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Judgment Summary — Page, J. (with Cuming, J. agreeing)

Factual and Procedural Background

Certain auction-purchasers (the plaintiffs) brought a suit to recover khas possession of immovable property which they had bought at a sale in execution of a decree obtained by Defendant No. 35 against Defendants Nos. 1 and 2. Alternatively, the plaintiffs sought a refund of the purchase price with interest if it turned out that the judgment-debtors possessed no saleable interest in the property.

The trial Court dismissed the claim for khas possession but granted a decree for refund of the purchase money with interest in favour of the plaintiffs. Defendant No. 35 appealed to the lower appellate Court, which affirmed the trial Court's decree and dismissed the appeal. Defendant No. 35 then prosecuted a further appeal to this Court.

Legal Issues Presented

  1. Whether an auction-purchaser at a sale in execution can maintain a suit for recovery of the purchase money (as against the execution creditor) where it later transpires that the judgment-debtor had no saleable interest in the property, or whether the purchaser's remedy is confined to the statutory procedure under Order 21, Rule 93 of the Code of Civil Procedure, 1908 (i.e., by applying to set aside the sale).
  2. Whether, apart from the statutory procedure, an auction-purchaser may recover the purchase money from the person to whom it was paid (for example, the execution creditor) on equitable grounds (money had and received / unconscionability), and if so, under what circumstances.

Arguments of the Parties

Defendant No. 35 (Appellant) — Advocate's contention

  • No suit lies for recovery of the price paid for property purchased at a sale in execution of a decree.
  • The only mode by which a purchaser at an execution sale can obtain a refund of the purchase money "from the person to whom it has been paid" is by preferring an application to set aside the sale under Order 21, Rules 89–93 of the Code of Civil Procedure (i.e., Rule 93 of Order 21 of 1908).

Plaintiffs

  • Sought khas possession of the property purchased at the execution sale.
  • Alternatively, claimed they were entitled to be refunded the amount of the purchase price with interest if it was found that the judgment-debtors had no saleable interest in the property.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Dorab Ally Khan v. Abdool Azeez Holds that where property sold in execution was one in which the judgment-debtor had no saleable interest, and equitable considerations make it unconscionable for the recipient to retain the purchase money, the auction-purchaser may recover the money as money had and received; the Sheriff does not guarantee the debtor's title, but equitable principles may permit recovery from the person who received the purchase money. The Court treated this Privy Council judgment as decisive on the equitable right to recover purchase money against the execution creditor in appropriate circumstances; the Court relied on it to conclude that an equitable remedy exists in principle, although it further applied that principle to the facts and found it inapplicable on those facts.
Doyal Krishna Naskar v. Amirta Lal Das Authority for the proposition that where an auction-purchaser has suffered loss through fraud of the execution creditor or breach of duty by the execution creditor, the purchaser is entitled to compensation for the loss. Cited as supporting the general rule that a purchaser can obtain compensation where fraud or breach of duty by the execution creditor causes loss.
Parvathi Ammal v. Govindasami Pillai Similar authority for compensation to the purchaser where loss is caused by fraud or breach of duty by the execution creditor. Cited alongside other authorities to indicate the purchaser's entitlement to relief where fraud or breach occurs.
Balvant Raghunath v. Bala Also cited for the principle that compensation may be awarded where the purchaser suffers loss due to fraud or breach of duty by the execution creditor. Placed among authorities supporting recovery or compensation where wrongful conduct of the execution creditor caused loss.
Juraru Mahamad v. Jathi Mohamad Cited in support of the view that the purchaser's remedy is to apply under the Code for setting aside the sale and consequential refund. Used by the Court to show that the statutory route (application to set aside sale) is the remedy the plaintiffs should have pursued in the circumstances of this case.
Banka Behari Das v. Gurudas Bihar Cited as authority for seeking relief by applying to set aside the sale under the Code. Cited to support the proposition that the Code-prescribed remedy should be invoked where appropriate.
Ram Sarup v. Dalpat Rai Cited in the context of relying on Code remedies to set aside sales and obtain refunds. Included among authorities indicating that the statutory procedure is the proper route for relief in such cases.
Balvant Baghunath v. Bala Cited both as authority relating to the Act of 1882 jurisprudence and as one of the cases supporting reliance on the Privy Council's decision in Dorab Ally Khan. The Court noted earlier decisions (including this) and discussed how Rustomji was decided under the 1882 Act; Balvant Baghunath was used in the comparative analysis.
Nagendra Nath Ghose v. Sambhu Nath Pandey Cited among authorities supporting the Code-route (application to set aside sale) and related principles. Placed with other authorities to show established practice of seeking statutory relief to set aside sales and obtain repayments.
Rustomji Ardeshir v. Vinayak Gangadhar Authority relied on by those who take the view that an auction-purchaser may recover the purchase price by a suit; decision was under the Act of 1882. The Court observed that Rustomji's case was decided under the Act of 1882 and proceeded on a contractual view of relations between judgment-creditor and purchaser; thus it was distinguished from the present statutory and Privy Council authorities.
Prasanna Kumar Bhattacharjee v. Ibrahim Mirza A decision of this Court relied upon by authorities taking the view that a purchaser can recover by suit; the Court here found its ratio irreconcilable with the Privy Council's decision in Dorab Ally Khan. Criticised by the Court as not reconcilable with Dorab Ally Khan and contrary to the persistent current of opinion in the High Courts; the Court declined to treat it as a binding authority for the contrary view.
Asadullah Khan v. Karam Chand Followed Prasanna Kumar's decision in taking the view favouring purchaser's suit-based remedy. The Court observed that Asadullah appeared to follow Prasanna Kumar and considered those decisions not to be consistent with Dorab Ally Khan; therefore they were not followed.

Court's Reasoning and Analysis

The Court's analysis proceeds in distinct steps, confined to the text of the opinion:

  1. Statutory framework: The Court compared S. 315 of the Code of 1882 with Order 21, Rule 93 of the Code of Civil Procedure, 1908. Under S. 315 (1882) a purchaser deprived of the property because the judgment-debtor had no saleable interest was entitled to receive back the purchase money (with or without interest) from any person to whom it had been paid, and repayment could be enforced as a decree for money. Order 21, Rule 93 (1908) provides that where a sale is set aside the purchaser shall be entitled to an order for repayment of his purchase money (with or without interest) against any person to whom it has been paid.
  2. Construction of Rule 93: The Court accepted that Order 21, Rule 93 makes the Code-prescribed procedure the statutory method by which a purchaser may obtain a refund under the Code — i.e., by applying to set aside the sale. The Court explained the legislative policy: once a sale is confirmed and execution concluded, the sale should not be lightly questioned because the purchase money may already have been distributed and tracing recipients would be difficult.
  3. Survival of non‑statutory rights: The Court concluded, however, that Rule 93 does not operate to repeal rights that existed apart from the Code. In other words, the Court asked whether, independently of the statutory remedy, any common law or equitable right remained for an auction-purchaser to recover the purchase money.
  4. Reliance on Privy Council authority: The Court found the Privy Council decision in Dorab Ally Khan v. Abdool Azeez dispositive on the non-statutory point. Dorab establishes that although generally a purchaser evicted by a title paramount has no remedy against the Sheriff or the judgment-creditor, where the judgment-debtor had no saleable interest and equitable considerations make it unconscionable for the recipient to retain the money, the auction-purchaser may recover the purchase price as money had and received. The Court therefore accepted that an equitable remedy exists in principle.
  5. Limits of the equitable remedy and application to facts: The Court applied the equitable principle to the facts and concluded it did not entitle the plaintiffs to recover from Defendant No. 35. The circumstances were that agents of Defendant No. 35, by inadvertence or carelessness, included the property in the particulars given for the sale though the judgment-debtor had no saleable interest. There was no suggestion of misrepresentation, fraud, or privity of contract that would ground an equitable claim against the execution creditor.
  6. Practical consequence of allowing recovery against execution creditor: The Court observed that if the plaintiffs were allowed to recover the purchase money from Defendant No. 35, the execution creditor would wholly lose the fruits of the decree, because the execution proceedings were at an end and full satisfaction had been obtained by payment; the decree could no longer be executed.
  7. Conclusion on remedy: Given the absence of fraud or unconscionable retention and given the statutory scheme, the Court held that the plaintiffs' only available remedy was the statutory route — to apply under the Code for an order setting aside the sale and consequential repayment. The Court therefore found that the trial and lower appellate Courts were in error in awarding refund by a direct suit against the execution creditor on these facts.
  8. Precedential assessment: The Court reviewed contrary decisions (Rustomji, Prasanna Kumar, Asadullah) and explained why they did not persuade it: Rustomji was decided under the 1882 Act; Prasanna Kumar's ratio was seen as irreconcilable with Dorab and contrary to the prevailing opinion in the High Courts, and therefore the Court declined to treat it as a binding authority for the contrary proposition.

Holding and Implications

Core Ruling: APPEAL ALLOWED.

Consequential orders (directly taken from the opinion):

  • The decisions of the lower Courts are reversed.
  • The plaintiffs' suit is dismissed.
  • Because the plaintiffs misconceived their remedy, they are ordered to pay the costs in all the Courts.

Implications as articulated in the opinion:

  • The Court recognised an equitable, non‑statutory right (following Dorab Ally Khan v. Abdool Azeez) permitting recovery of purchase money as money had and received where it would be against reason and conscience that the recipient should retain it. However, that equitable remedy is limited to circumstances such as fraud, collusion, breach of duty or other unconscionable retention; it does not automatically apply where there is merely inadvertence or carelessness by the execution creditor's agents.
  • Where the facts do not invoke the equitable ground, and particularly where the practical consequence of a recovery would be to extinguish the execution creditor's decree which has been fully satisfied, the purchaser's proper remedy is the statutory procedure under the Code (Order 21, Rule 93) by applying to set aside the sale.
  • The Court criticised certain earlier decisions (notably Prasanna Kumar Bhattacharjee v. Ibrahim Mirza and decisions following it) as being inconsistent with Dorab Ally Khan and declined to follow them; it instructed that the principles restated in the opinion should be followed as the settled view (as stated by the Court).

Cuming, J. agreed with the judgment. The appeal was formally allowed.

    Raja Risheecase Law v. Manik Molla

    Page, J.:— The suit out of which this appeal arises was brought by certain auction-purchasers to recover khas possession of property which they had bought at a sale in execution of a decree obtained by Defendant No. 35 against Defendants Nos. 1 and 2. In the alternative the plaintiffs claimed that they were entitled to be refunded the amount of the purchase price if in the event it transpired that the judgment debtors possessed no saleable interest in the property.

    2. The trial Court dismissed the claim for khas possession, but decreed the plaintiff's suit for a refund of the purchase money and interest thereon Defendant No. 35, the decree-holder, preferred an appeal, but the lower appellate Court affirmed the decree of the trial Court and dismissed the appeal.

    3. The learned advocate for Defendant No. 35, who has prosecuted a further appeal to this Court, contended that no suit lies for the recovery of the price paid for property purchased at a sale in execution of a decree.

    4. In support of his contention the learned advocate referred to O. 21, Rr. 89 to 93 of the CPC, and urged that the only mode by which a purchaser at an execution sale is entitled to obtain a refund of the purchase money “from the person to whom it has been paid” is by preferring an application to set aside the sale as provider in O. 21, Rr. 89 to 93. Now, there is authority for the proposition that the provisions of S. 315 of the Code of 1882 were repealed by O. 21, R. 93 of the Code of 1908 and that except under the Code of 1908 there is no mode in which an auction-purchaser at a Court sale can recover the purchase price that he has paid. I find myself unable to give my assent to that view. In S. 315 of the Code of 1882 it is provided that when a sale of immovable property is set aside under Ss. 310A, 312 or 313, or when it is found that the judgment-debtor had no saleable interest in the property which purported to be sold and the purchaser is for that reason deprived of it the purchaser shall be entitled to receive back his purchase money with or without interest as the Court may direct from any person to whom the purchase money has been paid. The repayment of the said purchase money and of the interest, if any, allowed by the Court may be enforced against such person under the rules provided by this Code for the execution of a decree for money.

    5. Order 21, R. 93 of the Code, 1908, pro” vides that where a sale of immovable property is set aside under B. 92 the purchaser shall be entitled to an order for repayment of his purchase money, with or without interest, as the Court may direct against any person to whom it has been paid.

    6. In my opinion, the effect of O. 21, R. 93, is that the only method under the Code by which an auction-purchaser at a Court sale is entitled to obtain a refund of the purchase no may is by applying to set aside the sale as therein provided. The reason that the Code was passed in this form is that the Legislature intended that after a sale was confirmed and the execution had been concluded the sale should not further be questioned; for by that time the purchase money may have been distributed, and it may have become a matter of great difficulty to trace the persons into whose hands it has come. On the other hand, I am of opinion that R. 93 does not, and does act affect to, repeal any right which, prior to the enactment of the Code of 1908, a purchaser of property at an execution sale may have possessed under the law and apart from the Code to recover the purchase price of the property which he purported to have bought, but in which afterwards it has been discovered that the judgment-debtor had no saleable interest. Now what other right to recover the purchase money does an action purchaser at a Court sale possess under the law in such circumstances. Clearly he has lost the statutory right to proceed by suit which was granted specifically under S. 315 of the old Code because the Code of 1882 was superseded by the Code of 1908, and any right to recover the purchase money which formerly was given under S. 315 of the Code of 1882 is now to be found in the Code of 1908. It is necessary, therefore, to consider whether apart from the statutory right to recover the purchase money in the manner provided by the Code a purchaser at a Court sale is entitled otherwise under the law to obtain a refund of the price which he has paid. In my opinion the answer to this question is to be found in, and the matter is concluded by, the judgment of the Privy Council in Dorab Ally Khan v. Abdool Azeez(1). In that case an auction-purchaser sought to recover the purchase price which he had paid for property that purported to have been sold at an execution sale upon the ground that the Sheriff had no power to sell the property in suit because it was situated outside the jurisdiction of the Court. It appeared from the evidence in that case that the execution creditor had specifically authorised the Sheriff to sell the property then in suit notwithstanding that it was outside the district within which the Sheriff was entitled to seize in execution the property off the judgment-debtor. Sir James Colville, in delivering the judgment of the Board, stated that the question must be determined upon a consideration of the rights of the auction-purchaser as against the execution creditor to recover the purchase money. His Lordship observed that it is of course perfectly clear that when the property has been so sold under a regular execution and the purchaser is afterwards evicted under a title paramount to that of the judgment-debtor he has no remedy against either the Sheriff or the judgment-creditor. This, however, is because the Shariff is authorized by the writ to seize the property of the execution debtor which lies within his territorial jurisdiction and to pass the debtor's title to it without warranting that title to be good.

    7. Later in his judgment his Lordship added:

    The Sheriff may be held to undertake by his conduct that he has seized and put up for sale the property sold in the exercise of his jurisdiction; although when he has jurisdiction he does not in any way warrant that the judgment-debtor had a good title to it, or guarantee that the purchaser shall not be turned out of possession by some person other than the judgment-debtor.

    8. That is the general rule, but in a case where property in which the judgment-debtor has no saleable interest has been purchased in execution of a decree and the circumstances are such that in accordance with the equitable rules obtaining in that behalf it would be against reason and conscience that the person to whom the purchase price has been paid should retain the purchase money as against the auction-purchaser, the auction-purchaser is entitled to recover such money had and received to his use. If he did not possession such a right he right be exposed to loss resulting from fraud or collusion at the sale between an execution creditor and the judgment-debtor and yet remain without redress. But against loss sustained in such circumstances the law does not leave him defenceless, and the auction purchaser may recover the purchase price which he has paid if he can bring himself within the equitable principles which justify a suit for money had and received upon the ground that, it is unconscionable that the defendant should retain the money as against the plaintiff. That, I think, is the true position of the auction-purchaser under the law upon principle and apart from any statutory right which he may possess see Dorab Ally Khan v. Abdool Azeez. There is authority also for the view that where an auction-purchaser at a Court sale has suffered loss through the fraud of the execution creditor or the breach of any duty Which the execution creditor owes to the auction-purchaser he is entitled to receive compensation for the loss which thereby he has sustained: see Doyal Krishna Naskar v. Amirta Lal Das(2); Parvathi Ammal v. Govindasami Pillai(3) and Balvant Raghunath v. Bala(4).

    9. Now, in the present case it appears that the agents of the Defendant No. 35, who is a large zamindar, by inadvertence, and it may be through carelessness, included the property in suit in the particulars which they gave to the Court officials for the purpose of the sale as belonging to the judgment-debtor, although in fact the judgment-debtor had no saleable interest therein. No misrepresentation, or fraud or privity of contract were or could have been, suggested, in the circumstances of this case, as founding any legal or equitable cause of action for the recovery of the purchase price that has been paid by the plaintiffs. Nay more, in the events that have happened if it was held that the plaintiffs are now entitled to recover the purchase money from Defendant No. 35 the result would be that the execution creditor would wholly lose the fruits of the decree which he has obtained; for he cannot now execute the decree, because the execution proceedings are at an end, full satisfaction of the decree having been obtained by payment. In my opinion, in this case, having regard to the evidence the plaintiff is not entitled to recover the purchase money from the execution creditor, as being money which has been received by Defendant No. 35 to the plaintiffs' use. The only remedy open to the plaintiff, therefore, was to apply, as provided in the Code, for an order setting aside the sale, and a consequential order for a refund of the purchase money: see the case of Juraru Mahamad v. Jathi Mohamad(5); Banka Behari Das v. Gurudas Bihar(6); Ram Sarup v. Dalpat Rai(7); Balvant Baghunath v. Bala; Parvathi Ammal v. Govindasami Pillai, and Nagendra Nath Ghose v. Sambhu Nath Pandey(8). The only authorities which were cited in support of the view that an auction-purchaser at an execution sale is entitled to recover the purchase price which he paid for property in which the judgment-debtor was found to have no saleable interest without having ire course to O. 21 or the equitable doctrine to which I have referred are Rustomji Ardeshir v. Vinayak Gangadhar(9); Prasanna Kumar Bhattacharjee v. Ibrahim Mirza(10) and Asadullah Khan v. Karam Chand(11). The decision in Rustomji's case, however, was decided under the Act of 1882 as was pointed out by Macleod, C.J, in Balvant Baghunath v. Bala, and further the judgment in that case proceeded upon the ground that there can be no objection to treating the relations of the parties, namely, judgment-creditor and Court sale purchaser as relations in the nature of contract.

    10. With all due deference, however, in my opinion, the view, taken by their Lordships of the position of an auction purchaser vis-a-vis the execution creditor cannot be supported having regard to the decision of the Privy Council in Dorab Ally Khan v. Abdool Azeez, supra. In Asadullah v. Karam Chand, the learned Judges appeared merely to have followed the decision of this Court in Prasanna Kumar Bhattacharjee v. Ibrahim Mirza. I am of opinion however, that the ratio decidendi in Prasanna Kumar Bhattacharjee v. Ibrahim Mirza cannot be reconciled with the ruling of Privy Council in Dorab Ally Khan v. Abdool Azeez and runs counter to the strong and persistent current of opinion in all the High Courts in India. In my opinion the rulings in the decisions to which I have refereed, and which I have endeavoured to re-state should now be followed as a settled Cursus Curiae, and with great respect for the learned Judges who decided Prosanna Kumar's case, supra, I cannot regard it in such circumstances as a binding authority or as having been correctly decided. For these reasons, in my opinion, this appeal should be allowed; the decisions of the lower Courts reversed; and the plaintiffs'suit dismissed. As the plaintiffs have misconceived their remedy they must pay the costs in all the Courts.

    Cuming, J.:— I agree.

    11. Appeal allowed.

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    Raja Risheecase Law v. Manik Molla
    (Mar 23, 1926)