found that the judgment-debtors had no saleable interest left in the property, their remedy was an application under Order XXI, rule 91 of the Code of Civil Procedure for setting aside that sale; they not having done so cannot now plead that they still hold an unsatisfied decree. In other words, the learned Advocate's contention is that as long as the sale is there the decree stands satisfied, and there being, no application under Order XXI, rule 91, we have no power to interfere. We cannot uphold this. It is obvious that the property against which the applicants were proceeding was really sold in execution of another decree and there was nothing left which could be sold again. If under some misapprehension the court, not having been apprised of the fact that a property which was under sale had already been sold by that very court to another person in satisfaction of another decree, sells it again in execution of another decree it cannot be said that the latter decree has been satisfied. The learned Advocate on behalf of the applicants has placed before us the decision in the case of Harnandan Marwari v. Prannath Roy; it lays down and, if I may say so, correctly lays down, that when a property under attachment has been sold in execution of another decree the first attachment falls to the ground and proceedings taken thereunder fall along with it. In the present case there was an attachment in favour of the applicant while that attachment, was subsisting the property was sold in execution of a subsequently obtained decree. Therefore, after the sale in favour of the opposite party no. 1-5 held on 24th June, 1929, all the steps which were taken in execution of the decree of the applicants were of no avail and the sale and the consequent satisfaction of the decree is illegal and must be ignored.

    It has rightly been pointed out by Mr. S.N Bose that if his client now wishes to execute the decree the execution cannot be resisted on the ground that the decree had already been satisfied: it has in fact not been satisfied. In Moti Lal v. Karrabuldin, the Judicial Committee held in effect that if a property is sold in execution of two decrees the first sale holds good and the second does not give to the purchaser any right in the property. It is not necessary to set aside the second sale as it did not affect the property at all. A decree can only be satisfied if either it is paid up or the decree-holder has received property in lieu of money. In this case the decree-holder has received no property in satisfaction of his decree. In Radha Kishan Lal v. Kashi Lal, a Division Bench of this Court has held that if a decree-holder purchased property in execution of his decree and if subsequently the claim of a third person was established over it the effect was to set aside the sale and revive the decretal debt and no formal order to set aside the sale was necessary. In this case there is no question that the sale in favour of the opposite party no. 1-5 will prevail and, therefore, the sale in favour of the applicants must be held to have been set aside ipso facto and the decretal debt revived. Similar view was taken in Bihari Lal Misr v. Jagarnath Pershad. The learned Subordinate Judge was informed on 7th September, 1929, by the application for rateable distribution that the same property had been sold twice over in the execution of two decrees, one on the 24th June, 1929, and the other on the 14th August, 1929. By that day (7th September, 1929) none of the sales had been confirmed. The earlier sale was confirmed on 12th November, 1930, and the latter on the 14th September, 1929. When this situation was brought to his notice he ought not to have confirmed the second sale. If, however, his attention was drawn to this fact after he had confirmed the sales he ought to have cancelled the order of confirmation of the second sale when, he disposed, of the application for rateable distribution 15 months later. Thereby he would have avoided the abuse of the process of the court. He had hill power to do so—see Thakur Barmha v. Jiban Ram Marwari.

    The next question for consideration is whether there was an asset in the hands of the court when an application for rateable distribution was filed. No doubt there was no cash in the hands of the court, as the opposite party no. 1-5 were permitted to bid at the sale and the purchase money was set off against their decree. But nevertheless assets were under the control of the court. That sale was not confirmed till same months after the application for rateable distribution was filed. It was held in Sree Krishna Doss v. Chandook Chand that if the court permitted a decree-holder, to bid at the sale and consequently allowed him to set off the purchase-money towards his decree, it was open to the court afterwards, on a good case being made out, to withdraw that order and order him to deposit the purchase-money in cash for rateable distribution and if the subordinate court did not do so the High Court could pass such an order in revision. In the case of Bijoy Kumar Addya v. Rama Nath Barman the Calcutta High Court held that the court could order a refund and such an order might be enforced by process in execution. Their Lordships observed that although the money remained in the hands of the purchasing decree-holder it was open to the court to direct him to pay that sum into court and it was, therefore, in the power and at the disposal of the court within the meaning of section 73 of the Civil Procedure Code. Similar view was taken by the Bombay High Court in the case of Shrinivas v. Radha Bai.

    The two conditions necessary for the application of section 73 of the Civil Procedure Code are present in this case and in our opinion the applicants have made out a good case for our interference. We therefore, order that the sale held in favour of the applicants on the 14th August, 1929, do stand cancelled as the property had already been sold in execution of the decree in favour of opposite party no. 1-5 on 24th June 1929, and any order of satisfaction of the decree that might have been passed by the learned Subordinate Judge is set aside and the applicants' decretal debt is revived. The learned Subordinate Judge is directed to call upon the opposite party no. 1-5 to exercise, within such time as he may fix, the option of either retaining the sale held on 24th June, 1929, in their favour or of asking to have it set aside on their satisfying the court that they have not created any right in favour of any third party. If within the time fixed by the court the opposite party no. 1-5 exercise the option of having the sale set aside and satisfy the court as aforesaid, the sale will be set aside and then the parties will be at liberty to proceed for the realization of their respective decrees in such manner as they think fit and their execution in cases will be revived. If on the other hand within the in time so fixed the opposite party no. 1-5 do not exercise that option or fail to satisfy the court as aforesaid, the learned Subordinate Judge will take accounts of the decrees of the applicants and of the opposite party no. 1-5 and rateably distribute between the two decree-holders the proceeds of the sale of the properties held on 24th June, 1929, and the opposite party no. 1-5 will be directed to pay to the applicants such sum in excess of their own quota as they might have set off towards the satisfaction of their own decree. In case of failure the applicants will be at liberty to execute the order of the learned Subordinate Judge in the manner provided for the execution of a decree. Any sum realized by the applicants will go towards the satisfaction of their decree which we have ordered to be revived and to that extent the decree of the opposite party no. 1-5 will stand satisfied. Parties to bear their own costs in this Court.

    Scroope, J.:— I agree.

    Rule made absolute.

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    Firm Ganga Ram Gulraj Ram v. Muktiram Marwari
    (Jul 6, 1931)