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V.S. Thiru Venkita Reddiar Vs. S. Noordeen and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtKerala High Court
Decided On
Case NumberC.R.P. No. 3375 of 1976
Judge
Reported inAIR1978Ker11
ActsCode of Civil Procedure (CPC) , 1908 - Sections 64 and 65 - Order 21, Rule 54 - Order 38, Rule 10; Registration Act, 1908 - Sections 17(2) and 49
AppellantV.S. Thiru Venkita Reddiar
RespondentS. Noordeen and anr.
Advocates: S.A. Nagendran,; N.N. Divakaran Pillai and; K.B. Subhaga
Cases ReferredC. M. Filial v. H.S.S.M.S.S. Kadhiri Thaikal
Excerpt:
.....constituting inseparable part of consideration for compromise is regarded as subject matter of suit - decree passed on basis of compromise cannot stand without that property - held, by decree following compromise enforceable charge was created. - - this is the only way left to a money-decree-holder when other like decree-holders proceed against the same property in execution. if the consent decree or order in the suit or proceeding covered the property, although it was not in the plaint or in dispute, such property constituting, as it does, an inseparable dart of the consideration for the compromise, may well, in our view, be regarded as the subject-matter of the suit. hence, with great respect, the view taken by the madras high courtand the patna high court seems tome to be the..........the copy of the com-promise petition. ext. x4 is the copy of the judgment to the effect that the suit is decreed in terms of the compromise. the copy of the decree produced in the case also shows that the decree contains the terms of the compromise. the bank subsequently went into liquidation and the liquidator could bring the property to sale only on 26-6-1969. the liquidator himself was the purchaser. he sold the property to the revision petitioner under ext. xi on 25-4-1974 for rs. 35,000/- and the latter discharged the prior encumbrances in the property amounting to rs. 55,000/-. in the meanwhile the 1st respondent, another creditor of the 2nd respondent, filed a suit o.s. no. 38/60 and obtained a money decree against the 2nd respondent. in execution of the decree he also attached.....
Judgment:
ORDER

G. Viswanatha Iyer, J.

1. The petitioner in E.A.57/75 who was also one of the respondents in E.A. 1061/74 in E.P. 91/66 in O.S. 38/60 on the file of the Quilon Sub Court is the revision petitioner. His application to set aside the court sale of items Nos. 1 to 7 in the proclamation schedule filed in execution of the decree in O.S. 38/60 was allowed by the Sub Court, Quilon, but dismissed in appeal by the District Court. While dismissing the appeal the District Judge observed that the application to set aside the sale was misconceived in thesense the petitioner who claims to be a purchaser under an earlier charged decree and who is in actual possession of the property can assert his rights in the property and also his right to remain in possession of it when he is sought to be dispossessed in execution of the present decree and the exact nature of his rights and the question whether these rights can prevail against the decree-holder are matters which are to be properly determined at that stage. The lower appellate court in so observing lost sight of the fact that the petitioner came to court on receiving a notice to show cause why he shall not be evicted from the properties to put the decree-holder auction purchaser in O.S. 38/60 in possession of the same as per the sale certificate and application filed by him as E.A. 1061/ 74. The petition and objection filed by the revision petitioner before the Sub Court were really one in answer to that on asserting his preferential right to the property as against the respondent-decree-holder-auction purchaser and so in deciding whether the court sale in O.S. 38/60 is invalid and liable to be set aside this question arises for consideration. This question is also material in considering whether the petitioner's predecessor's right is affected by the sale to apply under Order XXI Rule 90, C.P.C. The execution court dismissed the application for delivery and allowed the petitioner's application. So the petitioner's right under the decree in O.S. 95/53 and the court sale following it on 26-6-1969 calls for consideration in this case and the case has been argued before me on that basis.

2. The Palai Central Bank Ltd. had filed a suit, O.S. 95/53, against the 2nd respondent herein for recovery of a very large amount due from him on the basis of an equitable mortgage. Before decree the present disputed items were attached on the ground that the properties mortgaged are insufficient to realise the amount due to the bank. Ext. X3 is the copy of the plaint in O.S. 95/53 and Ext. X2 is the copy of the report and of the list of properties attached. That suit was compromised and Ext. X5 is the copy of the com-promise petition. Ext. X4 is the copy of the judgment to the effect that the suit is decreed in terms of the compromise. The copy of the decree produced in the case also shows that the decree contains the terms of the compromise. The bank subsequently went into liquidation and the Liquidator could bring the property to sale only on 26-6-1969. The Liquidator himself was the purchaser. He sold the property to the revision petitioner under Ext. XI on 25-4-1974 for Rs. 35,000/- and the latter discharged the prior encumbrances in the property amounting to Rs. 55,000/-. In the meanwhile the 1st respondent, another creditor of the 2nd respondent, filed a suit O.S. No. 38/60 and obtained a money decree against the 2nd respondent. In execution of the decree he also attached the same and other properties, brought them to sale and himself purchased for Rs. 12,000/- and odd. The 2nd respondent had taken steps to set aside the sale, but did not succeed. After obtaining the sale certificate the 1st respondent applied for delivery of possession. In the meanwhile the revision petitioner had come into possession of the disputed properties under the proceedings referred to earlier and so in answer to the notice of the application for delivery he put forward his claim to the properties.

3. In this connection two questions arise for consideration. Firstly what is the effect of a prior attachment against an earlier sale in pursuance of a subsequent attachment and secondly whether the decree-holder in O.S. No. 95/53 had obtained an enforceable charge by the compromise decree. An attachment is the order prohibiting and restraining the defendant from transferring or charging the attached property by sale, gift or otherwise and all persons from so receiving it (See Order XXI Rule 54 and Appendix E Form No. 24 of Civil P.C.) and Section 64 of the Civil P.C. provides that private transfer or delivery of property attached shall be void against all claims enforceable under the attachment. Its effect therefore is only to prevent alienation and not to confer title by way of charge or other-wise on the attaching decree-holdor. Further it is only aimed at private alienations. It does not prevent involuntary alienations. On this aspect of the matter there is no difference between attachment fan execution of a decree and an attachment before judgment. Order XXXVIII Rule 10, C.P.C. makes this position clear. That rule provides that the attachment before judgment shall not affect the rights existing prior to the attachment or persons not parties to the suit, nor bar any person holding decree against the defendant from applying for sale of the property attached. Such being the effect of an attachment, whether before or after decree, it does not bar a court sale in execution of another decree and with the court sale the interest of the judgment-debtor passes to the auction purchaser and there is nothing left to be sold later at the instance of another decree-holder who may have attached the property earlier. The purpose of the attachment is solely for the purpose of protecting the attaching creditor's right to bring to sale in execution the right, title and interest in the attached property of the judgment-debtor and there is no reason for holding that it continued to affect the attached property in any way when tile attached property no longer continues to be the property of the? judgment-debtor. The auction-purchaser takes the property free from attachment. The consequence no doubt to an earlier attaching creditor is very serious, but his rights are sufficiently safeguarded in such a situation by entitling him a rateable distribution of the proceeds of the sale. This is the only way left to a money-decree-holder when other like decree-holders proceed against the same property in execution. If this were not so complications will arise between an earlier attaching creditor and a subsequent attaching creditor. If the sale was under a private alienation with the earlier sale there is nothing left with the transferor to transfer subsequently to another. In the same manner the prior sale in pursuance of an attachment will prevail over a subsequent sale even if the latter sale wasin pursuance of an earlier attachment. In other words with the court sale all attachment subsisting on the property will fall to the ground. I am supported in these conclusions by the decisions of the Calcutta High Court in Kashy Nath Roy Chowdhry v. Surbanand Shaha (1880) ILR 12 Cal 317), of the Madras High Court in Chamiyappa Tharagan v. Rama Ayyar, (ILR 44 Mad 232) : (AIR 1921 Mad 30) of the Patna High Court in Harnandan v. Pran Nath Roy (AIR 1921 Pat 409) and of the Travancore High Court in Civil Revn. Petn. No. 333 of 1115 : (14 Trav LT 767). If this was not so, it would give rise to great hardship and seriously affect court sales and there may not be any bidders in court-sale. Hence it must be taken as fairly settled that when a property is sold in execution of a money decree it cannot be sold again at the instance of the decree-holder who had attached it before it was actually sold. The consequence is on the happening of a judicial sale all previous attachment effected upon the property sold fall to the ground. On the facts of this case if the revision petitioner's right is only based on attachment before judgment in O.S. No. 95/53 he has no right over the properties because before he actually sold them in execution of the above decree they had been attached and sold in execution of the decree obtained by the respondent. The fact that the case before confirmation of the sale in O.S. No. 38/60 the sale in O.S. No. 95/53 was confirmed is also irrelevant for Section 65, C.P.C. provides that with the confirmation the vesting of title will relate back to the date of sale (see also AIR 1921 Pat 409).

4. But there is one more aspect to be looked into and that is what is the effect of the compromise decree creating a charge over these properties but which decree has not been registered under the Registration Act. According to the respondent's counsel the decree in O.S. No. 95/53 being a compromise decree and the disputed properties being not scheduled to the plaint therein the charge created by the decreeis ineffective for want of registration under Section 49 of the Registration Act. According to him, the decree comes under the exception mentioned in Section 17 (2) (vi) of the Registration Act. Section 17 specifies the documents of which registration is compulsory. All non-testamentary instruments which purport to create any right, title or interest of the value of Rs. 100/- and upwards, to or in immovable property should be registered (See Section 17 (i) (b) of the Registration Act). But, Sub-section (2) exempts certain documents of the above category from registration. Clause (vi) of Sub-section (2) which is in the following terms:

'Nothing in Clauses (b) and (c) of Sub-section (1) applies to--any decree or order of a Court (except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding)'

exempts decrees and orders of a court from registration. There is an exception to this exemption. If a decree or order is expressed to be made on a compromise and comprises immovable property other than that which is the subject-matter of the suit or proceeding, that requires registration. Learned arguments were advanced on both sides as to whether the decree in O.S. No. 95/ 53 comes under this exception or not. According to the respondent's counsel, the properties now in dispute in this revision petition were not scheduled to the plaint in that case. That suit was for recovery of money based on an equitable mortgage. Some other properties were scheduled to the plaint and a decree was asked for sale of those properties mortgaged. The disputed properties were attached before judgment. Subsequently Ext. X5 compromise was entered into between the parties, and in the compromise there was a provision for payment of the amount due in instalments, and in case of default, for sale of the mortgaged properties and the properties attached before judgment. Ext. X4 is the copy of the judgment and it is to the effect that the suit is decreed in terms of the compromise, The copy of thedecree available among the records of the case also shows that the decree is expressed to Joe based on the compromise. The revision petitioner's counsel contended that the disputed properties must also be taken to be subject-matter of the suit or proceeding. According to him, properties need not be scheduled to the plaint to form the subject-matter of the suit. Rights in or over the property need not be in dispute to form the subject-matter of the suit. If the properties are subject-matter of an inter-locutory proceeding or if the creation of the charge over and a right to sell such properties form the consideration for the compromise such properties must be deemed to be subject-matter of the suit. In support of this contention he relied on the decision of the Madras High Court in Govindaswami v. Rasu (AIR 1935 Mad 232), M.P. Reddiar v. A. Animal (AIR 1971 Mad 182), C.M. Pillai v. H.S.S.M.S.S. Kadhiri Thaikal (AIR 1974 Mad 199), Ramdas v. Jagarnath Prasad (AIR I960 Pat 179) and the cases referred to in the latter decision. As against these the respondent's counsel relied on Chhotibai Daulatram v. Mansukhlal Jasraj (AIR 1941 Bom 1), Ganeshial v. Ramgopal (AIR 1955 Raj 17) and Mani Sahoo v. Lokanath Misra (AIR 1950 Ori 140). In Ramdas v. Jagarnath Prasad (AIR 1960 Pat 179) cited by the petitioner the view was that the question whether a particular term of a compromise relates to the subject-matter of the suit is obviously a question to be answered on the frame of the suit, the relief claimed in it, and the matters arising for decision between the parties. In this connection the following observation made in that case is relevant (at p. 180):

'The question whether a particular term of a compromise relates to the subject-matter of the suit is obviously a question to be answered on the frame of the particular suit, the relief claimed in the suit and the matters arising for derision on the pleadings of the parties. The term is comprehensive enough, and if the compromise relates to all the matters which fan to be decided in the case, it cannot be said that any part ofthe compromise is beyond the subject-matter of the suit.

In other words, where the compromise is really an adjustment of the rights and differences in respect of all matters in dispute between the parties and the compromise purports to be a final settlement and adjustment of these disputes on a fair and satisfactory basis acceptable to all. it must be held to relate to the suit.' This view was followed by the Madras High Court in M.P. Reddiar v. A. Ammal (AIR 1971 Mad 182). The principle is stated thus in para 5 (at p. 183):

'The words 'the subject-matter of the suit' in Section 17 (2) (vi) cannot be read as subject-matter of the plaint nor even as subject-matter in dispute in the suit or proceeding. If the consent decree or order in the suit or proceeding covered the property, although it was not in the plaint or in dispute, such property constituting, as it does, an inseparable Dart of the consideration for the compromise, may well, in our view, be regarded as the subject-matter of the suit. This is because the decree passed on the basis of the compromise cannot stand without that property.'

In this Division Bench decision, the earlier single Bench decision of the Madras High Court in Govindaswami v. Rasu (AIR 1935 Mad 232) where on the facts similar to the present case it was held that the property was subject-matter of the proceeding within the meaning of Section 17 (2) (vi) was approved. In AIR 1935 Mad 232 the question whether the compromise comprising immovable property not scheduled to the plaint will be subject-matter of the suit, was left open and His Lordship Mr. Justice Venkatasubba Rao took the view that the property will form the subject-matter of the proceeding for attachment and that was enough to exempt the decree from registration. No doubt, this latter view was held to be wrong in Chhotibai Daulatram v. Mansukhlal Jasrai (AIR 1941 Bom 1) and in Ganeshlal v. Ramgopal (AIR 1955 Raj 17). In the Bombay case the Single Bench decision of the Madras High Court was criticised as fallacious and the expression 'proceeding'in Section 17 (2) (vi) was interpreted tomean only an independent originating proceeding which may be contrasted with a suit, a proceedingthat is under some special Act. Ona perusal of the judgment it is seenthe terms of the compromise therewere not similar to the terms of thecompromise in this case. The coin-promise only provided that the mortgage is created over the propertiesnot scheduled to the plaint for theamount due to the plaintiff. Therewas no attachment for the plaintamount and there was no term providing for the sale of such properties as we have in this case. Thesuit was a simple ordinary moneysuit and for a portion of the plaintamount some other properties weresold and for the balance amount adecree was granted against the defendant and then a provision wasadded that for the said balanceamount due the defendant has by thecompromise mortgaged the propertiesto the plaintiff. The question arosewhether the compromise decree required registration and it was inthat connection the Bombay HighCourt held that the decree is not effective without registration. Thequestion whether the charge andthe direction to sell the property inexecution of the same decree constituted the consideration for the compromise did not arise. Ordinarily bythe attachment the property is placedat the disposal of the Court to satisfythe amount due under the decree.The defendant is prohibited and restrained until further orders of the Court from transferring or charging the property. The plaintiffs right tobring to sale in execution the right,title and interest of the defendant inthe attached property thus gets protected. Though this order of attachmentdoes not create any interest or chargein the property, indirectly the property is secured for the plaintiff. Inthat way it has got involved in thesuit and when a charge is createdover it by the compromise and formsthe consideration for it it can fairlybe deemed to be subject-matter in the suit. Hence, with great respect, the view taken by the Madras High Courtand the Patna High Court seems tome to be the better view than theBombay view. In Ganeshlal v. Ramgopal (AIR 1955 Raj. 17) there was nodiscussion. The decision of the Bombay High Court was only followed. Thus, I hold that on the terms of the compromise decree in this case the attached properties were as well treated as subject-matter of the suit and compromise and hence the decree based on the compromise does not require registration. The Division Bench decision in M.P. Reddiar v. A. Amal (AIR 1971 Mad. 182) was followed in he later decision C. M. Filial v. H.S.S.M.S.S. Kadhiri Thaikal (AIR 1974 Mad. 199). The same principle is stated there. In this view, I hold that by the decree following the compromise an effective charge was created in favour of the plaintiff, in O.S. No. 95/53 and that charge is not affected by the attachment and sale in O.S. No. 38/60. Therefore, as per the sale in O.S. No. 95/53 the decree-holder-auction-purchaser got right over the properties and that will prevail over the right claimed by the respondent. The right of the predecessor of the petitioner and that of the petitioner are not affected by the sale. It follows that the respondent is not entitled to recover possession of the properties from the revision petitioner. The revision petition is ordered in the above terms. But, in the circumstances, I make no order as to costs.


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