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PETITIONER: BINAYAK SWAIN

       Vs.

RESPONDENT: RAMESH CHANDRA PANIGRAHI AND ANOTHER

DATE OF JUDGMENT: 10/12/1965

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. SATYANARAYANARAJU, P.

CITATION:  1966 AIR  948            1966 SCR  (3)  24  CITATOR INFO :  RF         1992 SC 248  (76)

ACT: Code  of Civil Procedure, s. 144-Property of defendant  sold in  execution  of decree-Subsequently decree set  aside  and case remanded-Application for restitution by defendant-Fresh decree passed against defendant-Application for  restitution whether to be allowed.

HEADNOTE: A  money-suit  against the appellant was  dismissed  by  the trial court but the first appellate court passed an ex-parte decree  against him.  The appellant’s property was  sold  in execution and purchased by the decreeholder.  The  appellant went  to the High Court which set aside the  exparte  decree and  remanded the suit.  The appellant then filed an  appli- cation  for  restitution under s. 144 of the Code  of  Civil Procedure.   It was stayed pending proceedings in  the  main suit.   ’Me suit was finally decided against the  applicant, by  the High Court.  Thereafter the trial court allowed  the appellant’s application for restitution.  After intermediate proceedings the High Court decided in Letters Patent  Appeal that  the  appellant was not entitled  to  restitution.   He appealed to this Court by special leave. HELD:     The  application for restitution was filed by  the appellant  before the passing of a fresh decree by the  High Court  in  second appeal.  At the time  of  the  application therefore the appellant was entitled to restitution  because on that date the decree in execution of which the properties were  sold had been set aside.  The appellant was  therefore entitled  to  restitution  notwithstanding  anything   which happened subsequently. [27 C-E] The principle of the doctrine of restitution is that on  the reverse  of  a decree the law imposes an obligation  on  the party to the suit who received the benefit of the  erroneous decree  to make restitution to the other party for  what  he has  lost.   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. [27 E-F]

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Zainal-Abdin Khan v. Muhammad Asghar All Khan, I.L.R. 10 All 166, relied on. Set  Umedmal  & Anr. v. Srinath Ray & Anr.  I.L.R.  27  Cal. 810,  Raghu  Nandan Singh v. Jagdish Singh, 14  C.W.N.  182, Abdul Rahaman v. Sarafat Ali, 20 C.W.N. 667 and Shivbai  Kom Babya Swam v. Yesoo, I.L.R. 43 Bom. 235, referred to. Lal Bhagwant Singh v. Rai Sahib Lala Sri Kishen Das,  [1953] S.C.R. 559, distinguished.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 804 of 1963. Appeal by special leave from the judgment and decree,  dated January  3,  1961 of the Orissa High Court in  Appeal  under Orissa High Court Order No. 3 of 1959. 25 K.   R. Chaudhuri, for the appellant. C.   B. Aggarwala, B. Parthasarathy, J. B. Dadachanji,  O.C. Mathur, and Ravinder Narain, for respondent No. 1. The Judgment of the Court was delivered by Ramaswami,  J.  This appeal is brought by special  leave  on behalf  of the judgment-debtor against the judgment  of  the Orissa  High Court, dated January 3, 1961 in Letters  Patent Appeal No. 3 of 1959. The  deceased plaintiff filed Original Suit No. 500 of  1941 against   the  appellant-defendant  in  the  Court  of   the Additional  Munsif, Aska claiming Rs. 970 on the basis of  a promissory note.  The suit was dismissed on August 17, 1942. The plaintiff preferred an appeal No. 178 of 1942 before the District  Judge  who allowed the appeal and  set  aside  the decree of the Munsif and decreed the suit ex parte on  March 9,  1943.  Against this decree of the appellate  Court,  the appellant filed Second Appeal No. 100 of 1943 in the  Orissa High Court which set aside the decree of the District  Judge on  November  11, 1946 and remanded the suit  to  the  lower appellate court for disposal.  The lower appellate court  in its  turn  remanded  the  suit to the  trial  court  by  its judgment,  dated  April  11,  1947.   In  the  meantime  the original  plaintiff  died and the present  respondents  were brought  on record as his legal representatives.   The  suit was again dismissed by the trial court on November 29,  1947 but on appeal the Additional Subordinate Judge set aside the judgment and decree of the Munsif on November 30, 1948.  The appellant carried the matter in Second Appeal No. 12 of 1949 to  the  Orissa  High Court which dismissed  the  appeal  on August 27, 1954.      After the ex parte decree was passed inappeal No.  178 of 1942 by the District Judge on March 9,1943,       the plaintiff executed the decree, attached the propertiesin dispute  and  himself  purchased  the  properties  in  Court auction.The plaintiff also took delivery of the properties on  May  17, 1946 and since that date the  respondents  have been  in  possession  of the  properties  and  enjoying  the usufruct.   After  the  decree  of  the  High  Court,  dated November  11.  1946  in Second Appeal No. 100  of  1943  the appellant  made an application for restitution in the  Court of the Additional Munsif in Miscellaneous Judicial Case  No. 34 of 1947.  The plaintiff obtained a stay of the hearing of the  Miscellaneous  Judicial  Case from  the  Court  of  the Additional District Judge but on March 30, 1948 the order of stay was discharged.  In Civil Revision No. 75 sup, Cl/66---3 2 6 of  1948  the High Court also granted interim  stay  in  the

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proceedings  in  the  Miscellaneous  Judicial  Case  at  the instance of the plaintiff but the order of stay was  vacated by the High Court on April 28, 1949.  Thereafter the present appellant  got the Miscellaneous Judicial Case  stayed  till disposal  of  his Second Appeal after remand.  On  July  12, 1956  the  Miscellaneous Judicial case was  allowed  by  the Munsif and an order of restitution was made in favour of the appellant.   The  respondents  filed an  appeal  before  the Subordinate  Judge of Berhampur who allowed the  appeal  and set aside the order of restitution.  The appellant took  the matter before the High Court in Miscellaneous Appeal No.  24 of  1958 which was allowed by P. V. Balakrishna Rao,  J.  on October  3, 1958 and it was ordered that the restitution  of the  properties should be made to the appellant  subject  to the  condition  that he must deposit the amount  decreed  in favour  of  the plaintiff-decree holder.  The order  of  the learned  Single  Judge was, however, set  aside  in  Letters Patent  appeal  by  a Division Bench  which  held  that  the appellant was not entitled to restitution of properties sold in the execution case. The  question  presented for determination in this  case  is whether  the  appellant was entitled to restitution  of  his properties purchased by judgment-debtor in execution of  the decree  passed by the District Judge on the ground that  the decree  was  set aside by the High Court and  the  suit  was remanded   for  rehearing  and  fresh  disposal  under   the provisions  of  s.  144 of the Civil  Procedure  Code  which states as follows 144  (1) Where and in so far as a decree or order is  varied or  reversed,  the  Court of first instance  shall,  on  the application  of any party entitled to 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  such part  thereof as has been varied or reversed; 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 or reversal." On behalf of the responds Mr. aggarwala made the  submission that  after  the suit was re-heard a decree  was  passed  in favour  of  the respondents and that decree  was  eventually affirmed  by  the  High  Court.,  and  the  appellant   was, therefore, not entitled to 27 restitution  under the provisions of this section.   We  are unable  to accept this argument as correct.  The  properties of  the appellant were sold in execution at the instance  of the  respondents  who  were executing the  ex  parte  decree passed  by  the District Judge on March 9,  1943.   In  this execution  case, the properties of the appellant  were  sold and  the respondents got delivery of possession on  May  17, 1946.  It is true that the suit was eventually decreed after remand on August 27, 1954 by judgment of the High Court, but we are unable to accept the argument of the respondents that the  execution sale held under the previous ex parte  decree which  was set aside by the High Court, is validated by  the passing of the subsequent decree and therefore the appellant is not entitled to, any restitution.  It is evident that the application  for restitution was filed by the  appellant  in 1947  in Miscellaneous Judicial Case, No. 34 of 1947  before the  passing  of  a fresh decree by the High  Court  in  the Second   Appeal.   At  the  time  of  the  application   for restitution,  therefore,  the  appellant  was  entitled   to restitution,.  because on that date the decree in  execution

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of  which the properties. were sold had been set aside.   We are  of  the  opinion  that the  appellant  is  entitled  to restitution   notwithstanding   anything   which    happened subsequently as the right to claim restitution is based upon the  existence  or otherwise of a decree in  favour  of  the plaintiff’ at the time when the application for  restitution was  made.  The principle of the doctrine of restitution  is that  on  the  reversal  of a decree,  the  law  imposes  an obligation on the party to the suit who received the benefit of  the  erroneous decree to make restitution to  the  other party  for  what  he  has  lost.   This  obligation   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 berestored, to the same  position  they were  in at the time when the Court by its erroneous  action had  displaced  them  from.  It should be  noticed,  in  the present  case,  that the properties were purchased’  by  the decree-holder  himself in execution of the  ex-parte  decree and not by a stranger auction-purchaser.  After the ex-parte decree was set aside in appeal and after a fresh decree  was passed on remand, the sale held in execution of the ex-parte decree  becomes invalid and the decree-holder who  purchased the properties in executions of the invalid decree is  bound to  restore to the judgment-debtor what he had gained  under the decree which was subsequently set aside.  The view  that we  have  expressed  is borne out by  the  decision  of  the Judicial Committee in Zain-Ul-Abdin Khan v. 28 Muhammad  Asghar Ali Khan(1) in which a suit was brought  by the judgment-debtor to set aside the sale of his property in execution of the decree against him in force at the time  of the sales, but afterwards so modified, as the result of  an appeal to Her Majesty in Council, that, as it finally stood, it  would have been satisfied without the sales in  question having taken place.  The judgmentdebtor sued both those  who were purchasers at some of the sales, being also holders  of the decree to satisfy which the sales took place, and  those who were bona fide purchasers at other sales, under the same decree,  who were no parties to it.  The Judicial  Committee held that, as against the latter purchasers, whose  position was  different from that of the  decree-holding  purchasers, the suit must be dismissed.  At page 172 of the Report,  Sir B. Peacock observed as follows               "It appears to their Lordships that there is a               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." The  same principle has been laid down by the Calcutta  High Court in Set Umedmal and another v. Srinath Ray and  another (2  )  where  certain  immovable  properties  were  sold  in execution  of  an exparte decree and were purchased  by  the decree-holder himself.  After the confirmation of the  sale, the decree was set aside under S.  108    of    the    Civil Procedure Code, 1882 at the instance    of   some   of the  defendants  in the original suit.   On  an  application unders.   244 of the Civil Procedure Code, 1882 having  been made by adecree, to set aside the sale held in execution  of

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the  ex-parte  decree the defence was that  the  application could  not  come under s. 244 of the Civil  Procedure  Code, 1882,  and that the sale could not be set aside, as  it  had been confirmed.  It was held by the Calcutta High Court that the ex-parte decree having been set aside the sale could not stand,  inasmuch  as  the  decree-holder  himself  was   the purchaser.  At page 813 Maclean, C.J. stated :               "As  regards the second point, viz.,  whether,               notwithstanding  the  confirmation,  the  sale               ought to be set aside,               (1) I.L,R. 10 All, 166.               (2) I.L.R. 27 Cal. 810.               29               the fact that the decree-holder is himself the               auction    purchaser   is   an   element    of               considerable   importance.   The   distinction               between the case of the decree-holder and of a               third  party  being the auction  purchaser  is               pointed out by their Lordships of the Judicial               Committee  in the case of  Nawab  Zainal-abdin               Khan  v. Mahommed Asghar Ali (I.L.R. 10  All.,               166),  and  also in the case  of  Mina  Kumari               Bibee v. Jagat Sattani Bibee (I.L.R. 10  Cal.,               220),  which  is  a clear  authority  for  the               proposition  that where the  decree-holder  is               himself the auction-purchaser, the sale cannot               stand,  if  the  decree  be  subsequently  set               aside.   I  am not aware that  this  decision,               which  was  given  in  1883,  has  since  been               impugned." The  same view has been expressed in Raghu Nandan  Singh  v. Jagdish  Singh(1)  where  it was held that  if  an  ex-parte decree  has  been  set aside, it cannot  by  any  subsequent proceeding  be  revived and if a decree  is  passed  against judgment-debtors on re-hearing, it is a new decree and  does not  revive  the former decree.  The same opinion  has  been expressed in Abdul Rahaman v. Sarafat Ali(2) in which it was pointed  out  that  as soon as an ex-parte  decree  was  set aside, the sale, where the decree-holder was the  purchaser, falls  through  and  was not validated  by  a  fresh  decree subsequently made.  The same principle was reiterated by the Bombay  High Court in Shivbai Kom Babya Swami v.  Yesoo.(3). In  that  case, an ex-parte decree was  passed  against  the defendant,  in execution of which the defendant’s house  was sold and purchased by the plaintiff decree-holder.  The  ex- parte decree was subsequently set aside; but at the retrial, a  decree  was again passed in plaintiffs  favour.   In  the meanwhile,  the  defendant applied to have the sale  of  the house  set aside.  It was held, in these  circumstances,  by the Bombay High Court that the previous sale of the house in execution under the previous decree which had been set aside should  itself be set aside as being no longer based on  any solid  foundation; but subject in all the  circumstances  to the  condition that the defendant should pay up  the  amount due under the second decree within a specified time. On  behalf  of  the respondents reference was  made  to  the decision  of this Court in Lal Bhagwant Singh v.  Rai  Sahib Lala Sri Kishen Das. (4 ) But the ratio of that case has  no application to the present case.  It should be noticed  that the  decree in that case was affirmed at all stages  of  the litigation except that the amount of (1)  14 Calcutta Weekly Notes, 182. (3)  I.L.R. 43 Bom. 235. (2)  20 Calcutta Weekly Notes, 667. (4) [1953] S.C.R. 559.

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30 the decree was slightly altered from Rs. 3,38,300 and odd to Rs. 3,76,790 and odd which amount was ultimately decreed  by the  Privy Council in the appeal which  the  judgment-debtor preferred  from the decision of the Oudh Chief  Court  which restored the decree of the trial Judge who decreed a sum  of Rs.  3,88,300.   It was held by this Court  that  the  Privy Council  had  merely  restored the  amended  decree  without altering  the  provisions as to payment  by  instalments  or extending the time for payment by instalments and its decree did  not in any way alter the position of the parties as  it stood  under  the amended decree, and, the sale was  not  in consequence  of any error in a decree which was reversed  on appeal  by the Privy Council and so the judgment debtor  was not  entitled  to  restitution.  In  the  present  case  the material.facts are manifestly very different. For  the  reasons  expressed,  we  are  satisfied  that  the appellant is entitled to restitution of the properties  sold in execution of the export decree subject to equities to  be adjusted  in  favour of the respondent-decree  holders.   We order  that  the  appellant  should  be  restored  back   to possession  of  the properties sold in  the  execution  case subject to the condition that he deposits the amount of  Rs. 970 in the Court of the Munsif, Aska within two months  from this  date.   If no deposit is made within  this  time  this appeal  will  stand  dismissed  with  costs.   But  if   the appellant makes the deposit within the time allowed the sale of  the properties in the execution case will be  set  aside and  the  respondents will make over the possession  of  the properties sold to the appellant.  The appellant will not be entitled to any past mesne profits but if the respondents do not  deliver the possession of the properties the  appellant will  be  entitled  to the future  mesne  profits  from  the respondents from the date of deposit till the actual date of delivery  of possession.  Learned Counsel for the  appellant has  informed us that the deposit has already been  made  by the  appellant  in  pursuance of the order  of  the  learned Single  Judge of the High Court, dated October 3, 1958.   If the  deposit  has already been made the  appellant  will  be entitled  to take possession of the properties through  the executing court and to future mesne profits from the date of this   judgment  till  the  actual  date  of   delivery   of possession. We  accordingly  allow the appeal to  the  extent  indicated above.   In the circumstances of the case we do not  propose to make any order as to costs. Appeal allowed in part. 31