Supreme Court: Doctrine Of Lis Pendens Can’t Be Blindly Made Inapplicable To Suits In Which Plaint Contains Averment That Mortgaged Property Be Attached & Sold

The Supreme Court held that the Doctrine of Lis Pendens cannot blindly be made inapplicable to suits in which the plaint contains a specific averment that the mortgaged property be attached and sold in lieu of the decree or a charge be created on the property.

The Court held thus in a Civil Appeal arising from the Judgment of the Punjab and Haryana High Court by which the second Appeal was dismissed and the Judgment of the Appellate Court was affirmed.

The two-Judge Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan observed, “Section 52 of the 1882 Act embodying the doctrine of lis pendens would apply to suits where any right to the property in question is directly and specifically in issue. Whether any right in the property was directly and specifically in question in the suit would depend on the facts and circumstances of each case. The doctrine cannot blindly be made inapplicable to suits in which the plaint contains a specific averment that the mortgaged property be attached and sold in lieu of the decree or a charge be created on the property. If interpreted so, any judgment-debtor can render the decree incapable of execution by transferring his interest in the property during the pendency of such a suit.”

The Bench said that once an Application under Rule 99 of the Civil Procedure Code, 1908 (CPC) comes to be allowed and the person dispossessed by the auction-purchaser is put back into possession by the Executing Court through an Order under Rule 100, Rule 92(5) or at least its underlying intent must be carried forward by the Executing Court such that the auction-purchaser, against whom the order under Rule 100 would operate is able to take back the purchase-money he paid at the auction-sale, with or without interest.

Senior Advocate Vikas Singh appeared for the Appellants, while Senior Advocate Aparajita Singh appeared for the Respondents.

Facts of the Case

In the year 1970, Duli Chand had availed a loan of Rs. 20,000/- from New Bank of India, i.e., the Respondent no. 6, to purchase a tractor, and in lieu thereof he had mortgaged his property admeasuring 116 Kanals 13 marlas (mortgaged property) vide a registered Mortgage Deed. Owing to his failure in repaying the entire loan amount, the Respondent Bank instituted a suit before the Sub-Judge, which was decreed ex-parte against the Respondent nos. 3 to 5 as the original borrower had passed away during the pendency of the suit. The decree ordered the recovery of the due amount along with costs and interest amounting to Rs. 22,753/- and no Appeal was preferred against the same. Thereafter, the Respondent no. 1 purchased the mortgaged property for Rs. 45,000/-. Afterwards, the bank moved for execution of the decree and prayed that the decretal amount be paid, alongwith costs and interest by way of attachment and sale of the mortgaged property.

The first purchase was effected before the Execution Petition was instituted by the Bank and the second purchase occurred after its institution. The Executing Court vide Order attached the entire mortgaged property as the Judgment-debtors failed to make the payment to the bank. Consequently, an auction of the property was held and the Appellants were declared as the highest bidders. The execution proceedings were disposed of. It was the case of the Respondent nos. 1 and 2 that on a date after the delivery of possession to the Appellants, they were denied access to the property. Such denial gave rise to the cause of action to file a separate suit before the Civil Judge (Trial Court). The Trial Court passed a decree declaring that the sale in respect of the suit property was void, illegal and not binding upon the Plaintiffs-Respondents. This was challenged before the Appellate Court, which dismissed the Appeal and the case was before the High Court. The High Court dismissed the second Appeal and being aggrieved, the Appellants approached the Apex Court.

Court’s Observations

The Supreme Court in view of the facts and circumstances of the case, noted, “… although any fraud or irregularity in the process of publication of an order of attachment or the lack thereof is broadly covered within the scope of Rule 90, yet an applicant must be able to prove that he has suffered substantial injury as a consequence of it. At the very least, the facts must be able to convince that substantial injury has been caused. Only then can it fall within the ambit of Rule 90.”

The Court elucidated that Rule 92(1) of CPC being couched in a mandatory language reflects that the Executing Court is cast with an obligation to pass an Order confirming the sale when the requisites mentioned therein stand fulfilled and when the sale becomes absolute, the Executing Court proceeds to grant a certificate under Rule 94, specifying the particulars of the property and the name of the purchaser.

“On the contrary, under Rule 92(2), where an application under Rules 89, 90, or 91 respectively, as the case may be, is made within the prescribed period of limitation and allowed, the court must proceed to pass an order setting aside the sale”, it added.

The Court said that when no application has been made under Rule 90 and a suit is preferred directly to assail an auction sale conducted in execution of a decree, Courts have attempted to adopt a balanced approach in deciding whether the suit was maintainable or not.

“While, on the one hand, courts have taken a strict approach in situations where the grounds which fall under Rules 89, 90 or 91 are being raised in a separate suit; on the other hand, in cases where the executing court did not have jurisdiction to sell the properties in the first place and therefore, the sale as a whole was rendered, a nullity, several decisions have leaned in favour of holding the separate suit maintainable. To curb any misuse of this leeway granted in the latter situation, over the period of time, the discussions reflected in the various law commission reports and the coming into force of the 1976 amendment respectively, have shown us that several grounds which were earlier interpreted as rending the whole sale a nullity were clarified as only being irregularities which would fall under the scope of Rule 90 instead. As a result, this progressively narrowed down the already small scope which existed for the filing of a separate suit”, it remarked.

The Court observed that the recourse under Section 47 CPC could be availed in a situation where the execution proceedings were itself without jurisdiction and a nullity and therefore, in holding a separate suit maintainable, along with ensuring that it is not hit by the bar under Rule 92(3), one must also be mindful of the fact that the words “and not by a separate suit” finds mention under Section 47 as well.

“… courts have to consider the interplay between allowing the filing of a suit and the possibility of raising such an issue under Section 47 CPC. … Section 47 envisages a bar which is wider in scope and states that any (other) question pertaining to the execution, discharge or satisfaction of a decree which is arising between the parties to the original suit or their representatives, must not be raised in a separate suit. This enlarged scope of application of Section 47 is probably why parties, on several instances, file simpliciter applications under Section 47”, it further noted.

The Court was of the view that one cannot overcome the limitation period prescribed under Rules 89, 90 or 91 respectively by filing a simpliciter application under Section 47 and demanding that the same be allowed.

“… any irregularity or fraud in the publishing or conducting of the auction sale cannot be raised even in a proceeding under Rule 99, as such grounds lie within the exclusive domain of the application under Rule 90. However, in an application under Rule 99, a dispossessed person could allege that the entire sale conducted by the executing court was a nullity for the reason that the judgment-debtor did not have any title over the said property”, it clarified.

The Court explained that there exists no option of filing a separate suit for a person who may very well prefer an application under Rule 99 of Order XXI CPC and one cannot file a separate suit as an alternative to an application under Rule 99.

“The facts and circumstances that we are faced with are entirely different and goes to the very root of the maintainability of the suit instituted by the respondent nos. 1 and 2 respectively. Their suit is non-maintainable not merely because of the failure to implead a necessary party but owing to the bar to a suit under Section 47 CPC and Rule 99 of Order XXI CPC respectively. Moreover, they are transferees pendente lite of the judgment-debtor, which fact, by itself, renders them ineligible to obtain any relief of declaration of title and/or possession”, it held.

Conclusion

The Court, therefore, concluded the following points –

• Rule 89 of Order XXI CPC provides an opportunity to any person claiming an interest in the property sold or a person acting for or on behalf of the persons having such interest, another opportunity to save the property from the clutches of the sale. A sine qua non for setting aside the sale under this rule would be the payment of the deposit as prescribed therein within a period of sixty days from the date of the sale. For the purposes of this rule, a pendente lite transferee of the judgment-debtor would also fall under the ambit of the phrase “person claiming an interest in the property sold”.

• Rule 90 of Order XXI CPC provides that the sale shall be set aside if there exists any material irregularity or fraud in publishing or conducting the sale. Furthermore, such material irregularity or fraud must cause a substantial injury to the applicant under Rule 90. In other words, there must be a direct nexus between the material irregularity or fraud and the substantial injury caused to the applicant.

• The words “material irregularity in publishing or conducting it” in Rule 90 would include any material irregularity or fraud occurring at a stage prior to the proclamation of sale as well, provided that the applicant did not have an opportunity to raise or could not have raised such a grievance at the appropriate time. Furthermore, the mere absence of or any defect in the attachment, by itself, cannot be a ground for setting aside the sale under Rule 90, unless substantial injury is proved. The applicant must make specific averments as regards the alleged irregularities or fraud, and convince the executing court that a substantial injury has been caused to him as a consequence.

• The absence of a saleable interest on the part of the judgment-debtor to the suit property cannot be brought in as a ground under Rule 90 of Order XXI CPC. Such a ground would squarely fall within the ambit of Rule 58 of Order XXI CPC, if the sale is yet to be confirmed.

• Rule 92(3) of Order XXI CPC states that no person against whom an order under Rule 92 is made (either confirming the sale under Rule 92(1) or setting it aside under Rule 92(2)) can institute a separate suit in that regard. However, there is a very narrow scope for a person to file a separate suit despite the bar under Rule 92(3). The reason for such a separate suit must be that the execution proceedings and the sale was without jurisdiction and therefore, a nullity and not binding on the plaintiff who has instituted a separate suit.

• Courts must be vigilant in ensuring that the plaintiff was not a party to the original decree or a representative of a party to the original decree, as stated in Section 47 CPC. If so, instead of filing a separate suit, such persons must prefer an application under Section 47 CPC. Upon any failure to do so, their separate suit would be hit by the bar contained in Section 47 CPC which specifically uses the words “and not by a separate suit”.

• The term “third party” under Rule 92(4) would mean a party other than the judgment-debtor, decree-holder or the auction-purchaser and would refer to a party who has not had his right, title or interest vis-à-vis the property in question adjudicated under Rule 58, Rule 97 or Rule 99 of Order XXI CPC respectively.

• Rule 92(4) is not a provision which confers any right to the third party to institute a suit for challenging the title of the judgment-debtor to the property which is subject to the execution proceedings.

• When a party other than the judgment-debtor, including a third party, is dispossessed during the course of execution of a decree, the only remedy for such a dispossessed party would lie in filing an application under Rule 99 complaining of its dispossession.

The Court also emphasised that Courts must be vigilant as to when the Plaintiff is invoking grounds which otherwise could be said to fall under the scope of Rule 90 of Order XXI CPC and when the grounds raised by the Plaintiff are such that the entire execution proceedings and the consequent sale suffered from the want of jurisdiction and/or was a nullity.

Accordingly, the Apex Court allowed the Appeal, directed the Appellants to pay Rs. 75 lakhs to the Respondents, and directed the Registry to circulate one copy each of the Judgment to all the High Courts.

Cause Title- Danesh Singh & Ors v. Har Pyari (Dead) Thr. LRs. & Ors. (Neutral Citation: 2025 INSC 1434)

Appearance:

Appellants: Senior Advocate Vikas Singh, AOR Lakshmi Raman Singh, Advocates Deepeika Kalia, Udita Singh, Sudeep Chandra, Vasudha Singh, Divya Sharma, and Punit Budhiraja.

Respondents: Senior Advocate Aparajita Singh, AORs Gp. Capt. Karan Singh Bhati, Vipin Kumar Jai, Advocates Rashid Khan, Anirudh Singh, Abhijeet Singh, Dashrath Singh, Gurinder Jai, and Sanjna Dua.

Click here to read/download the Judgment