In a recent judgement on May 14, 2024, the Supreme Court of India, comprising Justice Hrishikesh Roy and Justice Prashant Kumar Mishra, declared that the sale of a judgement debtor’s entire property is impermissible if the sale of a part of the property is sufficient to satisfy the decree. This decision was rendered in the case of Bhikchand S/O Dhondiram Mutha (Deceased) Through LRS. vs. Shamabai Dhanraj Gugale (Deceased) Through LRS. (Civil Appeal No. 5026 of 2023).

The judgement stressed that the principle of restitution, as recognized under Section 144 of the Code of Civil Procedure, 1908 (CPC), necessitates that the decree be executed in a manner that minimizes the loss to the judgement debtor. The case revolved around a debt recovery dispute dating back to 1969, wherein the original plaintiff, Shamabai Dhanraj Gugale, had advanced a loan of Rs. 8,000 to the original defendant, Bhikchand S/O Dhondiram Mutha.

Background and Case Details

In 1972, Shamabai Dhanraj Gugale, the original plaintiff, filed Special Civil Suit No. 255 for the recovery of Rs. 10,880 (principal amount of Rs. 8,000 plus accrued interest of Rs. 2,880) along with interest at 12% per annum pendente lite and post-decree. On February 15, 1982, the 4th Joint Civil Judge, Senior Division, Pune partially decreed the suit, awarding the principal amount, pre-suit accrued interest, and further interest at the rate of 12% per annum until realization.

Shamabai Dhanraj Gugale appealed against the partial rejection of her claim, while the judgement debtor filed cross-objections. During the pendency of the appeal, the plaintiff sought execution of the decree, leading to the attachment and sale of the judgement debtor’s properties.

Justice Prashant Kumar Mishra noted, “The obligation for restitution 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.”

Execution of Decree and Auction Sale

The execution of the decree resulted in the attachment of several properties belonging to the judgement debtor. These included:

  • Land at Mauje Davtakli, Taluka Shevgaon, District Ahmednagar at Gut No. 72, approximately 9 Hectares 55 Are (about 24 acres).
  • Land at Mauje Davtakli, Taluka Shevgaon, District Ahmednagar at Gut No. 280, approximately 0 Hectare 48 Are.
  • Three house properties at Mauje Devtakli, Taluka Shevgaon, District Ahmednagar.

On September 23, 1985, these properties were auctioned and purchased by the decree holders for Rs. 34,000. The first property, comprising 24 acres, was subsequently sold to Respondent No. 3 for Rs. 3.9 Lakhs on July 17, 2009.

Justice Hrishikesh Roy remarked, “The sale of the entire attached properties when only a part of the property was sufficient to satisfy the decree is a clear case of overreach and an injustice to the judgement debtor.”

Restitution Application and Legal Proceedings

Following the appellate court’s modification of the decree on August 2, 1988, reducing the interest and costs, the total decretal amount was lowered from Rs. 27,694 to Rs. 17,120. Subsequently, the judgement debtor, Bhikchand S/O Dhondiram Mutha, filed an application for restitution under Section 144 CPC on January 29, 1990. This application sought to set aside the auction sale on the grounds that the original decree had been varied substantially.

Despite depositing the revised decretal amount, the Trial Court, Appellate Court, and the Second Appellate Court rejected the judgement debtor’s application. They reasoned that he had not deposited any amount during the initial execution proceedings and thus was not entitled to restitution. However, Justice Prashant Kumar Mishra emphasized that “the principle of restitution ensures that no party should gain an advantage due to an erroneous decree. Restitution must place the parties in the position they would have occupied if the decree had not been erroneous.”

Supreme Court’s Analysis and Decision

The Supreme Court carefully analyzed the principles of restitution as enshrined in Section 144 CPC. Justice Hrishikesh Roy remarked that “the sale of the entire attached properties when only a part of the property was sufficient to satisfy the decree is a clear case of overreach and an injustice to the judgment debtor.” The Court further noted that the decree holder, being the auction purchaser, enjoyed the property for over 25 years and sold it for a significantly higher amount, highlighting the unfair advantage gained.

The Court underscored that the Code of Civil Procedure mandates that only so much of the property should be sold as is necessary to satisfy the decree. The ruling referenced prior cases, including Binayak Swain vs. Ramesh Chandra Panigrahi & Anr. and Chinnamal & Ors. vs. Arumugham & Anr., to reinforce the principle that a decree holder who becomes an auction purchaser must restore the property if the decree is varied or reversed.

The decision also drew on the principles outlined in South Eastern Coalfields Ltd. vs. State of M.P. & Ors., which highlighted the broad scope of restitution under Section 144 CPC. The Court noted that “the principles enshrined in Section 144 CPC have to be given the widest possible meaning,” ensuring that parties are placed in the position they would have been in if the erroneous decree had not been passed.

Final Verdict and Implications

In its final verdict, the Supreme Court set aside the auction sale of the judgement debtor’s properties. The Court ordered that the parties be restored to their original positions prior to the execution of the erroneous decree. This decision underscores the judiciary’s commitment to justice, equity, and fair play.

The Court highlighted that the provisions of Order XXI Rule 64 of the CPC were not properly followed. According to this rule, only the portion of the property sufficient to satisfy the decree should be sold. Justice Hrishikesh Roy observed, “The duty cast upon the court to sell only such property or portion thereof as is necessary to satisfy the decree is a mandate of the legislature which cannot be ignored.”

The ruling also clarified that the principle of restitution under Section 144 CPC is a statutory recognition of a pre-existing rule of justice. The Court cited the case South Eastern Coalfields Ltd. vs. State of M.P. & Ors. to affirm that the principles enshrined in Section 144 CPC must be given the widest possible meaning to ensure complete justice.

Additionally, the Court rejected the argument that the judgement debtor was not entitled to restitution due to his failure to deposit any amount during the initial execution proceedings. Justice Prashant Kumar Mishra reiterated, “A decree for the realization of a sum in favour of the plaintiff should not amount to the exploitation of the judgement debtor by selling his entire property.”

Conclusion

The Supreme Court’s ruling marks a significant moment in the jurisprudence surrounding the execution of decrees and the application of restitution principles. By declaring that the sale of a judgement debtor’s entire property is impermissible if the sale of a part of the property is sufficient to satisfy the decree, the Court has set a clear precedent to prevent overreach and ensure fairness in judicial processes.

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