# Bhikchand S/o Dhondiram Mutha (Deceased) Through Lrs v. Shamabai Dhanraj Gugale (Deceased) Through Lrs

- **Citation:** 2024 INSC 411
- **Court:** Supreme Court of India
- **Decided:** 2024-05-14
- **Case number:** Civil Appeal No. 5026 of 2023
- **Bench:** Hrishikesh Roy, Prashant Kumar Mishra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bhikchand-s-o-dhondiram-mutha-deceased-through-lrs-v-shamabai-dhanraj-gugale-37766
- **Pages:** 29

## Headnote

Whether the present is a fit and suitable case for exercising
power under Section 144, Code of Civil Procedure, 1908 directing
restitution in favour of the appellant-judgment debtor by placing
the parties in the position which they would have occupied before
the execution.
Headnotes†
Code of Civil Procedure, 1908 - s.144 - Application for
restitution - Decree passed by the Trial Court was varied by
the appeal court by reducing the decretal amount of Rs.27694/-
to Rs.17120/- -However, in the meantime, the plaintiff-decree
holder executed the decree and the properties of the defendantjudgment debtor (appellant) were put to auction and were
purchased by the decree holders - Confirmed by Executing
Court - After variation of decree, the appellant-judgment
debtor filed application under Section 144 CPC for restitution -
Rejected - First property in auction was sold by the plaintiff in
favour of respondent no.3 herein vide registered sale deed -
Appellant-judgment debtor, if entitled to restitution:
Held: Section 144 CPC statutorily recognises a pre-existing rule
of justice, equity and fair play - That is why it is often held that
even away from Section 144, the court has inherent jurisdiction to
order restitution so as to do complete justice between the parties -
Further, where the decree holder is himself the auction purchaser,
the sale cannot stand, if the decree is subsequently set aside -
Respondent no.3 purchased the property from decree holder with
full knowledge of pending restitution proceedings as the same
was contained in the recital in para 4 of the sale deed - Thus, the
purchaser or the assignee from the decree holder is not entitled to
object restitution on the ground that he is a bona fide purchaser-
[2024] 6 S.C.R.
625
Bhikchand S/o Dhondiram Mutha (Deceased) Through Lrs. v.
Shamabai Dhanraj Gugale (Deceased) Through Lrs.
In the present case, the decree was subsequently modified/
varied and the decretal amount was reduced from Rs.27,694/- to
Rs.17,120/-, the sale of all the three attached properties was not
at all required and further in the facts and circumstances of the
case variation of the decree read together with the sale of the
properties at a low price caused huge loss to the judgment debtor
where restitution by setting aside the execution sale is the only
remedy available - Present is a fit and suitable case for exercising
power under Section 144 CPC directing restitution in favour of the
judgment debtor by placing the parties in the position which they
would have occupied before such execution and for this purpose
the Court may make any order, as provided under Section 144
CPC - Order passed by the High Court set aside, appellants'
application under Section 144 CPC is allowed and the sale of
the attached properties belonging to the judgment debtor is set
aside - Parties restored back to the position where the execution
was positioned before the attachment of the immovable properties
of the judgment debtor. [Paras 12, 14, 18, 26-28]
Code of Civil Procedure, 1908 - Execution of the decree by
attachment of whole property when part of the property could
have satisfied the decree - Impermissibility:
Held: A decree for realisation of a sum in favour of the plaintiff
should not amount to exploitation of the judgment debtor by selling
his entire property - The execution of a decree by sale of the entire
immovable property of the judgment debtor is not to penalise him
but the same is provided to grant relief to the decree holder and to
confer him the fruits of litigation - However, the right of a decree
holder should never be construed to have bestowed upon him a
bonanza only because he had obtained a decree for realisation of
a certain amount - Court's power to auction any property or part
thereof is not just a discretion but an obligation imposed on the
Court and the sale held without examining this aspect and not in
conformity with this mandatory requirement would be illegal and
without jurisdiction - In the case

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* Author
[2024] 6 S.C.R. 624 : 2024 INSC 411
Bhikchand S/o Dhondiram Mutha (Deceased)
Through Lrs.
v.
Shamabai Dhanraj Gugale (Deceased) Through Lrs.
(Civil Appeal No. 5026 of 2023)
14 May 2024
[Hrishikesh Roy and Prashant Kumar Mishra,* JJ.]
Issue for Consideration
Whether the present is a fit and suitable case for exercising
power under Section 144, Code of Civil Procedure, 1908 directing
restitution in favour of the appellant-judgment debtor by placing
the parties in the position which they would have occupied before
the execution.
Headnotes†
Code of Civil Procedure, 1908 - s.144 - Application for
restitution - Decree passed by the Trial Court was varied by
the appeal court by reducing the decretal amount of Rs.27694/-
to Rs.17120/- -However, in the meantime, the plaintiff-decree
holder executed the decree and the properties of the defendantjudgment debtor (appellant) were put to auction and were
purchased by the decree holders - Confirmed by Executing
Court - After variation of decree, the appellant-judgment
debtor filed application under Section 144 CPC for restitution -
Rejected - First property in auction was sold by the plaintiff in
favour of respondent no.3 herein vide registered sale deed -
Appellant-judgment debtor, if entitled to restitution:
Held: Section 144 CPC statutorily recognises a pre-existing rule
of justice, equity and fair play - That is why it is often held that
even away from Section 144, the court has inherent jurisdiction to
order restitution so as to do complete justice between the parties -
Further, where the decree holder is himself the auction purchaser,
the sale cannot stand, if the decree is subsequently set aside -
Respondent no.3 purchased the property from decree holder with
full knowledge of pending restitution proceedings as the same
was contained in the recital in para 4 of the sale deed - Thus, the
purchaser or the assignee from the decree holder is not entitled to
object restitution on the ground that he is a bona fide purchaser-
[2024] 6 S.C.R.
625
Bhikchand S/o Dhondiram Mutha (Deceased) Through Lrs. v.
Shamabai Dhanraj Gugale (Deceased) Through Lrs.
In the present case, the decree was subsequently modified/
varied and the decretal amount was reduced from Rs.27,694/- to
Rs.17,120/-, the sale of all the three attached properties was not
at all required and further in the facts and circumstances of the
case variation of the decree read together with the sale of the
properties at a low price caused huge loss to the judgment debtor
where restitution by setting aside the execution sale is the only
remedy available - Present is a fit and suitable case for exercising
power under Section 144 CPC directing restitution in favour of the
judgment debtor by placing the parties in the position which they
would have occupied before such execution and for this purpose
the Court may make any order, as provided under Section 144
CPC - Order passed by the High Court set aside, appellants'
application under Section 144 CPC is allowed and the sale of
the attached properties belonging to the judgment debtor is set
aside - Parties restored back to the position where the execution
was positioned before the attachment of the immovable properties
of the judgment debtor. [Paras 12, 14, 18, 26-28]
Code of Civil Procedure, 1908 - Execution of the decree by
attachment of whole property when part of the property could
have satisfied the decree - Impermissibility:
Held: A decree for realisation of a sum in favour of the plaintiff
should not amount to exploitation of the judgment debtor by selling
his entire property - The execution of a decree by sale of the entire
immovable property of the judgment debtor is not to penalise him
but the same is provided to grant relief to the decree holder and to
confer him the fruits of litigation - However, the right of a decree
holder should never be construed to have bestowed upon him a
bonanza only because he had obtained a decree for realisation of
a certain amount - Court's power to auction any property or part
thereof is not just a discretion but an obligation imposed on the
Court and the sale held without examining this aspect and not in
conformity with this mandatory requirement would be illegal and
without jurisdiction - In the case at hand, the Executing Court did
not discharge its duty to ascertain whether the sale of a part of
the attached property would be sufficient to satisfy the decree -
When the valuation of three attached properties was mentioned
in the attachment Panchanama, it was the duty of the Court to
have satisfied itself on this aspect and having failed to do so the
Court caused great injustice to the judgment debtor by auctioning
his entire attached properties causing huge loss to him and undue
626
[2024] 6 S.C.R.
Digital Supreme Court Reports
benefit to the auction purchaser - The fact that the properties were
sold for Rs. 34,000/- would further demonstrate that the decree
holder who himself was the auction purchaser calculatedly offered
a bid at Rs. 34,000/- despite being aware that the value of the
attached properties was Rs. 1,05,700/-. [Paras 25, 27]
Code of Civil Procedure, 1908 - Order XXI, Rule 54(1) r/w
Order XXI CPC, Rule 66 - Plea of the respondent nos.1 and
2 that the valuation of the attached properties as shown in
the attachment panchanama cannot be the basis to hold that
the property of the judgment debtor valued much more than
the decretal sum has been sold in execution as, Rule 54 of
Order XXI CPC does not contemplate valuation at the time
of attachment:
Held: Sub-rule (2) of Rule 66 of Order XXI CPC mandates that
the sale proclamation should mention the estimated value of the
property and such estimated value can also be given under Rule
54 Order XXI CPC - The fact that the Court is also entitled to
enter in the proclamation of sale its own estimate of the value of
the property demonstrates that whenever the attached immovable
property is to be sold in public auction the value thereof is required
to be estimated - In between Rule 54 to Rule 66 of Order XXI
CPC, there is no other provision requiring assessment of value
of the property to be sold in auction - The provisions contained
in Rule 54(1) Order XXI read with Rule 66 of Order XXI CPC
are to be borne in mind wherein it is provided that either whole
of the attached property or such portion thereof as may seem
necessary to satisfy the decree shall be sold in auction - If there
is no valuation of the property in the attachment Panchanama and
there being no separate provision for valuation of the property put
to auction, it is to be understood that the valuation of the property
mentioned in attachment Panchanama prepared under Rule 54
can always provide the estimated value of the property otherwise
the provisions enabling the court to auction only a part of the
property which would be sufficient to satisfy the decree would
be unworkable or redundant - In the present case, the assessed
value of all the attached properties was Rs.1,05,700/- whereas
the original decretal sum was Rs.27,694/- which is about 26.2%
of the total value of the property - Therefore, when only one of
the attached properties was sufficient to satisfy the decree there
was no requirement for effecting the sale of the entire attached
properties. [Paras 21, 22]
[2024] 6 S.C.R.
627
Bhikchand S/o Dhondiram Mutha (Deceased) Through Lrs. v.
Shamabai Dhanraj Gugale (Deceased) Through Lrs.
Case Law Cited
Binayak Swain v. Ramesh Chandra Panigrahi & Anr.
[1966] 3 SCR 24 : AIR 1966 SC 948; South Eastern
Coalfields Ltd. v. State of M.P. & Ors. [2003] Supp. 4
SCR 651 : (2003) 8 SCC 648; Chinnamal & Ors. v.
Arumugham & Anr. [1990] 1 SCR 78 : AIR 1990 SC
1828; Padanathil Rugmini Ama v. P.K. Abdulla [1996]
1 SCR 651 : (1996) 7 SCC 668; Lal Bhagwant Singh
v. Sri Kishen Das [1953] 1 SCR 559; Balakrishnan v.
Malaiyandi Konar [2006] 2 SCR 363 : (2006) 3 SCC
49; Ambati Narasayya v. M. Subba Rao [1989] Supp.
1 SCR 451 : 1989 supp (2) SCC 693 - relied on.
Gurjoginder Singh v. Jaswant Kaur & Anr. [1994] 1 SCR
794 : (1994) 2 SCC 368; Kuppa Sankara Sastri & Ors.
v. Kakumanu Varaprasad & Anr., AIR 1948 MAD.12 -
referred to.
Jai Berham v. Kedar Nath Marwari, AIR 1922 PC 269;
Zain-UlAbdin Khan v. Muhammad Asghar Ali Khan
(1888) ILR 10 ALL 166 (PC) - referred to.
List of Acts
Code of Civil Procedure, 1908.
List of Keywords
Section 144 of Code of Civil Procedure, 1908; Restitution; Judgment
debtor; Properties of judgment debtor; Decree holders; Decree
varied/Variation of decree; Auction; Public auction; Auction sale;
Decree holder is auction purchaser, Decree subsequently set aside;
Decree holder purchased property in execution of his own decree;
Person not party to the decree; Third-party auction purchaser;
Knowledge of pending proceeding; Executing Court; Registered
sale deed; Decree subsequently modified/varied; Attachment of
immovable properties of the judgment debtor; Purchaser or the
assignee from the decree holder; Bona fide purchaser; Sale of all
the attached properties; Restitution in favour of judgment debtor;
Execution sale; Restitution by setting aside execution sale; Execution
of a decree by sale of entire immovable property; Sale of a part
of the attached property sufficient to satisfy the decree; Valuation
of the property put to auction; Valuation at the time of attachment;
Valuation of the attached properties; Attachment Panchanama.
628
[2024] 6 S.C.R.
Digital Supreme Court Reports
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5026 of 2023
From the Judgment and Order dated 05.06.2017 of the High Court
of Bombay in SA No. 338 of 1994
Appearances for Parties
D.N. Goburdhan, Sr. Adv., Ms. Kamakshi S. Mehlwal, Sanveer
Mehlwal, Ms. Deepa Joseph, Ms. Gauri Goburdhan, Advs. for the
Appellants.
K. Parameshwar, Yuvraj Vijayrao Kakade, Kailas B. Autade, Sachin
Patil, Shashibhushan P. Adgaonkar, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
Prashant Kumar Mishra, J.
1.
The legal issue in this appeal, concerns restitution of a judgment
debtor on a decree being varied, reversed, set aside or modified
as it is statutorily recognised in Section 144 of the Code of Civil
Procedure, 1908.1 The decree passed by the Trial Court in the present
case was varied by the appeal court. However, in the meantime, the
decree was executed by sale of the judgment debtor's property on
23.09.1985 in favour of the decree holders, including respondent
Nos. 1 and 2.
2.
After the decree was varied by the Appellate Court, the appellant/
judgment debtor applied for restitution by invoking Section 144 CPC.
The Trial Court, Appellate Court and the second Appellate Court as
well, under impugned judgment have rejected the appellant/Judgment
debtor's application for restitution inter alia on the ground that the
original decree was modified to the extent of interest payable and
the judgment debtor not having deposited any amount in the court
after the original decree and the property was put in auction, is not
entitled to restitution.
3.
Before proceeding to deal with the legal issue, few relevant facts
need to be referred which are stated intra:
1
'CPC'
[2024] 6 S.C.R.
629
Bhikchand S/o Dhondiram Mutha (Deceased) Through Lrs. v.
Shamabai Dhanraj Gugale (Deceased) Through Lrs.
3.1 Dhanraj, the husband of the original plaintiff - Shamabai Dhanraj
Gugale advanced loan of Rs. 8,000/- to the original defendant
- appellant/judgment debtor in the year 1969. Upon his failure
to repay the debt, the original plaintiff instituted a Special Civil
Suit No. 255 of 1972 for recovery of Rs. 10,880/- (Rs.8,000/-
as principal amount + Rs. 2880/- as accrued interest) along
with interest @ 12% per annum pendente lite and post decree
and for other ancillary reliefs and costs. On 15.02.1982, the
4th Joint Civil Judge, Senior Division, Pune partly decreed the
suit by awarding the principal amount; pre-suit accrued interest;
pendente lite and further interest at the rate of 12% per annum
till realization of the principal amount and costs. The original
plaintiff-decree holder preferred appeal against rejection of part
of the claim. In this appeal (C.A. No. 1293 of 1986), the judgment
debtor preferred cross objections. During the pendency of the
above first appeal, the plaintiff-decree holder also preferred
execution application which came to be transferred to the
court of Civil Judge, Senior Division, Ahmednagar because the
property belonging to the judgment debtor against which the
decretal amount was to be recovered fell within the jurisdiction
of Ahmednagar court. A special Darkhast No. 100 of 1982 came
to be filed in the Ahmednagar court on 20.09.1982. In these
execution proceedings, the decree holder sought attachment
and sale of the following properties of the judgment debtor for
satisfaction of the decree:
(1) The land situate at Mauje Davtakli, Taluka
Shevgaon, District Ahmednagar at Gut No. 72,
admeasuring approximately 9 Hectares 55 Are.
(approximately 24 acres);
(2) land situate at Mauje Davtakli, Taluka Shevgaon,
District-Ahmednagar at Gut No. 280, admeasuring
approximately 0 Hectare 48 Are.
(3) Three House Property bearing nos. 13, 23 and
8 situate at Mauje Devtakli, Taluka Shevgaon,
District Ahmednagar.
3.2 The civil appeal preferred by the original plaintiff came to be
dismissed by the district court on 02.08.1988 and at the same
time the defendant's cross objections were allowed to the extent
630
[2024] 6 S.C.R.
Digital Supreme Court Reports
of interest and cost. The appellate court reduced the interest
from 12% per annum to 6% per annum for both pre-suit and
pendente lite/ future interest and further directed the parties to
bear their own costs. As a result, the appellate decree, while
retaining the principal decretal amount of Rs. 8,000/-, reduced
the pre-suit interest from Rs. 2880/- to Rs. 1440/- and the
pendente lite interest from Rs. 15360/- to Rs. 7680/- and denied
costs of Rs. 1454/- altogether. The total decretal amount of
Rs.27694/- thus stood reduced to Rs. 17120/-.
3.3 Before the decision rendered by the appellate court reducing the
decretal amount, as above, the plaintiff/decree holder executed
the decree and the properties of the defendant/judgment debtor
as mentioned (supra) were put to auction and were purchased
by the original plaintiffs/decree holders themselves for a sum
of Rs. 34000/- in the auction dated 09.08.1985 which was
confirmed by the Executing Court i.e. 2nd Joint Civil Judge, Senior
Division, Ahmednagar in Special Darkhast No. 100 of 1982 on
23.09.1985. The first property in auction admeasuring 24 acres
was subsequently sold by the plaintiff in favour of respondent
no. 3 herein vide registered sale deed dated 17.07.2009 for a
sum of Rs.3.9 Lakhs.
3.4 On 29.01.1990, the present appellant/ judgment debtor moved an
application for restitution under Section 144 CPC on the ground
that the original decree having been varied, substantially, the
execution sale deserves to be set aside and reversed by way
of restitution. The appellant/judgment debtor also deposited
the entire decretal amount (as finally decreed by the appeal
court) in the Trial Court. As noted above, the courts below have
concurrently rejected the appellant/judgment debtor's application
for restitution basing the reasoning that he had not deposited
any amount in court, when the suit was originally decreed and
the decree was put in execution, and not even a part of the
amount which was finally decreed by the appeal court was
deposited, hence, the principle of restitution is not invokable.
4.
Mr. D.N. Goburdhan, learned senior counsel appearing for the
appellant/judgment debtor has strenuously urged that the auction
purchaser, being the decree holder, in the present case, is not
entitled to any equity, which a bona fide auction purchaser with no
[2024] 6 S.C.R.
631
Bhikchand S/o Dhondiram Mutha (Deceased) Through Lrs. v.
Shamabai Dhanraj Gugale (Deceased) Through Lrs.
knowledge of the litigation, or the pending appeal would have in
such matter. Reliance is placed on Binayak Swain vs. Ramesh
Chandra Panigrahi & Anr2. & Chinnamal & Ors. Vs. Arumugham
& Anr3. It is further argued that even an assignee of a decree holder/
auction purchaser (respondent no. 3 herein) cannot be equated with
a bona fide purchaser for value without notice. Reference is made
to the decision of this Court in Padanathil Rugmini Ama Vs. P.K.
Abdulla4. It is then argued that where a decree holder himself is
an auction purchaser, the sale cannot stand not only in the case of
reversal of a decree but also on any variation or modification of it. It
is submitted that the judgment debtor's right under Section 144 CPC
is ignited immediately after reversal or modification of the decree.
Referring to South Eastern Coalfields Ltd. Vs. State of M.P. &
Ors.5, it is argued that the principles enshrined in Section 144 CPC
have to be given the widest possible meaning, therefore, even in
case of variation or modification of decree, restitution must follow.
Reference is also made to Chinnamal (supra).
5.
Learned senior counsel for the appellant would highlight that the
decree holder in the present case enjoyed harvesting 24 acres of
land for over 25 years and then sold the said land for a sum of Rs.
39 lakhs on 17.07.2009 to respondent no. 3 who was gambling on
the litigation. He had full knowledge of the litigation which is reflected
from the recital in the sale deed (in para 4 of the sale deed) wherein
he agreed that if the decree holder loses the litigation, Rs. 39 lakhs
would be paid back to him (to the purchaser) without interest. This
crucial point was not noticed by the courts below as probably, the said
information was not made available to the court. Such subsequent
purchaser can never be treated as bona fide purchaser as held in
the matter of Chinnamal (supra), Gurjoginder Singh vs. Jaswant
Kaur & Anr.6 & Padanathil (supra).
6.
Per contra, Mr. Vinay Navare learned senior counsel appearing for
respondent nos. 1 and 2 would submit that even assuming that the
modified decree was for Rs. 17120/-, auction sale by the Executing
2
[1966] 3 SCR 24 : AIR 1966 SC 948
3
[1990] 1 SCR 78 : AIR 1990 SC 1828
4
[1996] 1 SCR 651 : (1996) 7 SCC 668
5
[2003] Supp. 4 SCR 651 : (2003) 8 SCC 648
6
[1994] 1 SCR 794 : (1994) 2 SCC 368
632
[2024] 6 S.C.R.
Digital Supreme Court Reports
Court was inevitable and the appellant cannot claim for setting aside
the sale and his only right is to recover the amount of difference i.e.
Rs. 10574/- under Section 144 CPC. It is argued that the appellant/
defendant remained absent during the proceedings, and he entered
into two agreements to defraud the respondent/plaintiff which has
been noted by the Executing Court while rejecting his objections
to the attachment and sale of the said property. Insofar as the
valuation of the property mentioned in the attachment Panchanama
under Rule 54 of Order XXI it is argued that the rule itself does not
contemplate valuation at the time of attachment. It is then argued
that the contention regarding hurried auction cannot be raised in
the proceedings under Section 144 CPC for which there are various
provisions in Order XXI CPC which can be invoked in the course of
the execution proceedings. The appellant having not invoked any such
provisions, the same cannot be raised in proceeding under Section
144 CPC. It is also submitted that Order XXI is a self-contained
code and Principal of Estoppel would apply because the appellant,
having accepted the conclusion of auction proceedings and choosing
not to challenge the same, is now estopped from questioning the
validity of the auction.
7.
Learned counsel would further submit that the judgments referred by
the appellant in the matter of South Eastern Coal Field (supra) has
no application in the facts of the present case. It is further put forth that
difference in the value of the property in the year 1985 and 2009 also
cannot be allowed to be raised, as it is alien to jurisprudence under
Section 144 CPC. According to the learned counsel, the provisions
contained in Section 144 CPC need to be read in correct perspective
and restitution can be ordered in appropriate case, when decree is
set aside, but restitution is not the only way of compensating the party
under Section 144 CPC. Laying emphasis on the words "restitution
or otherwise" in Section 144 CPC, it is vehemently argued that
the wordings clearly show such legislative intention that restitution
is not the only way of compensating the party and the judgment
debtor can be granted relief by way of compensation or interest, in
appropriate case.
8.
Mr. K. Parameshwar learned counsel appearing for respondent no.
3 would submit that the said respondent had purchased the subject
property vide sale deed dated 17.07.2009 as a bona fide purchaser
for value. He would refer to the conduct of the appellant throughout
[2024] 6 S.C.R.
633
Bhikchand S/o Dhondiram Mutha (Deceased) Through Lrs. v.
Shamabai Dhanraj Gugale (Deceased) Through Lrs.
the litigation including the execution proceedings wherein he did not
prefer any appeal against the trial court's decree nor against the
confirmation of sale by the Executing Court. It is argued that the
cases relied upon by the appellant/judgment debtor are in respect
of reversal of decree whereas the present is one of variation of the
decree and not of reversal.
9.
Mr. Parameshwar would submit that the appellant/judgment debtor is
not entitled for restitution, and he had no means to pay the reduced
decretal amount, therefore, the sale was inevitable. Reference is
made to Kuppa Sankara Sastri & Ors. Vs. Kakumanu Varaprasad
& Anr.7 so also Lal Bhagwant Singh vs. Sri Kishen Das8 & South
Eastern Coalfields Ltd. (supra).
10. It is next argued by Mr. Parameshwar that the appellant/judgment
debtor is not entitled to restitution against respondent no. 3 who
purchased the property from the decree holder. Reference is made
to Chinnamal (supra) & Padanathil (supra). Alternatively, it is argued
by Mr. Parameshwar that extent of variation in the decree/order is
an important factor to be considered by the Court in view of the
language employed in Section 144 CPC providing restitution will be
made "so far as may be" in the context of "insofar as a decree is
varied or reversed". It is argued that the restitution to the judgment
debtor shall be in proportion to the variation/modification made in
the decree so that equitable justice is done to subsequent purchaser
as well. The conduct of the party and lapse of time from the date of
variation of decree and when the restitution is going to be ordered
as well as the third-party interest are other factors which need to be
considered while ordering restitution.
ANALYSIS
11. The statutory mandate for restitution is contained in Section 144
CPC which is reproduced hereunder:
"144. Application for restitution.-(1) Where and in so far
as a decree [or an order] is [varied or reversed in any
appeal, revision or other proceeding or is set aside or
modified in any suit instituted for the purpose, the Court
7
AIR 1948 MAD.12
8
[1953] SCR 559
634
[2024] 6 S.C.R.
Digital Supreme Court Reports
which passed the decree or order] shall, on the application
of any party entitled in any benefit by way of restitution
or otherwise, cause such restitution to be made as will,
so far as may be, place the parties in the position which
they would have occupied but for such decree [or order]
or [such part thereof as has been varied, reversed, set
aside or modified]; and, for this purpose, the Court may
make any orders, including orders for the refund of costs
and for the payment of interest, damages, compensation
and mesne profits, which are properly [consequential on
such variation, reversal, setting aside or modification of
the decree or order].
[Explanation.-For the purposes of sub-section (1) the
expression "Court which passed the decree or order" shall
be deemed to include,- (a) where the decree or order
has been varied or reversed in exercise of appellate or
revisional jurisdiction, the Court of first instance; (b) where
the decree or order has been set aside by a separate suit,
the court of first instance which passed such decree or
order; (c) where the Court of first instance has ceased to
exist or has ceased to have jurisdiction to execute it, the
Court which, if the suit wherein the decree or order was
passed were instituted at the time of making the application
for restitution under this section, would have jurisdiction
to try such suit.]
(2) No suit shall be instituted for the purpose of obtaining
any restitution or other relief which could be obtained by
application under sub-section (1)."
The principle behind the order of restitution made after the original
decree is reversed or varied or modified has been explained by this
Court in the matter of South Eastern Coal Fields (supra) in the
following words in paras 26, 27 & 28:
"26. In our opinion, the principle of restitution takes care of
this submission. The word "restitution" in its etymological
sense means restoring to a party on the modification,
variation or reversal of a decree or order, what has been
lost to him in execution of decree or order of the court
or in direct consequence of a decree or order (see Zafar
[2024] 6 S.C.R.
635
Bhikchand S/o Dhondiram Mutha (Deceased) Through Lrs. v.
Shamabai Dhanraj Gugale (Deceased) Through Lrs.
Khan v. Board of Revenue, U.P. [1984 Supp SCC 505 :
AIR 1985 SC 39] ) In law, the term "restitution" is used
in three senses: (i) return or restoration of some specific
thing to its rightful owner or status; (ii) compensation for
benefits derived from a wrong done to another; and (iii)
compensation or reparation for the loss caused to another.
(See Black's Law Dictionary, 7th Edn., p. 1315). The Law
of Contracts by John D. Calamari & Joseph M. Perillo
has been quoted by Black to say that "restitution" is an
ambiguous term, sometimes referring to the disgorging of
something which has been taken and at times referring to
compensation for injury done:
"Often, the result under either meaning of the term
would be the same. ... Unjust impoverishment
as well as unjust enrichment is a ground for
restitution. If the defendant is guilty of a nontortious misrepresentation, the measure of
recovery is not rigid but, as in other cases
of restitution, such factors as relative fault,
the agreed-upon risks, and the fairness of
alternative risk allocations not agreed upon and
not attributable to the fault of either party need
to be weighed."
The principle of restitution has been statutorily recognized
in Section 144 of the Code of Civil Procedure, 1908.
Section 144 CPC speaks not only of a decree being varied,
reversed, set aside or modified but also includes an order
on a par with a decree. The scope of the provision is
wide enough so as to include therein almost all the kinds
of variation, reversal, setting aside or modification of a
decree or order. The interim order passed by the court
merges into a final decision. The validity of an interim order,
passed in favour of a party, stands reversed in the event
of a final decision going against the party successful at
the interim stage. Unless otherwise ordered by the court,
the successful party at the end would be justified with all
expediency in demanding compensation and being placed
in the same situation in which it would have been if the
interim order would not have been passed against it. The
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successful party can demand (a) the delivery of benefit
earned by the opposite party under the interim order of
the court, or (b) to make restitution for what it has lost;
and it is the duty of the court to do so unless it feels that
in the facts and on the circumstances of the case, the
restitution far from meeting the ends of justice, would rather
defeat the same. Undoing the effect of an interim order by
resorting to principles of restitution is an obligation of the
party, who has gained by the interim order of the court,
so as to wipe out the effect of the interim order passed
which, in view of the reasoning adopted by the court at
the stage of final decision, the court earlier would not or
ought not to have passed. There is nothing wrong in an
effort being made to restore the parties to the same position
in which they would have been if the interim order would
not have existed.
27. Section 144 CPC is not the fountain source of restitution,
it is rather a statutory recognition of a pre-existing rule of
justice, equity and fair play. That is why it is often held
that even away from Section 144 the court has inherent
jurisdiction to order restitution so as to do complete justice
between the parties. In Jai Berham v. Kedar Nath Marwari
[(1922) 49 IA 351: AIR 1922 PC 269] Their Lordships of
the Privy Council said: (AIR p. 271)
"It is the duty of the court under Section 144 of
the Civil Procedure Code to 'place the parties
in the position which they would have occupied,
but for such decree or such part thereof as has
been varied or reversed'. Nor indeed does this
duty or jurisdiction arise merely under the said
section. It is inherent in the general jurisdiction
of the court to act rightly and fairly according to
the circumstances towards all parties involved."
Cairns, L.C. said in Rodger v. Comptoir D'Escompte de
Paris [(1871) 3 PC 465: 7 Moo PCC NS 314: 17 ER 120]:
(ER p. 125)
"[O]ne of the first and highest duties of all
courts is to take care that the act of the court
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does no injury to any of the suitors, and when
the expression, 'the act of the court' is used, it
does not mean merely the act of the primary
court, or of any intermediate court of appeal,
but the act of the court as a whole, from the
lowest court which entertains jurisdiction over
the matter up to the highest court which finally
disposes of the case."
This is also on the principle that a wrong order should not
be perpetuated by keeping it alive and respecting it (A.
Arunagiri Nadar v. S.P. Rathinasami [(1971) 1 MLJ 220]).
In the exercise of such inherent power the courts have
applied the principles of restitution to myriad situations not
strictly falling within the terms of Section 144.
28. That no one shall suffer by an act of the court is not
a rule confined to an erroneous act of the court; the "act
of the court" embraces within its sweep all such acts
as to which the court may form an opinion in any legal
proceedings that the court would not have so acted had
it been correctly apprised of the facts and the law. The
factor attracting applicability of restitution is not the act of
the court being wrongful or a mistake or error committed
by the court; the test is whether on account of an act of
the party persuading the court to pass an order held at the
end as not sustainable, has resulted in one party gaining
an advantage which it would not have otherwise earned,
or the other party has suffered an impoverishment which
it would not have suffered but for the order of the court
and the act of such party. The quantum of restitution,
depending on the facts and circumstances of a given
case, may take into consideration not only what the party
excluded would have made but also what the party under
obligation has or might reasonably have made. There is
nothing wrong in the parties demanding being placed in
the same position in which they would have been had
the court not intervened by its interim order when at the
end of the proceedings the court pronounces its judicial
verdict which does not match with and countenance its
own interim verdict. Whenever called upon to adjudicate,
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the court would act in conjunction with what is real and
substantial justice. The injury, if any, caused by the act
of the court shall be undone and the gain which the party
would have earned unless it was interdicted by the order
of the court would be restored to or conferred on the party
by suitably commanding the party liable to do so. Any
opinion to the contrary would lead to unjust if not disastrous
consequences. Litigation may turn into a fruitful industry.
Though litigation is not gambling yet there is an element of
chance in every litigation. Unscrupulous litigants may feel
encouraged to approach the courts, persuading the court
to pass interlocutory orders favourable to them by making
out a prima facie case when the issues are yet to be heard
and determined on merits and if the concept of restitution
is excluded from application to interim orders, then the
litigant would stand to gain by swallowing the benefits
yielding out of the interim order even though the battle
has been lost at the end. This cannot be countenanced.
We are, therefore, of the opinion that the successful party
finally held entitled to a relief assessable in terms of money
at the end of the litigation, is entitled to be compensated
by award of interest at a suitable reasonable rate for the
period for which the interim order of the court withholding
the release of money had remained in operation."
12. The principle explained by this Court in South Eastern Coal Fields
(supra) as extracted above is to the effect that Section 144 CPC
statutorily recognises a pre-existing rule of justice, equity and fair
play. That is why it is often held that even away from Section 144
the court has inherent jurisdiction to order restitution so as to do
complete justice between the parties as held by Privy Council in
Jai Berham vs. Kedar Nath Marwari9. It is also explained that the
factor attracting applicability of restitution is not the act of the court
being wrongful or a mistake or error committed by the court; the test
is whether on account of an act of the party persuading the court
to pass an order held at the end as not sustainable, has resulted in
one party gaining an advantage which it would not have otherwise
earned.
9
AIR 1922 PC 269
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13. In the matter of Binayak Swain (supra), this Court held that the
obligation for restitution arises automatically on the reversal or
modification of the decree and necessarily carries with it the right to
restitution of all that has been done under the erroneous decree; and
the Court in making restitution is bound to restore the parties, so far
as they can be restored to the same position they were in at the time
when the Court by its erroneous action had displaced them from.
14. Drawing the distinction between a decree holder who himself is the
auction purchaser and a third-party auction purchaser, this Court in
Binayak Swain (supra) approved an earlier judgment of Privy Council
in the matter of Zain-Ul-Abdin Khan vs. Muhammad Asghar Ali
Khan10 to reiterate that "great distinction between the decree-holders
who came in and purchased under their own decree, which was
afterwards reversed on appeal, and the bona fide purchasers who
came in and bought at the sale in execution of the decree to which they
were no parties, and at a time when that decree was a valid decree,
and when the order for the sale was a valid order". It is categorically
held that where the decree holder is himself the auction purchaser,
the sale cannot stand, if the decree is subsequently set aside.
15. In the matter of Chinnamal (supra), this Court again dealt with the
distinction between the decree holder who purchased the property in
execution of his own decree, which is afterwards modified or reversed,
and a person who is not a party to the decree. This Court held thus
in paras 10 and 11:
"10. There is thus a distinction maintained between the
decree holder who purchases the property in execution of
his own decree, which is afterwards modified or reversed,
and an auction purchaser who is not party to the decree.
Where the purchaser is the decree holder, he is bound
to restore the property to the judgment debtor by way of
restitution but not a stranger auction purchaser. The latter
remains unaffected and does not lose title to the property
by subsequent reversal or modification of the decree. The
courts have held that he could retain the property since he
is a bona fide purchaser. This principle is also based on the
premise that he is not bound to enquire into correctness
10
(1888) ILR 10 ALL 166 (PC)
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of the judgment or decree sought to be executed. He is
thus distinguished from an eo nomine party to the litigation.
11. There cannot be any dispute on this proposition, and
it is indeed based on a fair and proper classification. The
innocent purchaser whether in voluntary transfer or judicial
sale by or in execution of a decree or order would not be
penalised. The property bona fide purchased ignorant of
the litigation should be protected. The judicial sales in
particular would not be robbed of all their sanctity. It is a
sound rule based on legal and equitable considerations.
But it is difficult to appreciate why such protection should
be extended to a purchaser who knows about the pending
litigation relating to the decree. If a person ventures to
purchase the property being fully aware of the controversy
between the decree holder and judgment debtor, it is difficult
to regard him as a bona fide purchaser. The true question
in each case, therefore, is whether the stranger auction
purchaser had knowledge of the pending litigation about
the decree under execution. If the evidence indicates that
he had no such knowledge he would be entitled to retain
the property purchased being a bona fide purchaser and
his title to the property remains unaffected by subsequent
reversal of the decree. The court by all means should
protect his purchase. But if it is shown by evidence that
he was aware of the pending appeal against the decree
when he purchased the property, it would be inappropriate
to term him as a bona fide purchaser. In such a case
the court also cannot assume that he was a bona fide
or innocent purchaser for giving him protection against
restitution. No assumption could be made contrary to
the facts and circumstances of the case and any such
assumption would be wrong and uncalled for."
16. Whether a third-party auction purchaser who had the knowledge of
the pending proceedings can resist restitution has been answered
against such auction purchaser in paras 14, 16 & 17 of Chinnamal
(supra)
"14. This proposition, we are, however, unable to accept.
In our opinion, the person who purchases the property in
court auction with the knowledge of the pending appeal
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against the decree cannot resist restitution. His knowledge
about the pending litigation would make all the difference
in the case. He may be a stranger to the suit, but he must
be held to have taken calculated risk in purchasing the
property. Indeed, he is evidently a speculative purchaser,
and, in that respect, he is in no better position than the
decree holder purchaser. The need to protect him against
restitution, therefore, seems to be unjustified. Similarly,
the auction purchaser who was a name lender to the
decree holder or who has colluded with the decree holder
to purchase the property could not also be protected to
retain the property if the decree is subsequently reversed.
16. This is also the principle underlying Section 144 of
the Code of Civil Procedure. It is the duty of all the courts
as observed by the Privy Council "as aggregate of those
tribunals" to take care that no act of the court in the
course of the whole of the proceedings does an injury to
the suitors in the court. The above passage was quoted
in the majority judgment of this Court in A.R. Antulay v.
R.S.