Lal Bhagwant Singh vs Rai Sahib Lala Sri Kishen Das

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 101, 102 and 103 of 1951

Decision Date: 21 January 1953

Coram: Mehr Chand Mahajan, Natwarlal H. Bhagwati

In this matter the Supreme Court of India delivered its judgment on twenty-first January 1953. The parties before the Court were the petitioner, Lal Bhagwant Singh, and the respondent, Rai Sahib Lala Sri Kishen Das. The judgment was authored by Justice Mehr Chand Mahajan, who sat on the bench together with Justice Natwarlal H. Bhagwati. The case is reported in the law reports under the citations 1953 AIR 136 and 1953 SCC 539, and it is also referenced in the citator as D 1966 SC 948 (5). The substantive statutory provision involved was Section 144 of the Civil Procedure Code of 1908, which deals with compromise decrees and their enforcement. The factual backdrop concerned a compromise decree that required the defendant to sell immovable property to the decree-holder within one week for the amount stipulated as due. The decree was later amended to allow the debtor to pay the sum in instalments, with a provision that default on three instalments would make the entire balance immediately payable. After the amendment, the original decree was restored by the High Court, leading to a sale in execution. The amended decree was subsequently restored by the Privy Council. The issues before the Court included the validity of the sale, the possibility of restitution under the Uttar Pradesh Encumbered Estates Act of 1934 as amended in 1939, and whether the amendment application constituted fresh proceedings. The Court also had to consider the effect of the amendment Act on the earlier sale and the applicability of the procedural provisions of the said Act.

The Court’s headnote explained that the compromise decree had been mutually agreed upon by the parties, fixing the amount due to the plaintiff and obligating the defendant to convey sufficient immovable property within a week to satisfy the decree. When the Uttar Pradesh Agriculturists Relief Act of 1934 came into force, the Civil Judge amended the decree by reducing the monetary liability and permitting payment in twelve annual instalments, subject to the condition that default on three instalments would render the whole amount immediately payable. This amended decree was set aside by the Chief Court in 1938. The decree-holder then sought execution, resulting in a sale deed executed by the Civil Judge in 1939 for the full decree amount. The Privy Council later reversed the Chief Court’s decision and reinstated the Civil Judge’s amended decree in 1944. The judgment-debtor subsequently applied for restitution of the properties along with mesne profits. The Court held, confirming the decree of the Chief Court, that the judgment-debtor had not obtained any stay of the amended decree while the decree-holder’s appeal was pending before the Chief Court, and therefore was bound to comply with the terms of the amended decree. Moreover, the Privy Council’s restoration of the amended decree did not alter the instalment payment provisions or extend the time for such payments, and it did not change the parties’ positions under the amended decree. Consequently, the sale was not the result of any error in a decree that had been reversed on appeal, and the judgment-debtor was not entitled to restitution. The Court approved the principles laid down in Dayal Sardar v. Tari Deshi (I.L.R. 59 Cal. 647) and Gansu Ram v. Parvati Kuer (A.I.R. 1941 Pat. 130). The judgment-debtor’s request for restitution was therefore dismissed.

In the matter referred to, the appellant had earlier invoked section 4 of the Uttar Pradesh Encumbered Estates Act, 1934, seeking administration of his estate in the year 1936. However, the Board of Revenue set aside those proceedings in 1938. Because the appellant did not obtain an order staying execution, the decree was executed by means of a sale in February 1939. The Uttar Pradesh Encumbered Estates (Amendment) Act, 1939, was enacted only after the February sale had taken place. On 10 October 1939 the judgment-debtor filed a further application seeking to amend his earlier application. The Chief Court ultimately held that the October 1939 application must be treated as a new proceeding rather than as a continuation of the earlier one. The Court, confirming that view, observed that the original proceedings initiated in 1936 had been nullified by the Board of Revenue in 1938; consequently the February 1939 sale could not be disturbed by the bar created in section 11 of the Act. The order issued on the basis of the 10 October application was an order under a fresh application made pursuant to section 4, and therefore it possessed no retrospective effect and could not invalidate the sale that had been carried out when no application under section 4 was pending.

The judgment concerned civil appeals numbered 101, 102 and 103 of 1951, filed in the Civil Appellate Jurisdiction. Appeal 101 challenged the judgment and decree dated 13 March 1946 rendered by the Chief Court of Avadh at Lucknow in First Civil Appeal No. 132 of 1943, which itself arose from a judgment dated 25 September 1943 of the Court of Special Judge, First Grade, Sitapur in E E Act Suit No. 27/1 of 1938. Appeals 102 and 103 contested the judgment and decree dated the same 13 March 1946 of the Chief Court of Avadh at Lucknow in execution of decree appeals numbered 103 of 1944 and 23 of 1945, which were based on a judgment dated 16 November 1944 of the Court of Additional Civil Judge, Lucknow, in Miscellaneous Case No. 70 of 1944. Counsel for the appellant was represented by a senior advocate, while counsel for the respondent was assisted by another practitioner. The judgment was delivered on 21 January 1953 by Justice Mahajan.

The factual background of the three appeals was summarized as follows. On 4 July 1933, Rai Bahadur Lala Hari Kishen Das obtained from the civil judge of Sitapur a final compromise decree granting him a sum of Rs 3,88,300-2-6 together with costs, on the basis of two simple mortgages executed in his favour in 1928 and 1931 by Thakur Raghuraj Singh. The compromise stipulated that Thakur Raghuraj Singh would, within one week, sell to Hari Kishen Das selected villages from the mortgaged estate at agreed prices sufficient to satisfy the decree. Thakur Raghuraj Singh retained a right to reacquire the sold villages after five years and, in any case, before fifteen years had elapsed, upon payment of the stipulated prices.

Hari Kishen Das selected eight villages and the parties prepared sale and relinquishment deeds, which they executed on 4 July 1933. Before the deeds could be registered, the parties learned that a notification had been issued for the Court of Wards to assume management of the talukdar’s estate, and that such an assumption would probably make the conveyances ineffective. Because of the imminent notification, the sale fell through and the parties recovered the money spent on stamp papers. On 20 January 1934 the Court of Wards decided not to take the estate under its supervision. Following that decision, Hari Kishen Das renewed his demand that the judgment-debtor complete the sale deeds, but the judgment-debtor ignored the request. Consequently, on 26 May 1934 Hari Kishen Das filed an application for execution of the compromise decree. Raghuraj Singh raised several objections to the execution of that decree.

Before the court could dispose of those objections, two statutes came into force: the Uttar Pradesh Agriculturists’ Relief Act (XXVII of 1934) and the Uttar Pradesh Encumbered Estates Act (XXV of 1934). The Relief Act gave the judgment-debtor the right to obtain an amendment of the decree by reducing interest and to pay the decretal sum in instalments. The Encumbered Estates Act permitted a landlord-debtor whose property was encumbered to apply to the court for administration of his estate and liquidation of his debts. Raghuraj Singh promptly sought relief under both statutes. In the application under the Relief Act he prayed for a reduction of the decree amount and for instalment payments. In the application under section 4 of the Encumbered Estates Act he asked the civil judge to liquidate his debts. On 11 January 1936 the civil judge of Sitapur altered the decretal amount from Rs 3,88,300-2-6 to Rs 3,76,790-4-3, exclusive of costs and future interest, and ordered the amount to be paid in twelve equal annual instalments, each due in December, the first instalment to be paid in December 1936. The order also provided that if three instalments were missed, the entire balance then due would become immediately payable. Hari Kishen Das contested this order by filing a revision application before the Chief Court. The Chief Court set aside the amended decree on 15 February 1938. Meanwhile, in the proceedings under the Encumbered Estates Act that began on 29 October 1936, Raghuraj Singh obtained an order under section 6 of that Act, but the Board of Revenue later quashed that order.

On 13 August 1938 the court dismissed the debtor’s application filed under section 4 of the Encumbered Estates Act. After obtaining a successful revision from the Chief Court, Hari Kishen Das revived the execution of the compromise decree and demanded that Raghuraj Singh execute a sale deed conveying the selected villages to him. When Raghuraj Singh failed to comply with this demand, the court itself executed a deed of sale in favor of Hari Kishen Das on 24 February 1939 and subsequently delivered possession of the property covered by the deed to him. Thakur Raghuraj Singh died in 1941, and his son, the present appellant, succeeded to his interests. The appellant had earlier filed an appeal against the Chief Court’s decision dated 15 February 1938, which had set aside the amended decree, and had taken the matter to His Majesty in Council. By an order of His Majesty in Council dated 20 January 1944 the earlier decision of the Chief Court was reversed and the amended decree originally passed by the Civil Judge of Sitapur on 11 January 1936 was restored. The appellate authority authorised the appellant to approach the Civil Judge of Sitapur for any relief he might be entitled to concerning recovery of possession of the property. In reliance on the Privy Council’s decision, Bhagwant Singh, the appellant, applied for restoration of possession and for recovery of profits that he alleged had been wrongfully realised by Hari Kishen Das and, after his death, by his adopted son Sri Kishen Das. The creditor opposed the application vigorously, contending that under the amended decree a sum of Rs 4,31,148-9-9, which included interest and costs, was already due to the decree-holder on the date of the sale because three instalments that had fallen due remained unpaid. The creditor argued that the default clause of the decree had therefore been triggered, that the sale in execution could not be set aside, and that the decree-debtor had suffered no injury nor any loss, especially in the absence of proof that he possessed the means to pay the instalments.

The subordinate judge allowed the appellant’s restitution application on the condition that he pay, within two months, the accumulated sum that had become due to the decree-holder for the unpaid instalments up to the date of the order. The judge calculated that the arrears due up to December 1943 amounted to Rs 3,58,914-8-9. After deducting from this figure the net profits realised by the decree-holder during his period of possession, which were Rs 73,294-8-5, and also deducting the costs of the appeal that had been allowed by the Privy Council, the judge determined that a balance of Rs 2,85,620-0-74 remained payable. He directed that if this amount was not deposited in court within the two-month period, the restitution application would be dismissed. Bhagwant Singh subsequently applied for an extension of time to make the payment, but the application was summarily rejected. Both Rai Sahib Sri Kishen Das and Bhagwant Singh then appealed the subordinate judge’s decision to the Chief Court.

The appeal lodged by Rai Sahib Sri Kishen Das was recorded as appeal number 103 of 1944. In that appeal he maintained that the judgment-debtor was not entitled to any restitution at all. The appeal submitted by Bhagwant Singh bore the number 23 of 1945, and in that proceeding he asserted that he should be permitted restitution without any condition attached. The Chief Court examined both appeals and decided to allow the decree-holder’s appeal, numbered 103 of 1944, awarding costs to the decree-holder. The Court dismissed the judgment-debtor’s appeal, numbered 23 of 1945, but did not award costs to that party. Moreover, the Court rejected the judgment-debtor’s application for restitution on the thirteenth day of March, 1946. The decisions rendered in that case gave rise to further appeals identified as Appeals 102 and 103 of 1951, which arose out of the same set of orders. Another appeal, numbered 101 of 1951, originated from a different decision of the Chief Court dated the thirteenth of March, 1946, which affirmed a decree dated the twenty-sixth of September, 1943, issued by the special judge of Sitapur under the provisions of the Encumbered Estates Act. The factual matrix of that earlier matter was as follows: on the twenty-eighth of October, 1936, Thakur Ragburaj Singh filed an application under section 4 of the Uttar Pradesh Encumbered Estates Act (Year XXV of 1934) seeking administration of his estate in order to liquidate debts estimated at approximately fourteen lakh rupees. On the thirteenth of August, 1938, the Board of Revenue set aside the proceedings that had been initiated under the Encumbered Estates Act by Thakur Ragburaj Singh. Because the debtor failed to obtain a stay of execution from either the Chief Court or the Privy Council, the civil judge to whom the execution proceedings had been transferred, on the thirteenth of February, 1939, directed the judgment-debtor to execute a sale deed; when the judgment-debtor defaulted, that same civil judge, on the twenty-fourth of February, 1939, executed a sale deed on behalf of the judgment-debtor in favour of Rai Bahadur Hari Kishen Das.

The Uttar Pradesh Encumbered Estates Amendment Act (XI of 1939) became operative after the February 1939 sale and permitted the original applicants to amend their applications, thereby reviving matters that had previously been quashed. Accordingly, on the tenth of October, 1939, Thakur Ragburaj Singh applied for such an amendment. The sub-divisional officer approved the request and, under the authority of section 6 of the Encumbered Estates Act, issued an order on the eighteenth of October, 1939, forwarding the amended application to the first-grade special judge at Sitapur. On the thirty-first of July, 1940, that special judge issued an order declaring that the proceedings would commence anew. Thakur Ragburaj Singh challenged this determination by filing a revision before the Chief Court, contending that the proceedings should not be treated as fresh. The Chief Court dismissed the revision on the ninth of December, 1940. Subsequently, a notice issued under section 11 of the Encumbered Estates Act enabled Hari Kishen Das, on the fourteenth of August, 1942, to lodge an objection under the same section, asserting that the villages sold to him formed his property and therefore could not be attached or sold to satisfy Thakur Ragburaj Singh’s debts. The debtor contested this objection. Finally, the special judge, by his decree dated the twenty-fifth of September, 1943, declared that Rai Bahadur Hari Kishen Das was the proprietor of all eight villages that had been included in the sale deed executed on the twenty-fourth of February, 1939.

In 1939 an appeal was filed against the decree of the special judge, and the Chief Court affirmed that decree on 13 March 1946. The present appeal, identified as Appeal No 101 of 1951, is directed against the same decree and, in the view of the Court, can be disposed of without extensive argument. The proceedings under the Encumbered Estates Act had been nullified by the Board of Revenue in August 1938; consequently, the sale that occurred in February 1939 was not affected by the prohibition imposed by section 7 of that Act. According to the decision of the Chief Court dated 9 December 1940, the appellant could not be permitted to revive the contention that the proceedings should be treated as having been pending in February 1939 because of the provisions of the amending Act. Counsel for the appellant pressed the argument that the provisions of the amending Act XI of 1939 should operate retrospectively and that the date of his original application ought to be regarded as the commencement date of the proceedings under the Encumbered Estates Act. The Court held that this contention had been correctly rejected by the lower courts, observing that the order issued under section 6 on 18 October 1939 was based on a fresh application filed under section 4 of the U.P. Encumbered Estates Act on 10 October 1939, and that this order could not undermine the validity of the sale deed executed at a time when no application under section 4 was pending. An argument had been raised in the lower courts that the sale deed was a nullity because execution proceedings were then pending before the collector under Schedule III of the Code of Civil Procedure; that issue was not raised before this Court. Accordingly, the appeal fails and is dismissed with costs. Regarding Appeals Nos 102 and 103, the principal issue for determination is whether, under the circumstances, the appellant is entitled to restitution through restoration of possession and an award of mesne profits after the Privy Council reversed the compromise decree and the civil judge restored the amended decree under the Relief Act. In view of section 144 of the Code of Civil Procedure, the Chief Court had expressed the view that the 1939 sale was inevitable and could not have been avoided had the amended decree been in force, and that setting it aside would grant the appellant an advantage not available to his predecessor, who had defaulted on three instalments before the sale. The Court quoted the Chief Court’s judgment: “For purposes of section 144 we have in the words of the section ‘to place, the parties in the position which they would have occupied but for such decree.’”

The Court observed that the language of section 144 of the Code of Civil Procedure requires that the parties be placed “in the position which they would have occupied but for such decree or such part thereof as has been varied or reversed.” Accordingly, the issue for determination was whether the judgment-debtor would have been able to pay the accumulated amount of three instalments, amounting to Rs 1,37,839-1-11, in December 1939. On the basis of the evidence, the lower court concluded, and the Court concurred, that Thakur Raghuraj Singh was indebted to other creditors to an amount not less than fourteen lakh rupees, while the total value of the landed property, computed at the rate specified in the compromise of 1133, was only nine lakh rupees. Lal Bhagwant Singh presented no evidence to show that his father was in a financial position to meet the three instalments falling due in December 1938. No objection was recorded at the bar to either the estimate of indebtedness or the valuation of the estate. Accepting those figures as correct, the Court found it impossible to believe that the judgment-debtor could have prevented the sale that occurred on 24 February 1939, had the parties been governed by the decree of 1936. The resulting sale was therefore inevitable and could not be ascribed solely to the erroneous order issued by this Court in February 1938. In the Court’s opinion, no exception could be made to the judgment of the Chief Court given the facts and circumstances, and consequently both appeals were to be dismissed. By virtue of the order of His Majesty in Council, the amended decree passed by the civil judge of Sitapur on 11 January 1936 was to be deemed as constantly in force. All terms of the original compromise were incorporated into the amended decree, the only differences being a reduction of the sum due from Rs 3,88,300-2-6 to Rs 3,76,790-4-3, a reduction of pendente-lite and future interest, and the provision for instalments. The compromise decree, after the necessary adaptations, became the amended decree and was enforceable as such. It afforded the judgment-debtor an opportunity to satisfy the decree by instalments, provided he did not default, thereby allowing him to protect the property from sale; however, if the entire amount became due according to its terms or any portion remained unpaid, the decree had to be satisfied in the same manner as the original compromise decree. While the decree-holder’s appeal was pending before the Chief Court, the judgment-debtor obtained no order staying the operation of the amended decree and was therefore bound to comply with its terms. He failed to pay any of the instalments that fell due in 1936 or 1937, and although the third instalment fell due in December 1938 after the amended decree had been set aside by the Chief Court, the judgment-debtor had appealed to the Privy Council for its restoration. Consequently, the Court held that he should have taken steps to protect himself against being in default with payment.

In that case the debtor was required to prevent a default that would arise from his failure to pay the third instalment. To avoid such a default, he was obliged either to pay or to offer to pay the decree-holder an amount equal to one instalment so that no instalment would be in arrears, or to obtain from the Privy Council an order releasing him from compliance with the amended decree that had been set aside by the Chief Court, even if that decree were later restored. If he could not obtain such a release, he should have applied to the Privy Council for a fresh order that would specify new instalments and a new timetable for payment. The debtor, however, took no action. He acted on the basis that he need make no payment and regarded himself as discharged from the liability under both the original decree and the amended decree. Because of this attitude, the failure to pay the third instalment that was due under the amended decree in December 1938 caused the entire decretal amount to become immediately due. Consequently, the benefit of paying the decretal sum by instalments was lost. The sum that was due from him in February 1939 under the decree was exactly the amount for which the property was sold in execution of the original decree. In this situation it could not be said that the Privy Council’s setting aside of the compromise decree and the restoration of the decree passed by the civil judge of Sitapur in 1936 altered the parties’ positions. The position would have been identical if that decree had remained in force and been under execution. If the debtor had been able to demonstrate that he could have paid the total of the instalments in December 1938, or at least one instalment so that he would not have been in default on three instalments, then the sale that took place in February 1939 could not be regarded as having been made under the amended decree. Rather, it would have been a sale resulting from the original compromise decree, which had been superseded, and because the amended decree had been restored, the sale effected under the reversed decree would have had to be set aside.

Conversely, if the sale could not have been avoided even if the amended decree that was eventually restored had been operative at the time of the sale, because the debtor was in default on three instalments and the sale was a necessary consequence of the decree of the civil judge, then the sale of February 1939 could not be said to be the result of the reversed decree. It is a fundamental duty of a court to ensure that its actions do not cause injury to any party. If any injury had been caused to the debtor by the sale of February 1939, it would have been the court’s responsibility to remedy that wrong. However, in this case it could not be said that any such wrong had been done to the debtor that required redress. The court therefore concluded that the debtor remained obligated to satisfy either the original decree or the amended decree, and that his failure to comply with the terms of the decree he had appealed to the Privy Council to restore resulted in the consequences that now applied, which differed from those of the original decree.

In this case the Court observed that no injury had been caused to the judgment-debtor that would require a remedy. The Court rejected the proposition that the judgment-debtor was released from the obligation to satisfy either of the two decrees. It noted that the instalment decree had been set aside by the Chief Court and the original decree had later been set aside by the Privy Council, but that the judgment-debtor could not claim exemption from both obligations. Because he himself had appealed to the Privy Council seeking restoration of the instalment decree, the Court held that he was bound to obey the terms of that decree if he wished to benefit from it. By failing to comply with those terms, he incurred the consequences attached to the restored decree, which differed from the consequences of the original decree. The Court further explained that granting the judgment-debtor’s prayer for restitution would create an injustice to the decreeholder and would be contrary to fairness. The Court recalled that in February 1939, a sum exceeding four lakh rupees had become payable to the decreeholder under both the original and the amended decrees, and that the judgment-debtor was entitled to a sale of the villages he had selected in order to satisfy that decretal debt. If that sale were set aside and possession of the eight villages were restored to the judgment-debtor with mesne profits awarded to him, the decreeholder would be stripped of the fruits of his decree, an outcome that the law of restitution does not intend. Such a result would place the judgment-debtor in a position of advantage to which he was not entitled. The Court noted that the executing court had ordered the restoration of possession of the eight villages to the appellant, on the condition that he pay the amount due to the decreeholder under the amended decree up to the date of that order. The trial judge’s order was favorable to the appellant, but the judgment-debtor could not avail himself of it because he lacked any means to make the required payment. Consequently, the Court held that an order of restitution as sought would conflict with the doctrine of restitution, which imposes on the party who received the benefit of an erroneous judgment a duty to make restitution to the other party, unless doing so would be manifestly against the real justice of the case. The Court found that the decreeholder had not obtained any advantage to which he was not entitled and that the judgment-debtor had suffered no loss. In any event, the judgment-debtor remained bound to discharge the decretal debt that was due from him, whether under the first decree or the second.

The Court observed that the debt could be discharged only by selling the villages that had been selected by the decreeholder, whether the debt arose under the first decree or under the second decree. Referring to the authority of Rankin C. J. in Dayal Sardar v. Tari Deshi (1), the Court noted that a judgment-debtor is not entitled to recover the properties unless the sale can be shown to be, in substance and truth, a consequence of the error in the reversed decree. Because the sale was inevitable under the amended decree, the judgment-debtor was therefore clearly not entitled to restitution. The Court further cited the decision in Gansu Ram v. Parvati Kuer (2), which held that when a judgment-debtor is unable to pay even the reduced decretal amount and the amount realized at sale is less than the decretal sum, the situation could not have been altered in any way had the decree been modified prior to, rather than after, the sale. In such circumstances, the judgment-debtor could not invoke the provisions of section 144 unless he could demonstrate that the sale was, in substance and truth, a consequence of the error in the original decree. The Court stated that the observations made in those precedents are directly applicable to the facts and circumstances of the present case. Consequently, for the reasons already explained, the Court held that there was no merit in either of the appeals and dismissed both appeals with costs. The appeals were therefore dismissed. The representation for the appellant was made by an agent identified as C. P. Lal, and the representation for the respondent was made by an agent identified as Rajinder Narain. (1) (1932) I.L.R. 59 Cal. 647, (2) A.I.R. 1941 Pat. 130.