# H. S. GOUTHAM v. RAMA MURTHY AND ANR. ETC

- **Citation:** [2021] 4 S.C.R. 996
- **Court:** Supreme Court of India
- **Decided:** 2021-02-12
- **Case number:** Civil Appeal No. 1844 of 2010
- **Bench:** Ashok Bhushan, R. Subhash Reddy, M. R. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/h-s-goutham-v-rama-murthy-and-anr-etc-35276
- **Pages:** 23

## Headnote

Code of Civil Procedure, 1908 - Or.XXI, r.92 r/w r.94, Or.XLI,
rr.27-29 -Defendants (mortgagers) failed to repay the borrowed
amount, father of appellant-original plaintiff filed suit - Consent
decree passed - Plaintiff filed execution petition - Judgment debtorsdefendants filed objections therein that the decree was obtained by
fraud - Overruled by Executing Court vide order dtd.03.03.98 -
Mortgaged property sold in Court auction - High Court in appeals
and revision by judgment debtors called for a report from the
Principal City Civil Judge as to whether the decree was obtained
by fraud - Relying thereupon and holding that the decree was
obtained by fraud and thus setting it aside, the appeals and revision
were allowed by impugned common judgment - On appeal by
original plaintiff and auction purchaser, held: All through-out there
was delay and negligence on the part of the judgment debtors in
not initiating the appropriate proceedings at appropriate stage -
Order dtd. 03.03.98 was not challenged by the judgment debtors
till the year 2000 - By then the mortgaged property was already
sold in the execution proceedings and the sale was confirmed in
favour of the auction purchaser, even the sale certificate was issued
and 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 evidence
in support thereof - Mere allegation that there was a fraud, not
sufficient - Also, procedure u/Or.XLI, r.27-29 was not followed by
High Court while calling for the report from the Principal City Civil
Judge - High Court erred in relying upon the report and holding
that the decree was obtained by fraud - Impugned common judgment
set aside - Fraud.
[2021] 4 S.C.R. 996
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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 be
permitted to lead additional evidence.
Or.XXI, rr.89-92, 94 - Application filed to set aside court
auction/sale w.r.t the subject mortgaged property - Held: It is not
the case of the judgment debtors that there was any material
irregularity or fraud in publishing or conducting the sale - Their
objection is that the decree was obtained by fraud - Application
u/Or.XXI, r.90 was rightly dismissed by the Executing Court.
Fraud - Pleadings - Held: When fraud is alleged, the same
is required to be pleaded and established by leading evidence -
Mere allegation that there was a fraud, not sufficient.
Code of Civil Procedure, 1908 - s.96, Or.XXIII, r.3, Or.XLIII,
r.1(m), r.1A(2) - Appeal against consent decree - Maintainability
of - Held: As per s.96(3), the appeal against the decree passed
with the consent of the parties shall be barred - However, as per
Or.XXIII, r.3A no suit shall lie to set aside a decree on the ground
that the compromise on which the decree is based was not lawful -
However, when Or.XLIII, r.1(m) came to be omitted by Act 104 of
1976, simultaneously, Or.XLIII, r.1A came to be inserted by the same
Act, which provides that in an appeal against the decree passed in
a suit for recording a compromise or refusing to record a compromise,
it shall be open to the appellant to contest the decree on the ground
that the compromise should or should not have been recorded.
Allowing the appeals, the Court
HELD: 1.1 The execution of the simple mortgage deed,
execution of the promissory note and taking the amounts of loan,
have not been disputed by the judgment debtors. All throughout there was a delay and negligence on the part of the judgment
debtors in not initiating the appropriate proceedings at
appropriate stage. Order dated 03.03.1998 overruling the
objections submitted by the judgment debtors to the effect that
the judgment was obtained by fraud and mis-representation was
not challenged by the judgment debtors till the mortgaged
property was auctioned; sale of the mortgaged

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SUPREME COURT REPORTS
[2021] 4 S.C.R.
H. S. GOUTHAM
v.
RAMA MURTHY AND ANR. ETC.
(Civil Appeal No. 1844 of 2010)
FEBRUARY 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 borrowed
amount, father of appellant-original plaintiff filed suit - Consent
decree passed - Plaintiff filed execution petition - Judgment debtorsdefendants filed objections therein that the decree was obtained by
fraud - Overruled by Executing Court vide order dtd.03.03.98 -
Mortgaged property sold in Court auction - High Court in appeals
and revision by judgment debtors called for a report from the
Principal City Civil Judge as to whether the decree was obtained
by fraud - Relying thereupon and holding that the decree was
obtained by fraud and thus setting it aside, the appeals and revision
were allowed by impugned common judgment - On appeal by
original plaintiff and auction purchaser, held: All through-out there
was delay and negligence on the part of the judgment debtors in
not initiating the appropriate proceedings at appropriate stage -
Order dtd. 03.03.98 was not challenged by the judgment debtors
till the year 2000 - By then the mortgaged property was already
sold in the execution proceedings and the sale was confirmed in
favour of the auction purchaser, even the sale certificate was issued
and 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 evidence
in support thereof - Mere allegation that there was a fraud, not
sufficient - Also, procedure u/Or.XLI, r.27-29 was not followed by
High Court while calling for the report from the Principal City Civil
Judge - High Court erred in relying upon the report and holding
that the decree was obtained by fraud - Impugned common judgment
set aside - Fraud.
[2021] 4 S.C.R. 996
996
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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 be
permitted to lead additional evidence.
Or.XXI, rr.89-92, 94 - Application filed to set aside court
auction/sale w.r.t the subject mortgaged property - Held: It is not
the case of the judgment debtors that there was any material
irregularity or fraud in publishing or conducting the sale - Their
objection is that the decree was obtained by fraud - Application
u/Or.XXI, r.90 was rightly dismissed by the Executing Court.
Fraud - Pleadings - Held: When fraud is alleged, the same
is required to be pleaded and established by leading evidence -
Mere allegation that there was a fraud, not sufficient.
Code of Civil Procedure, 1908 - s.96, Or.XXIII, r.3, Or.XLIII,
r.1(m), r.1A(2) - Appeal against consent decree - Maintainability
of - Held: As per s.96(3), the appeal against the decree passed
with the consent of the parties shall be barred - However, as per
Or.XXIII, r.3A no suit shall lie to set aside a decree on the ground
that the compromise on which the decree is based was not lawful -
However, when Or.XLIII, r.1(m) came to be omitted by Act 104 of
1976, simultaneously, Or.XLIII, r.1A came to be inserted by the same
Act, which provides that in an appeal against the decree passed in
a suit for recording a compromise or refusing to record a compromise,
it shall be open to the appellant to contest the decree on the ground
that the compromise should or should not have been recorded.
Allowing the appeals, the Court
HELD: 1.1 The execution of the simple mortgage deed,
execution of the promissory note and taking the amounts of loan,
have not been disputed by the judgment debtors. All throughout there was a delay and negligence on the part of the judgment
debtors in not initiating the appropriate proceedings at
appropriate stage. Order dated 03.03.1998 overruling the
objections submitted by the judgment debtors to the effect that
the judgment was obtained by fraud and mis-representation was
not challenged by the judgment debtors till the mortgaged
property was auctioned; sale of the mortgaged property was
confirmed in favour of the auction purchaser and even the sale
H. S. GOUTHAM v. RAMA MURTHY AND ANR. ETC.
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certificate was issued in favour of the auction purchaser and sale
was registered with the Sub-Registrar and even also the dismissal
of I.A. No. 3 of 1999 and I.A. No. 4 of 1999. Not only that, till that
time even no appeal was assailed/challenged before the higher
forum. The first appeal was filed in the year 2000 and by that time
the mortgaged property was already sold in the execution
proceedings and the sale was confirmed in favour of the auction
purchaser and even the sale certificate was issued in favour of
the auction purchaser. As per the relevant provisions of the Code
of Civil Procedure, more particularly, Order XXI Rule 92 read
with Order XXI Rule 94, once the sale is confirmed and the sale
certificate has been issued in favour of the purchaser, the same
shall become final. [Paras 8.1, 9][1013-D-H]
1.2 At the time when the High Court passed an order calling
for the report from the Principal City Civil Judge on whether the
decree was obtained by fraud or not, there was already an order
passed by the Executing Court dated 03.03.1998 overruling the
objections raised by the judgment debtors that the decree was
obtained by fraud and mis-representation. The judgment debtors
except the averments that the decree was obtained by fraud, misrepresentation, neither any further submissions were made on
that nor even the judgment debtors led any evidence in support
of the same. Therefore, Executing Court was justified in
overruling the objection that the decree was obtained by fraud,
mis-representation etc. When the fraud is alleged the same is
required to be pleaded and established by leading evidence. Mere
allegation that there was a fraud is not sufficient. Therefore,
subsequent order passed by the High Court calling for the report
from the Principal City Civil Judge on the question whether the
decree was obtained by fraud or not, can be said to be giving an
opportunity to the judgment debtors to fill in the lacuna. Therefore,
the course adopted by the High Court calling for the report from
the Principal City Civil Judge cannot be approved. As per the
provisions of Order XLI, the appellate court may permit additional
evidence to be produced whether oral or documentary, if the
conditions mentioned in Order XLI Rule 27 are satisfied after
the additional evidence is permitted to be produced in exercise
of powers under Order XLI Rule 27. Thereafter, the procedure
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under Order XLI Rules 28 and 29 is required to be followed.
Therefore, unless and until the procedure under Order XLI Rules
27, 28 and 29 are followed, the parties to the appeal cannot be
permitted to lead additional evidence and/or the appellate court
is not justified to direct the court from whose decree the appeal
is preferred or any other subordinate court, to take such
evidence and to send it when taken to the Appellate Court. From
the material produced on record, it appears that the said
procedure has not been followed by the High Court while calling
for the report from the Principal City Civil Judge. At the time
when the Principal City Civil Judge permitted the parties to lead
the evidence and submitted the report/finding that the decree
was obtained by fraud, there was already an order passed by the
Executing Court-Co-ordinate Court overruling the objections
made by the judgment debtors that the decree was obtained by
fraud. Therefore, unless and until the order dated 03.03.1998
was set aside, neither the High Court was justified in calling for
the report from the Principal City Civil Judge nor even the
Principal City Civil Judge was justified in permitting the judgment
debtors to lead the evidence on the allegation that the decree
was obtained by fraud, mis-representation, when the judgment
debtors failed to lead any evidence earlier before the Executing
Court when such objections were raised. [Paras 10-10.2][1014A-H; 1015-A-C]
1.3 The High Court committed an error in relying upon the
report submitted by the Principal City Civil Judge holding that
the decree was obtained by fraud. The High Court erred in holding
that the decree was obtained by fraud. The judgment debtorsoriginal defendants have put their signatures on the written
statement or on the consent terms. The mortgaged property and
the promissory note are not in dispute. Therefore, when the suit
was filed and the judgment debtors wanted to get more time to
repay the amount and when it was agreed to pay Rs.4,50,000/-
(suit claim) in a monthly installment of Rs.5,000/- within three
years, nothing was unnatural. [Paras 11, 11.1][1015-D; F-G]
1.4 It is true that, as per Section 96(3), the appeal against
the decree passed with the consent of the parties shall be barred.
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However, it is also true that as per Order XXIII Rule 3A no suit
shall lie to set aside a decree on the ground that the compromise
on which the decree is based was not lawful. However, it is
required to be noted that when Order XLIII Rule 1(m) came to
be omitted by Act 104 of 1976, simultaneously, Rule XLIII Rule
1A came to be inserted by the very Act 104 of 1976, which
provides that in an appeal against the decree passed in a suit for
recording a compromise or refusing to record a compromise, it
shall be open to the appellant to contest the decree on the ground
that the compromise should or should not have been recorded.
Therefore, the High Court rightly came to the conclusion that
the appeal before the High Court against the judgment and decree
was maintainable. [Para 12][1016-A-C]
Banwari Lal v. Chando Devi AIR 1993 SC 1139 (para
9) : [1992] 3 Suppl. SCR 524 - affirmed.
1.5 Where any immovable property has been sold in
execution of a decree, the decree-holder, or the purchaser, or
any other person entitled to share in a rateable distribution of
assets, or whose interests are affected by the sale, may apply to
the Court to set aside the sale on the ground of a material
irregularity or fraud in publishing or conducting it. Therefore, as
per Order XXI Rule 90, an application to set aside the sale on
the ground of irregularity or fraud may be made by the decree
holder on the ground of material irregularity or fraud in publishing
or conducting it. In the present case, as such, it is not the case of
the judgment debtors that there was any material irregularity or
fraud in publishing or conducting the sale. Their objection is that
the decree was obtained by fraud. The application submitted by
the original judgment debtors under Order XXI Rule 90 i.e. I.A.
No. 4 of 1999 was rightly dismissed by the Executing Court. [Para
13][1016-E-H]
1.6 At the time when Executing Court passed the order
dated 03.03.1998 no evidence was led by the judgment debtors.
The allegation that the decree was obtained by fraud and misrepresentation was not substantiated. The High Court ought to
have appreciated that even the order dated 03.03.1998 was not
challenged by the judgment debtors till the year 2000 and, in the
meantime, two applications being I.A. 3 of 1999 and I.A. No. 4 of
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1999 were submitted by the judgment debtors under Order XXI
Rule 90, which came to be dismissed and the mortgaged property
was sold in the court auction and even the sale was confirmed
and the sale certificate was issued and the same was registered
with the Sub-Registrar. Further, even on merits also and factually,
the High Court is not correct in observing that the auction
purchaser was not a bona fide purchaser. According to the
judgment creditor, the partnership firm was already dissolved
much before and thereafter the plaintiff inherited the assets,
claims and liabilities of the firm. Even as observed by the
Executing Court while passing the order in I.A. No. 4 of 1999
the judgment debtors even did not deposit the entire amount.
The High Court therefore committed error in quashing and setting
aside order passed in I.A. No. 4 of 1999. The impugned common
judgment and order is quashed and set aside. [Paras 14, 15][1018C-E]
Pushpa Devi Bhagat v. Rajinder Singh (2006) 5 SCC
566 : [2006] 3 Suppl. SCR 370; Chinnammal v.
P. Arumugham (1990) 1 SCC 513 : [1990] 1 SCR 78 -
referred to.
Case law Reference
[2006] 3 Suppl. SCR 370
referred to
Para 4
[1990] 1 SCR 78
referred to
Para 4.1
[1992] 3 Suppl. SCR 524
affirmed
Para 12
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
1844 of 2010.
From the Judgment and Order dated 16.09.2006 of the High Court
of 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 Amit
Sthalekar, Rahul Arya, Ms. Bharti Tyagi, P. R. Ramasesh, A. Subba
Rao, Advs. for the appearing parties.
H. S. GOUTHAM v. RAMA MURTHY AND ANR. ETC.
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The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 16.09.2006 passed by the High Court of Karnataka at
Bangalore in RFA No. 274 of 2001, MFA No. 3934 of 2000 and CRP
No. 3297 of 2000, the original plaintiff and the subsequent auction
purchaser who purchased the property in question in the Court auction
in execution proceedings, have preferred the present appeals.
2. The facts leading to the present appeals in nutshell are as under:
2.1 That, as per the case of the original plaintiff, the respondents
herein - original defendants (hereinafter referred to as the 'original
defendants') borrowed a sum of Rs.1,00,000/- from the father of the
appellant herein - original plaintiff (hereinafter referred to as the 'original
plaintiff') 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
deed of simple mortgage was executed on 11.07.1990. The mortgage
deed was executed between the original defendants as Mortgager and
one partnership firm namely C.H. Shantilal & Co. as Mortgagee. The
original plaintiff is the son of Shri C.H. Shantilal who was one of the
partners of the firm which was dissolved on 17.12.1994. That, as per the
case of the original plaintiff, 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 - suit property. That the mortgager was to
repay Rs.1,00,000/- to the mortgagee within a period of 5 years from the
day the deed was entered into along with interest at the rate of 1.5% per
mensem or 18% per annum. That the interest was required to be paid by
the mortgagers to the mortgagee every month on or before the 10th of
each month. According to the original plaintiff, in the event of failure to
pay the principal or interest within the period, the mortgagee will be
entitled to enforce the said mortgage and cause the property or any
portion sold and appropriate the proceeds towards the satisfaction of the
mortgage deed. A promissory note was also executed by the original
defendants while taking a further sum of Rs.50,000/- on 13.12.1992 and
created a further charge in the mortgaged property. That, as the
defendants-mortgagers did not pay the aforesaid amount, the plaintiff
filed a suit being O.S. No. 3376 of 1995 on 30.5.1995 before the Court
of learned City Civil Judge at Bangalore for a sum of Rs.2,50,000/-
together with interest thereon. It was also further prayed that on failure
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of the defendants to pay the decretal amount, the plaintiff shall be at
liberty to sell the mortgaged property and the sale considerations so
realized to be adjusted over the decretal amount. According to the plaintiff,
the defendants filed a written statement on 31.05.1995 and admitted
borrowing of Rs.1,50,000/-. According to the plaintiff, the defendants
were represented by an Advocate. A Compromise/Settlement was
entered 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 a
monthly installment of Rs.5,000/- within three years. Learned Trial Court
accordingly decreed the suit in terms of the compromise vide judgment
and decree dated 01.06.1995. That the plaintiff filed an execution petition
being Execution Petition No. 232 of 1996 before the Court of City Civil
Judge, Bangalore on 28.02.1996. The judgment debtor-defendant entered
appearance through an advocate on 21.06.1996 in the execution petition.
That the judgment debtor-defendant filed objections in the execution
petition and contended that the decree dated 01.06.1995 was obtained
by fraud. By order dated 03.03.1998, the Executing Court overruled the
objections of the judgment debtor-defendant and specifically observed
that the objections of the judgment debtor that the decree has been
obtained by fraud, mis-representation etc., are overruled. By overruling
the objections raised by the judgment debtor, learned Executing Court
specifically observed that the judgment debtor has failed to lead any
evidence in support of his objections that the decree was obtained by
fraud or mis-representation. That, thereafter, learned Executing Court
issued sale proclamation of the mortgaged property on 21.11.1998. The
mortgaged property was put to sale by the Executing Court. The appellant
in Civil Appeal No. 1845 of 2010 was declared the highest bidder. He
deposited 25% of the bid amount on 11.02.1999 itself on the day on
which the sale was conducted. The auction purchaser offered
Rs.4,50,000/- and his bid was accepted by the Executing Court. After
the bid of the auction purchaser was accepted, the judgment debtors
filed I.A. No. 03 of 1999 on 19.02.1999 in the Execution Petition under
Section 151 C.P.C. before the learned Additional City Civil Judge
(Executing Court) to stay further proceedings with regard to sale of the
subject mortgaged property. On 22.02.1999, the judgment debtors filed
another I.A. No. 04 of 1999 in the Execution Petition under Order XXI
read with Rule 90 and Order XXI read with Rule 47 and Section 151
CPC to set aside the court auction/sale dated 11.02.1999 and 18.02.1999
with respect to the subject mortgaged property. By order dated
H. S. GOUTHAM v. RAMA MURTHY AND ANR. ETC.
[M. R. SHAH, J.]
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30.10.1999 the learned Executing Court dismissed both the aforesaid
applications. While dismissing I.A. No. 3 of 1999, the learned Executing
Court observed that the earlier order dated 03.03.1998 was a speaking
order and the objections raised by the judgment debtors were overruled
and the same had attained the finality as the same has not been assailed
by the judgment debtor before any competent Appellate Forum. Learned
Executing Court also further observed that the Executing Court cannot
go behind the decree so as to decide the question of correctness and
validity of the decree, when the decree has become final. The learned
Executing Court dismissed I.A. No. 04 of 1999 on the ground that the
judgment debtors have not deposited the decretal amount of
Rs.4,50,000/- together with interest in terms of Order XXI Rule 90 and
therefore it does not entitle them to any relief for setting aside the sale
as per the requirement of Order XXI Rule 90. That, thereafter, the sale
of the mortgaged property came to be confirmed in favour of the auction
purchaser on 17.11.1999. Sale certificate was issued by the Court in
favour of the auction purchaser and the sale was registered with the
Sub-Registrar on 23.11.1999. That the judgment debtors thereafter on
24.11.1999 filed Civil Revision Application No. 3699 of 1999 before the
High Court against the order dated 30.10.1999 passed by the learned
Executing Court in I.A. No. 4 of 1999 which was thereafter converted
into MFA No. 3934 of 2000. The judgment debtors thereafter filed another
Civil Revision Application No. 3700 of 1999 in the High Court against
the order dated 30.10.1999 passed by the learned Executing Court in
I.A. No. 3 of 1999. The High Court vide its order dated 06.01.2000
dismissed Civil Revision Application No. 3700 of 1999 by observing that
the issue regarding fraud has attained finality as the order dated
03.03.1998 passed by the learned Executing Court overruling the
objections of the judgment debtor had attainted finality and the same
remained unchallenged. Having realized that the judgment debtors were
required to challenge the order dated 03.03.1998 overruling the objections,
thereafter, after a period of two years from date of the order dated
03.03.1998, the judgment debtors filed Civil Revision Application No.
3297 of 2000 before the High Court. Thereafter and having realized that
non-challenging of the judgment and decree dated 01.06.1995 passed by
the 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 and
decree dated 01.06.1995, the judgment debtors filed an appeal being
RFA no. 274 of 2001 in the High Court. The said appeal was preferred
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in the year 2001. It is the case on behalf of the plaintiff that before the
High Court a Compromise Petition was prepared on 10.06.2004 wherein
the judgment debtors agreed to pay Rs.6,96,062/- in full and final
settlement of the decree passed by the learned Trial Court. However, at
the time of filing of the Compromise Petition, the judgment debtors
withdrew from the compromise agreed by them. Thereafter, the aforesaid
first appeal proceeded further. The High Court vide order dated
19.09.2005 called for a finding/report from the Principal City Civil Judge
and directed him to hold an enquiry as to whether the decree passed in
O.S. No. 3376 of 1995 was obtained by fraud. The propriety and legality
of the said order of calling for a report/finding from the learned Principal
City Civil Judge shall be dealt with hereinafter at an appropriate stage.
That the learned Principal City Civil Judge submitted the report dated
06.12.2005 before the High Court wherein he recorded the finding that
the decree in O.S. No. 3376 of 1995 had been obtained by fraud. Relying
upon the report submitted by the Principal City Civil Judge dated
06.12.2005 and having opined that the decree in O.S. No. 3376 of 1995
was obtained by fraud, the High Court vide its impugned judgment and
order dated 16.09.2006 has allowed the appeals being RFA No. 274 of
2001, MFA No. 3934 of 2000 and CRP No. 3297 of 2000 and the operative
part of the impugned common judgment and order passed by the High
Court is as under:
"RFA No. 274/2001 is allowed with cost. The order and decree
passed by the Court of XV Addl. City Civil Judge, Bangalore in
O.S. No. 3376/1995 dated 1.6.1995 is set aside and suit is remitted
to the Addl. City Civil Judge, Bangalore, for fresh disposal, in
accordance with law. Defendants are permitted to file written
statement within sixty days from today before the trial court.
MFA No. 3394 /2000 is allowed. Order dated 30.10.1999
is set aside. However, it is open to the auction purchaser to make
an application before the trial court for refund of the amount
deposited by him and reimbursement of the amount spent by him
for registration of the sale deed and other expenses incurred by
him and trial court shall consider the said application and dispose
of the same, in accordance with law.
CRP No.3297/2000 is allowed. Order dated 3.3.98 is set
aside."
H. S. GOUTHAM v. RAMA MURTHY AND ANR. ETC.
[M. R. SHAH, J.]
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2.2 Feeling aggrieved and dissatisfied with the impugned common
judgment and order passed by the High Court in allowing the appeals
and quashing and setting aside the judgment and decree dated 01.06.1995
passed in O.S. No. 3376 of 1995; quashing and setting aside the order
dated 30.10.1999 passed by the learned Executing Court and quashing
and setting aside the order dated 03.03.1998 passed by the learned
Executing Court in overruling the objection raised by the judgment debtors,
the original defendants as well as the successful auction purchaser have
preferred the present appeals.
3. Shri Rahul Arya, learned advocate appearing on behalf of the
original plaintiff has vehemently submitted that the High Court has
committed an error in quashing and setting aside the consent decree and
also in quashing and setting aside the orders dated 01.06.1995 and
30.10.1999. It is vehemently submitted that the High Court has materially
erred in relying upon the report submitted by the learned Principal City
Civil Judge that the decree in O.S. No. 3376 of 1995 has been obtained
by fraud. It is vehemently submitted that as such even the defendants
admitted in the proceedings before the Principal City Civil Judge that he
had mortgaged the property for Rs.1,00,000/- under the registered
mortgage deed and that he took a further sum of Rs.50,000/- from
Shantilal by executing a pro-note in his favour. It is submitted that he
also admitted that the amount was not repaid. It is submitted that in fact
and as an after-thought, the defendant came up with a case that he
repaid the money. However, even as observed by the learned Principal
City Civil Judge, he could not prove the payment. It is submitted that the
conduct on the part of the defendant that he has come up with a case
that the consent decree in O.S. No. 3376 of 1995 was obtained by fraud
is dishonest attempt to get out of the consent decree.
3.1 It is submitted that in fact the original defendant No. 1 had put
his signature on the Vakalatnama, written statement and the compromise
deed. It is submitted therefore that it is not a case of forged signature. It
is further submitted that calling the report from the Principal City Civil
Judge and directing him to hold an enquiry as to whether the decree was
obtained by fraud itself was contrary to the provisions of the CPC and
such a procedure is unknown to law. It is submitted that as such by
referring the matter to the learned Principal City Civil Judge, the High
Court gave ample opportunity to the defendants to fill in the lacuna. It is
submitted that as such the learned Executing Court by passing the order
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dated 03.03.1998 specifically observed that the judgment debtors have
failed to prove by leading cogent evidence that the decree was obtained
by fraud. It is submitted that as such after two years of the order dated
03.03.1998 overruling the objections raised by the judgment debtors, a
revision was filed belatedly and as an after-thought.
3.2 It is submitted that as such the first appeal itself before the
High Court against the consent decree was not maintainable in view of
the provisions of Section 96 read with Order XXIII of the CPC. It is
submitted that the High Court has not properly appreciated and considered
the fact that against the consent decree, the appeal shall not be
maintainable. It is submitted that the High Court has materially erred in
holding that the appeal would be maintainable.
3.3 It is further submitted that the High Court has failed to
appreciate that the judgment debtors - original defendants challenged
the consent decree dated 01.06.1995 only in the year 2001. It is submitted
that in between number of proceedings were initiated before the
Executing Court and the orders were passed by the Executing Court
dated 03.03.1998, 30.10.1999 and even the mortgaged property was
auctioned and the sale certificate was issued in favour of the auction
purchaser in the month of November 1999 itself and the judgment debtorsoriginal defendants did not challenge the consent decree on the ground
that it was obtained by fraud till 2001. It is submitted therefore that the
conduct of the respondents suffers from delay and laches.
3.4 It is further submitted that the High Court has failed to
appreciate that pursuant to the compromise decree, execution
proceedings were filed, sale notice had been issued, immovable property
was sold, sale came to be confirmed in favour of the auction purchaser
and the auction purchaser paid the sale consideration in the court and
even thereafter the sale certificate was issued and registered before the
Sub-Registrar in the year 1999 itself.
3.5 It is further submitted by the learned advocate appearing on
behalf of the original plaintiff that the judgment debtors failed to deposit
the amount of sale consideration before the Executing Court, which was
required to be deposited under Order XXI Rule 90 of the CPC. It is
submitted that therefore the High Court has materially erred in quashing
and setting aside not only the consent decree, but also the orders dated
01.06.1995 and 30.10.1999.
H. S. GOUTHAM v. RAMA MURTHY AND ANR. ETC.
[M. R. SHAH, J.]
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3.6 It is submitted that the learned Principal City Civil Judge erred
in believing the plea of the judgment debtors-original defendants that as
the compromise process and the written statement were in English and
he was knowing only the vernacular language, he did not know what
was there in the written statement and the consent compromise deed. It
is submitted that the original defendants have signed the mortgage deed
which was in English and was also signed by them on each and every
page, it cannot be construed that the defendants were familiar only with
the vernacular language.
4. Learned counsel appearing on behalf of the auction purchaserappellant in Civil Appeal No. 1845 of 2010 has further submitted that the
appeal itself before the High Court challenging the consent decree was
not maintainable at all in view of the bar contained in Order XXIII Rule
3 and Section 96(3) CPC. In support of the above submission, he has
heavily relied upon the decision of this Court in Pushpa Devi Bhagat v.
Rajinder Singh (2006) 5 SCC 566.
4.1 It is further submitted by the learned counsel appearing on
behalf of the auction purchaser that as such the auction purchaser
purchased the property in the execution proceedings after he was
declared the highest bidder. It is submitted that in the year 1999 itself the
auction purchaser deposited the entire amount of sale consideration before
the Executing Court and even a sale certificate was also issued in favour
of the auction purchaser. It is further submitted that therefore in view of
the Order XXI Rule 92 read with Rule 94 once the sale has become
absolute and as held by this Court in the case of Chinnammal v.
P. Arumugham (1990) 1 SCC 513, subsequent reversal of the decree
shall not affect the auction purchaser who is not a party to the decree. It
is submitted that as held by this Court in the aforesaid decision, the
property bona fidely purchased ignorant of litigation should be protected.
It is submitted that despite the fact that in the year 1999 the auction
purchaser deposited the entire amount, because of the subsequent initiation
of proceedings by the judgment debtors, the auction purchaser is not in a
position to enjoy the property which the auction purchaser has purchased
on payment of full sale consideration purchased in an auction in the
execution proceedings.
4.2 It is further submitted that the High Court has failed to consider
the conduct on the part of the judgment debtors-original defendants. It is
submitted that even before the High Court a compromise petition was
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prepared wherein the judgment debtors-original defendants agreed to
pay Rs.6,96,062/- in full and final settlement of the decree passed by the
learned Trial Court, however, at the time of the compromise petition, the
respondents withdrew from the compromise agreed by them. It is
submitted that before the learned Principal City Civil Judge, the judgment
debtor- original defendant admitted the said compromise petition and
admitted that he put his signature on the compromise petition voluntarily
and with free consent. It is submitted that therefore all through-out the
conduct on the part of the defendants as original debtor is dis-honest and
to delay the proceedings and deprive the auction purchaser from using
the property purchased in the year 1999.
5. Shri P.R. Ramasesh, learned advocate appearing on behalf of
the original defendants-judgment debtors has supported the impugned
judgment and order passed by the High Court.
5.1 It is vehemently submitted that the learned Principal City Civil
Judge in its report, which was called for by the High Court, has specifically
observed that the consent decree was obtained by fraud. It is submitted
that therefore relying upon the report/finding by the learned Principal
City Civil Judge and when the High Court has also come to the conclusion
that the consent decree was obtained by fraud, the High Court has rightly
set aside the consent decree and has rightly quashed and set aside the
judgment and decree dated 01.06.1995 and order dated 30.10.1999 passed
by the Executing Court and has rightly remanded the matter to the learned
trial court to decide the suit on merits.
5.2 It is submitted that the High Court has rightly held that the
first appeal against the consent decree would be maintainable.
5.3 It is submitted that the findings recorded by the learned Principal
City Civil Judge that the consent decree obtained by fraud is on reappreciation of evidence. It is submitted that the High Court rightly
directed the Trial Court to hold an enquiry whether the decree was
obtained by fraud, mis-representation. It is submitted that once it is
observed and held that the consent decree was obtained by fraud, misrepresentation right from the beginning and even prior to the filing of the
suit, such consent decree is not a decree in the eye of law and therefore
the High Court has rightly set aside the consent decree and remanded
the matter to the Trial Court to decide the suit on merits. It is submitted
that therefore all other subsequent orders passed in the executing
H. S. GOUTHAM v. RAMA MURTHY AND ANR. ETC.
[M. R. SHAH, J.]
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proceedings would be nullity and therefore the same are rightly set aside
by the High Court.
5.4 Making the above submissions, it is prayed to dismiss the
present appeals.
6. Heard learned counsel appearing on behalf of the parties at
length.
6.1 At the outset, it is required to be noted that by the impugned
common judgment and order, 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 learned 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. By the impugned judgment and order, the High Court has also
set aside the order dated 30.10.1999 passed by the learned Executing
Court in I.A. No. 4 of 1999, by which the learned Executing Court
dismissed the application preferred by the judgment debtors under Order
XXI Rule 90 read Section 47 C.P.C. praying for setting aside the Court
auction sale. By the impugned judgment and order, the High Court has
also allowed the Revision Application being CRP No. 3297 of 2000 and
has also quashed and set aside the order dated 03.03.1998 overruling
the objections raised by the judgment debtors, more particularly, overruling
the objection raised by the judgment debtors that the consent decree
was obtained by fraud. As observed hereinabove, both the judgment
creditor-original plaintiff and the auction purchaser in whose favour the
sale deed was confirmed and the sale certificate was issued in his favour
as far back as on 17.11.1999/23.11.1999, have preferred the present
appeals.
7. Therefore, the short question which is posed for consideration
of this Court in the present appeals is whether in the facts and
circumstances of the case, more particularly, when the mortgaged
property was sold in the court auction in the execution proceedings and
the sale was confirmed in favour of the auction purchaser and the sale
certificate was issued and sale was confirmed after overruling the
objections raised by the judgment debtors, more particularly, the objection
that the consent decree was obtained by fraud and that initially the consent
decree was not challenged at all and not only that, even order dated
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03.03.1998 overruling the objections raised by the judgment debtors was
also not challenged at the earliest, the High Court is justified in quashing
and setting aside the consent decree on the ground that the same was
obtained by fraud, relying upon the report submitted by the Principal
City 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 decree
was passed are required to be considered, which are referred to
hereinabove and which are again reiterated as under:
8.1 That the learned Trial Court passed the consent decree on
01.06.1995 and decreed that the defendants shall pay to the plaintiff a
sum of Rs.2,50,000/- in a monthly installment of Rs.5,000/- within three
years from that day. At the outset, it is required to be noted that 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. That, after the consent decree was passed on
01.06.1995, the judgment creditor-original plaintiff filed an execution
petition before the Additional City Civil Judge, Bangalore, being Execution
Petition No. 232 of 1996 on 28.02.1996. The judgment debtors entered
appearance through an Advocate in the execution petition on 21.06.1996.
Therefore, at least, it can be said that the judgment debtors were aware
of the consent decree at least on 21.06.1996. Instead of challenging the
said consent decree on the ground that it was obtained by fraud, the
judgment debtors filed their objections in the execution petition contending
that it was obtained by fraud. Such objections were filed on 04.10.1996.
Learned Executing Court by a reasoned order dated 03.03.1998 overruled
the objections of the judgment debtors that the decree has been obtained
by fraud, mis-representation etc., by specifically observing that after
filing of the objections, the matter was being posted for hearing, but the
judgment debtors did not either adduce any evidence in that behalf nor
have they addressed any arguments also and, therefore, in the absence
of any proof of the allegation of fraud etc. made by the judgment debtors,
the objections have to be overruled. That the judgment debtors did not
challenge the order dated 03.03.1998 before the higher forum. Thereafter,
after a period of eight months from the passing of the order dated
03.03.1998, the learned Executing Court issued the sale proclamation of
the mortgaged property on 21.11.1998. The spot sale was held on
11.02.1999. The auction purchaser-appellant in Civil Appeal No. 1845
H. S. GOUTHAM v. RAMA MURTHY AND ANR. ETC.
[M. R. SHAH, J.]
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of 2010 was declared as the highest bidder. He deposited 25% of the bid
amount. After his bid was accepted being the highest bidder, the Executing
Court confirmed the sale/bid on 18.02.1999. Thereafter, judgment debtors
filed I.A. No. 03 of 1999 before the Executing Court for stay of further
proceedings in respect of sale of the subject mortgaged property.
Judgment debtors also filed I.A. No.