In Unnikrishnan vs. Kunhibeevi, the Kerala High Court Division Bench (A.S. No. 383 of 1997(E), decided 21 January 2011) held that after the 1976 Amendment to the Code of Civil Procedure, a civil suit filed by any person, including a third party, to challenge a court sale in execution proceedings is not maintainable. The exclusive forum is the execution court, acting under Rules 97 to 103 of Order XXI of the Code.
Court Details
IN THE HIGH COURT OF KERALA AT ERNAKULAM
THOTTATHIL B. RADHAKRISHNAN AND S.S. SATHEESACHANDRAN JJ.
Dated: 21st day of January, 2011 | A.S. No. 383 of 1997(E)
UNNIKRISHNAN vs. KUNHIBEEVI
For Petitioner: Sri. M.P. Sreekrishnan | For Respondent: Sri. N. Subramaniam
Background and Parties
The appellants are defendants 5, 7, 8, and certain legal representatives of the 6th defendant in O.S. No. 229/93 before the Principal Sub Court, Kochi. Respondents 1 to 8 are the legal representatives of the plaintiff P.K. Aboo. The 9th respondent is the 1st defendant. Respondents 10 to 12 are defendants 2 to 4, and respondents 13 to 18 are other legal representatives of the 6th respondent. Respondents 10 and 12 passed away during the appeal; their legal representatives were impleaded as respondents 19 to 27.
The appeal challenged the decree of the court below setting aside a court sale conducted in execution of the decree in O.S. No. 67/81 of the Principal Sub Court, Kochi, and directing re-delivery of four B schedule properties to the plaintiff.
Factual Background
The 1st defendant, a statutory bank, instituted O.S. No. 67/81 on 15 April 1981 for recovery of a loan advanced to the 2nd defendant, secured by mortgage of properties belonging to defendants 3 and 4. Twelve items were mortgaged, of which items 1 to 4 (described as B schedule in the present suit O.S. No. 229/93) and items 5 to 12 (A schedule) were included.
Before the bank filed O.S. No. 67/81, another creditor of the 2nd defendant, M/s. Mettur Beard Sell Limited, had instituted O.S. No. 102/76. A decree was passed in O.S. No. 102/76 earlier, and on 6 January 1982 the B schedule items (four properties) were brought to auction sale in execution of that decree. The plaintiff P.K. Aboo purchased them as the highest bidder. The sale was confirmed on 10 March 1982. Delivery of those properties took place on 16 March 1985 and 2 April 1985.
The bank's suit, O.S. No. 67/81, was decreed on 8 January 1983. In execution of that decree, the plaintiff obstructed the sale of B schedule properties at every stage. He filed E.A. No. 141/86 seeking deletion of B schedule items from the execution, which the execution court dismissed with a reservation of rights under Section 61 of the Transfer of Property Act. Both the bank and the plaintiff challenged this order in revision; both revisions were dismissed on 11 August 1989.
The plaintiff also filed E.A. No. 537/87 challenging the steps for sale of B schedule, which was also dismissed. This court directed the execution court to proceed against B schedule only if sale of A schedule proved insufficient to satisfy the decree. Since A schedule proceeds fell short, B schedule was brought to sale, and defendants 5 to 8 purchased those properties. The plaintiff filed an application under Order XXI Rule 89 after this sale, but it was dismissed because the required amount was not tendered with the requisite commission.
After sale confirmation and issue of the sale certificate, the auction purchasers applied for delivery. The plaintiff obstructed delivery through several petitions. The Amin filed a report that delivery had been effected. The plaintiff moved to annul the Amin's report, but the execution court dismissed that application. In revision, this court upheld the execution court's finding that delivery had been made and reserved the plaintiff's right to pursue appropriate proceedings.
The plaintiff then filed the present suit, O.S. No. 229/93, seeking: a declaration that the court sale in O.S. No. 67/81 was illegal and vitiated by fraud and material irregularity; a permanent prohibitory injunction against defendants; and re-delivery of B schedule under Section 144 of the Code of Civil Procedure.
Trial Court Findings
The court below framed issues on whether the court sale was vitiated by material irregularity and fraud in publishing and conducting it, and whether the plaintiff was entitled to the reliefs sought. After examining witnesses -- Pws. 1 to 6 and Exts. A1 to A33 for the plaintiff, and DW. 1 and Exts. B1 to B8 for the defendants -- the trial court found in favour of the plaintiff. It held the sale vitiated by fraud and material irregularity, decreed the suit, granted the declaration, and directed re-delivery of B schedule from defendants 5 to 8. Defendants 5, 7, 8, and certain legal representatives of defendant 6 preferred the present appeal.
Core Question: Maintainability of a Suit Challenging a Court Sale
The Division Bench found it necessary to first consider whether a civil suit challenging a court sale was at all entertainable, having regard to the scheme of Order XXI of the Code of Civil Procedure after the 1976 Amendment. Both sides made extensive arguments. The plaintiff's counsel relied on Pavan Kumar v. K. Gopikrishnan, AIR 1998 AP 247; Abdul Rashid Dar v. Mohamed Ismail, AIR 1989 J&K 48; M/s. Paramount Industries v. C.M. Malliga, ILR 91 Karnataka 254; and Tanzeem-e-Sufia v. Bibi Haliman, AIR 2002 SC 3083, arguing that a third party not bound by the decree retains a civil right to file a suit to protect his interest in property proceeded against in execution.
Judgment: S.S. Satheesachandran J.
Effect of the 1976 Amendment to Order XXI
The court examined the scheme created by the Code of Civil Procedure (Amendment) Act, 1976, which substituted Rules 97 to 103 of Order XXI. Under those rules, the execution court has exclusive jurisdiction to determine all disputes over the right, title, and interest of any person over property covered by a decree for possession that has been put in execution. Once execution has commenced and the property has been sold by court, or the claimant has been dispossessed, the only available remedy is an application under Rule 97 of Order XXI (before delivery) or Rule 99 of Order XXI (after dispossession). A separate suit before any other civil court to challenge such a court sale is not entertainable.
The court held that the Apex Court had laid down this position consistently, starting from Bhanwarlal's case, and that this applied even to third parties who were not parties to the decree. The provisions covered by Rules 97 to 103 are a complete code by themselves, and once execution proceedings have commenced, the execution court alone can adjudicate disputes over property in execution.
Positions of the Guwahati and Andhra Pradesh High Courts Distinguished
The court noted that the High Court of Guwahati in National Grindlays Bank v. Deepak Sharma, 2002 (TLS) 604153, and the High Court of Andhra Pradesh in Kukkala Balakrishna & Ors. v. M/s. Vijaya Oil Mills, AIR 2006 AP 98, had both expressed the view that a third-party suit to impeach a court sale remained maintainable having regard to sub-rules (4) and (5) of Rule 92 of Order XXI. The Division Bench disagreed. Both those courts, it held, had not taken into account the decisions of the Apex Court emerging from Bhanwarlal's case. Their views therefore carried no persuasive value.
Lis Pendens
The 1st defendant's Senior Counsel, Sri. M.C. Sen, argued that the court sale of B schedule in execution of the decree in O.S. No. 102/76 was hit by lis pendens, because the bank's suit O.S. No. 67/81 had been instituted before those properties were brought to sale under O.S. No. 102/76. The Division Bench agreed. Since the bank's mortgage predated the institution of O.S. No. 102/76, and the bank filed O.S. No. 67/81 before the B schedule properties were proclaimed for sale in O.S. No. 102/76, the sale in that earlier proceeding was subject to the outcome of the bank's suit. The plaintiff, as the auction purchaser in O.S. No. 102/76, took B schedule subject to the bank's prior mortgage, and his claim over those properties as such an auction purchaser was hit by lis pendens. The court relied on People's Co-operative Bank Ltd. v. Parvathy Ayyappan Pillai, AIR 1959 Kerala 133, and Govinda Marar v. Govinda Kurup, 1971 KLT 730.
Conclusion on Maintainability
Since the provisions of Rules 97 to 103 of Order XXI constitute a complete code vesting exclusive jurisdiction in the execution court over all property disputes arising in execution, the jurisdiction of any other civil court to entertain a suit challenging a court sale under those circumstances is excluded. The plaintiff, having been dispossessed in execution of the decree in O.S. No. 67/81, was required to move an application under Rule 99 of Order XXI. His attempts to apply under Rule 89, to annul the Amin's delivery report, and to file revisions before this court did not give him the right to file a fresh suit. O.S. No. 229/93 was not maintainable and ought to have been dismissed at the threshold. All findings of the trial court on the alleged fraud and material irregularity in conducting the sale were, therefore, of no consequence.
For related Kerala High Court property and execution cases, see Meenakshi Ammal vs S. Vijayalekshmi and the Property Law Unit V class notes on this site.
Decision
The Division Bench set aside the decree passed by the trial court and allowed the appeal. O.S. No. 229/93 on the file of the Principal Sub Court, Kochi, stood dismissed. The parties were directed to suffer their own costs.
Key Legal Principles
- After the 1976 Amendment, Rules 97 to 103 of Order XXI of the Code of Civil Procedure form an exclusive code for determining all disputes over property in execution. No separate civil suit to challenge a court sale is maintainable in any civil court.
- The rule applies equally to third parties not named in the original decree. The exclusive remedy after dispossession in execution is an application under Order XXI Rule 99.
- An auction purchaser of property in an earlier court sale takes that property subject to a prior mortgage suit filed before the sale (lis pendens), and the auction purchaser cannot impeach the subsequent mortgage-decree sale by filing a civil suit.
- Applications under Rule 89, obstruction petitions, and revisions before the High Court do not preserve a right to file a fresh suit challenging the sale.