O XLI R 27

H.S. GOUTHAM vs. RAMA MURTHY, SC 2021

FACTS – The original plaintiff, the respondents herein – original defendants (hereinafter referred to as the ‘original defendants’) borrowed a sum of Rs.1,00,000/- from the father of the appellant herein – original plaintiff (hereinafter referred to as the‘original plaintiff’) in the year 1990 by way of a simple mortgage deed and then further Rs.50,000/- by way of a promissory note inthe year 1992. The deed of simple mortgage was executed on11.07.1990. The mortgage deed was executed between the original defendants as Mortgager and one partnership firm namely C.H.Shantilal & Co. as Mortgagee. The original plaintiff is the son of Shri C.H. Shantilal who was one of the partners of the firm which was dissolved on 17.12.1994. That, as per the case of the original plaintiff, the mortgager borrowed a loan of Rs.1,00,000/- from mortgagee in order to clear their earlier debt in lieu of mortgage of property – suit property. That the mortgager was to repay Rs.1,00,000/- to the mortgagee within a period of 5 years from the day the deed was entered into along with interest at the rate of 1.5% per mensem or 18% per annum. That the interest was required to be paid by the mortgagers to the mortgagee every month on or before the 10th of each month. According to the original plaintiff, in the event of failure to pay the principal or interest within the period, the mortgagee will be entitled to enforce the said mortgage and cause the property or any portion sold and appropriate the proceeds towards the satisfaction of the mortgage deed. A promissory note was also executed by the original defendants while taking a further sum of Rs.50,000/- on 13.12.1992 and created a further charge in the mortgaged property. That, as the defendants-mortgagers did not pay the aforesaid amount, the plaintiff filed a suit being O.S. No. 3376 of 1995 on 30.5.1995 before the Court of learned City Civil Judge at Bangalore for a sum of Rs.2,50,000/- together with interest thereon. The learned Trial Court passed the consent decree on01.06.1995 and decreed that the defendants shall pay to the plaintiff a sum of Rs.2,50,000/- in a monthly installment ofRs.5,000/- within three years from that day. At the outset, it is required to be noted that the execution of the simple mortgage deed, execution of the promissory note and taking the amounts of loan, have not been disputed by the judgment debtors. That, after the consent decree was passed on 01.06.1995, the judgment creditor-original plaintiff filed an execution petition before The Additional City Civil Judge, Bangalore, being Execution Petition No.232 of 1996 on 28.02.1996. The judgment debtors entered appearance through an Advocate in the execution petition on21.06.1996. Therefore, at least, it can be said that the judgment debtors were aware of the consent decree at least on 21.06.1996. Instead of challenging the said consent decree on the ground that it was obtained by fraud, the judgment debtors filed their objections in the execution petition contending that it was obtained by fraud. Such objections were filed on 04.10.1996. Learned Executing Court by a reasoned order dated 03.03.1998 overruled the objections of the judgment debtors that the decree has been obtained by fraud, mis-representation etc., by specifically observing that after filing of the objections, the matter was being posted for hearing, but the judgment debtors did not either adduce any evidence in that behalf nor have they addressed any arguments also and, therefore, in the absence of any proof of the allegation of fraud etc. made by the judgment debtors, the objections have to be overruled. That the judgment debtors did not challenge the order dated 03.03.1998 before the higher forum. Thereafter, after a period of eight months from the passing of the order dated 03.03.1998, the learned Executing Court issued the sale proclamation of the mortgaged property on 21.11.1998. The spot sale was held on 11.02.1999. The auction purchaser-appellant in Civil Appeal No. 1845 of 2010 was declared as the highest bidder.He deposited 25% of the bid amount. After his bid was accepted being the highest bidder, the Executing Court confirmed the sale/bid on 18.02.1999. Thereafter, judgment debtors filed I.A. No. 03 of 1999 before the Executing Court for stay of further proceedings in respect of sale of the subject mortgaged property. Judgment debtors also filed I.A. No. 4 of 1999 under Order XXI Rule 90 read with Rule 47 CPC before the Executing Court for setting aside Court sale in respect of the subject mortgaged property. The learned Executing Court dismissed both the aforesaid applications. Learned Executing Court dismissed I.A. No. 3 of 1999 by observing that the order dated 03.03.1998 overruling the objections filed by the judgment debtors has attained the finality as the same has not been assailed before any appellate forum and that the Executing Court cannot go behind the decree so as to decide the question of correctness and validity of the decree, when the decree had become final. The learned Executing Court dismissed I.A. No. 4 of 1999 on the ground that the judgment debtors have not deposited the decretal amount of Rs.4,50,000/- together with interest in terms of Order XXI Rule 90 and therefore the judgment debtors are not entitled to seek for setting aside of thesale as per the requirement of Order XXI Rule 90. That, thereafter the learned Executing Court confirmed the sale in favour of the auction purchaser on 17.11.1999. On 23.11.1999, the sale certificate was issued by the court in favour of the auction purchaser and the sale was registered with the Sub-Registrar. That, after the sale was confirmed and the sale certificate was issued in favour of the auction purchaser and after the sale was registered with the Sub-Registrar, the judgment debtors filed Civil Revision Petition No. 3699 of 1999 in the High Court of Karnataka against the order dismissing I.A. No. 4 of 1999, which was thereafter converted into MFA No. 3934 of 2000. Thereafter the judgment debtors also filed Civil Revision Petition No. 3700 of 1999 in the High Court of Karnataka at Bangalore against the order dated 30.10.1999 passed by the Executing Court. Civil Revision Petition No. 3700 of 1999 came to be dismissed by the High Court by an order dated 06.01.2000 holding that the issue that the decree was obtained by fraud has attained finality in view of order dated 03.03.1998 rejecting the objections of the judgment debtors remained unchallenged. That, thereafter, after the lapse of around two years, the judgment debtors challenged the order dated03.03.1998 by filing CRP No. 3297 of 2000. At this stage, it is required to be noted that till this time judgment debtors did not challenge the decree dated 01.06.1995 before the High Court. That, after a period of five years from the date of passing of the judgment and decree dated 01.06.1995 the judgment debtors preferred RFA No. 274 of 2001 challenging the decree dated 01.06.1995 passed by the learned Trial Court on the ground that the same has been obtained by fraud and mis-representation. After a period of five years from the date of filing of the appeal, the High Court called for a finding/report from the learned Principal City Civil Judge and directed him to hold an enquiry as to whether the decree dated 01.06.1995 was obtained by fraud.That, thereafter, the learned Principal City Civil Judge submitted the report that the decree was obtained by fraudand on the basis of the report submitted by learned Principal City Civil Judge mainly, the High Court has set aside the judgment and decree by the impugned judgment and order.

CAUSE – Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the High Court in allowing the appeals and quashing and setting aside the judgment and decree dated 01.06.1995 passed in O.S. No. 3376 of 1995; quashing and setting aside the order dated 30.10.1999 passed by the learned Executing Court and quashing and setting aside the order dated 03.03.1998 passed by the learned Executing Court in overruling the objection raised by the judgment debtors, the original defendants as well as the successful auction purchaser have preferred the present appeals against the propriety and legality of the said order of calling for a report/finding from the learned Principal City Civil Judge.

ARGUMENT – Learned counsel appearing on behalf of the original plaintiff submitted that calling the report from the Principal City Civil Judge and directing him to hold an enquiry as to whether the decree was obtained by fraud itself was contrary to the provisions of the CPC and such a procedure is unknown to law. It is submitted that as such by referring the matter to the learned Principal City Civil Judge, the High Court gave ample opportunity to the defendants to fill in the lacuna. Learned counsel appearing on behalf of the auction purchaser-appellant in view of the Order XXI Rule 92 read with Rule 94 once the sale has become absolute and as held by this Court in the case of Chinnammal v. P. Arumugham(1990) 1 SCC513, subsequent reversal of the decree shall not affect the auction purchaser who is not a party to the decree. It is submitted that as held by this Court in the aforesaid decision, the property bona fidely purchased ignorant of litigation should be protected. Learned advocate appearing on behalf of the original defendants-judgment debtors findings recorded by the learned Principal City Civil Judge that the consent decree obtained by fraud is on re-appreciation of evidence. It is submitted that the HighCourt rightly directed the Trial Court to hold an enquiry whether the decree was obtained by fraud, mis-representation. It is submitted that once it is observed and held that the consent decree was obtained by fraud, mis-representation right from the beginning and even prior to the filing of the suit, such consent decree is not a decree in the eye of law and therefore the High Court has rightly set aside the consent decree and remanded the matter to the Trial Court to decide the suit on merits.

ISSUE – The issue before SC was that in the present appeals is whether in the facts and circumstances of the case, more particularly, when the mortgaged property was sold in the court auction in the execution proceedings and the sale was confirmed in favour of the auction purchaser and the sale certificate was issued and sale was confirmed after overruling the objections raised by the judgment debtors, more particularly, the objection that the consent decree was obtained by fraud and that initially the consent decree was not challenged at alland not only that, even order dated 03.03.1998 overruling the objections raised by the judgment debtors was also not challenged at the earliest, the High Court is justified in quashing and setting aside the consent decree on the ground that the same was obtained by fraud, relying upon the report submitted by the Principal City Civil Judge which was called for in the appeal.

DECISION – The SC held that it is required to be noted that as per the relevant provisions of the Code of Civil Procedure, more particularly, Order XXI Rule 92 read with Order XXI Rule 94, once the sale is confirmed and the sale certificate has been issued in favour of the purchaser, the same shall become final. Now, so far as the procedure adopted by the High Court calling for the report from the learned Principal City Civil Judge on whether the decree was obtained by fraud or not is concerned, at the outset,it is required to be noted that at the time when the High Court Passed such an order, there was already an order passed by the learned Executing Court dated 03.03.1998 overruling the objections raised by the judgment debtors that the decree was obtained by fraud and mis-representation. As observed by the learned Executing Court in the order dated 03.03.1998, the judgment debtors except the averments that the decree was obtained by fraud, mis-representation, neither any further submissions were made on that nor even the judgment debtors led any evidence in support of the same. Therefore, as such, learned Executing Court was justified in overruling the objection that the decree was obtained by fraud, mis-representation etc. As per the settled principle of law, when the fraud is alleged the same is required to be pleaded and established by leading evidence. Mere allegation that there was a fraud is not sufficient. Therefore, subsequent order passed by the High Court calling for the report from the learned Principal City Civil Judge on the question whether the decree was obtained by fraud or not, can be said to be giving an opportunity to the judgment debtors to fill in the lacuna. Therefore, the course adopted by the High Court calling for the report from the learned Principal City Civil Judge cannot be approved.SC held that even otherwise, it is required to be noted that as per the provisions of Order XLI, the appellate court may permit additional evidence to be produced whether oral or documentary, if the conditions mentioned in Order XLI Rule 27 are satisfied after the additional evidence is permitted to be produced in exercise of powers under Order XLI Rule 27. Thereafter, the procedure under Orders XLI Rules 28 and 29 is required to be followed. Therefore,unless and until the procedure under Order XLI Rules 27, 28 and 29 are followed, the parties to the appeal cannot be permitted to lead additional evidence and/or the appellate court is not justified to direct the court from whose decree the appeal is preferred or any other subordinate court, to take such evidence and to send it when taken to the Appellate Court. From the material produced on record, it appears that the said procedure has not been followed by the High Court while calling for the report from the learned Principal City Civil Judge.Also it is required to be noted that at the time when the learned Principal City Civil Judge permitted the parties to lead the evidence and submitted the report/finding that the decree was obtained by fraud, there was already an order passed by the Executing Court-Co-ordinate Court overruling the objections made by the judgment debtors that the decree was obtained by fraud.Therefore, unless and until the order dated 03.03.1998 was set aside, neither the High Court was justified in calling for the report from the learned Principal City Civil Judge nor even the learned Principal City Civil Judge was justified in permitting the judgment debtors to lead the evidence on the allegation that the decree was obtained by fraud, mis-representation, when the judgment debtors failed to lead any evidence earlier before the Executing Court when such objections were raised.Thus, theHigh Court has committed an error in relying upon the report submitted by the learned Principal City Civil Judge holding that the decree was obtained by fraud.

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