This appeal is directed against a decree in a suit to enforce a mortgage security. To appreciate the questions raised herein, it is necessary to examine the relevant facts as they appear on the record.
On the 1st June 1898; Krishna Chandra Mandal (the first Defendant) and Dukhbhanjan Mandal (since deceased and now represented by his infant sons, the second and third Defendants) executed the mortgage bond in suit in favour of Jogendra Narayan Roy and Mohendra Narayan Roy. The principal money secured was Rs. 4,999, which carried interest at 10 per cent, per annum and was repayable on the 12th April 1899. On the 12th April 1905, the mortgagees commenced the present suit to enforce their security. They joined fourteen persons as Defendants. Of these, the first three were one of the original mortgagors and the two infant sons of the other mortgagor. The remaining Defendants were persons who, it was alleged, had acquired an interest in the equity of redemption by purchase, settlement, mortgage and otherwise and were consequently necessary parties as entitled to redeem the Plaintiffs. On the day that the suit was instituted, the Plaintiffs applied for appointment of guardians ad litem of the infants Defendants, and proposed their mother as a suitable person. Notices were served upon the infants and the proposed guardian. The mother, however, did not enter appearance and signify her willingness to act as guardian of her sons. Yet the Court proceeded, at the instance of the Plaintiffs, to appoint her guardian of the infants for the purposes of the suit. There was no appearance on behalf of the infants at any stage of the suit; but some of the other Defendants filed written statements. On the 15th December 1905, the Court proceeded to decree the suit ex parte as against Defendants Nos. 1, 2, 3, 10, 11, 12 and 13, on a compromise as against Defendants Nos. 5, 6, 7, 9 and 14 and apparently on contest as against Defendants Nos. 4 and 8. On the 25th June 1906, the mortgagees applied for an order absolute, whereupon notices were directed to issue upon the Defendants. On the 25th July 1906, the first Defendant as also the mother of the second and third (Defendants applied to the Court to set aside the ex parte decree. They alleged that no summons in the suit had ever been served upon them and that there were substantial defences to the claim, and they prayed upon them and that there were substantill the matter had been investigated. This application was made by a pleader on the strength of a vakalatnama given by the mother of the infants on the 24th July 1906, authorising him to take necessary steps to oppose the grant of the application for order absolute. On the 25th October 1906, the Court dismissed the application to set aside the decree, and on the 13th November 1906 made the decree absolute. On the 17th January 1907 the Petitioners who had unsuccessfully applied to set aside the decree, preferred an appeal to this Court against the order dismissing their application. On the 8th January 1908, this Court heard the appeal and set aside the ex parte decree as against the three Petitioners and directed the suit to be reheard in so far as they were concerned. As regards the infant Appellants, this Court held that they were not parties to the suit, as no guardian had ever been appointed for them in accordance with law, and they would consequently not be bound by the decree. This Court was not apprised at the time, that, during the pendency of the appeal, the decree had been executed and the mortgage properties sold. In fact, on the 4th February 1907, the lower Court proceeded, at the instance if the mortgagees-decree-holders, to sell the properties; many of these were purchased by the decree-holders themselves; some were purchased by the Defendants other than the mortgagors; a few were purchased by persons who were neither Plaintiffs nor Defendants and were entire strangers to the proceedings. The sale was confirmed on the 8th April 1907, and on various dates between April and November 1907, possession was delivered to the purchasers. On the 24th March 1908, that is, shortly after the ex parte decree had been set aside by this Court, the first three Defendants applied to the Court below to set aside the sale. Petition of objection was filed by two only of the purchasers, one of whom was a party to the suit (Defendant No. 12). On the 31st July 1908, the Subordinate Judge dismissed the application on the ground that third parties were not affected by the cancellation of the decree. The suit which, by order of this Court, stood revived against the mortgagors, was then taken up for re-trial, and on the 16th December 1908, they filed their written statement. On the 3rd September 1909, the District Judge, who took up the case for disposal, overruled the defences on the merits and made his decree. This decree directs the mortgagors to pay up the mortgagees within three months, and, on default, entitles the latter to take the sale-proceeds of the mortgaged properties purchased by third parties in satisfaction of their decree. A provision is added that, should this prove insufficient, the mortgagees will have the right to realise the balance by sale of the remaining mortgage properties. The decree, it will be observed, does not specify what is meant by “third party”, whether it includes only a person who is not a party to the mortgage suit or includes all persons other than the Plaintiffs-mortgagees. The mortgagees-Defendants have now appealed to this Court, and have contended that the decree as drawn up is not in accordance with r. 4 of Or. 34 of the Code and that, in the events which have happened, all the mortgage properties should be directed to be sold afresh.
It is plain that the two infant Defendants have not been affected in any way by the sale held on the 4th February 1907, because there was at the time no valid and operative decree in force against them. They were not properly parties to the mortgage suit. It was not competent to the Court to appoint their mother as guardian ad litem without her express consent. The Court acted contrary to what was the established rule on the subject: Dhoniba v. Kusa(1), Babajiban v. Maruti(2), Issur Chandra v. Nobokristo(3), Narsingh Narayan v. Jahi Mistry(4), Balkishen v. Topeswar(5) and Dina bandhu v. Mashuda(6). The position, consequently, was that the infants were not properly before the Court, and are in no way bound by the decree of the 15th December 1905. The sale held under these circumstances did not pass the right, title and interest of the infants: Khirajmal v. Diam(7), Rashidunnessa v. Ismail Khan(8) and Kishan Chandra v. Ashoomn(9). It is consequently indisputable that every one of the purchasers at the execution sale, held on the 4th February 1907, has failed to acquire the right, title and interest of the infant Defendants in the mortgage properties. Such purchasers may have imagined that the infants were bound by the decree and may have paid the purchase money on the assumption that they were acquiring the interest of all the mortgagors. But that clearly cannot affect the position of the infants who are bound neither by the decree nor by the sale consequent thereon. It is thus necessary for the protection of the purchasers themselves, that the properties should be re-sold on the footing of a fresh decree binding on the infants in the suit as reconstituted.
Apart from this question, the effect of the Cancellation of the decree by this Court on the 8th January 1908, upon the sale held on the 4th February 1907, requires examination. Two positions are clear and incontestable, namely, first, that the purchase made by the decree-holders themselves must be treated as cancelled, and, secondly, that the purchase made by persons who are not parties to the suit must be ??? as unaffected: Zainul Abdin v. Ashgar Ali(10), Jan Ali v. Jan Ali(11), Chunder Kant v. Bissesar(12), Mukhoda v. Gopal Chandra(13), Indurjeet v. Pootee Begum(14), Shiblal v. Sambhuprasad(15), Janahdhari v. Gossainlal Bhaya(16), Chandan v. Ramdeni(17) and Dorasami v. Annasami(18). The question arises, however, as to the position of a purchaser who is not a stranger to the suit, but is a Defendant therein; is his position analogous to that of the Plaintiff or of an absolute stranger to the proceedings? The answer to this question must depend upon the reasons for the rule that a stranger who purchases in execution of a decree is not affected by the subsequent cancellation or reversal of the decree. Sir Barnes Peacock in Zainul Abdin v. Ashgar Ali refers to a passage from Bacon's Abridgment, Tit Error (M. 3), which runs as follows:—“If a man recovers damages and hath execution by fieri-facias, and upon the fieri-facias the Sheriff sells to a stranger a term for years, and after the judgment is reversed, the party shall be restored only to the money for which the term was sold and not to the term itself; because the Sheriff had sold it by the command of the writ of fieri-faciai”. This statement of the law is supported by a long series of early cases: Anon(19), Luddington v. Amnen(20), Beverley's case(21), Eyre v. Woodfine(22), Anon(23), Hoe's case(24), Manning's case(25), Drury's case(26), Goodyere v. Ince(27) and Doe v. Thorn(28). An examination of these cases shows that protection is afforded to the purchaser, only when he is a stranger to the suit. This is clear when we examine the reasons assigned in support of the rule. Thus in Bennett v. Hamill(29), Lord Kedesdale justified the rule on the principle that the stranger who purchases has a right to presume that the Court has taken the steps necessary to investigate the rights of the parties and has on such investigation properly decreed a sale. To the same effect is the observation of Sugden, L.C, in Bowen v. Evans(30). The principle was affirmed by the House of Lords in Bowen v. Evans(31) and Tommey v. White(32) and by the Supreme Court of the United States in Gray v. Brignardello(33), Beauregard v. New Orleans(34) and Grignon v. Astor(35). The reason for the rule is uniformly stated to be that the stranger purchaser cannot be expected to go behind the judgment, to enquire into irregularities in the suit, and that it is sufficient for him to know that the Court had jurisdiction and exercised it and that the order on the faith of which he purchased was made and did authorise the sale. To the same effect is the observation of the Judicial Committee in Rewa Mahtan v. Ram Kishen(36) and Zainul Abdin v. Ashgar Ali. The reason for the rule obviously disappears when the purchaser is himself a party to the suit and has notice, or at least opportunity of knowledge, of all the proceedings therein. The case is clearly one for the application of the maxim, cessante ratione legis, cessat ipsa lex, when the reason of any particular law ceases, so does the law itself. The question has been raised in the Courts of the United States and it has been held that a purchaser at a judicial sale who is a party to the proceeding and in interest is not a bonâ fide purchaser to the extent that will protect his purchase in case of a reversal of the decree by authority of which it is made [Buchanan v. Clark(37)], the condition of such a purchaser is unlike that of an absolute stranger to the proceedings who becomes a purchaser under the decree; such stranger is protected, but the sale fails on reversal of the decree as to the purchaser who is a party in interest or to the proceedings. There is only one solitary decision, Gossom v. Donaldson(38), where it was held that the protection afforded to strangers should also be extended to parties to the suit including the Plaintiff-decree-holder himself. This case stands alone, and the extreme view taken therein has been adversely criticised by text-writers [Kleber on Judicial Sales, secs. 201, 202 and 291; Baker v. Baker(39)]. The decision in Macbride v. Longworth(40) is not contrary to this view, as that case turned upon a statute which afforded protection to all execution purchasers whether strangers or parties to the suit; in fact, the view taken in Buchanan v. Clark is identical with that taken in Hubbel v. Broadwell(41) and Walpole v. Ink(42) (Roper on Judicial Sales, secs. 132-134). It is obviously essential, however, that for the reversal of the sale, the person whose property has been sold must be a party to the proceedings: Withers v. Little(43), Little v. Superior Court(44) and Withers v. Jacks(45) (Freeman on Executions, sec. 347). The rule that a stranger purchaser is not affected by the reversal of the decree is based, as the cases show, on grounds of public policy, though it operates harshly upon the person whose property has been sold and who, it may turn out, in the end, was not liable at all to the Plaintiff. We are not prepared to extend the scope of the rule and to apply it for the benefit of parties to the suit, in whose case the reason for the rule has no application. Consequently, all the properties which have been purchased by parties to the suit must be refold, if necessary, in execution of the decree now to be made.
We may add that we do not feel pressed by the argument that the decree made by the Subordinate Judge is not in conformity with r. 4 of Or. 34 of the Code. That rule no doubt contemplates a sale of the Mortgaged properties, but the decree must be suitably modified in exceptional circumstances where a sale of the mortgaged properties may be impossible, for instance, where the mortgaged properties have been sold for arrears of revenue, for arrears of rent or as here in execution of a decree; in such cases, where the property can no longer be reached, either in whole or in part, the Court is competent, in the exercise of its inherent power, to give appropriate directions for the disposal of the fund which represents the property.
The result is that this appeal is allowed, the decree of the District Judge discharged, and the case remanded to him in order that the necessary accounts may be taken and the final decree drawn up. An account will first be taken of the sum due to the Plaintiffs upon the mortgage of the 1st June 1898. An account will then be taken of the sums realised by the Plaintiffs from the properties purchased by them on the 4th February 1907, and of which, it is said, they have taken possession. Both these accounts will be taken up to the date of this judgment. The difference between these two sums will be taken and will be reduced by the sum realised by the sale of the mortgaged properties to strangers to the suit. A decree will be made in favour of the Plaintiffs for this reduced sum and the sum decreed will carry interest at 6 per cent per-annum from this date. The judgment-debtors will be allowed to pay up the money within three months from the date when the decree of the Court below is drawn up and signed. If the amount is, not so paid, the mortgaged properties other, than those sold to strangers on the 4th February 1907 will be sold by the Court; for the satisfaction of the decretal amount, after the usual order absolute has been I made. Each party will pay his own costs of the suit up to the present stage. The costs of the enquiry in the Court below will be in the discretion of that Court The District Judge will be at liberty to take the accounts himself or to transfer the case for disposal to the Subordinate Judge.
We do not at this stage consider the question of restitution by the Defendants-purchasers to the mortgagors-Defendants on account of their possession of the properties they had purchased on the 4th February 1907. Such question may be determined on application to the Court by which the sale was held: Beni Madhab Singh v. Pran Singh(46) and Raghu Singh v. Sheo Prasad(47).
Let the records be sent down at once.
Appeal allowed.