Supreme Court Restores Property After Decree Modification: Bhikchand vs. Shamabai (2024)

Date of the Judgment: 14 May 2024

Citation: 2024 INSC 411

Judges: Hrishikesh Roy, J., Prashant Kumar Mishra, J.

Can a person get their property back if a court changes its earlier order about that property? The Supreme Court of India recently addressed this important question in a case where a property was sold because of a court order, which was later modified. The core issue was whether the original owner of the property was entitled to get it back after the court changed its order. This judgment clarifies the rights of individuals when court orders are modified after property has been sold. The bench consisted of Justice Hrishikesh Roy and Justice Prashant Kumar Mishra, with the majority opinion authored by Justice Prashant Kumar Mishra.

Case Background

In 1969, Dhanraj, the husband of Shamabai Dhanraj Gugale, lent Rs. 8,000 to Bhikchand Dhondiram Mutha. When Bhikchand failed to repay the loan, Shamabai filed a civil suit in 1972 to recover Rs. 10,880 (principal plus interest) along with further interest. The trial court partly decreed the suit on 15 February 1982, ordering Bhikchand to pay the principal amount, pre-suit interest, and further interest at 12% per annum. Shamabai appealed against the rejection of part of her claim, and Bhikchand filed cross-objections. While the appeal was pending, Shamabai initiated execution proceedings in the court of Civil Judge, Senior Division, Ahmednagar, as Bhikchand’s properties were located there. These properties included land and houses, which were attached for sale to recover the debt.

The appellate court modified the trial court’s decree on 2 August 1988, reducing the interest rate from 12% to 6% per annum and denying costs. This reduced the total decretal amount from Rs. 27,694 to Rs. 17,120. However, before the appellate court’s decision, the properties of Bhikchand were auctioned on 9 August 1985 and purchased by Shamabai and her co-decree holders for Rs. 34,000. The sale was confirmed on 23 September 1985. Subsequently, one of the properties, a 24-acre land, was sold by Shamabai to a third party for Rs. 3.9 lakhs on 17 July 2009.

Bhikchand applied for restitution under Section 144 of the Code of Civil Procedure, 1908 (CPC) on 29 January 1990, arguing that the modified decree required the execution sale to be reversed. He also deposited the finally decreed amount in the trial court. However, the lower courts rejected his application, stating that he had not deposited any amount when the original decree was passed and the property was auctioned.

Timeline:

Course of Proceedings

The Trial Court initially decreed the suit partly in favor of the plaintiff, Shamabai. The Appellate Court modified the decree, reducing the interest rate and denying costs. Despite this modification, the lower courts rejected Bhikchand’s plea for restitution, primarily because he had not deposited any amount during the initial decree or execution. This led to Bhikchand appealing to the Supreme Court.

Legal Framework

The core legal provision in this case is Section 144 of the Code of Civil Procedure, 1908, which deals with restitution. This section states:

“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 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].”

This provision ensures that when a decree is varied or reversed, the parties are restored to their original positions as if the initial decree had not been passed. The court has the power to order restitution, including the return of property and compensation for losses.

Additionally, the judgment refers to Order XXI Rule 66 and Order XXI Rule 54 of the CPC, which govern the procedure for the sale of attached property in execution of a decree. These provisions mandate that the sale proclamation should mention the estimated value of the property and that only such portion of the property should be sold as is necessary to satisfy the decree.

Arguments

Appellant (Bhikchand)’s Arguments:

• The auction purchaser, being the decree holder, is not entitled to any equity.
• Even an assignee of a decree holder/auction purchaser cannot be equated with a bona fide purchaser.
• The right to restitution under Section 144 of CPC arises immediately after the modification of the decree.
• The principles of Section 144 CPC should be given the widest possible meaning, and restitution must follow even in case of variation of decree.
• The decree holder enjoyed the land for over 25 years and then sold it to a third party who was aware of the litigation.
• The subsequent purchaser cannot be treated as a bona fide purchaser.

Respondents (Shamabai and Others)’ Arguments:

• The appellant’s only right is to recover the difference between the original and modified decree amounts.
• The appellant remained absent during the proceedings and entered into agreements to defraud the respondent.
• The valuation of the property at the time of attachment is not relevant.
• The appellant cannot raise the issue of hurried auction in proceedings under Section 144 CPC.
• The principle of estoppel applies as the appellant accepted the auction proceedings.
• Restitution is not the only way of compensating a party under Section 144 CPC; compensation or interest can also be granted.
• The extent of variation in the decree is an important factor to be considered.
• The conduct of the party and lapse of time should be considered while ordering restitution.

Respondent No. 3’s (Third-party Purchaser) Arguments:

• He purchased the property as a bona fide purchaser for value.
• The appellant did not appeal against the trial court’s decree or the confirmation of sale.
• The present case is one of variation of decree and not of reversal.
• The appellant is not entitled to restitution.
• The restitution to the judgment debtor shall be in proportion to the variation/modification made in the decree.

Submissions Table

Issues Framed by the Supreme Court

The core issue before the Supreme Court was:

1. Whether the judgment debtor is entitled to restitution of property sold in execution of a decree, when that decree is subsequently varied by an appellate court.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Cases:

• Binayak Swain vs. Ramesh Chandra Panigrahi & Anr [AIR 1966 SC 948]: This case established that the obligation for restitution arises automatically on the modification of a decree and that the court must restore the parties to their original positions. The court distinguished between decree-holders who are auction purchasers and bona fide third-party purchasers.
  Ratio: The court is bound to restore the parties to the same position they were in at the time when the Court by its erroneous action had displaced them from.
• Chinnamal & Ors. Vs. Arumugham & Anr [AIR 1990 SC 1828]: This case reiterated the distinction between a decree holder who purchases property and a stranger to the decree. It held that a purchaser aware of the pending litigation cannot resist restitution.
  Ratio: A person who purchases the property in court auction with the knowledge of the pending appeal against the decree cannot resist restitution.
• Padanathil Rugmini Ama Vs. P.K. Abdulla [(1996) 7 SCC 668]: This case clarified that a decree-holder auction-purchaser is bound to return the property if the decree is set aside and that purchasers from such decree holders do not get the same protection as strangers to the decree.
  Ratio: The title of a purchaser from one who has bought at the sale in execution of his own decree is liable to be defeated when the decree is subsequently set aside.
• South Eastern Coalfields Ltd. Vs. State of M.P. & Ors [(2003) 8 SCC 648]: This case emphasized that the principles of Section 144 CPC should be given the widest possible meaning, and restitution must follow even in case of variation of decree.
  Ratio: 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.
• Gurjoginder Singh vs. Jaswant Kaur & Anr [(1994) 2 SCC 368]: This case was cited in support of the argument that a subsequent purchaser cannot be treated as a bona fide purchaser if they are aware of the ongoing litigation.
• Jai Berham vs. Kedar Nath Marwari [AIR 1922 PC 269]: The Privy Council held that the duty to place parties in their original position is inherent in the court’s jurisdiction.
  Ratio: It is inherent in the general jurisdiction of the court to act rightly and fairly according to the circumstances towards all parties involved.
• Zain-Ul-Abdin Khan vs. Muhammad Asghar Ali Khan [(1888) ILR 10 ALL 166 (PC)]: This Privy Council case highlighted the distinction between decree-holders and bona fide purchasers.
• Kuppa Sankara Sastri & Ors. Vs. Kakumanu Varaprasad & Anr [AIR 1948 MAD.12]: This case was cited by the respondent to argue against restitution, but the Supreme Court distinguished it.
• Lal Bhagwant Singh vs. Sri Kishen Das [(1953) SCR 559]: This case was also cited by the respondent but was distinguished by the Supreme Court.
• Rodger v. Comptoir D’Escompte de Paris [(1871) 3 PC 465]: The Privy Council held that it is the duty of all courts to ensure that the act of the court does no injury to any of the suitors.
  Ratio: One of the first and highest duties of all courts is to take care that the act of the court does no injury to any of the suitors.
• A. Arunagiri Nadar vs. S.P. Rathinasami [(1971) 1 MLJ 220]: This case was cited to support the principle that a wrong order should not be perpetuated.
• Balakrishnan vs. Malaiyandi Konar [(2006) 3 SCC 49]: This case emphasized that no sale can be allowed beyond the decretal amount and that only such portion of the property should be sold as is necessary to satisfy the decree.
  Ratio: The court has to first decide whether it is necessary to bring the entire property to sale or such portion thereof as may seem necessary to satisfy the decree.
• Takkaseela Pedda Subba Reddi vs. Pujari Padmavathamma [(1977) 3 SCC 337]: This case held that the executing court has jurisdiction to sell properties only to the point where the decree is fully satisfied.
• Ambati Narasayya vs. M. Subba Rao [1989 Supp (2) SCC 693]: This case held that it is obligatory for the court to sell only such portion of the property as would satisfy the decree.
  Ratio: If the property is large and the decree to be satisfied is small, the court must bring only such portion of the property, the proceeds of which would be sufficient to satisfy the claim of the decree holder.
• S. Mariyappa vs. Siddappa [(2005) 10 SCC 235]: This case also supported the view that only the necessary portion of property should be sold.
• S.S. Dayananda vs. K.S. Nagesh Rao [(1997) 4 SCC 451]: This case held that procedural compliance with Order 21 Rule 64 of the Code is a mandatory requirement.
• Desh Bandhu Gupta vs. N.L. Anand [(1994) 1 SCC 131]: This case also supported the view that procedural compliance with Order 21 Rule 64 of the Code is a mandatory requirement.
• A.R. Antulay v. R.S. Nayak [(1988) 2 SCC 602]: This case was cited to support the principle that no man should suffer because of the mistake of the court.
• Satis Chandra Ghose v. Rameswari Dasi [AIR 1915 Cal 363]: The Calcutta High Court held that decree-holders and those who claim under decree-holders will form one class as against strangers to the decree.
• Abdul Rahman v. Sarat Ali [AIR 1916 Cal 710]: The Calcutta High Court held that the assignee of a decree-holder auction-purchaser stands in no better position than his assignor.
• Gopi Lal v. Jamuna Prasad [AIR 1954 Pat 36]: The Patna High Court took a different view which the Supreme Court did not agree with.
• S. Chokalingam Asari v. N.S. Krishna Iyer [AIR 1964 Mad 404]: The Madras High Court took a different view which the Supreme Court did not agree with.
• Parameswaran Pillai Kumara Pillai v. Chinna Lakshmi [1970 Ker LJ 450]: The Kerala High Court took a different view which the Supreme Court did not agree with.

Legal Provisions:

• Section 144 of the Code of Civil Procedure, 1908: This section deals with the principle of restitution.
• Order XXI Rule 66 of the Code of Civil Procedure, 1908: This rule provides for the proclamation of sale by public auction and mandates the inclusion of the estimated value of the property.
• Order XXI Rule 54 of the Code of Civil Procedure, 1908: This rule deals with the attachment of immovable property.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Binayak Swain vs. Ramesh Chandra Panigrahi & Anr [AIR 1966 SC 948]*: Followed. The Court relied on this case to emphasize that the obligation for restitution arises automatically on the modification of a decree.
• Chinnamal & Ors. Vs. Arumugham & Anr [AIR 1990 SC 1828]*: Followed. The Court relied on this case to reiterate the distinction between a decree holder who purchases property and a stranger to the decree.
• Padanathil Rugmini Ama Vs. P.K. Abdulla [(1996) 7 SCC 668]*: Followed. The Court relied on this case to clarify that a decree-holder auction-purchaser is bound to return the property if the decree is set aside.
• South Eastern Coalfields Ltd. Vs. State of M.P. & Ors [(2003) 8 SCC 648]*: Followed. The Court relied on this case to emphasize that the principles of Section 144 CPC should be given the widest possible meaning.
• Gurjoginder Singh vs. Jaswant Kaur & Anr [(1994) 2 SCC 368]*: Followed. The Court relied on this case to support the argument that a subsequent purchaser cannot be treated as a bona fide purchaser if they are aware of the ongoing litigation.
• Jai Berham vs. Kedar Nath Marwari [AIR 1922 PC 269]*: Followed. The Court relied on this case to emphasize the inherent jurisdiction of the court to act fairly and ensure justice.
• Zain-Ul-Abdin Khan vs. Muhammad Asghar Ali Khan [(1888) ILR 10 ALL 166 (PC)]*: Followed. The Court relied on this Privy Council case to highlight the distinction between decree-holders and bona fide purchasers.
• Kuppa Sankara Sastri & Ors. Vs. Kakumanu Varaprasad & Anr [AIR 1948 MAD.12]*: Distinguished. The Court distinguished this case, which was cited by the respondents, and held that it did not apply to the facts of the present case.
• Lal Bhagwant Singh vs. Sri Kishen Das [(1953) SCR 559]*: Distinguished. The Court distinguished this case, which was cited by the respondents, and held that it did not apply to the facts of the present case.
• Rodger v. Comptoir D’Escompte de Paris [(1871) 3 PC 465]*: Followed. The Court relied on this case to emphasize the duty of all courts to ensure that the act of the court does no injury to any of the suitors.
• A. Arunagiri Nadar vs. S.P. Rathinasami [(1971) 1 MLJ 220]*: Followed. The Court relied on this case to support the principle that a wrong order should not be perpetuated.
• Balakrishnan vs. Malaiyandi Konar [(2006) 3 SCC 49]*: Followed. The Court relied on this case to emphasize that no sale can be allowed beyond the decretal amount and that only such portion of the property should be sold as is necessary to satisfy the decree.
• Takkaseela Pedda Subba Reddi vs. Pujari Padmavathamma [(1977) 3 SCC 337]*: Followed. The Court relied on this case to emphasize that the executing court has jurisdiction to sell properties only to the point where the decree is fully satisfied.
• Ambati Narasayya vs. M. Subba Rao [1989 Supp (2) SCC 693]*: Followed. The Court relied on this case to emphasize that it is obligatory for the court to sell only such portion of the property as would satisfy the decree.
• S. Mariyappa vs. Siddappa [(2005) 10 SCC 235]*: Followed. The Court relied on this case to support the view that only the necessary portion of property should be sold.
• S.S. Dayananda vs. K.S. Nagesh Rao [(1997) 4 SCC 451]*: Followed. The Court relied on this case to emphasize that procedural compliance with Order 21 Rule 64 of the Code is a mandatory requirement.
• Desh Bandhu Gupta vs. N.L. Anand [(1994) 1 SCC 131]*: Followed. The Court relied on this case to support the view that procedural compliance with Order 21 Rule 64 of the Code is a mandatory requirement.
• A.R. Antulay v. R.S. Nayak [(1988) 2 SCC 602]*: Followed. The Court relied on this case to support the principle that no man should suffer because of the mistake of the court.
• Satis Chandra Ghose v. Rameswari Dasi [AIR 1915 Cal 363]*: Followed. The Court relied on this case to emphasize that decree-holders and those who claim under decree-holders will form one class as against strangers to the decree.
• Abdul Rahman v. Sarat Ali [AIR 1916 Cal 710]*: Followed. The Court relied on this case to emphasize that the assignee of a decree-holder auction-purchaser stands in no better position than his assignor.
• Gopi Lal v. Jamuna Prasad [AIR 1954 Pat 36]*: Not followed. The Court did not agree with the view taken by the Patna High Court.
• S. Chokalingam Asari v. N.S. Krishna Iyer [AIR 1964 Mad 404]*: Not followed. The Court did not agree with the view taken by the Madras High Court.
• Parameswaran Pillai Kumara Pillai v. Chinna Lakshmi [1970 Ker LJ 450]*: Not followed. The Court did not agree with the view taken by the Kerala High Court.

What weighed in the mind of theCourt?

The Supreme Court was primarily influenced by the following factors:

• Principle of Restitution: The Court emphasized that the principle of restitution under Section 144 of the CPC is not merely a statutory provision but a fundamental principle of justice, equity, and fair play. This principle requires that parties be restored to the position they would have been in had the erroneous decree not been passed. The court clarified that this principle applies even when a decree is modified, not just reversed.
• Distinction between Decree-Holder and Bona Fide Purchaser: The Court reiterated the distinction between a decree-holder who purchases property at auction and a bona fide third-party purchaser. A decree-holder auction purchaser does not get the same protection as a stranger to the decree. Similarly, a subsequent purchaser with knowledge of the litigation cannot be considered a bona fide purchaser.
• Sale of Entire Property: The Court noted that the entire property of the judgment debtor was sold when a part of it would have been sufficient to satisfy the decree. This was considered a violation of the principles of execution of decrees, which require that only the necessary portion of the property should be sold to satisfy the decree.
• Awareness of Litigation: The Court highlighted that the third-party purchaser was aware of the ongoing litigation and therefore could not be considered a bona fide purchaser entitled to protection.
• Erroneous Action of the Court: The Court emphasized that it is the duty of the court to ensure that its actions do not cause injustice to any party. In this case, the court’s erroneous action of confirming the sale based on the original decree resulted in the judgment debtor losing his property, which needed to be rectified.
• Wider Interpretation of Section 144 CPC: The Court adopted a wide interpretation of Section 144 of the CPC, emphasizing that restitution must follow even in case of variation of decree.

Ratio Decidendi

The ratio decidendi of the judgment can be summarized as follows:

• The principle of restitution under Section 144 of the Code of Civil Procedure, 1908, applies even when a decree is modified and not just reversed.
• A decree-holder who purchases property at auction does not get the same protection as a bona fide third-party purchaser.
• A subsequent purchaser who is aware of the ongoing litigation cannot be considered a bona fide purchaser.
• The executing court should sell only such portion of the property as is necessary to satisfy the decree, and the sale of the entire property when a part would suffice is not permissible.
• The court has a duty to ensure that its actions do not cause injustice to any party, and restitution is necessary to rectify such injustices.

Final Order

The Supreme Court allowed the appeal, set aside the orders of the lower courts, and directed the following:

• The judgment debtor, Bhikchand, is entitled to restitution of his property.
• The third-party purchaser, who bought the property from Shamabai, will be entitled to receive the amount paid by him with interest at 6% per annum from the date of the purchase until payment.
• The court directed the execution court to restore the property to the judgment debtor after payment of the amount due to the third-party purchaser.

Flowchart of the Case

Conclusion

The Supreme Court’s judgment in Bhikchand vs. Shamabai (2024) reinforces the principle of restitution under Section 144 of the CPC. It clarifies that this principle applies even when a decree is modified, not just reversed. The judgment also emphasizes the distinction between decree-holder auction purchasers and bona fide third-party purchasers, ensuring that the latter are not unjustly enriched at the expense of the judgment debtor. This case serves as a significant precedent for future cases involving restitution after a decree modification, highlighting the importance of restoring parties to their original positions as far as possible.