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2025 DIGILAW 353 (AP)

Kanneganti Durganand v. Yuvaraj Finance Pvt. Ltd. , Rajahmundry

2025-02-24

VENUTHURUMALLI GOPALA KRISHNA RAO

body2025
JUDGMENT : 1. This appeal suit under Section 96 of the Code of Civil Procedure ("C.P.C." for short) is filed by the appellant challenging the order and decree, dated 21.09.2006 in EA No.261 of 2005 in EP No.43 of 2002 in Arbitration Application No.66 of 1999 passed by the I Additional District Judge, East Godavari District at Rajahmundry ("Executing Court" for short). 2. The appellant herein is the petitioner-3rd party claimant and the 1st respondent herein is the Decree Holder and 2nd respondent herein is the Judgment Debtor in EA No.261 of 2005 in EP No.43 of 2002 in Arbitration Application No.66 of 1999. 3. The appellant/petitioner-3rd party claimant filed EA No.261 of 2005 in EP No.43 of 2002 in Arbitration Application No.66 of 1999 praying for recognizing the right, title and possession of the petitioner-3rd party claimant over the petition schedule property and to raise attachment over the schedule property effected in the execution petition. 4. Both the parties in the appeal will be referred to as they are arrayed before the Executing Court. 5. The brief averments in EA No.261 of 2005 in EP No.43 of 2002 in Arbitration Application No.66 of 1999, are as under : The petitioner-3rd party claimant is the owner of the petition schedule property having purchased the same under a registered sale deed, dated 11.06.2004 for a sum of Rs.25,00,000/-. He took possession of the schedule property on the date of execution of sale deed and since then he is in possession and enjoyment of the same. The petitioner is a bona fide purchaser of the property for a valuable consideration. The recitals of the sale deed also disclose that 2nd respondent-Judgment Debtor is the owner of the petition schedule property and it is free from all encumbrances. Sale notice was affixed on the suit schedule property by affixing on the wall of the schedule property. On enquiry, the petitioner came to know the respondent Nos.1 and 2 herein colluded together and bring the schedule property for sale behind the back of the petitioner. If the respondents are allowed to sell the property, the petitioner-claimant will sustain loss which cannot be compensated. Hence, the application is filed to recognize the right, title and possession of the petitioner-third party claimant over the schedule property. 6. If the respondents are allowed to sell the property, the petitioner-claimant will sustain loss which cannot be compensated. Hence, the application is filed to recognize the right, title and possession of the petitioner-third party claimant over the schedule property. 6. The 1st respondent/decree-holder filed counter denying the averments mentioned in the petition and further contended as under : The execution petition was filed on 13.06.2002 and the attachment of the property was effected on 02.08.2002 and the matter is adjourned for return of warrant. The Judgment Debtor put up his appearance and failed to file the counter inspite of good amount of time, so the Judgment Debtor-2nd respondent was set ex parte and the Execution Petition was posted for sale papers. For the sale notice also publication was taken for appearance of 2nd respondent-Judgment Debtor and through his Counsel filed memo of appearance and failed to file the counter. As the Judgment Debtor failed to respond, again the Court directed for filing sale papers and encumbrance certificate and ordered for valuation of execution petition schedule property. Thus, the 1st respondent put up his appearance at various stages of proceedings, but failed to file the counter. The sale deed was obtained by the third party-petitioner on 11.06.2004 from the 2nd respondent, it is a long after attachment. The 2nd respondent, who was served with notice and aware of the attachment proceedings of the property and the proceedings of the execution petition sold the property on 11.06.2004. The 2nd respondent-Judgment Debtor in collusion with the petitioner wanted to drag on the litigation. The sale deed in favour of the petitioner is collusive one and only nominal. There are no grounds to raise attachment. 7. The 2nd respondent/Judgment-Debtor filed counter contended as under : The 2nd respondent has no knowledge about Arbitration proceedings said to have been concluded in favour of the decree-holder and the said Arbitration proceedings are only collusive and the award passed thereon is not binding on the 2nd respondent. The claimant-petitioner has purchased the property for a valuable consideration and he is a bona fide purchaser of the property. The decree-holder is fully aware of the sale transaction made by the 2nd respondent in favour of the claimant-petitioner but suppressing the same, taken the execution proceedings only to harass the 2nd respondent and the claimant-petitioner. The claimant-petitioner has purchased the property for a valuable consideration and he is a bona fide purchaser of the property. The decree-holder is fully aware of the sale transaction made by the 2nd respondent in favour of the claimant-petitioner but suppressing the same, taken the execution proceedings only to harass the 2nd respondent and the claimant-petitioner. The 2nd respondent mortgaged the suit schedule property to the Bank of Baroda in the year 1991 and as the 2nd respondent failed to discharge the said debt, the Bank has taken steps for realization of the amount. The third party has deposited the cash in the Bank directed the 2nd respondent to register the suit schedule property as per the directions of third parties. 8. Based on the above pleadings, the Executing Court framed the following points for consideration : (1) Whether the claimant-petitioner third party is having right, title or interest over the schedule property? (2) To what relief? 9. During the course of enquiry in the Executing Court, on behalf of the third party-claimant, PW1 was examined and Ex.A1 to Ex.A3 were marked. On behalf of the respondents, no oral evidence was adduced, but Ex.B1 to Ex.B3 were marked on their behalf. 10. After hearing the arguments of both sides, the Executing Court dismissed the application in EA No.261 of 2005 vide its order, dated 21.09.2006, against which the present appeal suit is preferred by the claim petitioner-3rd party in the application in questioning the order and decree passed by the Executing Court. 11. Heard Sri K.A. Narasimham, learned Counsel for the appellant and heard Sri T.V. Jaggi Reddy, learned Counsel for the 1st respondent/decree-holder. 12. Learned Counsel for the appellant would contend that the order and decree of the Executing Court is contrary to law, weight of evidence and probabilities of the case and the Executing Court erred in dismissing the petition filed by the appellant under Order XXI Rule 58 of the Code of Civil Procedure. He would further contend that the Executing Court ought to have held that the appellant herein is a bona fide purchaser for the value of the petition schedule property in good faith under a registered sale deed, dated 11.06.2004 said to have been executed by the 2nd respondent. He would further contend that the Executing Court did not appreciate the case in a proper perspective manner. He would further contend that the Executing Court did not appreciate the case in a proper perspective manner. He would further contend that the Executing Court has seen that merely because the 1st respondent attached the property and the same has been subsisting by the date of sale deed, the said transaction shall not be construed as a transaction inclusive of the debt payable to the 1st respondent by the 2nd respondent herein. He would further contend that the Executing Court came to a wrong conclusion and dismissed the application and the appeal may be allowed by setting aside the order and decree passed by the Executing Court. 13. Per contra, learned Counsel for the 1st respondent/decree-holder, would contend that on appreciation of the entire evidence on record, the Executing Court rightly dismissed the application filed by the appellant/claim petitioner herein and the appeal may be dismissed by confirming finding given by the Executing Court. 14. Now, the points for determination are as follows : (1) Whether the petitioner is a bona fide purchaser of the petition schedule property and whether the claim of the petitioner to release the property from attachment is maintainable under law? (2) Whether the Executing Court is justified in dismissing EA No.261 of 2005 in EP No.43 of 2002 in Arbitration Application No.66 of 1999? 15. Point No.1 : Whether the petitioner is a bona fide purchaser of the petition schedule property and whether the claim of the petitioner to release the property from attachment is maintainable under law? The case of the petitioner/appellant is that he is a bona fide purchaser. Prior to purchase of the property, he made enquiries and the alleged attachment is not known to him. The petitioner relied on Ex.A1 photostat copy of sale deed. It is not in dispute that the Arbitration Award in AA No.66 of 1999 was passed by the Arbitrator on 20.02.2002 against which the Decree Holder filed execution petition on 13.06.2002 and in the execution petition proceedings, the attachment was ordered by the Executing Court on 08.07.2002 and Rule 54 notice was also issued and the attachment on the schedule property was effected on 02.08.2002. The 2nd respondent herein is the 1st respondent in AA No.66 of 1999. She remained ex parte in arbitration proceedings. It is relevant to say the award passed on 20.02.2002 in AA No.66 of 1999 and it reached finality. The 2nd respondent herein is the 1st respondent in AA No.66 of 1999. She remained ex parte in arbitration proceedings. It is relevant to say the award passed on 20.02.2002 in AA No.66 of 1999 and it reached finality. As stated supra, the execution petition is filed on 08.07.2002 and Executing Court ordered notice under Order 21 Rule 54 of the Code of Civil Procedure and also attachment on the schedule property and the attachment was effected on 02.08.2002. In the execution petition proceedings, the 2nd respondent herein i.e., Judgment Debtor made appearance through her Advocate on 27.09.2002 and sought time for filing counter, but she failed to file any counter, though two years time has been granted by the Executing Court, she failed to raise any objection by filing any counter. Later on, the Executing Court ordered for filing sale papers and Encumbrance Certificate by the Decree Holder and subsequently, a sale notice was ordered and paper publication was also ordered on 17.06.2004. After receipt of sale notice, the 2nd respondent/ Judgment Debtor made appearance through her earlier Counsel. 16. The material on record clearly reveals that after passing Arbitration Award the execution petition proceedings are initiated by the Decree Holder and in the execution petition proceedings, the Judgment Debtor received notice and made appearance through her Counsel and attachment was effected on the schedule immovable property on 02.08.2002 and the Judgment Debtor is having much knowledge about the attachment which was effected on 02.08.2002 but she did not raise any objection in the Execution proceedings. As stated supra, the 2nd respondent who was served with notice engaged a Counsel and aware of the attachment proceedings of the schedule property and for the reasons best known to her, she executed a sale deed in favour of claim petitioner herein on 11.06.2004. It was contended by the appellant that the Judgment Debtor and Decree Holder colluded together. Admittedly, there is no evidence on record to prove the said bald plea taken by the appellant. Furthermore, the 2nd respondent filed counter in execution petition proceedings that the arbitration proceedings are collusive in nature and the award passed in AA No.66 of 1999 is not binding on the 1st respondent and claim petitioner purchased the property for a valuable sale consideration and he is a bona fide purchaser of the property. The Judgment Debtor supported the claim petitioner herein. 17. The Judgment Debtor supported the claim petitioner herein. 17. The fact remains that the execution petition was filed for sale of the schedule property and attachment was also effected on 02.08.2002 and having knowledge about the attachment proceedings having engaged Advocate in Executing Court, the Judgment Debtor wantonly executed a sale deed, dated 11.06.2004 i.e., after two years of the alleged attachment in favour of claim petitioner and the appellant herein filed a claim petition on 01.09.2005 at the fag-end of the execution proceedings. Attachment was effected and attachment warrant affixed to the house wall of the Judgment Debtor and the same is known to the public in large and having known about all proceedings in Execution Court, the Judgment Debtor executed a sale deed in the year 2004. Admittedly, appellant has not issued any notice to the Judgment Debtor demanding her to pay back his amount. Furthermore, the petitioner admitted in his evidence that he has not filed any complaint against the Judgment Debtor by alleging that she suppressed earlier attachment in execution petition proceedings and alienated the schedule property. Though PW1 admitted in his evidence in cross-examination that when he approached the Judgment Debtor through elders and the Judgment Debtor informed them about the loss sustained in the proceedings and findings. To prove the same, no evidence is produced by the appellant. The petitioner also relied on Ex.A3 paper publication that publication is subsequent to two years of the attachment effected in execution proceedings. The appellant relied on Ex.B1 to Ex.B3. Ex.B1 to Ex.B3 goes to show about the availment of loan by the Judgment Debtor from the Bank of Baroda, Bhimmavaram. The case of the Judgment Debtor is that third parties wanted to deposit the amount to which the debtor also gave consent for which amount was deposited and bank also received the amount from the third party and the debt due by the Judgment Debtor herein to the Bank of Baroda has been discharged. Therefore, attachment prevail over the sale deed. 18. Learned Counsel for the appellant placed a reliance of Gurram Seetharam Reddy v. Smt. Gunti Yashoda and another, 2004 (6) ALT 111 (F.B.), wherein the composite High Court of Andhra Pradesh at Hyderabad held as follows : "In relation to delivery of possession, the gist of the amendment is reflected in Rules 101 and 103 of Order XXI. 18. Learned Counsel for the appellant placed a reliance of Gurram Seetharam Reddy v. Smt. Gunti Yashoda and another, 2004 (6) ALT 111 (F.B.), wherein the composite High Court of Andhra Pradesh at Hyderabad held as follows : "In relation to delivery of possession, the gist of the amendment is reflected in Rules 101 and 103 of Order XXI. A perusal of Rule 58 discloses that all questions, including those relating to right, title or interest in the attached property, are required to be decided by the same Court and not by separate suit. Indirectly, an application filed under Rule 58 is conferred the status of a suit. The necessity to file a suit, in relation to such claims, would arise, if only the Executing Court refuses to entertain the claims or objections. The grounds for not entertaining the claims or objections are confined to those enumerated under proviso to sub-rule (1) of Rule 58. The nature of disposal to be given to the claims or objections, filed under sub-rule (1), is indicated in sub-rule (3). Under sub-rule (4), the order passed on such claims or objections, is to have the same force and be subject to the same conditions as if it were a decree, for the purpose of preferring the appeal and other related matters. The intention of the Legislature in extending the force of a decree, to an order passed under Rule 58, particularly in the context of appeal, is very clear." In the case on hand, after attachment effected, the Judgment Debtor made appearance through Advocate in execution petition proceedings and sought time for filing counter and after two years of the attachment, the Judgment Debtor alienated the property to the appellant herein, therefore, the attachment prevail over the sale deed. 19. Learned Counsel for the appellant placed a reliance of Ananthula Chandrakala v. Karim Gulam Hussain Lalani, 2006 (3) ALT 190 . The facts in the aforesaid case law are the suit is filed based on the strength of mortgage deed. Therefore, the facts and circumstances in the aforesaid case are different to the instant case. 20. 19. Learned Counsel for the appellant placed a reliance of Ananthula Chandrakala v. Karim Gulam Hussain Lalani, 2006 (3) ALT 190 . The facts in the aforesaid case law are the suit is filed based on the strength of mortgage deed. Therefore, the facts and circumstances in the aforesaid case are different to the instant case. 20. Learned Counsel for the appellant placed another reliance of Jampana Rajya Lakshmi v. Pattapu Seenaiah and others, 2006 (5) ALT 218 , wherein the composite High Court of Andhra Pradesh at Hyderabad held as follows : "The order of attachment before judgment obtained by the decree holder does not confer him the status of the secured creditor. The interim receiver appointed by the Court adjudicating a person as an insolvent has complete control over the properties kept under his custody notwithstanding the subsistence of any order of attachment including attachment made under Order XXXVIII Rule 5 C.P.C." In the case on hand, by the date of attachment, there is no relationship of mortgager and mortgagee in between appellant herein and State Bank of India, therefore, the facts and circumstances in the cited case are different to the instant case. 21. Learned Counsel for the appellant placed a reliance of Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan and another, (1990) 3 SCC 291 . The facts in the aforesaid case law are the third party executed an agreement of sale in favour of appellant and prior to attachment on land in execution of a decree obtained by a third party. Therefore, the facts and circumstances in the cited decision are different to the instant case. 22. Learned Counsel for the appellant relied on the decision of Yadava Kamala Bai v. Bijjam Venkata Subbamma and another, 2010 (6) ALT 639 (S.B.). The facts and circumstances in the cited case are different to the instant case. In the case on hand, the 2nd respondent/Judgment Debtor received notice in execution petition proceedings and also made appearance and later on engaged an Advocate and sought time for filing counter. Despite of sufficient opportunities were given to the 2nd respondent to raise her objection in execution petition proceeding, she remains silent and did not raise any objection. 23. In the case on hand, the 2nd respondent/Judgment Debtor received notice in execution petition proceedings and also made appearance and later on engaged an Advocate and sought time for filing counter. Despite of sufficient opportunities were given to the 2nd respondent to raise her objection in execution petition proceeding, she remains silent and did not raise any objection. 23. Section 64(1) of the Code of Civil Procedure defines as follows : Where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payment to the Judgment-Debtor of any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment. Learned Counsel for the appellant would contend that Section 64(2) of the Code of Civil Procedure would apply to the facts of the case on hand, but not Section 64(1) of the Code of Civil Procedure. Section 64(2) of the Code of Civil Procedure defines as follows : Nothing in this section shall apply to any private transfer or delivery of the property attached or of any interest therein, made in pursuance of any contract for such transfer or delivery entered into and registered before the attachment.] [Inserted by the Code of Civil Procedure (Amendment) Act, 2002, Section 3 (w.e.f. 01.07.2002)]. In the case on hand, attachment was effected on 02.08.2002 much earlier to two years to the date of alleged sale deed said to have been executed in favour of appellant by the 2nd respondent. In the case on hand, attachment was effected on 02.08.2002 and order of attachment was affixed to the house wall of the Judgment Debtor and it is a notice to the public in large. Moreover, the 2nd respondent/Judgment Debtor made appearance in execution petition proceedings and she also engaged an Advocate in execution petition proceedings and she is aware of effect of attachment in the year 2002 and having knowledge she executed a sale deed in respect of the plaint schedule property in favour of appellant on 11.06.2004 that too after two years of the attachment. Therefore, the attachment prevail over the sale deed. Therefore, Section 64(1) of the Code of Civil Procedure applies to the case on hand. Therefore, I am unable to accept the contention of the appellant that Section 64(2) of the Code of Civil Procedure applicable to the present case. 24. Therefore, the attachment prevail over the sale deed. Therefore, Section 64(1) of the Code of Civil Procedure applies to the case on hand. Therefore, I am unable to accept the contention of the appellant that Section 64(2) of the Code of Civil Procedure applicable to the present case. 24. The material on record reveals that the attachment was effected on 02.08.2002 and the same was affixed to the house wall of the Judgment Debtor and it is notice to the public in large. Despite of attachment, the appellant herein purchased the land from the 2nd respondent under a registered sale deed, dated 11.06.2004. The appellant herein filed a petition under Order XXI Rule 58 of the Code of Civil Procedure in the year 2005 to release the attachment. Admittedly, subsequent to passing of award, the execution petition is filed by the decree-holder and in the execution petition proceedings, Rule 54 notice and attachment was ordered and the said attachment was effected on 02.08.2002 and the same is affixed to the house wall of the Judgment Debtor by informing the same to public in large and the alleged sale deed is said to have been executed on 11.06.2004 by the Judgment Debtor, to defeat the rights of the decree-holder. An alienation of the immovable property made before the attachment shall be void against all claims in enforceable under the decree. Provisions of Section 64 of the Code of Civil Procedure are meant to safeguard the interest of the creditor. As against attached creditor, a private sale would not effective but if the order of attachment is withdrew or claim of the creditor is otherwise satisfied, the sale deed executed will convey good title to the transferee. 24A. Admittedly, in the case on hand, having knowledge about the attachment proceedings, the Judgment Debtor executed a sale deed in favour of the appellant herein. Therefore, the said transfer is ineffective and void. Moreover, the contention of the appellant is that there was collusion in between the decree-holder and the Judgment Debtor. Admittedly, no evidence is produced by the appellant to prove the alleged collusion in between the decree-holder and the Judgment Debtor. 25. For the aforesaid reasons, I am of the considered view that the appellant is not a bona fide purchaser of the plaint schedule property and there are no grounds to release the property from the attachment. Admittedly, no evidence is produced by the appellant to prove the alleged collusion in between the decree-holder and the Judgment Debtor. 25. For the aforesaid reasons, I am of the considered view that the appellant is not a bona fide purchaser of the plaint schedule property and there are no grounds to release the property from the attachment. Accordingly, Point No.1 is answered against the appellant. Point No.2 : 26. Whether the Executing Court is justified in dismissing EA No.261 of 2005 in EP No.43 of 2002 in Arbitration Application No.66 of 1999? In view of my findings on Point No.1, the Executing Court is justified in dismissing the petition filed by the appellant herein. 27. In the result, this appeal is dismissed. Considering the facts and circumstances of the case, each party do bear their own costs in the appeal. 28. As a sequel, miscellaneous petitions, if any, pending in the appeal shall stand closed.