H. S. GOUTHAM versus RAMA MURTHY AND ANR. ETC. on 12 February 2021

996

[2021] 4 S.C.R. 996

SUPREME COURT REPORTS

[2021] 4 S.C.R.

H. S. GOUTHAM

A

v.

RAMA MURTHY AND ANR. ETC.

(Civil Appeal No. 1844 of 2010)

BFEBRUARY 12, 2021

[ASHOK BHUSHAN, R. SUBHASH REDDY,M. R. SHAH, JJ.]

Code of Civil Procedure, 1908 – Or.XXI, r.92 r/w r.94, Or.XLI,rr.27-29 –Defendants (mortgagers) failed to repay the borrowedCamount, father of appellant-original plaintiff filed suit – Consentdecree passed – Plaintiff filed execution petition – Judgment debtors-defendants filed objections therein that the decree was obtained byfraud – Overruled by Executing Court vide order dtd.03.03.98 –Mortgaged property sold in Court auction – High Court in appealsDand revision by judgment debtors called for a report from thePrincipal City Civil Judge as to whether the decree was obtainedby fraud – Relying thereupon and holding that the decree wasobtained by fraud and thus setting it aside, the appeals and revisionwere allowed by impugned common judgment – On appeal byoriginal plaintiff and auction purchaser, held: All through-out thereEwas delay and negligence on the part of the judgment debtors innot initiating the appropriate proceedings at appropriate stage –Order dtd. 03.03.98 was not challenged by the judgment debtorstill the year 2000 – By then the mortgaged property was alreadysold in the execution proceedings and the sale was confirmed inFfavour of the auction purchaser, even the sale certificate was issuedand thus the sale became final in terms of Or.XXI, r.92 r/w r.94 –Further, except the averments that the decree was obtained by fraud,misrepresentation, the judgment debtors did not lead any evidencein support thereof – Mere allegation that there was a fraud, notsufficient – Also, procedure u/Or.XLI, r.27-29 was not followed byGHigh Court while calling for the report from the Principal City CivilJudge – High Court erred in relying upon the report and holdingthat the decree was obtained by fraud – Impugned common judgmentset aside – Fraud.

H

Code of Civil Procedure, 1908:

Or.XLI, rr.27-29 – Held: Unless and until the procedure u/Or.XLI, rr.27-29 are followed, the parties to the appeal cannot bepermitted to lead additional evidence.

Or.XXI, rr.89-92, 94 – Application filed to set aside courtauction/sale w.r.t the subject mortgaged property – Held: It is notthe case of the judgment debtors that there was any materialirregularity or fraud in publishing or conducting the sale – Theirobjection is that the decree was obtained by fraud – Applicationu/Or.XXI, r.90 was rightly dismissed by the Executing Court.

Fraud – Pleadings – Held: When fraud is alleged, the sameis 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 – Maintainabilityof – Held: As per s.96(3), the appeal against the decree passedwith the consent of the parties shall be barred – However, as perOr.XXIII, r.3A no suit shall lie to set aside a decree on the groundthat 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 of1976, simultaneously, Or.XLIII, r.1A came to be inserted by the sameAct, which provides that in an appeal against the decree passed ina suit for recording a compromise or refusing to record a compromise,it shall be open to the appellant to contest the decree on the groundthat the compromise should or should not have been recorded.

Allowing the appeals, the Court

Conclusion

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 through-out there was a delay and negligence on the part of the judgmentdebtors in not initiating the appropriate proceedings atappropriate stage. Order dated 03.03.1998 overruling theobjections submitted by the judgment debtors to the effect thatthe judgment was obtained by fraud and mis-representation wasnot challenged by the judgment debtors till the mortgagedproperty was auctioned; sale of the mortgaged property wasconfirmed in favour of the auction purchaser and even the sale A

B

C

D

E

F

G

H

Acertificate was issued in favour of the auction purchaser and salewas registered with the Sub-Registrar and even also the dismissalof I.A. No. 3 of 1999 and I.A. No. 4 of 1999. Not only that, till thattime even no appeal was assailed/challenged before the higherforum. The first appeal was filed in the year 2000 and by that timethe mortgaged property was already sold in the executionBproceedings and the sale was confirmed in favour of the auctionpurchaser and even the sale certificate was issued in favour ofthe auction purchaser. As per the relevant provisions of the Codeof Civil Procedure, more particularly, Order XXI Rule 92 readwith Order XXI Rule 94, once the sale is confirmed and the saleCcertificate has been issued in favour of the purchaser, the sameshall become final. [Paras 8.1, 9][1013-D-H]

1.2 At the time when the High Court passed an order callingfor the report from the Principal City Civil Judge on whether thedecree was obtained by fraud or not, there was already an orderDpassed by the Executing Court dated 03.03.1998 overruling theobjections raised by the judgment debtors that the decree wasobtained by fraud and mis-representation. The judgment debtorsexcept the averments that the decree was obtained by fraud, mis-representation, neither any further submissions were made onthat nor even the judgment debtors led any evidence in supportEof the same. Therefore, Executing Court was justified inoverruling the objection that the decree was obtained by fraud,mis-representation etc. When the fraud is alleged the same isrequired to be pleaded and established by leading evidence. Mereallegation that there was a fraud is not sufficient. Therefore,Fsubsequent order passed by the High Court calling for the reportfrom the Principal City Civil Judge on the question whether thedecree was obtained by fraud or not, can be said to be giving anopportunity to the judgment debtors to fill in the lacuna. Therefore,the course adopted by the High Court calling for the report fromthe Principal City Civil Judge cannot be approved. As per theGprovisions of Order XLI, the appellate court may permit additionalevidence to be produced whether oral or documentary, if theconditions mentioned in Order XLI Rule 27 are satisfied afterthe additional evidence is permitted to be produced in exerciseof powers under Order XLI Rule 27. Thereafter, the procedure H

H

under Order XLI Rules 28 and 29 is required to be followed.Therefore, unless and until the procedure under Order XLI Rules27, 28 and 29 are followed, the parties to the appeal cannot bepermitted to lead additional evidence and/or the appellate courtis not justified to direct the court from whose decree the appealis preferred or any other subordinate court, to take suchevidence and to send it when taken to the Appellate Court. Fromthe material produced on record, it appears that the saidprocedure has not been followed by the High Court while callingfor the report from the Principal City Civil Judge. At the timewhen the Principal City Civil Judge permitted the parties to leadthe evidence and submitted the report/finding that the decreewas obtained by fraud, there was already an order passed by theExecuting Court-Co-ordinate Court overruling the objectionsmade by the judgment debtors that the decree was obtained byfraud. Therefore, unless and until the order dated 03.03.1998was set aside, neither the High Court was justified in calling forthe report from the Principal City Civil Judge nor even thePrincipal City Civil Judge was justified in permitting the judgmentdebtors to lead the evidence on the allegation that the decreewas obtained by fraud, mis-representation, when the judgmentdebtors failed to lead any evidence earlier before the ExecutingCourt when such objections were raised. [Paras 10-10.2][1014-A-H; 1015-A-C]

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

1.4 It is true that, as per Section 96(3), the appeal againstthe decree passed with the consent of the parties shall be barred.

ABC

DE

F

G

H

AHowever, it is also true that as per Order XXIII Rule 3A no suitshall lie to set aside a decree on the ground that the compromiseon which the decree is based was not lawful. However, it isrequired to be noted that when Order XLIII Rule 1(m) came tobe omitted by Act 104 of 1976, simultaneously, Rule XLIII Rule1A came to be inserted by the very Act 104 of 1976, whichBprovides that in an appeal against the decree passed in a suit forrecording a compromise or refusing to record a compromise, itshall be open to the appellant to contest the decree on the groundthat the compromise should or should not have been recorded.Therefore, the High Court rightly came to the conclusion thatCthe appeal before the High Court against the judgment and decreewas maintainable. [Para 12][1016-A-C]Banwari Lal v. Chando Devi AIR 1993 SC 1139 (para

9) : [1992] 3 Suppl. SCR 524 – affirmed.

9) : [1992] 3 Suppl. SCR 524 – affirmed.

1.5 Where any immovable property has been sold inDexecution of a decree, the decree-holder, or the purchaser, orany other person entitled to share in a rateable distribution ofassets, or whose interests are affected by the sale, may apply tothe Court to set aside the sale on the ground of a materialirregularity or fraud in publishing or conducting it. Therefore, asEper Order XXI Rule 90, an application to set aside the sale onthe ground of irregularity or fraud may be made by the decreeholder on the ground of material irregularity or fraud in publishingor conducting it. In the present case, as such, it is not the case ofthe judgment debtors that there was any material irregularity orfraud in publishing or conducting the sale. Their objection is thatFthe decree was obtained by fraud. The application submitted bythe original judgment debtors under Order XXI Rule 90 i.e. I.A.No. 4 of 1999 was rightly dismissed by the Executing Court. [Para13][1016-E-H]

1.6 At the time when Executing Court passed the orderGdated 03.03.1998 no evidence was led by the judgment debtors.The allegation that the decree was obtained by fraud and mis-representation was not substantiated. The High Court ought tohave appreciated that even the order dated 03.03.1998 was notchallenged by the judgment debtors till the year 2000 and, in theHmeantime, two applications being I.A. 3 of 1999 and I.A. No. 4 of 1999 were submitted by the judgment debtors under Order XXIRule 90, which came to be dismissed and the mortgaged propertywas sold in the court auction and even the sale was confirmedand the sale certificate was issued and the same was registeredwith the Sub-Registrar. Further, even on merits also and factually,the High Court is not correct in observing that the auctionpurchaser was not a bona fide purchaser. According to thejudgment creditor, the partnership firm was already dissolvedmuch before and thereafter the plaintiff inherited the assets,claims and liabilities of the firm. Even as observed by theExecuting Court while passing the order in I.A. No. 4 of 1999the judgment debtors even did not deposit the entire amount.The High Court therefore committed error in quashing and settingaside order passed in I.A. No. 4 of 1999. The impugned commonjudgment and order is quashed and set aside. [Paras 14, 15][1018-C-E]

Pushpa Devi Bhagat v. Rajinder Singh (2006) 5 SCC566 : [2006] 3 Suppl. SCR 370; Chinnammal v.P. Arumugham (1990) 1 SCC 513 : [1990] 1 SCR 78 –referred to.

Case law Reference

[2006] 3 Suppl. SCR 370referred toPara 4[1990] 1 SCR 78referred toPara 4.1[1992] 3 Suppl. SCR 524affirmedPara 12

CIVIL APPELLATE JURISDICTION: Civil Appeal No.1844 of 2010.

From the Judgment and Order dated 16.09.2006 of the High Courtof Karnataka at Bangalore in R.F.A. No. 274 of 2001, M.F.A,. No.3934 of 2000 and C.R.P. No. 3297 of 2000.

With

Civil Appeal No. 1845 of 2010

Ashish Choudhury, Dhruv Surana, Mrs. Ravina Surana, Rohit AmitSthalekar, Rahul Arya, Ms. Bharti Tyagi, P. R. Ramasesh, A. SubbaRao, Advs. for the appearing parties.

A

B

C

D

E

F

G

H

AThe Judgment of the Court was delivered by

M. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 16.09.2006 passed by the High Court of Karnataka atBangalore in RFA No. 274 of 2001, MFA No. 3934 of 2000 and CRPBNo. 3297 of 2000, the original plaintiff and the subsequent auctionpurchaser who purchased the property in question in the Court auctionin execution proceedings, have preferred the present appeals.

2. The facts leading to the present appeals in nutshell are as under:

C2.1 That, as per the case of the original plaintiff, the respondentsherein – original defendants (hereinafter referred to as the ‘originaldefendants’) borrowed a sum of Rs.1,00,000/- from the father of theappellant herein – original plaintiff (hereinafter referred to as the ‘originalplaintiff’) in the year 1990 by way of a simple mortgage deed and thenfurther Rs.50,000/- by way of a promissory note in the year 1992. TheDdeed of simple mortgage was executed on 11.07.1990. The mortgagedeed was executed between the original defendants as Mortgager andone partnership firm namely C.H. Shantilal & Co. as Mortgagee. Theoriginal plaintiff is the son of Shri C.H. Shantilal who was one of thepartners of the firm which was dissolved on 17.12.1994. That, as per theEcase of the original plaintiff, the mortgager borrowed a loan ofRs.1,00,000/- from mortgagee in order to clear their earlier debt in lieuof mortgage of property – suit property. That the mortgager was torepay Rs.1,00,000/- to the mortgagee within a period of 5 years from theday the deed was entered into along with interest at the rate of 1.5% permensem or 18% per annum. That the interest was required to be paid byFthe mortgagers to the mortgagee every month on or before the 10[th] ofeach month. According to the original plaintiff, in the event of failure topay the principal or interest within the period, the mortgagee will beentitled to enforce the said mortgage and cause the property or anyportion sold and appropriate the proceeds towards the satisfaction of theGmortgage deed. A promissory note was also executed by the originaldefendants while taking a further sum of Rs.50,000/- on 13.12.1992 andcreated a further charge in the mortgaged property. That, as thedefendants-mortgagers did not pay the aforesaid amount, the plaintifffiled a suit being O.S. No. 3376 of 1995 on 30.5.1995 before the Courtof learned City Civil Judge at Bangalore for a sum of Rs.2,50,000/-Htogether with interest thereon. It was also further prayed that on failure

of the defendants to pay the decretal amount, the plaintiff shall be atliberty to sell the mortgaged property and the sale considerations sorealized to be adjusted over the decretal amount. According to the plaintiff,the defendants filed a written statement on 31.05.1995 and admittedborrowing of Rs.1,50,000/-. According to the plaintiff, the defendantswere represented by an Advocate. A Compromise/Settlement wasentered into between the plaintiff and the defendants on 01.06.1995.The defendants agreed to pay to the plaintiff a sum of Rs.2,50,000/- in amonthly installment of Rs.5,000/- within three years. Learned Trial Courtaccordingly decreed the suit in terms of the compromise vide judgmentand decree dated 01.06.1995. That the plaintiff filed an execution petitionbeing Execution Petition No. 232 of 1996 before the Court of City CivilJudge, Bangalore on 28.02.1996. The judgment debtor-defendant enteredappearance through an advocate on 21.06.1996 in the execution petition.That the judgment debtor-defendant filed objections in the executionpetition and contended that the decree dated 01.06.1995 was obtainedby fraud. By order dated 03.03.1998, the Executing Court overruled theobjections of the judgment debtor-defendant and specifically observedthat the objections of the judgment debtor that the decree has beenobtained by fraud, mis-representation etc., are overruled. By overrulingthe objections raised by the judgment debtor, learned Executing Courtspecifically observed that the judgment debtor has failed to lead anyevidence in support of his objections that the decree was obtained byfraud or mis-representation. That, thereafter, learned Executing Courtissued sale proclamation of the mortgaged property on 21.11.1998. Themortgaged property was put to sale by the Executing Court. The appellantin Civil Appeal No. 1845 of 2010 was declared the highest bidder. Hedeposited 25% of the bid amount on 11.02.1999 itself on the day onwhich the sale was conducted. The auction purchaser offeredRs.4,50,000/- and his bid was accepted by the Executing Court. Afterthe bid of the auction purchaser was accepted, the judgment debtorsfiled I.A. No. 03 of 1999 on 19.02.1999 in the Execution Petition underSection 151 C.P.C. before the learned Additional City Civil Judge(Executing Court) to stay further proceedings with regard to sale of thesubject mortgaged property. On 22.02.1999, the judgment debtors filedanother I.A. No. 04 of 1999 in the Execution Petition under Order XXIread with Rule 90 and Order XXI read with Rule 47 and Section 151CPC to set aside the court auction/sale dated 11.02.1999 and 18.02.1999with respect to the subject mortgaged property. By order dated A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

A30.10.1999 the learned Executing Court dismissed both the aforesaidapplications. While dismissing I.A. No. 3 of 1999, the learned ExecutingCourt observed that the earlier order dated 03.03.1998 was a speakingorder and the objections raised by the judgment debtors were overruledand the same had attained the finality as the same has not been assailedby the judgment debtor before any competent Appellate Forum. LearnedBExecuting Court also further observed that the Executing Court cannotgo behind the decree so as to decide the question of correctness andvalidity of the decree, when the decree has become final. The learnedExecuting Court dismissed I.A. No. 04 of 1999 on the ground that thejudgment debtors have not deposited the decretal amount ofCRs.4,50,000/- together with interest in terms of Order XXI Rule 90 andtherefore it does not entitle them to any relief for setting aside the saleas per the requirement of Order XXI Rule 90. That, thereafter, the saleof the mortgaged property came to be confirmed in favour of the auctionpurchaser on 17.11.1999. Sale certificate was issued by the Court infavour of the auction purchaser and the sale was registered with theDSub-Registrar on 23.11.1999. That the judgment debtors thereafter on24.11.1999 filed Civil Revision Application No. 3699 of 1999 before theHigh Court against the order dated 30.10.1999 passed by the learnedExecuting Court in I.A. No. 4 of 1999 which was thereafter convertedinto MFA No. 3934 of 2000. The judgment debtors thereafter filed anotherECivil Revision Application No. 3700 of 1999 in the High Court againstthe order dated 30.10.1999 passed by the learned Executing Court inI.A. No. 3 of 1999. The High Court vide its order dated 06.01.2000dismissed Civil Revision Application No. 3700 of 1999 by observing thatthe issue regarding fraud has attained finality as the order dated03.03.1998 passed by the learned Executing Court overruling theFobjections of the judgment debtor had attainted finality and the sameremained unchallenged. Having realized that the judgment debtors wererequired to challenge the order dated 03.03.1998 overruling the objections,thereafter, after a period of two years from date of the order dated03.03.1998, the judgment debtors filed Civil Revision Application No.G3297 of 2000 before the High Court. Thereafter and having realized thatnon-challenging of the judgment and decree dated 01.06.1995 passed bythe learned Trial Court in O.S. No. 3376 of 1995 shall come in their way,after a period of five years from the date of passing the judgment anddecree dated 01.06.1995, the judgment debtors filed an appeal beingRFA no. 274 of 2001 in the High Court. The said appeal was preferredH

in the year 2001. It is the case on behalf of the plaintiff that before theHigh Court a Compromise Petition was prepared on 10.06.2004 whereinthe judgment debtors agreed to pay Rs.6,96,062/- in full and finalsettlement of the decree passed by the learned Trial Court. However, atthe time of filing of the Compromise Petition, the judgment debtorswithdrew from the compromise agreed by them. Thereafter, the aforesaidfirst appeal proceeded further. The High Court vide order dated19.09.2005 called for a finding/report from the Principal City Civil Judgeand directed him to hold an enquiry as to whether the decree passed inO.S. No. 3376 of 1995 was obtained by fraud. The propriety and legalityof the said order of calling for a report/finding from the learned PrincipalCity Civil Judge shall be dealt with hereinafter at an appropriate stage.That the learned Principal City Civil Judge submitted the report dated06.12.2005 before the High Court wherein he recorded the finding thatthe decree in O.S. No. 3376 of 1995 had been obtained by fraud. Relyingupon the report submitted by the Principal City Civil Judge dated06.12.2005 and having opined that the decree in O.S. No. 3376 of 1995was obtained by fraud, the High Court vide its impugned judgment andorder dated 16.09.2006 has allowed the appeals being RFA No. 274 of2001, MFA No. 3934 of 2000 and CRP No. 3297 of 2000 and the operativepart of the impugned common judgment and order passed by the HighCourt is as under:

“RFA No. 274/2001 is allowed with cost. The order and decreepassed by the Court of XV Addl. City Civil Judge, Bangalore inO.S. No. 3376/1995 dated 1.6.1995 is set aside and suit is remittedto the Addl. City Civil Judge, Bangalore, for fresh disposal, inaccordance with law. Defendants are permitted to file writtenstatement within sixty days from today before the trial court.

MFA No. 3394 /2000 is allowed. Order dated 30.10.1999is set aside. However, it is open to the auction purchaser to makean application before the trial court for refund of the amountdeposited by him and reimbursement of the amount spent by himfor registration of the sale deed and other expenses incurred byhim and trial court shall consider the said application and disposeof the same, in accordance with law.

CRP No.3297/2000 is allowed. Order dated 3.3.98 is setaside.”

A

B

C

D

E

F

G

H

A2.2 Feeling aggrieved and dissatisfied with the impugned commonjudgment and order passed by the High Court in allowing the appealsand quashing and setting aside the judgment and decree dated 01.06.1995passed in O.S. No. 3376 of 1995; quashing and setting aside the orderdated 30.10.1999 passed by the learned Executing Court and quashingand setting aside the order dated 03.03.1998 passed by the learnedBExecuting Court in overruling the objection raised by the judgment debtors,the original defendants as well as the successful auction purchaser havepreferred the present appeals.

A

A

3. Shri Rahul Arya, learned advocate appearing on behalf of theoriginal plaintiff has vehemently submitted that the High Court hasCcommitted an error in quashing and setting aside the consent decree andalso in quashing and setting aside the orders dated 01.06.1995 and30.10.1999. It is vehemently submitted that the High Court has materiallyerred in relying upon the report submitted by the learned Principal CityCivil Judge that the decree in O.S. No. 3376 of 1995 has been obtainedDby fraud. It is vehemently submitted that as such even the defendantsadmitted in the proceedings before the Principal City Civil Judge that hehad mortgaged the property for Rs.1,00,000/- under the registeredmortgage deed and that he took a further sum of Rs.50,000/- fromShantilal by executing a pro-note in his favour. It is submitted that healso admitted that the amount was not repaid. It is submitted that in factEand as an after-thought, the defendant came up with a case that herepaid the money. However, even as observed by the learned PrincipalCity Civil Judge, he could not prove the payment. It is submitted that theconduct on the part of the defendant that he has come up with a casethat the consent decree in O.S. No. 3376 of 1995 was obtained by fraud Fis dishonest attempt to get out of the consent decree.

3.1 It is submitted that in fact the original defendant No. 1 had puthis signature on the Vakalatnama, written statement and the compromisedeed. It is submitted therefore that it is not a case of forged signature. Itis further submitted that calling the report from the Principal City CivilGJudge and directing him to hold an enquiry as to whether the decree wasobtained by fraud itself was contrary to the provisions of the CPC andsuch a procedure is unknown to law. It is submitted that as such byreferring the matter to the learned Principal City Civil Judge, the HighCourt gave ample opportunity to the defendants to fill in the lacuna. It issubmitted that as such the learned Executing Court by passing the orderH

dated 03.03.1998 specifically observed that the judgment debtors havefailed to prove by leading cogent evidence that the decree was obtainedby fraud. It is submitted that as such after two years of the order dated03.03.1998 overruling the objections raised by the judgment debtors, arevision was filed belatedly and as an after-thought.

3.2 It is submitted that as such the first appeal itself before theHigh Court against the consent decree was not maintainable in view ofthe provisions of Section 96 read with Order XXIII of the CPC. It issubmitted that the High Court has not properly appreciated and consideredthe fact that against the consent decree, the appeal shall not bemaintainable. It is submitted that the High Court has materially erred inholding that the appeal would be maintainable.

3.3 It is further submitted that the High Court has failed toappreciate that the judgment debtors – original defendants challengedthe consent decree dated 01.06.1995 only in the year 2001. It is submittedthat in between number of proceedings were initiated before theExecuting Court and the orders were passed by the Executing Courtdated 03.03.1998, 30.10.1999 and even the mortgaged property wasauctioned and the sale certificate was issued in favour of the auctionpurchaser in the month of November 1999 itself and the judgment debtors-original defendants did not challenge the consent decree on the groundthat it was obtained by fraud till 2001. It is submitted therefore that theconduct of the respondents suffers from delay and laches.

3.4 It is further submitted that the High Court has failed toappreciate that pursuant to the compromise decree, executionproceedings were filed, sale notice had been issued, immovable propertywas sold, sale came to be confirmed in favour of the auction purchaserand the auction purchaser paid the sale consideration in the court andeven thereafter the sale certificate was issued and registered before theSub-Registrar in the year 1999 itself.

3.5 It is further submitted by the learned advocate appearing onbehalf of the original plaintiff that the judgment debtors failed to depositthe amount of sale consideration before the Executing Court, which wasrequired to be deposited under Order XXI Rule 90 of the CPC. It issubmitted that therefore the High Court has materially erred in quashingand setting aside not only the consent decree, but also the orders dated01.06.1995 and 30.10.1999.

A

BC

D

E

F

G

H

A3.6 It is submitted that the learned Principal City Civil Judge erredin believing the plea of the judgment debtors-original defendants that asthe compromise process and the written statement were in English andhe was knowing only the vernacular language, he did not know whatwas there in the written statement and the consent compromise deed. Itis submitted that the original defendants have signed the mortgage deedBwhich was in English and was also signed by them on each and everypage, it cannot be construed that the defendants were familiar only withthe vernacular language.

A

4. Learned counsel appearing on behalf of the auction purchaser-appellant in Civil Appeal No. 1845 of 2010 has further submitted that theCappeal itself before the High Court challenging the consent decree wasnot maintainable at all in view of the bar contained in Order XXIII Rule3 and Section 96(3) CPC. In support of the above submission, he hasheavily relied upon the decision of this Court in Pushpa Devi Bhagat v.Rajinder Singh (2006) 5 SCC 566.D

4.1 It is further submitted by the learned counsel appearing onbehalf of the auction purchaser that as such the auction purchaserpurchased the property in the execution proceedings after he wasdeclared the highest bidder. It is submitted that in the year 1999 itself theauction purchaser deposited the entire amount of sale consideration beforeEthe Executing Court and even a sale certificate was also issued in favourof the auction purchaser. It is further submitted that therefore in view ofthe Order XXI Rule 92 read with Rule 94 once the sale has becomeabsolute and as held by this Court in the case of Chinnammal v.P. Arumugham (1990) 1 SCC 513, subsequent reversal of the decreeshall not affect the auction purchaser who is not a party to the decree. ItFis submitted that as held by this Court in the aforesaid decision, theproperty bona fidely purchased ignorant of litigation should be protected.It is submitted that despite the fact that in the year 1999 the auctionpurchaser deposited the entire amount, because of the subsequent initiationof proceedings by the judgment debtors, the auction purchaser is not in aGposition to enjoy the property which the auction purchaser has purchasedon payment of full sale consideration purchased in an auction in theexecution proceedings.

4.2 It is further submitted that the High Court has failed to considerthe conduct on the part of the judgment debtors-original defendants. It isHsubmitted that even before the High Court a compromise petition was

prepared wherein the judgment debtors-original defendants agreed topay Rs.6,96,062/- in full and final settlement of the decree passed by thelearned Trial Court, however, at the time of the compromise petition, therespondents withdrew from the compromise agreed by them. It issubmitted that before the learned Principal City Civil Judge, the judgmentdebtor- original defendant admitted the said compromise petition andadmitted that he put his signature on the compromise petition voluntarilyand with free consent. It is submitted that therefore all through-out theconduct on the part of the defendants as original debtor is dis-honest andto delay the proceedings and deprive the auction purchaser from usingthe property purchased in the year 1999.

5. Shri P.R. Ramasesh, learned advocate appearing on behalf ofthe original defendants-judgment debtors has supported the impugnedjudgment and order passed by the High Court.

5.1 It is vehemently submitted that the learned Principal City CivilJudge in its report, which was called for by the High Court, has specificallyobserved that the consent decree was obtained by fraud. It is submittedthat therefore relying upon the report/finding by the learned PrincipalCity Civil Judge and when the High Court has also come to the conclusionthat the consent decree was obtained by fraud, the High Court has rightlyset aside the consent decree and has rightly quashed and set aside thejudgment and decree dated 01.06.1995 and order dated 30.10.1999 passedby the Executing Court and has rightly remanded the matter to the learnedtrial court to decide the suit on merits.

5.2 It is submitted that the High Court has rightly held that thefirst appeal against the consent decree would be maintainable.

5.3 It is submitted that the findings recorded by the learned PrincipalCity Civil Judge that the consent decree obtained by fraud is on re-appreciation of evidence. It is submitted that the High Court rightlydirected the Trial Court to hold an enquiry whether the decree wasobtained by fraud, mis-representation. It is submitted that once it isobserved and held that the consent decree was obtained by fraud, mis-representation right from the beginning and even prior to the filing of thesuit, such consent decree is not a decree in the eye of law and thereforethe High Court has rightly set aside the consent decree and remandedthe matter to the Trial Court to decide the suit on merits. It is submittedthat therefore all other subsequent orders passed in the executing AB

C

D

E

F

G

H

Aproceedings would be nullity and therefore the same are rightly set asideby the High Court.

5.4 Making the above submissions, it is prayed to dismiss thepresent appeals.

6. Heard learned counsel appearing on behalf of the parties atBlength.

6.1 At the outset, it is required to be noted that by the impugnedcommon judgment and order, the High Court has allowed the first appealpreferred by the original defendants and has quashed and set aside theconsent decree passed by the learned Trial Court in O.S. No. 3376 ofC1995 dated 01.06.1995, much after the mortgaged property came to besold in the execution proceedings and much after the sale in favour ofthe auction purchaser was confirmed and the sale certificate was alsoissued. By the impugned judgment and order, the High Court has alsoset aside the order dated 30.10.1999 passed by the learned ExecutingDCourt in I.A. No. 4 of 1999, by which the learned Executing Courtdismissed the application preferred by the judgment debtors under OrderXXI Rule 90 read Section 47 C.P.C. praying for setting aside the Courtauction sale. By the impugned judgment and order, the High Court hasalso allowed the Revision Application being CRP No. 3297 of 2000 andhas also quashed and set aside the order dated 03.03.1998 overrulingEthe objections raised by the judgment debtors, more particularly, overrulingthe objection raised by the judgment debtors that the consent decreewas obtained by fraud. As observed hereinabove, both the judgmentcreditor-original plaintiff and the auction purchaser in whose favour thesale deed was confirmed and the sale certificate was issued in his favourFas far back as on 17.11.1999/23.11.1999, have preferred the presentappeals.

7. Therefore, the short question which is posed for considerationof this Court in the present appeals is whether in the facts andcircumstances of the case, more particularly, when the mortgagedGproperty was sold in the court auction in the execution proceedings andthe sale was confirmed in favour of the auction purchaser and the salecertificate was issued and sale was confirmed after overruling theobjections raised by the judgment debtors, more particularly, the objectionthat the consent decree was obtained by fraud and that initially the consentdecree was not challenged at all and not only that, even order datedH

03.03.1998 overruling the objections raised by the judgment debtors wasalso not challenged at the earliest, the High Court is justified in quashingand setting aside the consent decree on the ground that the same wasobtained by fraud, relying upon the report submitted by the PrincipalCity Civil Judge which was called for in the appeal.

8. While considering the above-said questions, as such, the conduct/inaction on the part of the judgment debtors after the consent decreewas passed are required to be considered, which are referred tohereinabove and which are again reiterated as under:

8.1 That the learned Trial Court passed the consent decree on01.06.1995 and decreed that the defendants shall pay to the plaintiff asum of Rs.2,50,000/- in a monthly installment of Rs.5,000/- within threeyears from that day. At the outset, it is required to be noted that theexecution of the simple mortgage deed, execution of the promissorynote and taking the amounts of loan, have not been disputed by thejudgment debtors. That, after the consent decree was passed on01.06.1995, the judgment creditor-original plaintiff filed an executionpetition before the Additional City Civil Judge, Bangalore, being ExecutionPetition No. 232 of 1996 on 28.02.1996. The judgment debtors enteredappearance through an Advocate in the execution petition on 21.06.1996.Therefore, at least, it can be said that the judgment debtors were awareof the consent decree at least on 21.06.1996. Instead of challenging thesaid consent decree on the ground that it was obtained by fraud, thejudgment debtors filed their objections in the execution petition contendingthat it was obtained by fraud. Such objections were filed on 04.10.1996.Learned Executing Court by a reasoned order dated 03.03.1998 overruledthe objections of the judgment debtors that the decree has been obtainedby fraud, mis-representation etc., by specifically observing that afterfiling of the objections, the matter was being posted for hearing, but thejudgment debtors did not either adduce any evidence in that behalf norhave they addressed any arguments also and, therefore, in the absenceof any proof of the allegation of fraud etc. made by the judgment debtors,the objections have to be overruled. That the judgment debtors did notchallenge the order dated 03.03.1998 before the higher forum. Thereafter,after a period of eight months from the passing of the order dated03.03.1998, the learned Executing Court issued the sale proclamation ofthe mortgaged property on 21.11.1998. The spot sale was held on11.02.1999. The auction purchaser-appellant in Civil Appeal No. 1845

A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

Aof 2010 was declared as the highest bidder. He deposited 25% of the bidamount. After his bid was accepted being the highest bidder, the ExecutingCourt confirmed the sale/bid on 18.02.1999. Thereafter, judgment debtorsfiled I.A. No. 03 of 1999 before the Executing Court for stay of furtherproceedings in respect of sale of the subject mortgaged property.Judgment debtors also filed I.A. No. 4 of 1999 under Order XXI RuleB90 read with Rule 47 CPC before the Executing Court for setting asideCourt sale in respect of the subject mortgaged property. The learnedExecuting Court dismissed both the aforesaid applications. LearnedExecuting Court dismissed I.A. No. 3 of 1999 by observing that theorder dated 03.03.1998 overruling the objections filed by the judgmentCdebtors has attained the finality as the same has not been assailed beforeany appellate forum and that the Executing Court cannot go behind thedecree so as to decide the question of correctness and validity of thedecree, when the decree had become final. The learned Executing Courtdismissed I.A. No. 4 of 1999 on the ground that the judgment debtorshave not deposited the decretal amount of Rs.4,50,000/- together withDinterest in terms of Order XXI Rule 90 and therefore the judgment debtorsare not entitled to seek for setting aside of the sale as per the requirementof Order XXI Rule 90. That, thereafter the learned Executing Courtconfirmed 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 ofEthe auction purchaser and the sale was registered with the Sub-Registrar.That, after the sale was confirmed and the sale certificate was issued infavour of the auction purchaser and after the sale was registered withthe Sub-Registrar, the judgment debtors filed Civil Revision Petition No.3699 of 1999 in the High Court of Karnataka against the order dismissingI.A. No. 4 of 1999, which was thereafter converted into MFA No. 3934Fof 2000. Thereafter the judgment debtors also filed Civil Revision PetitionNo. 3700 of 1999 in the High Court of Karnataka at Bangalore againstthe order dated 30.10.1999 passed by the Executing Court. Civil RevisionPetition No. 3700 of 1999 came to be dismissed by the High Court by anorder dated 06.01.2000 holding that the issue that the decree was obtainedGby fraud has attained finality in view of order dated 03.03.1998 rejectingthe objections of the judgment debtors remained unchallenged. That,thereafter, after the lapse of around two years, the judgment debtorschallenged the order dated 03.03.1998 by filing CRP No. 3297 of 2000.At this stage, it is required to be noted that till this time judgment debtorsdid not challenge the decree dated 01.06.1995 before the High Court.H

That, after a period of five years from the date of passing of the judgmentand decree dated 01.06.1995 the judgment debtors preferred RFA No.274 of 2001 challenging the decree dated 01.06.1995 passed by the learnedTrial Court on the ground that the same has been obtained by fraud andmis-representation. After a period of five years from the date of filing ofthe appeal, the High Court called for a finding/report from the learnedPrincipal City Civil Judge and directed him to hold an enquiry as to whetherthe decree dated 01.06.1995 was obtained by fraud. The legality andpropriety of the said order shall be dealt with hereinbelow at anappropriate stage. Before the learned Principal City Civil Judge, thejudgment debtors led the evidence in support of their claim that thejudgment and decree was obtained by fraud and mis-representation, whichevidence was not led by them before the Executing Court when theysubmitted the objections and contended that the decree was obtained byfraud. That, thereafter, the learned Principal City Civil Judge submittedthe report that the decree was obtained by fraud and on the basis of thereport submitted by learned Principal City Civil Judge mainly, the HighCourt has set aside the judgment and decree by the impugned judgmentand order. Thus, from the aforesaid it is crystal clear that all through-outthere was a delay and negligence on the part of the judgment debtors innot initiating the appropriate proceedings at appropriate stage. Orderdated 03.03.1998 overruling the objections submitted by the judgmentdebtors to the effect that the judgment was obtained by fraud and mis-representation was not challenged by the judgment debtors till themortgaged property was auctioned; sale of the mortgaged property wasconfirmed in favour of the auction purchaser and even the sale certificatewas issued in favour of the auction purchaser and sale was registeredwith the Sub-Registrar and even also the dismissal of I.A. No. 3 of 1999and I.A. No. 4 of 1999. Not only that, till that time even no appeal wasassailed/challenged before the higher forum. The first appeal was filedin the year 2000 and by that time the mortgaged property was alreadysold in the execution proceedings and the sale was confirmed in favourof the auction purchaser and even the sale certificate was issued infavour of the auction purchaser.

9. At this stage, it is required to be noted that as per the relevantprovisions of the Code of Civil Procedure, more particularly, Order XXIRule 92 read with Order XXI Rule 94, once the sale is confirmed andthe sale certificate has been issued in favour of the purchaser, the sameshall become final.

AB

C

DE

F

G

H

A10. Now, so far as the procedure adopted by the High Court callingfor the report from the learned Principal City Civil Judge on whether thedecree was obtained by fraud or not is concerned, at the outset, it isrequired to be noted that at the time when the High Court passed suchan order, there was already an order passed by the learned ExecutingCourt dated 03.03.1998 overruling the objections raised by the judgmentBdebtors that the decree was obtained by fraud and mis-representation.As observed by the learned Executing Court in the order dated03.03.1998, the judgment debtors except the averments that the decreewas obtained by fraud, mis-representation, neither any furthersubmissions were made on that nor even the judgment debtors led anyCevidence in support of the same. Therefore, as such, learned ExecutingCourt was justified in overruling the objection that the decree wasobtained by fraud, mis-representation etc. As per the settled principle oflaw, when the fraud is alleged the same is required to be pleaded andestablished by leading evidence. Mere allegation that there was a fraudis not sufficient. Therefore, subsequent order passed by the High CourtDcalling for the report from the learned Principal City Civil Judge on thequestion whether the decree was obtained by fraud or not, can be saidto be giving an opportunity to the judgment debtors to fill in the lacuna.Therefore, the course adopted by the High Court calling for the reportfrom the learned Principal City Civil Judge cannot be approved.

E

10.1 Even otherwise, it is required to be noted that as per theprovisions of Order XLI, the appellate court may permit additional evidenceto be produced whether oral or documentary, if the conditions mentionedin Order XLI Rule 27 are satisfied after the additional evidence ispermitted to be produced in exercise of powers under Order XLI RuleF27. Thereafter, the procedure under Order XLI Rules 28 and 29 is requiredto be followed. Therefore, unless and until the procedure under OrderXLI Rules 27, 28 and 29 are followed, the parties to the appeal cannotbe permitted to lead additional evidence and/or the appellate court is notjustified to direct the court from whose decree the appeal is preferred orany other subordinate court, to take such evidence and to send it whenGtaken to the Appellate Court. From the material produced on record, itappears that the said procedure has not been followed by the High Courtwhile calling for the report from the learned Principal City Civil Judge.10.2 Even otherwise, it is required to be noted that at the timewhen the learned Principal City Civil Judge permitted the parties to leadH

the evidence and submitted the report/finding that the decree was obtainedby fraud, there was already an order passed by the Executing Court-Co-ordinate Court overruling the objections made by the judgment debtorsthat the decree was obtained by fraud. Therefore, unless and until theorder dated 03.03.1998 was set aside, neither the High Court was justifiedin calling for the report from the learned Principal City Civil Judge noreven the learned Principal City Civil Judge was justified in permitting thejudgment debtors to lead the evidence on the allegation that the decreewas obtained by fraud, mis-representation, when the judgment debtorsfailed to lead any evidence earlier before the Executing Court whensuch objections were raised.

11. From the impugned judgment and order passed by the HighCourt, it appears that the High Court has heavily relied upon the reportsubmitted by the learned Principal City Civil Judge and thereafter hascome to the conclusion that the decree was obtained by fraud, mis-representation. Therefore, in the facts and circumstances of the caseand for the reasons stated above, the High Court has committed anerror in relying upon the report submitted by the learned Principal CityCivil Judge holding that the decree was obtained by fraud.

11.1 Even otherwise, on perusal of the evidence led before thelearned Principal City Civil Judge and even the findings recorded by thelearned Principal City Civil Judge and the reasoning given by the HighCourt while holding that the decree was obtained by fraud, we are of theopinion that, in the facts and circumstances of the case, and even on theevidence led, the High Court has erred in holding that the decree wasobtained by fraud. The judgment debtors-original defendants have puttheir signatures on the written statement or on the consent terms. Themortgaged property and the promissory note are not in dispute. Therefore,when the suit was filed and the judgment debtors wanted to get moretime 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.

12. Now, so far as the objection raised on behalf of the appellantherein that the appeal before the High Court against a consent decreewas not maintainable is concerned, the same has no substance. TheHigh Court has elaborately dealt with the same in detail and hasconsidered the relevant provisions of the Code of Civil Procedure, namely,Section 96, Order XXIII Rule 3, Order XLIII Rule 1 (m) and order A

B

C

D

E

F

G

H

AXLIII Rule 1A(2). It is true that, as per Section 96(3), the appeal againstthe 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 lieto set aside a decree on the ground that the compromise on which thedecree is based was not lawful. However, it is required to be noted thatwhen Order XLIII Rule 1(m) came to be omitted by Act 104 of 1976,Bsimultaneously, Rule XLIII Rule 1A came to be inserted by the very Act104 of 1976, which provides that in an appeal against the decree passedin 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 thatthe compromise should or should not have been recorded. Therefore,Cthe High Court has rightly relied upon the decision of this Court in BanwariLal v. Chando Devi AIR 1993 SC 1139 (para 9) and has rightly come tothe conclusion that the appeal before the High Court against the judgmentand decree passed in O.S. No. 3376 of 1995 was maintainable. No errorhas been committed by the High Court in holding so.

D13. Now, so far as the dismissal of I.A. No. 4 of 1999 by thelearned Executing Court in the Execution Petition No. 232 of 1996 whichwas filed by the judgment debtors to set aside the court auction/saledated 11.02.1999 and 18.02.1999 with respect to the subject mortgagedproperty is concerned, it is not in dispute that the judgment debtors assuch did not deposit the amount of Rs.4,50,000/- i.e. sale considerationEtogether with interest in terms of Order XXI Rule 90 CPC. Where anyimmovable property has been sold in execution of a decree, the decree-holder, or the purchaser, or any other person entitled to share in a rateabledistribution of assets, or whose interests are affected by the sale, mayapply to the Court to set aside the sale on the ground of a material

Firregularity or fraud in publishing or conducting it. Therefore, as perOrder XXI Rule 90, an application to set aside the sale on the ground ofirregularity or fraud may be made by the decree holder on the ground ofmaterial irregularity or fraud in publishing or conducting it. It is requiredto be noted that in the present case, as such, it is not the case of thejudgment debtors that there was any material irregularity or fraud inGpublishing or conducting the sale. No such submissions have been madebefore this Court. Their objection is that the decree was obtained byfraud. Therefore also, the application submitted by the original judgmentdebtors under Order XXI Rule 90 i.e. I.A. No. 4 of 1999 was requiredto be dismissed and was rightly dismissed by the learned Executing Court.

H

14. Now, so far as the impugned judgment and order passed bythe High Court in CRP No. 3297 of 2000 quashing and setting aside theorder passed by the Executing Court dated 03.03.1998 is concerned,from the impugned judgment and order passed by the High Court, itappears that the sale has been set aside by the High Court in view of thefinding on Point No. 1 i.e. the decree was obtained by fraud and mis-representation and considering the report filed by the learned PrincipalCity Civil Judge. However, it is required to be noted that at the timewhen learned Executing Court passed the order dated 03.03.1998 noevidence was led by the judgment debtors. The allegation that the decreewas obtained by fraud and mis-representation was not substantiated.The High Court ought to have appreciated that even the order dated03.03.1998 was not challenged by the judgment debtors till the year2000 and, in the meantime, two applications being I.A. 3 of 1999 andI.A. No. 4 of 1999 were submitted by the judgment debtors under OrderXXI Rule 90, which came to be dismissed and the mortgaged propertywas sold in the court auction and even the sale was confirmed and thesale certificate was issued and the same was registered with the Sub-Registrar. As observed hereinabove, as per Order XXI Rule 92, wherean application is made under Order XXI Rule 89, Order XXI Rule 90and Order XXI Rule 91 and the same is disallowed, the Court shallmake an order confirming the sale and thereafter the sale shall becomeabsolute. As per Order XXI Rule 94, where a sale of immovable propertyhas become absolute, the Court shall grant a certificate specifying theproperty sold and the name of the person who at the time of sale isdeclared to be the purchaser. Such certificate shall bear the date onwhich the sale became absolute. Therefore, when after the order dated03.03.1998 overruling the objections raised by the judgment debtors andthereafter the order was passed in I.A. No. 4 of 1999 and thereafterwhen the sale was confirmed and the sale certificate was issued, theHigh Court ought not to have thereafter set aside the order dated03.03.1998 overruling the objections raised by the judgment debtors, whichorder was not challenged by the judgment debtors before the High Courttill the year 2000. Under the circumstances, the impugned judgment andorder passed by the High Court in CRP No. 3297 of 2000 quashing andsetting aside the order dated 03.03.1998 cannot be sustained and thesame deserves to be quashed and set aside.

15. Now, so far as the impugned judgment and order passed bythe High Court in MFA No. 3934 of 2000 quashing and setting aside the AB

C

DE

F

G

H

Aorder dated 30.10.1999 dismissing I.A. No. 4 of 1999 which was filedby the judgment debtors under Order XXI Rule 90 is concerned, theHigh Court has set aside the same observing that the auction purchasercannot be said to be the bona fide purchaser as he was related to thejudgment creditor and that he was a partner of the firm in whose favourthe mortgage was executed. However, it is required to be noted thatBI.A. No. 4 of 1999 was not filed to set aside the sale on the aforesaidgrounds. The said application was submitted on the ground that no properpublication was made to get the adequate market value. Therefore, theHigh Court has gone beyond the case of the judgment debtors in I.A.No. 4 of 1999. Even on merits also and factually, the High Court is notCcorrect in observing that the auction purchaser was not a bona fidepurchaser. According to the judgment creditor, the partnership firm wasalready dissolved much before and thereafter the plaintiff inherited theassets, claims and liabilities of the firm. Even as observed by the learnedExecuting Court while passing the order in I.A. No. 4 of 1999 the judgmentdebtors even did not deposit the entire amount. Under the circumstances,Dthe High Court therefore committed an error in quashing and settingaside order dated 30.10.1999 passed in I.A. No. 4 of 1999.

16. In view of the above and for the reasons stated above, boththese appeals succeed. The impugned common judgment and orderpassed by the High Court in RFA No. 274 of 2001, MFA No. 3934 ofE2000 and CRP No. 3297 of 2000 is hereby quashed and set aside.However, there shall be no order as to costs.

F

Divya Pandey

Appeal allowed.

G

H