Sale confirmed; objections of judgment debtor overruled. Can consent decree be set aside in such case? Supreme Court answers

Supreme Court: The 3-Judge Bench comprising of R. Subhash Reddy, M. R. Shah* and Ashok Bhushan, JJ., set aside the order of High Court of judicature at Karnataka holding that the Court had exceeded its jurisdiction while quashing the order. The Bench expressed,

“When the mortgaged property was sold in the auction in the execution proceedings, sale was confirmed in favour of the auction purchaser after overruling the objections raised by the judgment debtors and the sale certificate was issued, the High Court was not justified in quashing and setting aside the consent decree.”

The instant appeal was filed by the mortgagee and the auction purchaser who purchased the mortgaged property. The defendant had borrowed a sum of Rs.1,00,000 from the father of the appellant in the year 1990 by way of a simple mortgage deed and then further Rs.50,000 by way of a promissory note in the year 1992. The mortgage deed was executed between the original defendants as Mortgager and one partnership firm namely C.H. Shantilal & Co. as Mortgagee. Subsequently, 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 which made the total amount Rs. 2,5,000. When the defendant defaulted in making payment, the appellant initiated a suit for recovery of the said amount, wherein a compromise had been made and the defendant agreed to pay the sum of Rs.2,50,000 in monthly instalments of Rs.5,000 within three years. The said compromise was affirmed by the Court.

Proceedings at the Courts Below

Pursuant to the aforementioned compromise the appellant filed an execution petition before the Court of City Civil Judge, on 28-02-1996. The respondent contended that the compromise was obtained by fraud. By order dated 03-03-1998, the Executing Court overruled the objections of the judgment debtor-respondent and issued sale proclamation of the mortgaged property on 21-11-1998. The appellant, was declared the highest bidder at Rs. 4,50,000. He deposited 25% of the bid amount on the day on which the sale was conducted.

On 19-02-1999 in the Execution Petition, the judgment debtor filed an application to stay further proceedings with regard to sale of the subject mortgaged property and set aside the auction/sale dated 30-10-1999. The Court dismissed the application and Sale certificate was issued in favour of the auction purchaser and the sale was registered.

The High Court vide its order dated 06-01-2000 dismissed Revision Application filed on behalf of the judgment debtor. Consequently, another compromise was arrived at between the parties wherein the judgment debtor agreed to pay Rs.6,96,062 in full and final settlement of the decree passed by the Trial Court. The judgment debtors again withdrew from the compromise agreed by them and filed an appeal in the High Court. The High Court had quashed and set aside the consent decree passed by the Trial Court while relying upon the report submitted by the Principal City Civil Judge and having opined that the decree in O.S. No. 3376 of 1995 was obtained by fraud.

Observations and Decision

The Bench observed that the High Court has allowed the first appeal preferred by the original defendants and has quashed and set aside the consent decree passed by the Trial Court in O.S. No. 3376 of 1995 dated 01-06-1995, much after the mortgaged property came to be sold in the execution proceedings and much after the sale in favour of the auction purchaser was confirmed and the sale certificate was also issued, which said the Bench, could not be approved. By the impugned judgment and order, the High Court had also set aside the order dated 30-10-1999 passed by the Executing Court by which the Executing Court had dismissed the application preferred by the judgment debtors praying for setting aside the auction sale. Similarly, the High Court had also allowed the Revision Application had also quashed and set aside the order dated 03-03-1998 wherein the Court had overruled the objections raised by the judgment debtor that the consent decree was obtained by fraud.

Noticing that the judgment debtor was aware of the consent decree yet instead of challenging it on the ground that it was obtained by fraud, the judgment debtors filed their objections in the execution petition. Overruling of the objections filed by the judgment debtors had attained the finality as the same had not been assailed before any appellate forum. Hence, the Bench stated that,

“Order XXI Rule 92 of CPC read with Order XXI Rule 94, once the sale was confirmed and the sale certificate had been issued in favour of the purchaser, the same should become final.”

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, specially when the judgment debtors had failed to lead any evidence earlier before the Executing Court when such objections were raised.

“It is crystal clear that all through-out there was a delay and negligence on the part of the judgment debtors in not initiating the appropriate proceedings at appropriate stage.”

In the light of above mention considerations, the impugned order was quashed and set aside.

[H.S. Goutham v.  Rama Murthy, 2021 SCC OnLine SC 87, decided on 12-02-2021]

Kamini Sharma, Editorial Assistant has put this report together

*Judgment by: Justice M. R. Shah

Appearance before the Court by:

Counsel for the appellant: Advocate Rahul Arya,

Counsel for the respondent: Advocate P.R. Ramasesh