H. S. Goutham vs Rama Murthy and Anr. etc.

Or.XXI, rr.89-92, 94 – Application filed to set aside court auction/sale w.r.t the subject mortgaged property – Held: It is not the case of the judgment debtors that there was any material irregularity or fraud in publishing or conducting the sale – Their objection is that the decree was obtained by fraud – Application u/Or.XXI, r.90 was rightly dismissed by the Executing Court. Fraud – Pleadings – Held: When fraud is alleged, the same is required to be pleaded and established by leading evidence – Mere allegation that there was a fraud, not sufficient. Code of Civil Procedure, 1908 – s.96, Or.XXIII, r.3, Or.XLIII, r.1(m), r.1A(2) – Appeal against consent decree – Maintainability of – Held: As per s.96(3), the appeal against the decree passed with the consent of the parties shall be barred – However, as per Or.XXIII, r.3A no suit shall lie to set aside a decree on the ground that the compromise on which the decree is based was not lawful – However, when Or.XLIII, r.1(m) came to be omitted by Act 104 of 1976, simultaneously, Or.XLIII, r.1A came to be inserted by the same Act, which provides that in an appeal against the decree passed in a suit for recording a compromise or refusing to record a compromise, it shall be open to the appellant to contest the decree on the ground that the compromise should or should not have been recorded. Allowing the appeals, the Court

HELD: 1.1 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. All throughout there was a delay and negligence on the part of the judgment debtors in not initiating the appropriate proceedings at appropriate stage. Order dated 03.03.1998 overruling the objections submitted by the judgment debtors to the effect that the judgment was obtained by fraud and mis-representation was not challenged by the judgment debtors till the mortgaged property was auctioned; sale of the mortgaged property was confirmed in favour of the auction purchaser and even the sale certificate was issued in favour of the auction purchaser and sale was registered with the Sub-Registrar and even also the dismissal of I.A. No. 3 of 1999 and I.A. No. 4 of 1999. Not only that, till that time even no appeal was assailed/challenged before the higher forum. The first appeal was filed in the year 2000 and by that time the mortgaged property was already sold in the execution proceedings and the sale was confirmed in favour of the auction purchaser and even the sale certificate was issued in favour of the auction purchaser. 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. [Paras 8.1, 9][1013-D-H]

1.2 At the time when the High Court passed an order calling for the report from the Principal City Civil Judge on whether the decree was obtained by fraud or not, there was already an order passed by the Executing Court dated 03.03.1998 overruling the objections raised by the judgment debtors that the decree was obtained by fraud and mis-representation. The judgment debtors except the averments that the decree was obtained by fraud, misrepresentation, neither any further submissions were made on that nor even the judgment debtors led any evidence in support of the same. Therefore, Executing Court was justified in overruling the objection that the decree was obtained by fraud, mis-representation etc. 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 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 Principal City Civil Judge cannot be approved. 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 Order 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 Principal City Civil Judge. At the time when the 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 Principal City Civil Judge nor even the 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. [Paras 10-10.2][1014A-H; 1015-A-C]

1.3 The High Court committed an error in relying upon the report submitted by the Principal City Civil Judge holding that the decree was obtained by fraud. The High Court erred in holding that the decree was obtained by fraud. The judgment debtorsoriginal defendants have put their signatures on the written statement or on the consent terms. The mortgaged property and the promissory note are not in dispute. Therefore, when the suit was filed and the judgment debtors wanted to get more time to repay the amount and when it was agreed to pay Rs.4,50,000/(suit claim) in a monthly installment of Rs.5,000/- within three years, nothing was unnatural. [Paras 11, 11.1][1015-D; F-G]

1.4 It is true that, as per Section 96(3), the appeal against the decree passed with the consent of the parties shall be barred. However, it is also true that as per Order XXIII Rule 3A no suit shall lie to set aside a decree on the ground that the compromise on which the decree is based was not lawful. However, it is required to be noted that when Order XLIII Rule 1(m) came to be omitted by Act 104 of 1976, simultaneously, Rule XLIII Rule 1A came to be inserted by the very Act 104 of 1976, which provides that in an appeal against the decree passed in a suit for recording a compromise or refusing to record a compromise, it shall be open to the appellant to contest the decree on the ground that the compromise should or should not have been recorded. Therefore, the High Court rightly came to the conclusion that the appeal before the High Court against the judgment and decree was maintainable. [Para 12][1016-A-C]

Banwari Lal v. Chando Devi AIR 1993 SC 1139 (para 9) : [1992] 3 Suppl. SCR 524 – affirmed.

1.5 Where any immovable property has been sold in execution of a decree, the decree-holder, or the purchaser, or any other person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale, may apply to the Court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it. Therefore, as per Order XXI Rule 90, an application to set aside the sale on the ground of irregularity or fraud may be made by the decree holder on the ground of material irregularity or fraud in publishing or conducting it. In the present case, as such, it is not the case of the judgment debtors that there was any material irregularity or fraud in publishing or conducting the sale. Their objection is that the decree was obtained by fraud. The application submitted by the original judgment debtors under Order XXI Rule 90 i.e. I.A. No. 4 of 1999 was rightly dismissed by the Executing Court. [Para 13][1016-E-H]

1.6 At the time when Executing Court passed the order dated 03.03.1998 no evidence was led by the judgment debtors. The allegation that the decree was obtained by fraud and misrepresentation was not substantiated. The High Court ought to have appreciated that even the order dated 03.03.1998 was not challenged by the judgment debtors till the year 2000 and, in the meantime, two applications being I.A. 3 of 1999 and I.A. No. 4 of 1999 were submitted by the judgment debtors under Order XXI Rule 90, which came to be dismissed and the mortgaged property was sold in the court auction and even the sale was confirmed and the sale certificate was issued and the same was registered with the Sub-Registrar. Further, even on merits also and factually, the High Court is not correct in observing that the auction purchaser was not a bona fide purchaser. According to the judgment creditor, the partnership firm was already dissolved much before and thereafter the plaintiff inherited the assets, claims and liabilities of the firm. Even as observed by the Executing Court while passing the order in I.A. No. 4 of 1999 the judgment debtors even did not deposit the entire amount. The High Court therefore committed error in quashing and setting aside order passed in I.A. No. 4 of 1999. The impugned common judgment and order is quashed and set aside. [Paras 14, 15][1018C-E]

Pushpa Devi Bhagat v. Rajinder Singh (2006) 5 SCC

566 : [2006] 3 Suppl. SCR 370; Chinnammal v.

P. Arumugham (1990) 1 SCC 513 : [1990] 1 SCR 78 – referred to.