SUPREME COURT HOLDS THAT A PROPERTY WHICH HAS BEEN SOLD PRIOR TO THE INSTIUITION OF A SUIT FOR SPECIFIC PERFORMANCE CANNOT BE THE SUBJECT MATTER OF AN ATTACHMENT OR AN EXECUTION

Recently, a two Judge Bench of the Supreme Court comprising of Justice M. R. SHAH and Justice CT Ravikumar passed a Judgment dated 10.02.2023 in Gas Point Petroleum India Limited vs Rajendra Marothi in CIVIL APPEAL NO.  619 OF 2023, and held that provision regarding the deposit of 25% of the amount by the purchaser other than the Decree Holder is mandatory and the full amount of the purchase money must be paid within fifteen days from the date of the sale.

FACTS

In this case, a civil suit was filed by Smt. Gayatri Agrawal against the National Ginni Enterprises with respect to the L.P.G. Gas Agreement.  In the year 1998, the decree holder filed a suit for specific performance of the L.P.G. Gas Agreement. The civil   suit   was not in manner with respect to the property in question. An interim injunction application was filed by the   original   plaintiff where the Plaintiff submitted that there was a likelihood that   the defendants were trying to leave Damoh after selling and transferring their firm, namely, National Gini Enterprises, to any other person. The application was filed under Order 38 CPC as well as for  permanent  injunction.  By order dated   18.05.1999   the   learned   Trial   Court   directed   to maintain status quo.  The learned Trial Court further directed that if the defendants transfer their firm Ginni Enterprises to any other person then they would not transfer the same against  the interest  of  the plaintiff. That thereafter the decree   came   to   be   passed   on   30.09.1999   directing   the defendants – judgment   debtor   –   Ginni   Enterprises   to supply LPG gas and in the event they could not do so they were to pay Rs. 2,38,450/­ + Rs. 23,500/­ (sic). As the decree was not executed the decree   holder   filed   the   execution   proceeding.   In   the execution proceeding the property in question was put to auction for recovery of Rs. 2,38,450/­ + Rs. 23,500/­ (sic). The   property   was   put   to   auction   on   18.10.2011 despite the fact that the current owner of the said the property had purchased from the Judgment Debtor as early as 31.08.1999. The auction purchaser – respondent No. 1 in the Supreme Court deposited 25% of the amount on 03.11.2011 and balance 75% of the amount on 04.11.2011. The matter went up to the Appellate Court, High Court and finally before the Apex Court. The Supreme Court after hearing the parties held that a sale that has been concluded in 1999 much before the Decree was passed could not be the subject matter of the suit which was for specific performance of the agreement.

Feeling aggrieved and dissatisfied with the judgment and order passed by the Madhya Pradesh High Court, the original Respondent No. 1 moved the Supreme Court under Article 133 of the Constitution of India (Appeals to the Supreme Court in Civil Matters).

The Apex Court relied on the Judgment Manilal Mohanlal Shah and Ors. Vs. Sardar Sayed Ahmed Sayed Mahmad and Anr. (1955) 1 SCR 108, wherein it was held that

“8. The provision regarding the deposit of 25 per cent by the purchaser other than the decree­holder is mandatory as the language of the Rule suggests. The full amount of the purchase money must be paid within fifteen days from the date of the sale but the decree­holder is entitled to the advantage of a set­off. The provision for payment is, however, mandatory…. (Rule 85). If the payment is not made within the period of fifteen days, the court has the discretion to forfeit the deposit, and there the discretion ends but the obligation of the court to resell the property is imperative. A further consequence of non­payment is that the   defaulting purchaser forfeits all claim to  the property.… (Rule 86).”

CONCLUSION

Based on the aforesaid observations, the Supreme Court set aside the Judgment of the Madhya Pradesh High Court and consequently the order passed by the Executing Court overruling the objections raised by the Appellant was also quashed. The Supreme Court concluded as follows:

“9. Even otherwise, it   is   required   to   be   noted   that   the Appellant herein purchased the property in question much before the auction of the property i.e., 31.08.1999. At the relevant time the property in question was not the subject matter of suit. As observed hereinabove, the subject matter of   suit   was   specific   performance   of   the   L.P.G.   gas agreement   and   even   the   ad­interim   injunction   dated 18.05.1999 was also against the transfer of firm Ginni Enterprises to any other person and the defendants were directed to maintain status quo with respect to their firm Ginni   Enterprises.  

Therefore, at   the   time   when   the property in question was put to auction on 18.10.2011 the Appellant had already purchased the said property as far as back on 31.08.1999 as there was no injunction with respect to the said property while ad­interim injunction dated   18.05.1999   and   as   observed   hereinabove,   the property in question was not the subject matter of suit and the   decree   came   to   be   passed   on   30.09.1999   and   the property was put to auction in the year 2011 for recovery of sum of Rs.  2,38,450/­ + Rs. 23,500/­ (sic). The ad interim injunction dated 18.05.1999 cannot be pressed into   service against the Appellant. Therefore, the High Court has committed an error in considering injunction dated 18.05.1999 against the Appellant. Therefore, at the time when the property was put to auction on 18.10.2011, the Judgment Debtor was not the owner and therefore, the same   could   not   have   been   put   to   auction.   Under   the circumstances, learned   Executing   Court   erred   in overruling the objections raised by the Appellant against the   auction/sale   of   the   property   which   the   Appellant purchased much prior to the date of the auction i.e., on 31.08.1999.

10. In view of the above and for the reasons stated above, the impugned judgment and order passed by the High Court deserves to be quashed and set aside and is accordingly quashed and set aside and consequently the order passed by the Executing Court overruling the objections raised by the Appellant also deserves to be quashed and set aside and is quashed and set aside. The order passed by the lower Appellate Court is hereby restored. It will be open for respondent No. 1 to get back the amount deposited by him, lying with the Executing Court. Present appeal is accordingly allowed. In the facts and circumstance of the case there shall be no order as to costs.”

EDITOR’S COMMENT

As usual a well-reasoned Judgment has been passed by the above Bench which is known for quick dispensation of justice. The Respondent no. 1 at the Supreme Court had already purchased the land before the Decree was passed by the Trial Court and as such, a land that did not belong to the National Ginni Enterprises could not have been made the subject matter of the attachment or sale in an execution proceeding wherein the buyer had already paid for the land much before the Decree.

Devashish Kakkar

Legal Associate

The Indian Lawyer