Supreme Court Clarifies Restitution Rights: Decree Holder vs. Bona Fide Auction Purchaser in Modified or Reversed Decrees

May24,2024 #Execution #SUPREME COURT
Landmark Judgment Law Insider (1)

Published on: May 24, 2024 08:44 IST

Court: Supreme Court of India

Case: Chinnammal v. P. Arumugham 1991

Honourable Supreme Court of India has held that there is thus a distinction maintained between the decree holder who purchases the property in execution of his own decree which is afterwards modified or reversed, and an auction purchaser who is not party to the decree.

Where the purchaser is the decree holder, he is bound to restore the property to the judgment debtor by way of restitution but not a stranger auction purchaser.

The latter remains unaffected and does not lose title to the property by subsequent reversal or modification of the decree. The courts have held that he could retain the property since he is a bona fide purchaser. This principle is also based on the premise that he is not bound to enquire into correctness of the judgment or decree sought to be executed.

11. There cannot be any dispute on this proposition and it is indeed based on a fair and proper classification. The innocent purchaser whether in voluntary transfer or judicial sale by or in execution of a decree or order would not be penalised. The property bona fide purchased ignorant of the litigation should be protected. The judicial sales in particular would not be robbed of all their sanctity.

It is a sound rule based on legal and equitable considerations. But it is difficult to appreciate why such protection should be extended to a purchaser who knows about the pending litigation relating to the decree. If a person ventures to purchase the property being fully aware of the controversy between the decree holder and judgment debtor, it is difficult to regard him as a bona fide purchaser.

The true question in each case, therefore, is whether the stranger auction purchaser had knowledge of the pending litigation about the decree under execution. If the evidence indicates that he had no such knowledge he would be entitled to retain the property purchased being a bona fide purchaser and his title to the property remains unaffected by subsequent reversal of the decree. The court by all means should protect his purchase.

But if it is shown by evidence that he was aware of the pending appeal against the decree when he purchased the property, it would be inappropriate to term him as a bona fide purchaser.

In such a case the court also cannot assume that he was a bona fide or innocent purchaser for giving him protection against restitution. No assumption could be made contrary to the facts and circumstances of the case and any such assumption would be wrong and uncalled for.

Drafted By Abhijit Mishra

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