Kabiruddin Auction-Purchaser v. Krishna Rao And Others Decree-Holder And Judgment-Debtor

Hallifax, A.J.C:— (23rd June 1927). The first respondent Krishna Rao attached certain immovable property belonging to the second respondent Dattfiatray in execution of a decree, and it was sold by auction to the appellant Kabiruddin for Rs. 1,600 on 2nd May 1924. The purchase-money was paid within the time allowed by law. On the day after the sale the judgment-debtor filed an application praying that the sale should be set aside under R. 90, O. 21 of the CPC on the ground of material irregularity in publishing it. With the details of the alleged irregularity we are not now concerned.

2. The Courts were closed for the summer vacation from 11th May to 15th June and on 16th June the judgment-debtor filed an application to have the sale set aside under R. 89, O. 21. This was accompanied by a deposit of Rs. 800 for payment to the auction purchaser and a receipt signed by the decree-holder acknowledging full satisfaction of the decree. The deposit and the application must be considered, in respect of limitation, to have been made on 11th May, but it may be mentioned that the deposit of the Rs. 800 was actually made on 2nd June, which was a Monday and therefore counts as the thirtieth day from 2nd May, the date of the sale. There has been a sad waste of time and effort over pleas such as that the decree was not really satisfied on 29th May, though the decree-holder said it was, and the judgment-debtor also said so on the following day, and that all that happened on that day was an agreement between the decree-holder and the judgment-debtor and a third person for the payment of the money on some future day, which was eventually carried out, and that R. 89. O. 21, was not satisfied by an acknowledgment of full payment by the decree-holder but required the production of the money in Court. If the decree-holder says his decree is satisfied, it is satisfied and nobody else is concerned with the manner of that satisfaction, whether it is cash or kind or promises or kindness.

3. Taken by itself then the judgment-debtor's application under R. 89, was well within time and had to be granted. But he had already made an application under R. 90, and till that was withdrawn he was not “entitled to make or prosecute” an application under R. 89. That withdrawal was not actually made till 25th July. It is urged that the withdrawal ought to relate back to the date of the making of the application under R. 89, which should be regarded as itself a sort of automatic withdrawal. That would be impossible according to the plain words of R. 89, but anyhow there was more here than the absence of an express withdrawal; there was an express refusal to withdrawal.

4. The judgment-debtor drew up two applications on 31st May, of which one was actually presented at once and the other was apparently held up till 16th June. In the first he asked to be allowed to deposit Rs. 800 “for payment to Kabiruddin in case his first application is disallowed” In his second petition of 31st May, which is the same at slightly greater length, he said that if his application under R. 90 succeeded, he would be satisfied (to thik bai), but otherwise he prayed that the Rs. 800 might be paid to Kabirud lin, and he repeated that it his previous application succeeded he would withdraw the money himself.

5. Even on 25th July there appears to have been some attempt in Court to keep the first application alive before it was withdrawn. But, in view of the words of these two petitions, it is quite impossible, by the use of any legal fiction or any stretch of the imagination, to find that the application under R. 90 was withdrawn till after 16th June, to take the earliest possible date. The application under R. 89 was therefore not made after 16th June, because it could not be either “made or prosecuted” till then, and that is more than thirty days after the date of the sale.

6. The only facts with which we are concerned then are that property was sold in execution of a decree to a person other than the decree-holder, and an application to set aside the decree under R. 89, O. 21, was made by the judgment-debtor at some time after the expiry of thirty days from the date of the sale. As it was then time barred it would seem that there was nothing for the Court to do but to reject it and confirm the sale. The learned Additional District Judge has however followed the published ruling of this Court in Nilkanth v. Yeshwant A.I.R 1922 Nag. 248 , 18 N.L.R 134 as he was bound to do, and has set aside the sale, holding that, as soon as the decree was satisfied, whether before or after the end of the thirty days from the sale, it was dead and there was nothing left for the Court to execute. My learned colleague, who was responsible for the judgment in the case mentioned, is still of opinion that the principles on which it was decided are correct. As I find myself in respectful but complete dissent, it is necessary to state the reasons for that view of the matter, in order that the question may go before a third Judge for decision.

7. In Nilkanth v. Yeshwant A.I.R 1922 Nag. 248 , 18 N.L.R 134, payment of the decretal sum and of the 5 per cent, of the purchase money was made within thirty days of the sale, but apparently there was no formal written application by the judgment-debtor that the sale should be set aside; the application seems to have been made verbally by the decree-holder though it was undoubtedly on behalf of the judgment-debtor and at his request. It was held in the lower appellate Court that, as the application under R. 89 had not been made by any person having an interest in the property, the sale could not be set aside and the Court was bound to confirm it. Kotval, A.J.C was inclined to the view that an application by the judgment-debtor was implied in what actually took place, which, if it may be said with respect, seems to be the only possible view of the case.

8. My learned brother, however, refrained from deciding the case on that ground because there was another reason which gave the same result. That reason is stated in the following words:

Where a decree is admitted by the decree-holder to be satisfied it ceases to exist as a decree capable of execution. The very foundation of the powers of a Court to execute a decree, namely the existence of a decree capable of execution, having disappeared, the Court's powers in execution also cease, and confirmation of the sale which is a proceeding in execution cannot be ordered: vide Khusalchand v. Nandram [1911] 35 Bom. 516 , 12 I.C 572 , 13 Bom. L.R 977 and Mulchand v. Mukta Prasad [1888] 10 All. 83 , (1887) A.W.N 287.

9. It may be mentioned that the first of these cases is also published in Khushal Chand v. Nandram, Vol. 35 of the Bombay Series of the Indian Law Reports at p. 516.

10. The reasons for my inability to accept this view of the law are that it directly violates each of three provisions of the statute law and is directly contrary to a judgment of the Privy Council and also has a most inequitable result. The three provisions of the law are Clause (a), R. 89, O. 21 of the CPC, Article 166, Sch. 1, Limitation Act and Section 12 of the Specific Relief Act. The judgment of the Privy Council is in Zain-ul-Abdin Khan v. Muhammad Asghar Ali Khan [1888] 10 All. 166.

11. In the view under discussion a sale may, or rather must, be set aside on payment of the decretal sum at any time before it is confirmed, even after the expiry of the period of thirty days. That wipes out Article 166, Lim. Act, so far as it refers to R. 89, O. 21 of the CPC. Also no deposit of 5 per cent, of the purchase-money need be made, whether the payment of the decretal sum is before or after the expiry of thirty days after the sale. That wipes out Cl. (a), R. 89, O. 21.

12. As for Section 12 of the Specific Relief Act, the position of the judgment-debtor in such a case is not merely analogous to that of a person who has entered into a contract to sell his immovable property; it is exactly the same. If does not matter whether he enters into the contract under pressure from a Court or from his creditor himself, without the help of a Court, or from the members of his family or from his own desires. In order to pay off a debt he contracts to sell his property to the auction-purchaser, stipulating that the purchase-money shall be paid within fifteen days and shall go to his creditor, and farther that for thirty days he is to have the option of canceling the agreement on payment of per cent of the agreed price.

13. In the case of such a contract made directly and not with a Court acting as the agent of the seller, the purchaser, having performed the whole of his part of it, could sue for specific performance, and, if the breach by the seller had occured within thirty days, he would get 5 per cent of the purchase-money under the contract as damages, but, if the breach was later the Court would be bound to order specific performance under the explanation appended to Section 12 of the Specific Relief Act.

14. The only difference in the case of a contract made under the orders of a Court is that the Court enforces specific performance summarily in execution proceedings, and there is no necessity for a suit. Even if the incidents of a sale in execution and a private sale were merely analogous and not identical, it seems impossible to hold that anybody can resile more easily from the former than from the latter. That would be equivalent to saying he was less liable to pay money due on a decree than money due on a bond.

15. In Zain-ul-Abdin [1888] 10 All. 166, decided by the Privy Council in 1887, it was held that a sale in execution of a decree which was set aside in appeal later, must hold good if the purchaser was not a party to the decree; it could be set aside, by reason of the decree having ceased to exist, only if the purchaser was a party to the decree or claimed through a person who was. If then the extinction of a decree by its being set aside in appeal, that is to say by its being declared never to have existed at all legally, cannot be allowed to interfere with a sale held under it while it was thought to exist, still less can its death by payment, after valid existence, do so.

16. Some attempt has been made to distinguish this Privy Council case from cases of the present kind by the fact that the sales in that case had been confirmed. It is true that the sales considered by the Privy Council had been confirmed, even before the decrees had been set aside in appeal, but that fact formed no part of the basis of their Lordship's decision, which would clearly have been the same if the sales had still been awaiting confirmation.

17. A perusal of the judgments in the cases-mentioned in Nilkanth v. Yeshwant A.I.R 1922 Nag. 248 , 18 N.L.R 134, as supporting the proposition that a decree becomes incapable of execution on the payment of the decretal amount to the decree-holder, at any stage of the proceedings and whatever other interests might have become vested in third parties, shows that they do not do so. In Khusalchand v. Nandram [1911] 35 Bom. 516 , 12 I.C 572 , 13 Bom. L.R 977 the proposition was outside the case. In Mul Chand v. Mukta Prasad [1888] 10 All. 83 , (1887) A.W.N 287 the purchaser under the decree that was subsequently set aside in appeal, was the decree-holder himself. As was pointed out by the Privy Council in the case already mentioned, and as indeed is obvious, the case of a purchase by a decree-holder is very different to that of one by a staranger to the decree.

18. Another consideration fatal to the argument that payment of the decree by the judgment-debtor killed it so as to render it incapable of further execution is that, if such payment could have that effect, it had already been killed by the payment made by the auction purchaser, at least to the extent of the purchase-money, it cannot be killed twice over.

19. In a recent judgment of this Court on this question mention is made of the inherent right of a judgment-debtor and decree-holder to settle the matter of the decree between themselves. They certainly have that right, but no right to interfere with the vested interests of others can arise out of it. If the contract to sell in this case had been a voluntary contract, not a forced contract, the seller would still be at liberty to pay off his creditor and to keep the proceeds of the sale to the third person himself, but he would not have any right to resile from his contract to sell to that person.

20. For all these reasons I am of opinion that the lower Court was bound to reject the application made under R. 89, O. 21 as time-barred, and thereafter to confirm the sale in favour of the appellant Kabiruddin. As, unfortunately, my learned brother takes the contrary view, the question must go before a third Judge for decision.

OPINION

21. (Kotwal, A.J.C:— 18th June 1927.) The decision in Nilkanth v. Yeshwant A.I.R 1922 Nag. 248 , 18 N.L.R 134 must be held applicable only in the circumstances stated therein. It was based on the assumption that there was no effective application under R. 89, O. 21 of the CPC. In the present case also there was no such application.

22. In both cases the sale had not been confirmed before the decree was satisfied out of Court and the Court informed to that effect. As held by the Bench in Moroti v. Vithoba A.I.R 1928 Nag. 43, the decree-holder and the judgment-debtor had an inherent right to settle the matter between themselves in view of the fact that the sale had not at the moment been confirmed.

23. I am of opinion that the order of the lower Court is correct and that the appeal should be dismissed and the appellant ordered to bear the costs thereof.

Macnair, A.J.C:— (15th August 1927)— The Judges composing the Bench hearing this appeal differed in opinion on a point of law, and under the provisions of the proviso to Section 98(2) of the CPC, the appeal has come before me for hearing upon that point only.

24. The facts with which I am concerned are that property was sold in execution of a decree to a person other than the decree-holder, and an application to set aside the decree under R. 89, O. 21 of the CPC, was made by the judgment-debtor after the expiry of so days from the date of the sale. The decree had been satisfied before the date of the application, and the learned trial Judge, following the published ruling of this Court in Nilkanth v. Yeshwant A.I.R 1922 Nag. 248 , 18 N.L.R 134, set aside the sale, holding that the decree was dead and that there was nothing left for the Court to execute. Hallifax, A.J.C, was of opinion that the lower Court was bound to reject the application as time barred and thereafter to confirm the sale in favour of the auction-purchaser. Kotval, A.J.C, was of opinion that the order of the lower Court was correct.

25. The reasons given by Kotval. A.J.C, in Nilkanth v. Yeshwant A.I.R 1922 Nag. 248 , 18 N.L.R 134, are:

Where a decree is admitted by the decree-holder to be satisfied, it ceases to exist as a decree capable of execution. The very foundation of the powers of a Court to execute a decree, namely, the existence of a decree capable of execution having disappeared, the Court's powers in execution also cease, and confirmation of the sale, which is a proceeding in execution cannot be ordered.

26. None of the counsel who appear before me urge that this reasoning is entirely satisfactory. The opinion expressed by Kotval, A.J.C, in the present case indicates that this reasoning requires modification: he appears to concede that if the decree is satisfied after the sale has been confirmed, the Court has still to exercise powers. But he states that the decree-holder and the judgment-debtor had in this case an inherent right to settle the matter between themselves in view of the fact that the sale had not been confirmed.

27. At the commencement of execution proceedings the Court is concerned solely with the execution of the decree, but, after confirmation of the sale of immovable property the Court has to deal with questions connected with that sale and must retain some powers until the purchaser is safely in possession of the property sold. It is quite clear that, where the sale proceeds are sufficient to satisfy the decretal debt, the decree-holder can withdraw the money and obtain full satisfaction as soon as the sale has become absolute and it is equally clear that, after the decree has thus been satisfied, the Court has power to act under Rr. 94 to 101, O. 21 of the CPC.

28. It can then be only up to a stage in the execution proceedings that, when a decree ceased to exist as a decree capable of execution, the Court is functus officio. After a certain stage it becomes necessary for the Court to pass orders safeguarding the rights of the auction-purchaser, whether he is the decree-holder or not, although the decree may be satisfied. The Court retains power to grant a certificate to the purchaser, and, after due enquiry, to remove or even commit to jail persons who obstruct his possession.

29. It cannot then be inferred from the fact that the decree is no longer capable of execution that the powers of the executing Court have ceased: it has to be considered whether it is necessary for the Court to complete any act on which it is engaged. The main contention of the respondent is that, if the decree is satisfied after the auction sale has been held, but before it has been confirmed, the sale, as the Court has no power to confirm it, fades away in some manner. In my opinion the provisions of R. 92, of the CPC, show conclusively that this contention is incorrect. The Court has to perform one of two duties namely, ordering confirmation of the sale or ordering that the sale be set aside. The Court through its officer has held the sale, and the sale cannot be left without confirmation or without annulment.

30. It is urged that the decree-holder and the judgment-debtor have an inherent right to settle the matter between themselves up to the time the sale is confirmed. They certainly have a right to settle the decree-holder's claim, but the effect of such a settlement is merely that the decree is satisfied, and the question still remains whether or not the executing Court retains any powers. I see no reason to think that either party has a right to put an end to the proceedings after the decree is satisfied. The decree-holder in that capacity has no interest in subsequent proceedings the judgment-debtor had not at an earlier stage any such right. Either party can inform the Court that the decree is satisfied, but neither can deprive the Judge of any power which he may retain after satisfaction of the decree. The point decided in Chowdhury Ram Prasad Rai v. Mahesh Kant Chowdhury A.I.R 1922 Pat. 525 , 1 Pat. 232 was that a decree-holder had a right to withdraw his application: after the withdrawal the Court had obviously no jurisdiction to take any steps with the object of recovering the decretal debt. In the case I am considering, the object of confirming the sale is not the recovery of the decretal debt, for, if the sale be confirmed, the money will be paid to the judgment-debtor. The decision in the Patna case has no bearing on the question whether the Court has jurisdiction to confirm the sale.

31. So far my reasoning is independent of the fact that in the case under discussion the property was sold in execution to a person other than the decree-holder. But this fact furnishes another very cogent reason for holding that, although after the sale the decree has been satisfied, the Court has still jurisdiction. It cannot be denied, that after the sale, the auction-purchaser has interests which require consideration. Kotval, A.J.C, refers to Maroti v. Vithoba A.I.R 1928 Nag. 43. In that case the Judges stated:

All that the auction purchaser loses in a case like the present is the interest on the money which has been locked up in deposit, and this is, in the circumstances, no great hardship.

32. Even if this statement were correct, there seems no reason why the auction purchaser should be deprived of the interest on his money. But the auction-purchaser, in addition, has entered into a bargain involving some risk. If the bargain had proved unprofitable he would probably have been held to it. If the property had suffered damage immediately after the sale, he could not have claimed that the sale should be set aside on that account. Deprivation of his prospective profits involves in very many cases serious loss to him. The auction-purchaser is before the Court and the Court must have jurisdiction to protect his interests. It is quite clear that the decree-holder and the judgment-debtor have no right to put an end to the proceedings without consideration of the rights of the auction-purchaser.

33. As Hallifax, A.J.C, points out, the object of the provisions of the Code is clearly that an auction-purchaser in a valid sale should be certain of confirmation unless he receives 5 per cent of the price within 30 days. If the view taken by Kotval, A.J.C, is correct, this object will be defeated. The judgment-doctor can pay the decretal amount into Court under O. 21, R. 1. Such payment will operate as satisfaction of the debt. If it is not convenient to the judgment-debtor to pay the money before the date fixed for confirmation of the sale he can make an application under O. 21, R. 90, and thus delay confirmation. The provisions of O. 21, R. 89 are futile and absurd, if the judgment-debtor can get the sale set aside by payment of a smaller amount at a later period, and I should be very slow to hold that the intention of the Code was such as to render one of the rules futile and absurd. I add that the provision in the Code for the payment of 5 per cent to the auction-purchaser shows that he is considered to have claims which cannot be neglected.

34. It is argued by the learned counsel for the appellant that a comparison of S. 316 of the Code of 1882 with S. 65 and O. 21, R. 94, of the new Code shows that the Court has power to confirm a sale although the decree does not subsist. S. 316 of the old Code runs:

When a sale of immovable property has become absolute in manner aforesaid the Court shall grant a certificate stating the property sold and the name of the person who at the time of sale, is declared to be the purchaser. Such certificate shall bear the date of the confirmation of the sale, and, so far as regards the parties to the suit and persons claiming through or under them, the title to the property sold shall vest in the purchaser from the date of such certificate and not before: Provided that the decree under which the sale took place was still subsisting at that date.

35. This clearly means that, even if a sale of immovable property has become absolute, the Court shall not grant a certificate and thereby cause the title to the property to vest in the purchaser unless the decree was subsisting at the date of confirmation of the sale. S. 65 of the new Code lays down that, after the sale of immovable property has become absolute, the property shall be deemed to have vested in the purchaser from the time when the property was sold. R. 94, O. 21 relates to the grant of a certificate. There is no proviso, either in the section or in the rule, excepting a case where the decree has ceased to subsist before the sale becomes absolute. It does seem possible to infer from the omission of the proviso that, once the sale has become absolute, it is immaterial whether the decree subsisted at the date of confirmation. It is, however, a hazardous proceeding to refer to provisions which have been absolutely repealed in order to ascertain what the legislature meant to enact in their stead: (Maxwell on the Interpretation of Statutes, 6th edition, p. 68). I, therefore, prefer not to base my opinion on the omission of the proviso to S. 316 of the old Code. I add that the respondents waver between two positions. At one time they maintain that satisfaction of the decree deprives the Court of jurisdiction: at another time they adopt the view expressed by Kotval, A.J.C, in his opinion, dated 18th June 1927, that, after satisfaction, the Judge has still power to confirm the sale, unless the decree-holder and the judgment-debtor inform him of the fact of satisfaction and exercise a right. The omission of the proviso was necessary if the second position is correct: and it is convenient for me to base my opinion on reasons which meet either line of argument.

36. The doctrine that a Court has no jurisdiction to confirm a sale when there is no longer a decree capable of execution is not a new one, and it is instructive to consider its origin. Basappa v. Dundaya [1877] 2 Bom. 540, is the earliest ruling which I have been able to trace. The Judges who decided that case did not consider the points that a Court could not set aside an auction sale, if it had no jurisdiction, and that an auction-purchaser's interest could not be ignored. In Mul Chand v. Mukta Prasad [1888] 10 All. 83 , (1887) A.W.N 287 the decree-holder was the auction-purchaser, and the Judge of the execution Court learnt that the decree had been set aside before the sale was confirmed. Although their Lordships based their decision on the ground that the Judge had no jurisdiction to confirm the sale, the sentence I do not think that a Court executing a decree ought to make an order under such circumstances confirming a sale indicates that they were influenced by the consideration that confirmation was opposed to equity. In my opinion, had their Lordships, Straight and Brodhurst, JJ., had the advantage of reading the ruling of the Privy Council in Zain-ul-Abdin Khan v. Muhammad Asghar Ali Khan [1888] 10 All. 166, they would have based their decision that the sale should be set aside on a different principle. Their Lordships of the Privy Council expressed their opinion that a sale to a decree-holder purchaser could be set aside even after confirmation, if the decree was reversed in appeal, and this opinion could not have been based on want of jurisdiction of the executing Court at the time of the sale or confirmation. There seems no doubt that their Lordships considered that the principle now enunciated in Section 144 of the CPC, should be applied.

37. I have given careful consideration to unreported decisions in which Judges of this Court held that a Court has no jurisdiction to confirm a sale when there is no longer a decree capable of execution, and it appears to me that several of these decisions have been influenced by the consideration that, in Mul Chand v. Mukta Prasad [1888] 10 All. 83 , (1887) A.W.N 287, this doctrine was the basis of what is clearly an equitable decision. In my opinion the provisions of Section 144 of the CPC, are applicable in a case such as Mul Chand v. Mukta Prasad [1888] 10 All. 83 , (1887) A.W.N 287. The Court has still jurisdiction when a decree is reversed, but it will, on the application of the judgment-debtor, set aside the sale if the decree-holder is the purchaser, because it is possible to place the parties in the position which they would have occupied but for the decree. My opinion, therefore, is that, after the trial Judge had been informed that the decree had been satisfied, and had been asked by the decree-holder and the judgment-debtor to take no further step, he had still power to confirm or to set aside the sale. That is the point of law on which the referring Judges differed. It is urged before me that Section 151 of the CPC, can be applied and the sale can be set aside. It is sufficient for me to say that I must confine my opinion to the point on which the Judges differed. I have no reason whatever to think that the Judges desire my opinion on the scope of Section 151 of the CPC.

Macnair, A.J.C:— (13th September 1927). I understand that the words “he had still power to confirm or to set aside, the sale” in lines 4 and 5 of the last paragraph, of my opinion have led to difficulty. I therefore, desire to substitute the following paragraph for para. 13:

Hallifax, A.J.C, was of opinion that the lower Court was bound to reject the application made under R. 89, O. 21, as time barred and thereafter to confirm the sale in favour of the appellant Kabirruddin. Kotval, A.J.C, was of opinion that confirmation of the sale could not be ordered, because the Court's, power in execution had ceased, Nilkanth v. Yeshwant A.I.R 1922 Nag. 248 , 18 N.L.R 134; or because the decree-holder and the judgment-debtor had an inherent right to insist that the Court should not confirm the sale. I have discussed the reasons given by Kotval, A.J.C, for disagreement with the opinion of Hallifax, A.J.C, and consider that they are invalid. In argument before me it was not contended that, if the Court was not prevented from confirming the sale for the reasons stated by my brother Kotval, R. 92, O. 21 permitted the Court to take any other action except that stated in the opinion of my brother Hallifax, R. 92, read with R. 89, appears to me perfectly clear, and I am, therefore, of opinion that, in accordance with this rule, the lower Court was, in the circumstances stated bound to reject the application and, therefore, to confirm the sale. It has been urged before me that Section 151 of the CPC, can be applied and the sale can be set aside. It is sufficient for me to say that this is a question on which my opinion-has not been asked. I have no reason whatever to think that the referring Judges desire my opinion on the question whether or not the Judges should in this particular case exercise their inherent power and refuse to follow the provisions of O. 21, Sch. 1 of the CPC.

JUDGMENT

38. An attempt was made at the final hearing of this appeal to urge, on behalf of the respondents, that the sale should be set aside under the inherent powers of the Court to prevent injustice mentioned in Section 151 of the CPC, or that they should be allowed to revive their application under R. 90, O. 21, now that one under R. 89 has failed. There is no substance in these contentions and anyhow it is much too late to raise either of them.

39. In accordance with the opinion stated by the trial Judge, be whom the case was referred, the order of the lower Court will be set aside and the three sales held on 2nd May 1924 will be confirmed. The costs of the appellant in both Courts will be paid by both respondents. The pleader's fee in this Court will be a hundred and fifty rupees.

40. Order set aside.