Supreme Court: In an appeal filed by the auction purchasers challenging the impugned decree concerning a court auction being vitiated by fraud and material irregularities, which was subsequently affirmed by the first Appellate Court and the High Court, a Division Bench of J.B. Pardiwala* and R. Mahadevan, JJ. allowed the appeal and upheld the auction sale.
The Court held that the separate civil suit, seeking declaration that the auction sale was void, was not maintainable in law, because the respondents being transferee pendente lite, the protection meant for genuine third parties, cannot be extended to them.
Factual Matrix
In the instant matter, the dispute concerns agricultural land forming part of a larger mortgaged estate admeasuring 116 Kanals 13 marlas, out of which 24 Kanals 11 marlas constituted the suit property. In 1970, the original owner mortgaged the entire property with the respondent Bank to secure a tractor loan. Upon default, the Bank instituted a suit for recovery in 1982 seeking repayment and, in default, sale of the mortgaged property.
An ex parte money decree was passed on 12-11-1984 recognising the mortgage. No appeal was preferred. During the pendency of the decree and prior to satisfaction thereof, the legal heir of the borrower sold portions of the mortgaged property in two tranches to the plaintiffs (respondent 1 and 2), who claimed to be bona fide purchasers for value without notice.
Subsequently, execution proceedings were initiated. The entire mortgaged property was attached and auctioned in 1988. The appellants, sons of one of the judgment-debtors, purchased the entire property in court auction for ₹35,000. Sale was confirmed and possession delivered.
Alleging fraud, suppression, and illegality in the auction proceedings, the purchasers of the suit property filed a separate civil suit seeking declaration that the auction sale was void insofar as their property was concerned.
Proceedings Before the Courts Below
The trial court held that the auction sale insofar as it related to the suit property was “illegal, void and not binding” on the plaintiffs. The trial court found that the auction was conducted in a clandestine manner, that the judgment-debtors were barred from bidding but had indirectly participated through their sons, and that the entire property was sold though only a fraction was sufficient to satisfy the decretal amount. The trial court held plaintiffs to be lawful owners and granted joint possession.
The First Appellate Court affirmed the decree, and held that respondent 3, being a joint owner, was competent to transfer the suit property.
The High Court, while dismissing the second appeal, held that the auction was vitiated by fraud, that the plaintiffs were bona fide purchasers, and that a separate suit was maintainable notwithstanding Section 47 of the Civil Procedure Code, 1908 (CPC), as fraud vitiates all judicial acts.
Moot Points
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Whether the transfer of the suit property in favour of respondents 1 and 2 was hit by Section 52 of the Transfer of Property Act, 1882 and the doctrine of lis pendens?
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Whether the respondents could have availed remedies under Order XXI Rules 89 or 90 CPC respectively?
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Whether a separate suit was barred under Order XXI Rule 92(3) or Section 47 CPC and whether they were “third parties” within the meaning of Order XXI Rule 92(4) CPC?
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Whether failure to invoke Order XXI Rule 99 barred the maintainability of the suit?
Court’s Analysis
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Issue 1 — Doctrine of Lis Pendens applies to Mortgage-based Money Suits
The Court observed that Section 52 of the Transfer of Property Act embodies a principle of public policy, intended to maintain the subject matter of litigation in status quo until the rights of parties are finally determined. It was noted that the doctrine does not annul the transfer but renders it subservient to the rights declared by the Court in the pending proceedings.
The Court rejected the contention that the decree obtained by the Bank was a mere money decree and noted that the plaint itself referred to the registered mortgage dated 06-06-1970 and sought recovery of the loan amount with a clear prayer that, in the event of default, the mortgaged property be proceeded against. Once the mortgaged property was described in the plaint and formed the substratum of the claim, the “right to immovable property was directly and specifically in question”.
Placing emphasis on the Explanation to Section 52, the Court held that pendency of a suit continues “until complete satisfaction or discharge of such decree or order has been obtained”. The Court stated that the respondents purchased the suit property after the institution of the suit and, in fact, even after the decree had been passed. They were, therefore, clearly pendente lite transferees who stepped into the shoes of the judgment-debtor and were bound by the outcome of the proceedings.
“…the respondent nos. 1 and 2 respectively, had stepped into the shoes of their vendor who was a judgment-debtor.”
The Court held that “lack of knowledge of the pending proceedings or the procurement of a No Encumbrance Certificate would be of no avail”, as the doctrine applies irrespective of notice. The Court further stated that by purchasing a portion of the mortgaged property during the pendency of the suit, the respondents “agreed to be bound by the outcome of such proceedings”.
Accordingly, the Court held the transfer in favour of respondent 1 and 2 was hit by Section 52 of the Transfer of Property Act.
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Issue 2 — Relief under Order XXI Rules 89 or 90 CPC
The Court observed that Order XXI Rule 89 permits an application to set aside a sale only on deposit of the decretal amount along with compensation, and such remedy is generally available to judgment-debtors or persons deriving title from them. The Court asserted that the Respondent 1 and 2, being transferee pendente lite, could not claim any higher or independent right than their vendor.
As regards Rule 90, the Court reiterated that an auction sale cannot be set aside merely on the ground of irregularity or inadequacy of price unless substantial injury is established. The Court held that questions relating to title, saleable interest, or antecedent defects in the judgment-debtor’s title fall outside the scope of Rule 90.
The Court further held that since no application under either Rule 89 or Rule 90 was filed within limitation, therefore the respondents could not be permitted to circumvent statutory remedies by instituting a separate suit.
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Issue 3 — Separate suit barred under Order XXI Rule 92(3) or Section 47 CPC
The Court stated that a separate suit is barred by Rule 92(3) and Section 47 CPC, where the grievance pertains to execution, discharge, or satisfaction of the decree.
The Court held that respondents were not “third parties” within the meaning of Rule 92(4) CPC but were representatives of the judgment-debtor as they derived title from one of the judgment-debtors and, therefore, “stepped into the shoes of the judgment-debtor.”
The Court noted that a third party contemplated under Rule 92(4) is one who asserts an independent right, title or interest not traceable to the judgment-debtor. Since, the respondents’ claim being derivative in nature, they could not avail the exception carved out under Rule 92(4).
On the question of maintainability, the Court held that since the respondents were not “third parties” but representatives of the judgment-debtor as envisaged under Section 47 CPC having purchased the suit property during the pendency of the proceedings. The Court state that since the challenge pertained directly to the execution sale, the bar under Section 47 was absolute.
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Issue 4 — Failure to invoke Order XXI Rule 99 affected maintainability
The Court observed that Order XXI Rule 99 provides a complete code for adjudication of claims by persons dispossessed in execution and where such remedy is available, recourse to a separate suit is barred.
“The condition precedent for making an application under Rule 99 maintainable is that the person preferring such an application must be dispossessed from the immovable property, and that he must be someone other than the judgment debtor. This dispossession must occur as a direct consequence of or in the course of execution of said original decree.”
The Court noted that despite claiming dispossession pursuant to the auction sale, the Respondents did not invoke Rule 99 and held that having failed to avail the statutory remedy, they could not be permitted to institute a civil suit to reopen concluded execution proceedings.
“One cannot file a separate suit as an alternative to an application under Rule 99. If such a suit is preferred, it could be said to be non-maintainable for the reason that the appropriate course of action would have been to prefer an application under Rule 99 instead.”
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Remedy under Order XXI CPC vis-à-vis Separate Suit
The Court held that a separate suit is maintainable only at the instance of a person whose claim is wholly independent of the judgment-debtor and who does not derive title through him, and whose rights could not have been effectively adjudicated within the framework of execution proceedings.
The Court further held that a transferee pendente lite or a person stepping into the shoes of the judgment-debtor cannot claim the status of a third party, and any attempt by such person to bypass execution remedies by filing a separate suit would defeat the mandate of Section 47 CPC as well as the doctrine of lis pendens.
Court’s Decision
The Court held that the respondents, having derived title from the judgment-debtor during pendency of the mortgage suit and execution proceedings, could not be treated as third parties. The Court, further, held that respondents’ rights were subordinate to the decree, and therefore, their only remedies lay under Order XXI CPC, which they failed to invoke.
The Court held that —
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The respondents were transferee pendente lite and hit by Section 52 of the Transfer of Property Act.
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The respondents were representatives of the judgment-debtor and bound by Section 47 CPC.
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A separate suit challenging a confirmed auction sale was barred.
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Allegations of fraud were neither properly pleaded nor proved.
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Remedies under Order XXI CPC could not be bypassed.
Accordingly, the Court set aside the impugned judgments of the Trial Court, First Appellate Court, and High Court, and dismissed the suit filed by the respondents.
Recognizing that the auction purchasers were close relatives of the vendor and that 40 years had passed, the Court exercised its powers to do justice and directed the appellants to pay a sum of Rs. 75,00,000/- to the respondents, within a period of 6 months from the date of this judgment.
[Danesh Singh v. Har Pyari, CIVIL APPEAL NO. 14761 of 2025, Decided on 15-12-2025]
*Judgment by Justice J.B. Pardiwala
Advocates who appeared in this case:
Mr. Vikas Singh, Senior Counsel, Counsel for the Appellant
Ms. Aparajita Singh, Senior Counsel, Counsel for the Respondent No. 1 and 2