1990 (1) TMI 296 - SC - Indian Laws

Whether the auction purchaser s interest should be protected as against the judgment debtor who has since succeeded in getting rid off the decree against him? Held that - Appeal allowed. The judgment debtor who has been examined in the case has stated that the auction purchaser is a sambandhi of the decree holder. the decree holder s daughter has been given in marriage to the son of auction purchaser. That evidence remains unchallenged. The evidence further indicates that after the purchase both of them have entered into an agreement with a third party for sale of the second item of properties for Rs.96,000 and a case seems to be pending on the basis of that agreement. The evidence also discloses that the auction purchaser had no money of his own to purchase the property. These circumstances are sufficient to hold that the auction purchaser was not a bona fide purchaser. The auction sale in his favour must, therefore, fall for restitution. The Court cannot lend assistance for him to retain the property of the judgment-debtor who has since succeeded in getting rid of the unjust decree.

Issues Involved:

1. Jurisdiction of the Court to set aside a confirmed sale upon subsequent reversal or modification of the decree.
2. Protection of the auction purchaser's interest against the judgment debtor.
3. Bona fide purchaser status and knowledge of pending litigation.
4. Collusion between the decree holder and the auction purchaser.
5. Restitution principles under Section 144 of the Code of Civil Procedure.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Court to Set Aside a Confirmed Sale Upon Subsequent Reversal or Modification of the Decree:
The central issue was whether the court had the jurisdiction to set aside a confirmed sale after the decree was reversed. The court held that once a sale is confirmed, the purchaser's title relates back to the date of sale, and the sale cannot be set aside merely because the decree was subsequently reversed. This principle is based on the absence of any provision in the Code of Civil Procedure (CPC) that allows for setting aside a sale on such grounds.

2. Protection of the Auction Purchaser's Interest Against the Judgment Debtor:
The court discussed the protection afforded to auction purchasers, particularly strangers to the litigation. It cited the precedent set in Janak Raj v. Gurdial Singh, where it was held that a stranger auction purchaser should be protected to ensure that judicial sales attract customers. This protection is crucial for maintaining the sanctity and efficacy of judicial sales.

3. Bona Fide Purchaser Status and Knowledge of Pending Litigation:
The court distinguished between bona fide purchasers and those aware of pending litigation. It held that a purchaser aware of the pending appeal against the decree could not be considered bona fide. Such purchasers take a calculated risk, and their knowledge of the litigation negates their protection against restitution. The court emphasized that protecting such purchasers would be unjustified.

4. Collusion Between the Decree Holder and the Auction Purchaser:
The court found evidence of collusion between the decree holder and the auction purchaser, who were close relatives. The auction purchaser was a "sambandhi" (relative by marriage) of the decree holder, and there was evidence of a subsequent agreement to sell the property for a significantly higher amount. This collusion invalidated the auction purchaser's claim to bona fide status.

5. Restitution Principles Under Section 144 of the Code of Civil Procedure:
The court underscored the principle that no act of the court should cause injury to any party. It quoted Lord Cairns in Rodger v. The Comptoir D' Escompte De Paris, emphasizing that the courts must ensure that their actions do not harm suitors. The court held that restitution should be granted to the judgment debtor, as the auction purchaser was not bona fide and had knowledge of the pending appeal.

Conclusion:
The appeal was allowed, reversing the Division Bench's judgment and restoring the learned single Judge's decision. The court ordered restitution of the property to the judgment debtor and awarded costs of Rs. 5,000 to the auction purchaser. The judgment reinforced the principles of protecting bona fide purchasers while ensuring that collusion and knowledge of litigation do not unjustly benefit auction purchasers.

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