Kerala Financial Corporation, Vellayambalam, Trivandrum Vs. Syndicate Bank, Calicut and ors. - Court Judgment

Marimuthu, J.

1. This C.M.A. has arisen challenging the order of the Subordinate Judge, Kozhikode, delivered in E.A. No. 610 of 1981 in E.P. No. 263 of 1979 in O.S. No. 142 of 1969. The appellant is the Kerala Financial Corporation, having its registered office at Vellayambalam, Thiruvananthapuram.

2. Some of the facts necessary for appreciation can be summarised hereunder: Respondents 4, 6, 7 and 8 and additional respondents 10 to 18 (legal representatives of deceased respondents 3 and 4) were the owners of 9 acres and 75 cents of land which was mortgaged to the appellant, on obtaining a loan. Since there was a default in the repayment of loan, the appellant proceeded against the owners of the land under Sections 31 and 32 of the State Financial Corporation Act, 1951 before the District Court, Kozhikode and obtained an order in their favour in O.P. No. 87 of 1969. Then they moved for the execution of the order by filing E.P. No. 3 of 1973 for sale of the property, in which the sale was concluded on 15-3-1976. The property was sold for a sum of Rs. 3 lakhs and odd. The delivery was effected pursuant to the sale, on 30-7-1977. The owners of the land had also obtained a loan from the first respondent, Syndicate Bank, on executing a simple mortgage in respect of the property. First respondent for the recovery of the amount filed O.S. No. 142 of 1969 before the Sub Court, Kozhikode, in which, an ex parte decree was passed on 23-10-1973. The first respondent thereafter filed E.P. No. 263 of 1979 for bringing the property for sale. In that sale conducted, the property was purchased by the 9th respondent for a sum of Rs. 1,31,000/-. Then the 9th respondent filed E.A. No. 237 of 1987 for the delivery of the property and accordingly, the property was delivered to him on 2-4-1987. To set aside the sale on the ground of fraud and material irregularity, an application under Order 21, Rule 90, C.P.C. was filed in E.A. No. 610 of 1981. It was dismissed on 28-1-1981. That order is now in challenge in this appeal.

3. When this matter was first brought before a Division Bench of this Court for hearing, the Honourable Judges of the Division Bench took the view that this matter could be heard and decided by a Full Bench since there are divergent judicial pronouncements of various High Courts, namely, whether a party like the first respondent bank ought to be brought on record as a party in an earlier proceeding such as O.P. No. 87 of 1969 filed by the appellant and whether the earlier proceedings is hit by the doctrine of lis pendens by the subsequent prosecution such as O.S. No. 142 of 1969. In this situation, the matter has come up before us for consideration and decision.

4. Mr. Sivaswami, learned counsel appearing for the appellant would contend that there were fraud and material irregularity in publishing and conducting the sale in E.P. No. 263 of 1979. To fortify this contention, his argument was that the appellant though being in active possession of the property in pursuance of the earlier court delivery, was not impleaded as a party either in their suit, O.S. 142 of 1969 or in E.P. 263 of 1979. In the proclamation, the prior sale in their favour was not shown as an encumbrance, and nor was even a notice sent to them in the execution proceeding. And in the year 1979, the property seems to have been purchased by the 9th respondent for a low price of Rs. 1,31,000/-. It was also his submission that when the first respondent was aware that the appellant had already taken the delivery of the properly and in pursuance of the same, the appellant had been in continuous possession of the property, the first respondent is estopped from questioning the interest of the appellant over the properly.

5. Per contra, Mr. Sukumaran Nair, learned counsel appearing for the 9th respondent would contend that there was no necessity to implead the appellant as a party in the suit, O.S. 142 of 1969 and also in the execution petition and in the delivery application moved by them. The property which was outstanding on mortgage in favour of the appellant was entirely different from the property outstanding in the mortgage in favour of the first respondent. Material irregularity or fraud or both in publishing and conducting the sale alone are not sufficient to attract Order 21, Rule 90, C.P.C. unless there is a substantial injury to person who challenges the sale. In the instant case, the interest which the appellant had acquired under the order passed in O.P. No. 87 of 1969 even now is intact and no substantial injury is caused to the appellant on account of the decree passed in favour of the first respondent and then the sale in favour of the 9th respondent. Therefore, the appellant cannot take shelter under Order 21, Rule 90, C.P.C. As enjoined in Section 94 of the Transfer of Property Act, the puisne mortgagee has same right against the mortgagees posterior to himself as he has against the mortgagor. Hence the puisne mortgagee is a necessary party to the proceeding initiated by the prior mortgagee and the delivery effected in favour of the appellant on 15-3-1976 was also barred by virtue of Article 134 of the Limitation Act, 1963. It was also his contention that the proceedings initiated by the appellant is hit by the doctrine of lis pendens.

6. We can first examine the above contentions of both the learned counsel pertaining to the rights and the interests of a prior mortgagee and a puisne mortgagee. For reference, Section 94 of the Transfer of Property Act and Order XXXIV, Rule 1 with explanation of the Code of Civil Procedure are reproduced hereunder :

'Section 94 : Rights of mesne mortgagee : Where a property is mortgaged for successive debts to successive mortgagees, a mesne mortgagee has the same rights against mortgagees posterior to himself as he has against the mortgagor.'

'Order XXXIV, Rule 1: Parlies to suits for foreclosure, sale and redemption : Subject to the provisions of this Code, all persons having an interest either in the mortgage-security or in the right of redemption shall be joined as parties to any suit relating to the mortgage,

Explanation: A puisne mortgagee may sue for foreclosure or for sale without making the prior mortgagee a party to the suit; and a prior mortgagee need not be joined in a suit to redeem a subsequent mortgage.'

7. The principle laid down in various decisions on these aspects as submitted by both sides can be catalogued hereunder in order to appreci-ale Iheir contenlions :

8. In an earlier decision reported in Musammat Sukhi v. Ghulam Safdar Khan, AIR 1922 PC 11, the principle laid down is that where a prior mortgagee brings the property to sale in the execution of a decree on his mortgage withoul impleading the puisne mortgagee the rights of the puisne mortgagee are not affected by the sale. Then in a subsequent sale, in pursuance of the decree obtained by the puisne mortgagee, the purchaser of the prior mortgage decree can use the prior mortgage right as a shield and he can claim payment of the amount due under the prior mortgage decree. The same principle was laid down in a case reported in Sengamuthu v. Thayarammal, AIR 1940 Mad 646.

9. The Punjab High Court in Rattan Chand v. M/s. Prite Shah, AIR 1962 Punj 402, while agreeing with the above principle laid down by the Privy Council and Madras High Court, has held that the auction purchaser in the execution of the first mortgage occupies a dual capacity, namely, first mortgagee and owner of equity of redemption.

10. The majority view of the Full Bench of the Allahabad High Court in Ram Sanehi Lal v. Janki Prasad, AIR 1931 Allahabad 466 in respect of the interest and rights of prior mortgagee and puisne mortgagee (simple mortgages) and the principles laid thereon, for our reference, can be extracted hereunder : if the purchaser in execution of the prior mortgagee's decree or the earlier purchaser in point of time, can redeem the second mortgage and recover possession, even though the prior mortgage is barred by time. If the purchaser under the second mortgage was second in point of time, then he must redeem the prior mortgage, but the purchaser under the prior mortgage will have the right to redeem the purchase under the second mortgage next and retain possession of the mortgagor's properly.

11. The Calcutta High Court in Kaiser Khan v. Abdul Ghani, AIR 1942 Cal 138 has ruled that a purchaser in execution of a mortgage decree acquires property as it existed on the date of sale, discharged of the mortgage lien, but subject to the rights of the parties like the puisne mortgagee who was omitted from the suit. In other words, the title acquired by such purchaser is subject to the right of the puisne mortgagee, viz. the right of redemption. And, puisne mortgagee cannot be compelled to pay the purchase money which the purchaser had to pay and may be allowed to redeem on the basis of the mortgage decree obtained by the prior mortgagee.

12. This Court in Chacko v. Pramena, 1957 Ker LT 185 : (AIR 1957 Ker 48) had taken the view that the prior mortgagee's suit as well as auction purchase in execution of the decree being earlier in point of time, the purchaser is entitled to redeem the puisne mortgagee.

13. In yet another decision of the Lahore High Court in Jaspat Rai v. Kahan Chand, AIR 1938 Lahore 232, mortgage decree directed that the property in question should be sold free from mortgage and the sale proceeds should be deposited in Court for payment to the previous mortgagee. However, the decree-holder who purchased the properly did not implead the previous mortgagee in the execution nor did he deposit the money in Court and he obtained the sale certificate. It was held that the sale was not valid because the decree-holder did not conduct himself in an honest manner and his intention is so clear that the previous mortgagee should be kept in dark. Further the property could not be sold in that manner without protecting the rights of the previous mortgagee.

14. In the instant case on hand neither the appellant nor the first respondent, the decree-holder in O.S. No. 142 of 1969, nor the 9th respondent, the purchaser in the execution of the mortgage decree had adopted any of the rules laid down in the above decisions.

15. A Full Bench of the Madras High Court in Nagendran v. Lakshmi, AIR 1933 Mad 583 has held that when there are two different purchasers in the execution of two mortgage decrees, in determining the possession of the property, the priority in the date of sale carries with it the right to possession. This Court in the two decisions, Chacko v. Padmanabha Pillai, 1953 Ker LT 695 and in Kochu Kurumba v. Narayana Pillai, 1964 Ker LT 52 : (AIR 1965 Ker 104) has also followed the principle laid down in the above Full Bench of the Madras High Court by laying down that option is with the prior mortgagee who is the earlier purchaser to elect whether he should redeem the puisne mortgagee who is a later purchaser or get redeemed by the latter and the puisne mortgagee would no doubt be entitled to redeem the prior mortgagee. By virtue of the earlier court sale, the prior mortgagee would obtain the ultimate equity of redemption which belonged to the mortgagor and as owner of that equity of redemption, he would be entitled to redeem the subsequent mortgage. In short, in the two mortgage suits in which each of the other mortgagee is not impleaded, the earlier purchaser has a right to be in possession. In yet another decision of the Madras High Court in Bogi Arijisah v. Kanniappa, AIR 1954 Mad 266, the same principle has been laid down, viz. the first purchaser is entitled to retain possession and he is also entitled to a decree forinjunction restraining the 2nd purchaser from obtaining the delivery of possession on the basis of his purchase in the second court sale.

16. The above view of the Madras High Court in Bogi Arijisah's case is supported by the Supreme Court in C. V. Raghavachar v. Lakshminarasamma, AIR 1981 SC 160 holding that the transferees of the prior mortgagee's interest were entitled to possession of the property.

17. The Privy Council in Jadunath v. Parameswar, AIR 1940 PC 11 has ruled that a purchaser in the execution of the sale in a money decree gets the right, title and interest of the judgment-debtor on the date of the sale whereas, the purchaser in the execution of a mortgage decree gets the right, title and interest in the mortgaged subjects which the mortgagor had at the date of the mortgage and charged thereby. The purchaser of the mortgage property, in short, gets the title, both of the mortgagee and all those interested in the equity of redemption.

18. The Bombay High Court in Nagu v. Gopal, AIR 1953 Bom 405 has taken the view that under Order 34, Rule 1, a puisne mortgagee is a necessary party to a suit by a prior mortgagee whereas in a suit by a puisne mortgagee, the prior mortgagee is not a necessary party. In execution of the prior mortgage decree, the proceedings between the prior mortgagee and the mortgagor do not affect the puisne mortgagee's right to redeem. The prior mortgagee by virtue of the mortgage is entitled to mortgagee's right and the equity of redemption vested in the mortgagor but by virtue of the second mortgage what is really mortgaged is the equity of redemption. Hence the equity of redemption of the second mortgage vests on both the mortgagor and the puisne mortgagee and therefore, as per Order XXXIV, Rule 1, in, the prior mortgagee's suit, puisne mortgagee is a necessary party in order to effect the proper adjudication of the equity of redemption. In other words, in the suit instituted by the prior mortgagee and the decree obtained thereon will not affect the right of the puisne mortgagee. The principle laid down by the Privy Council in Jadunath Roy's case (AIR 1940 PC 11) (supra) and Bombay High Court in this case would signify that in simple mortgage, incorporeal right of the mortgagor is mortgaged and therefore, in execution of the decree passed on the simple mortgage, only the incorporeal right is brought to sale and not the physical property. On the other hand, in the execution of the decree based on a money suit, the physical orreal property is brought to sale.

19. The Supreme Court in S. P. Majoo v. Ganga Dhar, AIR 1969 SC 600 has laid down as follows :

'A puisne mortgagee in respect of whose mortgage, decree has already been made in a prior mortgagee's suit to which he is made a party, is entitled to institute a separate suit in respect of his mortgage and ask for a decree in Form 5-A of App. 'D' in First Schedule of Civil P.C. When the claim of the prior mortgagee made in the prior mortgagee's suit has been satisfied by payments made by the mortgagor and as a result thereof no sale takes place in the suit. The puisne mortgagee is merely a party to the suit in order that he may have an opportunity of redeeming if he wishes and in order that he may receive his mortgage money, or part of it, out of the surplus sale-proceeds after satisfaction of the prior mortgage, but the decree is not really a decree in his favour, and he cannot insist upon a sale nor get a personal decree in his favour if the prior mortgagee is satisfied by the mortgagor before the sale.'

20. On the law, both statutory and settled, extracted above, when once again the facts of the present case are considered, it can be found that in the earlier O.P. 87 of 1969 filed by the appellant, the appellant ought to have impleaded the first respondent puisne mortgagee or at least in their execution petition. And the first respondent too, though not mandatory, could have impleaded the appellant, prior mortgagee, in their suit or in execution petition in order to work out the rights of the parties for a full and satisfactory adjudication. No such action was taken either by the appellant or by the first respondent or by the 9th respondent. Even after obtaining the order in O.P. No. 87 of 1969 in their favour, the appellant would have filed a suit for their remedy against 1st respondent or 9th respondent. Equally first respondent on obtaining the decree in their favour could have separately proceeded against the appellant.

21. In this context, it is also pertinent to refer to the law laid down by the Supreme Court and also the principle laid down by this Court under the provisions of the State Financial Corporation Act. This Court in C. S. Re-rolling Co. (P.) Ltd. v. Kerala Financial Corpn., (1989) 2 Ker LT 474 has laid down that Order XXXIV of the Code cannot be invoked in an application under Section 31(1) of the Financial Corporation Act, i.e. because of Order XXXIV of the Code applies only at the stage of passing the decree and an application under Section 31(1) of the above Act is something akin to an application for attachment in the execution of a decree.

22. The Supreme Court in Gujarat State Financial Corpn. v. Natson Mfg. Co., AIR 1978 SC 1765 has laid down that under Section 31(1) of the State Financial Corporation Act, a special provision has been made for enforcement of the claims by the Financial Corporation. In an application filed under Section 31(1) of the State Financial Corporation Act, an injunction restraining the respondent can be moved from transferring or removing the machinery or plant, etc., for, the ultimate purpose is that the property will be sold for repayment of the loan or advance taken by the respondent industry and it could not be said that there is a substantial relief claimed by the Corporation, it can be valued in terms of monetary gain. Thus, the substantial relief in such an application is something akin to an application for attachment of property in the execution of a decree at a stage posterior to the passing of the decree. For reference, herein Sections 31(1) and 32(8) of the State Financial Corporation Act can be extracted :

'31. Special provisions for enforcement of claims by Financial Corporation :--

(1) Where an industrial concern, the breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the tenns of its agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under Section 30 and the industrial concern fails to make such repayment then, without prejudice to the provisions of Section 29 of this Act and of Section 69 of the Transfer of Property Act, 1882 (4 of 1882), any officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, may apply to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely :--

(a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or

(aa) for enforcing the liability of any surely; or

(b) for transferring the management of the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended.'

'Section 32(8) An order of attachment or sale of property under this section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908), for the attachment or sale of properly in execution of a decree as if the Financial Corporation were the decree-holder.'

23. The Supreme Court also held in yet another decision reported in Maganlal v. Jaiswal Industries Necmach, AIR 1989 SC 2113 that an order under Section 32 of the said Act can be deemed as decree and it can be accordingly executed as a decree and the property mortgaged thereunder can be brought to sale under Order XXI, C.P.C.

24. The next point raised was in relation to Order XXI, Rule 90, C.P.C. In order to appreciate the submissions of both the learned counsel, the relevant provisions in C.P.C. and Civil Rules of Practice can be extracted hcrcundcr :

'Order 21, Rule 58 : Adjudication of claims to, or objections to attachment of property :--

(1) Where any claim is preferred to, or any objection is made to the attachment of, any property attached in execution of a decree on the ground that such property is not liable to such attachment, the Court shall proceed to adjudicate upon the claim or objection in accordance with the provisions herein contained.' 'Order 21, Rule 66 : Proclamation of sale by public auction :-- (1) Where any property is ordered to be sold by public auction in execution of adecree, the Court shall cause a proclamation of the intended sale to be made in the language of such Court.

(2) Such proclamation shall be drawn up after notice to the decree-holder and the judgment-debtor and shall state the time and place of sale, and specify as fairly and accurately as possible--

(a) & (b)............................

(c) any encumbrance to which the property is liable;'

'Order 21, Rule 90. Application to set aside sale on ground of irregularity or fraud :--

(1)....................

(2) No sale shall be set aside on the ground or irregularity or fraud in publishing or conducting it unless, upon the facts proved, the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud.'

'Rule 347 : Delivery to purchaser or decree-holder :

Where under a decree or in pursuance of a sale certificate, any person is entitled to be put in possession of any property, he may apply for the same and on payment of the requisite process fee the Court shall order the issue of a warrant for delivery of such property, unless it thinks it fit to issue notice to any person interested in opposing the same.'

25. It is the contention of Mr. Sivaswamy, learned counsel for the appellant that in the matter of proclamation and the conduct of sale, there are fraud and material irregularity and therefore, the sale in favour of the 9th respondent ought to be set aside. In support of this contention, he invited our attention to the proclamation of both the sales, one under the order passed in O.P. No. 87 of 1969 and the other in the execution of the decree in O.S. 142 of 1969 and also Rule 66 of the Code of Civil Procedure extracted above. According to him, even in the year 1976, in the sale in favour of the appellant, the property was sold for a sum of Rs. 3 lakhs and odd, but in the year 1981 sale in favour of the 9th respondent, the property had been sold for a sum of Rupees 1,31,000/- fixing the upset price at Rupees 90,000/-. Hence there is glaring material irregularity even in the fixation of the upset price as well as in the sale for a sum of Rs. 1,31,000/- in the year 1981. It is also his submission that the sale in favour of the appellant in the year 1976 is an encumbrance over the property and that ought to have been mentioned in the proclamation of the second sale as provided in Rule 66 of Order XXI of the Code of Civil Procedure. Thus, according to him, the entire proceedings of the second sale is vitiated by fraud and material irregularity. By the fraud and material irregularity in the sale in favour of the 9th respondent, substantial injury had been caused to the appellant.

26. Per contra, the submission of Mr. Sukumaran Nair, learned counsel for the 9th respondent would be that as per the statutory provisions of C.P.C. and settled law, the sale in favour of the appellant is not in respect of the interest or right in the property which was brought on sale and then purchased by the 9th respondent. His contention would be that (as referred to above), the incorporeal right in the property which was the subject-matter in the simple mortgage executed in favour of the appellant is different from the incorporeal right or interest mortgaged to the first respondent, which was, then purchased by the 9th respondent in the sale. No doubt, as argued by him, only in a decree passed in a suit for money, the physical property is brought to sale whereas in the execution of the decree on a simple mortgage, the incorporeal right or interest in the property with reference to the particular mortgage is brought to sale. Hence such incorporeal right in respect of the puisne mortgage is different from the incorporeal right with reference to the earlier mortgage. In short, according to Mr. Sukumaran Nair, learned counsel, there is no necessity to mention the sale in favour of the appellant in the proclamation of the sale in the execution of the decree in O.S. No. 142 of 1969. When that be the real position, no substantial injury is caused to the appellant by virtue of the sale in favour of the 9th respondent and in such circumstance, notice is also not necessary as contemplated in Rule 347 of the Civil Rules of Practice. In support of their respective contentions, both the learned counsel invited our attention to some of the propositions of law which can be referred to hereunder :

27. The Privy Council in Marudanayagam v. Manickvasakam, AIR 1945 PC 67 has ruled that Order XXI, Rule 66, C.P.C, imposes a duty on the Court that the Court must see that the proclamation specified the fact and accurate things including encumbrance, as far as practicable. When the decree-holderknowing the true value of the property, deliberately undervalued in the proclamation and then he purchased the same at the low price, his conduct would amount to fraud on Court.

28. The Supreme Court in a decision reported in Desh Bandhu Gupa v. N. L. Anand and Rajinder Singh, (1994) I SCC 131 : (1993 AIR SCW 3458) has held that the sale without a notice to the judgment-debtor is nullity. The Court should apply its mind to the need for furnishing relevant and material particulars in the sale proclamation. In this juncture, M. Sivaswami, the learned counsel for the appellant once again emphasised that when the property had been low-valued in the proclamation of the sale of the mortgage decree obtained by the 1st respondent, the Court itself ought to have applied its mind and it also ought to have considered the irregularity in the proclamation in not mentioning the earlier sale in favour of the appellant. Mr. Sukumaran Nair, learned counsel for the 9th respondent repeated his earlier contention that interest brought in sale in the execution of the mortgage decree in O.S. 142 of 1969 is different and further it had got only low value when compared with the interest in the property brought in the earlier sale in favour of the appellant and thus there was no necessity to mention the earlier sale as an encumbrance in the proclamation of the sale in the execution of the decree in O.S. 142 of 1969 and the Court below has promptly applied its mind both in the matter of considering the particulars in the proclamation and the sale price. In yet another decision in lyyunni v. Anto, (1994) 1 KerLT 583, the view taken by this Court is that an attachment does not create any title and that is not an encumbrance or a charge on the property liable to be specified in the proclamation of the sale.

29. The Supreme Court in Nani Gopal Paul v. T. Prasad Singh, AIR 1995 SC 1971 has laid down that the Court should not remain mute spectator to obvious and manifest illegality committed in conducting Court sales even if applications are not filed within the time prescribed.

30. The Calcutta High Court in Basanta Kumar Biswas v. Mihirlal Biswas, AIR 1968 Cal 604 has held that although the sale could not be set aside, the judgment-debtor should get a fair price for the property sold and decree-holder should not be allowed to make unconscionable gain by giving a low value in the sale proclamation and thus purchasing it at a low value. The view taken by the Madras High Court in Seetharamayya v. Sivaramakrishna Rao, AIR 1944 Mad 145 is that the failure to mention the prior encumbrances in the sale proclamation may amount to a material irregularity within the meaning of Rule 90 of Order XXI, C.P.C. But however, when it does not follow any substantial injury to the applicant, he cannot take shelter under Order XXI, Rule 90, C.P.C.

31. In an earlier case reported in Narayanan v. Pappayi, AIR 1927 Mad 783, it is held that a purchaser of one item of the mortgaged property can apply under Rule 90, Order XXI, C.P.C. to have the sale of the other items of the mortgaged property set aside as he is a person whose interests are affected by the sale within Rule 90.

32. The Supreme Court in Ambati Narasayya v. M. Subba Rao, AIR 1990 SC 119 has ruled that when the sale is in contravention of the provisions of Rule 64 of Order XXI, C.P.C. that is liable to be set aside. In that case, the property was sold for a sum of Rs. 17,000/- in execution of adecree for Rs. 2,000/-. In that situation, the view taken by the Supreme Court was that it could not be said that the land was not divisible or that the division was impracticable or undesirable and the tendency in execution cases to sale blindfold the entire property by auction is to be deprecated.

33. The majority view of the Full Bench decision reported in Asmutunissa Begum v. Ashruff Ali, ILR (1988) 15 Cal 488 is that a person claims to be a purchaser from a judgment-debtor prior to attachment is not entitled to come under Section 311, C.P.C. and object to the sale of the judgment-debtor's property. This principle is followed by this Court in Kunjukrishnan v. Sankaran Potti, 1971 KerLT 553.

34. The Punjab and Haryana High Court in a decision reported in State Bank of India v. Sonepat Central Co-op. Bank Ltd., AIR 1982 Punj & Har 427 has laid down that a person who claims priority by title paramount to the judgment-debtor cannot file objections under Order 21, Rule 90 of the Code. He can file the objections under Order XXI, Rule 58, C.P.C. If that remedy is available to him. In any case, he has got a remedy by way of a suit. The reason why he cannot file objections under Rule 90 of Order XXI, is that in execution of a decree for the recovery of the decretal amount, the interest of the judgment-debtor in the property is sold. In case an objector claims a paramount title to the judgment-debtor in that property, he can establish that right by an independent suit. If he is allowed to get it decided in objection under Rule 90, that would open another flood gate of the litigation for the auction-purchaser. That does not appear to be the purpose of Order XXI, Rule 90, C.P.C. which provides for setting aside the sale on the ground of material irregularity or fraud in publishing or conducting a sale on the objection of the person who claims interest in the property through the judgment-debtor. The interest of a person who claims title paramount to the property sold is not affected adversely by such sale. He can claim it by independent suit. This view, in fact, had been earlier taken by the Orissa High Court in Padmalav v. Off. Liquidator, AIR 1971 Orissa 75.

35. The Madras High Court in Murugappa v. Kannammal, AIR 1959 Mad 76 has held that the interests which are alleged to be affected by the sale within the meaning of Order XXI, Rule 90, C.P.C. should be interests which are directly and immediately likely to be affected and not interests which may hypothetically and remotely be affected by the sale.

36. In yet another decision, the Madras High Court in Sailappan v. Subbiah, AIR 1963 Mad 156 (FB) has laid down that the words of Order XXI, Rule 90, C.P.C. are wider than those in Order XXI, Rule 89, C.P.C., which enables only aperson 'holding an interest' in the property sold, to apply for setting aside the sale. Thus while Rule 89 requires that the applicant should have an interest in the property, it would be sufficient for the purpose of Rule 90 if the applicant's interests are affected by the sale. A person charged with possession of the property and who has an interest in retaining such possession will prima facie come under that provision. At the same time, Rule 90 would not cover any remote or hypothetical interest.

37. The Allahabad High Court in Gulab Singh v. Raghubir Saran, AIR 1932 All 369 had taken the view that in order to convey a decision under Order XXI, Rule 90, three points have to be determined, viz. (1) whether there has been a material irregularity in publishing and conducting the sale; (2) whether the property has been soldfor an unreasonably low price; and (3) whether the injury to the judgment-debtor or the decree-holder has resulted in consequence of the material irregularity ?

38. This Court in a decision reported in Chandrika v. Gangadharan, 1983 Ker LT 953 has laid down that an enquiry at the instance of a third party in possession is contemplated only after he is dispossessed in execution and applies under Rule 100 of Order XXI, C.P.C. complaining of such dispossession. After the amendment in 1976, a detailed enquiry into the question of title is contemplated under Rule 90 which is merely an enabling provision intended for the benefit of the decree-holder or auction purchaser. If Rule 97 is to be construed in such a way as conferring a right on a third party to the decree, to compel the decree-holder/auction-purchaser to file an application under this rule, it will be only opening the flood gate of spurious claims and encouraging spurious claimants to indefinitely delay the execution.

39. When we examined the facts of the present case on the well-settled propositions of law extracted above and also the statutory provisions, we are of the view that there is no fraud or irregularity in publishing the proclamation and in conducting the sale in O.S. No. 142 of 1969 and no substantial injury was sustained by the appellant by that sale and that suit was filed well within the right of the first respondent for recovering the mortgage price and in that proceeding, the appellant is not a statutorily necessary party. As adverted to above, the interest and right which were brought for sale in execution of the decree in O.S. No. 142 of 1969 are different from those sold in O.P. No. 87 of 1969.

40. In a case reported in Bojjanna v. Kristappa, AIR 1947 Mad 268, it was held that where after the sale in execution of a mortgage decree is confirmed the judgment-debtor applies to set it aside on the allegation of fraud which, on proof, only amount to a ground for an application under Order XXI, Rule 90, C.P.C., to set aside the sale, it is not a ground with reference to which the Court should presume the existence of any inherent power to remedy the wrong done. The principle laid down here is the inherent power should not be invoked by the Court in order to save the wrong doer, though the application under Order XXI, Rule 90 was allowed on the ground of fraud in the sale.

41. The Madras High Court in Saraswathi Ammal v. M. Reddiar, AIR 1975 Mad 147 has ruled as follows :--

A third party, being an earlier purchaser, when affected by the sale in execution of a decree obtained against his vendor, can maintain an application under Order XXI, Rule 90, C. P. C., despite the fact his application under Rule 58 was dismissed. And the Court in such application has to decide on merit whether the sale is vitiated by fraud and material irregularity and that has resulted in substantial injury to applicant and it need not go to the question whether his interest in the property was affected.

42. The majority view taken by the Madras High Court in Ayyappa v. Kasiperumal, AIR 1939 Mad 250 (FB) is that when the petitioner attached certain properties before judgment and in due course, he obtained a decree; but before the date of that decree, the attached properties were sold in execution of a decree obtained by another creditor and the petitioner who obtained the attachment, can file a petition under Order XXI, Rule 90, C. P. C. as his attachment directly and immediately affected by the subsequent sale. It seems the view taken by this Full Bench of Madras High Court differs from the view taken in Asmutunissa Begum's case ((1888) ILR 15 Cal 488) and in Kunjukrishnan's case (1971 Ker LT 553) (supra).

43. In view of the principle laid down in Padmalav v. Official Liquidator, AIR 1971 Orissa 75 and in State Bank of India v. Sonepat Central Co-op. Bank Ltd., AIR 1982 Punj & Har 427, one of the arguments of Mr. Sukumaran Nair, seems to be that even if the interests of the appellant are affected by the sale in execution of the decree in O. S. No. 142 of 1969, they could have moved an application under Rule 58 Order XXI, C. P. C. and in case of their failure in such application, they could have filed a suit for adjudication of that right. This argument is, however, not fully supported by the Madras High Court in Saraswathi Ammal's case (AIR 1975 Mad 1475 stated supra).

44. The next question that was urged before us is lis pendens. Mr. Sukumaran Nair contended that while proceeding in the suit, O. S. No. 142 of 1969 was pending in which the original land owners were the defendants, the property had been purchased in execution of the order in O. P. No. 87 of 1969 filed by the appellant. Hence it is a transfer during the pendency of litigation and therefore, it is hit by the doctrine under Section 52 of the Transfer of Property Act, the explanation of which is reproduced hereunder :

'Section 52 : Transfer of property pending suit relating thereto :-- ....................

Explanation : For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.'

45. On the other hand, the contention of Mr. Sivaswami, learned counsel for the appellant would be that there was no lis pendens in this case. It was also his contention that even if there was lis pendens, their right to move an application under Order XXI, Rule 90, C. P. C. will not be affected. Regarding the second submission, we have already decided that the appellant is not the party who sustained substantial injury by fraud or material irregularity in the sale. However, the point of lis pendens can be discussed and decided herein on the basis of the settled proposition of law and the statutory provision in the explanation of Section 52 of the Transfer of Property Act extracted above. In Kumaran Unni v. Muhammed Kani, 1958 Ker LT 836, the principle laid down is that a suit based on a mortgage of a prior date during the pendency of other proceedings is not hit by the doctrine of lis pendens. The rule of lis pendens only applies to transfers by the plaintiff or the defendant of their respective interests after the suit including transfers by court sale in money decrees against either party. But it does not apply to previously existing transfers (including mortgages) or legal proceedings to enforce such transfers by those entitled. The mortgage having been executed before the institution of the suit is not affected by the doctrine of lis pendens.

46. The Allahabad High Court in Hakim Mohammad v. Sahab Collector Bahadur, AIR 1958 AH 24 has laid down that Section 52 of the Transfer of Property Act does not apply in terms of sales held in execution of a decree and the applicant has purchased the properties in execution of his own decree. But it is well settled that the principle of lis pendens applies to such court sale also. And this view is taken following the earlier decisions of the Allahabad High Court reported in Ram Sanehi Lal v.Janki Prasad, 1931 All LJ 729 : AIR 1931 All 466 (FB) (A) (stated supra). There, the principle laid down was that where the sale in execution of a decree obtained on the suit of a puisne mortgage takes place during the pendency of the suit on the prior mortgage, the sale in the subsequent mortgagee's suit is affected by the rule of lis pendens so as to make the purchaser's right subject to the result of the prior mortgagee's suit.

47. The Supreme Court in Jayaram Mudaliyar v. Iyyaswami (1973) 1 SCR 139 : (AIR 1973 SC 569) had laid down the following principle (Para 18 of AIR) :

'Section 42 of the Madras Revenue Recovery Act provides that all lands brought to sale on account of arrears of revenue shall be sold free of all encumbrances. The liability of the land to be sold under Section 7(c) of the Act was a pre-existing charge and that subsisted as from the date of the loans. This was not affected by the institution of the suit for parliiion. This charge could be enforced by the State notwithstanding the pendency of the partition suit.'

48. In the instant case on hand, the property was brought to sale by the appellant in E. P. No. 3 of 1973 and the sale was concluded in 15-3-1976. But the suit, O. S. No. 142 of 1969 was decreed on 23-10-1973. Hence before the date of sale, on 15-3-1976, the suit instituted by the first respondent was finally disposed of and therefore, 1st respondent was not affected by the sale concluded on 15-3-1976 in favour of the appellant. Hence there is no lis pendens. However, when this is one of the points raised in the reference, we feel that a principle can be laid down. Accordingly, we lay down that the principle of lis pendens does not apply to the previously existing transfers including mortgages as held by this Court in Kumarun Unni v. Muhmmed Kani, 1958 Ker LT 836 which is fortified by the Supreme Court in Jayaram Mudaliyar v. Iyyaswami (1973) 1 SCR 139 : (AIR 1973 SC 569). Consequently, we with great respect, are dissenting from the proposition of the Honourable Judges of Allahabad High Court, settled in Ram Sanehi Lal's case (AIR 1931 All 466) (FB) (stated supra).

49. Yet another point raised by Mr. Sukumaran Nair was that the delivery obtained by the appellant was barred by limitation in view of Article 134 of the Limitation Act, 1963 which reads as follows :

'Description of suitPeriod of

limitaionTime from which

period begins to run134. For delivery of possession

by a purchaser of immovabl e property

at a sale in execution of a decree.one yearWhen the sale

becomes absolute.'

No doubt, in the instant case, the sale in favour of the appellant was concluded on 15-3-1976 and the delivery was effected on 13-7-1977 after the expiry of one year. But we feel, for an effective and satisfactory disposal of this appeal, the arguments of both sides on the point of limitation need no investigation and however, if the facts and circumstances of the cases of both the contesting parties require and if law permits, that point can be advocated in the suit yet to be filed for complete and full adjudication among themselves.

50. One of the arguments of learned counsel, Mr. Sivaswami, was that the 9th respondent is estopped to contend that the appellant had no right to move the application under Order XXI, Rule 90. C. P. C. after having taken the delivery from the appellant. For this submission, our answer would be that when the 9th respondent has taken delivery in accordance with the provisions of law, the question of estoppel does not arise.

51. Before leaving this judgment, we feel it expedient and pertinent to refer 10 a judgment of this Court reported in Lakshmi Amma v. Ram Iyer, 1959 Ker LT 652 : (AIR 1960 Ker 52) (DB) where the principle laid down is that the purchaser whose purchase is earliest in point of time is entitled to possession and the right of a simple mortgagee, who omitted to make subsequent puisne mortgagee, a party to suit should be worked out in a proper suit instituted for that purpose by him. This principle has been laid down by the Division Bench following the proposition of law already declared by three Full Benches, namely, Nagendra v. Lakshmi, AIR 1933 Mad 583 (stated supra), Varghese v. Sanku, (29 TLJ 263) and George v. Raghava Menon, (39 Cochin 430).

52. On account of our foregoing discussions on the question of facts and law, both statutory and settled, in detail, the appeal stands dismissed confirming the order of the Subordinate Judge, Kozhikode delivered in E. A. No. 610 of 1981 in E. P. No. 263 of 1979 in O. S. No. 142 of 1969. Dismissal of this appeal will not stand in the way of the appellant initiating any other proceedings against respondents 1 and 9 and mortgagees including a suit for working out their respective rights.

Narayana Kurup, J.

53. Having perused the opinion rendered by my learned colleagues, I am unable to persuade myself to reconcile either with the reasonings or the conclusions reached therein. Therefore, J am giving my separate dissenting opinion as follows :

54. The Kerala Financial Corporation (hereinafter referred to as KFC) is the appellant in this appeal. The appeal is directed against the order passed by the IInd Addl. Sub-Court, Kozhikode in E. A. 610/81 in E. P. 263/79 in OS 142/69 dismissing an application filed by KFC under Order 21, Rule 90, C. P. C. to set aside the sale held in execution of the decree in O. S. 142/69.

55. An extent of 9 Acres and 75 cents of land consisting of a tile factory and the site thereof belonged to respondents 2 to 8 in E. A. 610/81. The 2nd respondent is a firm of which respondents 3 to 8 are its partners. The respondents 3 to 8 were thejudgment debtors in O. S. 142/69. The aforesaid property was mortgaged by them in favour of the KFC on 29-1-62 as per a registered simple mortgage. The machinery and other movable items were also mortgaged in favour of the KFC. KFC filed O. P. No. 87/69 before the District Court, Kozhikode under Section 31 of the State Financial Corporations Act for recovery of the amount due to it under the mortgage. The claim due to the KFC from respondents 2 to 8 came to Rs. 7,88,662.53. The KFC obtained a decree in the said proceeding for sale of the said properties on 30-3-1970 which was followed by steps for execution of the said decree by filing E. P. 3/73. The property in question was brought to sale in the said E. P. and it was finally purchased by the KFC on 15-3-1976 for Rs. 3,00,100/-. After getting the sale certificate KFC obtained delivery of the property from respondents 2 to 8 on 3-7-77. Ext. A2 dt. 4-10-76 is the certificate of sale in favour of the KFC and Exts. A3 and A4 dated 13-7-77 are certified copies of the delivery account and report.

56. The 1st respondent in EA No. 610/81 is the Syndicate Bank, Calicut. On the strength of a subsequent mortgage in its favour executed by respondents 2 to 8, the Bank filed the aforesaid suit O.S. 142/69 before the Sub-Court, Kozhikode for recovery of a sum of Rs. 1,48,696.35 due to it under the mortgage from respondents 2 to 8. It obtained a decree in the said suit against respondents 2 to 8 on 23-10-1973 for sale of the property. That was an ex parte decree. The Bank took out execution of the decree by filing E. P. 263/79 and brought the property to sale. Execution was so taken out by the Bank only after the KFC obtained possession of the sale property on 13-7-1977 pursuant to the Court sale in its favour in execution of the decree obtained by it in O. P. 87/ 69. The 9th respondent in E. A. 610/81 purchased the same property on 28-10-1981 in execution of the decree obtained by the bank in OS 142/69. The KFC was not made a party to OS 142/69, nor was it impleaded as a party in the execution proceedings in E. P. 263/79 even though it had purchased the property in execution of the decree in O. P. 87/69 as early as on 15-3-1976 and obtained delivery of possession of the property as early as on 13-7-1977. While the KFC purchased the property on 15-3-76 for Rs. 3,00,000/- the 9th respondent purchased the same property more than 5 years thereafter on 28-10-1981 for a sum of Rs. 1,30,000/-.

57. E. A. 610/81 out of which this appeal arises was filed by the KFC to set aside the aforesaid sale in favour of the 9th respondent on the ground of material irregularity and fraud in publishing and conducting the sale. The material items of fraud pointed out are :

(1) The prior encumbrance in favour of the KFC has not been shown in the sale proclamation in E. P. 263/79 even though that is the statutory requirement under Order 21, Rule 66(2)(c) of the C. P. C.

(2) While the KFC had obtained possession of the property as early as on 13-7-77, it was deliberately shown in the sale proclamation that the original defendants (i.e. Respondents 2 to 8) were still then in possession of the property. This was done deliberately to mislead the Court in a calculated move made by the 9th respondent auction purchaser in collusion with other defendants (judgment debtors) with the connivance of the decree holder bank in order to wrest possession of the property from the KFC even though the KFC was not made a party to the execution proceedings in E. P. 263/79. The sale proclamation was filed in Court in E. P. 263/79 only in October, 1980, about 4 years after the KFC had come in possession of the property.

(3) The property has been purchased by the 9th respondent for a grossly inadequate price clearly establishes fraud. While the KFC purchased the property on 15-3-76 for Rupees 3,00,100/- the 9th respondent has purchased it for a sum of Rs. 1,30,000/- more than 5 years afterwards on 28-10-81 and that too apparently without any liability to discharge the prior encumbrance in favour of the KFC which was suppressed from the Court.

58. Even in the application to set aside the sale (E. A. 610/81) the KFC had expressed its apprehension that the 9th respondent has bid at the sale in the background of these false particulars contained in the sale proclamation with a view to wrest possession of the property from the KFC. The apprehension so expressed by the KFC was not imaginary. Soon after E. A. 610/81 was dismissed by the Court below as per the impugned order dated 28-1-1987, the Court below confirmed the sale and issued the sale certificates to the 9th respondent. Thereafter the 9th respondent filed E. A. 237/87 on 30-3-1987 before the Court below seeking delivery of the property purchased by him. Besides the original judgment debtors (respondents 2 to 8) in E. A. 610/81, the KFC was impleaded for the first time as the additional 8th respondent in E. A. 237/87. The KFC was not evidently made a party in O. S. 142/ 69 or the execution proceedings therein as already noticed. The KFC was impleaded as 8th respondent in E. A. 237/87, alleging that substantial improvements which existed in the property at the time of the sale on 28-10-1981 have been demolished and removed by the KFC. The averments made in the application for delivery (viz. E. A. 237/87) by the 9th respondent go against the recitals in the sale proclamation in E. P. 263/ 79 which had been filed in Court in October, 1980 wherein it is stated that the improvements like buildings and other structures have already been demolished by the defendants alleged to be even then in possession of the property.

59. The Bank significantly has not filed any counter to the application of the KFC to set aside the sale, even though it is primarily responsible to answer the fraud and irregularity alleged by the KFC in the matter of publishing and conducting the sale. But the responsibility for the correctness of the particulars shown in the sale proclamation is now taken up by the original judgment debtors (respondents 2 to 8) and also by the 9th respondent auction purchaser. Both of them have contended that the KFC is bound by the sale inasmuch as it has purchased the equity of redemption in O. P. 87/69 during the pendency of the suit filed by the Bank as O. S. 142/69. However, there is no contention raised by them that the interests of the KFC are not affected by the sale sought to be set aside. Such a contention could not have been raised in the light of their stand that the KFC is bound by the decree. It is however specifically admitted by all these respondents that the KFC had taken actual possession of the property as Court auction purchaser in E, P. 3/73 in O. P. 87/ 69. It is further stated by respondents 2 to 8 in para 9 of their counter that the sale and delivery of the property in favour of the KFC are binding against the respondents and against the whole world. The 9th respondent in para 5 of his counter has even claimed to have inspected the property prior to the date of the sale and not found any indication of possession with the KFC. The Court below, as per its order dated 28-1-87, dismissed E. A. 610/81 only on the ground that no fraud or irregularity has been made out by the KFC. It was never contended before the Court below that the interests of the KFC are not affected by the sale. It was after the impugned order of the trial Court was passed, that the 9th respondent filed application for delivery as E. A. 237/89 on 30-3-1987 upon which delivery was ordered by the Court on 31-3-1987 and the 9th respondent auction purchaser obtained possession of the property by delivery through Court on 2-4-1987. When the matter came up before the Division Bench, it was contended on behalf of the auction purchaser for the first time that the sale sought to be set aside is not binding on the KFC and that the interests of the KFC are not therefore affected by that sale. In the same breath, it was further contended that the Court sale in favour of the KFC in OP 87/69 was affected by lis pendens on account of the proceeding in O. S. 142/69. The stand taken by the auction purchaser before the Division Bench is therefore self contradictory.

60. The plea of lis pendens however has not pressed at the final stage of the hearing by the learned counsel for the 9th respondent. In this connection it was pointed out by him that he could not raise this plea of lis pendens because the proceedings taken by the KFC as O. P. 87/69 commenced before the Bank filed its suit as O. S. 142/69. The excuse so offered for not pressing the plea of lis pendens is absolutely baseless. The proceedings in O. S. 142/69 was definitely pending when on 15-3-76 the KFC purchased the property. This is a clever stance made on behalf of the 9th respondent in order to enable him to contend that the interests of the KFC are not affected by the sale. In the application for delivery, the 9th respondent contended that the KFC was bound by the Court sale in O. S. 142/69 since it purchased the property during the pendency of O. S. 142/69. If the plea of lis pendens so raised is not upheld, the 9th respondent could not have got possession of the property from the KFC. But after having obtained possession of the property on 2-4-87 even before this CMA was filed, the 9th respondent now ventures to contend that there can be no lis pendens with the result that the KFC is not bound by the sale and hence its interests are not affected by the sale. It is also significant that the application for redelivery filed by the KFC (E, A. 274/87) was resisted on the ground of lis pendens contending that the KFC is bound by the sale and as such the 9th respondent was entitled to get possession of the property from the KFC.

61. In order to have the sale set aside, the KFC has to establish that the sale in question in favour of the 9th respondent in O. S. 142/69 is vitiated by material irregularity and fraud in publishing and conducting the sale as contemplated in Order 21, Rule 90, C. P. C. It has further to establish that its interest are affected by the sale and that upon the facts proved it has sustained substantial injury by reason of such irregularity or fraud.

62. The first question therefore that is to be considered is whether the sale in favour of the 9th respondent is vitiated by material irregularity and fraud in publishing and conducting the sale. Under Order 21, Rule 66(2)(c), prior encumbrance over the property proclaimed for sale has to be shown. This is a material particular to be shown in the proclamation. Admittedly, the KFC held a prior mortgage over the property and the same has not been shown in the sale proclamation. The only explanation now offered is that the mortgage in favour of the KFC has been extinguished by reason of the Court sale in its favour in O. P. 87/69. I am afraid that the said plea cannot be countenanced. The Bank which was the second mortgagee was of course not impleaded in O. P. 87/69. The purchase by the KFC of the property without the Bank on the party array can vest in it only the interest of the mortgagor in addition to the mortgage interest already held by it. But the two interests cannot merge by reason of the second mortgagee Bank's interest being not affected by that sale, since it was not a party to the said proceeding. As regards the Bank, the KFC still holds its own first mortgage even after the purchase of the ultimate equity of redemption and the position is crystal clear from Section 101 of the T. P. Act. The Bank as subsequent mortgagee will not be entitled to sell the property without redeeming the prior mortgage in favour of the KFC. The purchase by the KFC of the property in the first Court sale enabled it to get possession of the property from the original mortgagors even on 13-7-1997. The purchase bv the 9th respondent of the property in O. S. 142/69 on 28-10-82 in O. S. 142/69 instituted by the Bank cannot vest in him even the title of the original mortgagor which had already vested in the KFC by reason of the earlier Court sale on 15-3-1976 in O. P. 87/ 69. The remedy pf the Bank in such a situation was only to redeem the mortgage in favour of the KFC before it attempted to sell the property in Court auction and get possession of the property pursuant to such sale.

63. The view I am taking is fortified by the following decisions : In Ram Sanehi Lal v. Janaki Prasad, AIR 1931 All 466 (FB) it is held that the auction-purchaser in execution of decree on prior mortgage to which subsequent mortgagee was not party obtains all rights of mortgagor and prior mortgagee. The dictum laid down by the Full Bench is as follows :

'The auction-purchaser in execution of a decree obtained on a prior mortgage without impleading the subsequent mortgagee acquires all the rights of the mortgagor who was a party including his rights to possession in cases where both the mortgages are simple, if either no suit by subsequent mortgagee is pending or purchase in execution of the prior mortgagee's decree was earlier in point of time. If the first mortgagee be the earlier purchaser the rights of the mortgagor to obtain possession will ultimately vest in him. If the mortgage is not time barred he can compel the subsequent mortgagee to redeem him but if it is time barred he must redeem the subsequent mortgagee.'

In Chinnaswami v. Darmaling, AIR 1932 Mad 566 (DB) the Madras High Court took the view that doctrine of Ms pendens does not apply to sale in pursuance of mortgage decree, mortgage being executed before institution of suit. The Court said :

'The rule of lis pendens only applies to transfers by the plaintiff or defendant of their respective interests after the suit including transfers by Court sale in money decrees against either party. But it does not apply to previously existing transfers (including mortgages) or legal proceedings to enforce such transfers by those entitled. On principle the sale in pursuance of a mortgage decree the mortgage having been executed before the institution of the suit is not affected by the doctrine of lis pendens.

A who was the owner of certain property mortgaged it first with B and subsequently mortgaged it with C. C first sued on his mortgage and obtained a decree for sale of the mortgaged property without impleading B in that suit. After this B sued on his mortgage without making C a party to it and obtained a mortgage decree in execution of which he purchased the property himself and obtained possession of it through Court. Thereafter C in execution of his prior decree got the property sold and in execution purchased it himself. As he could not obtain possession of the property he brought a suit against B for unconditional possession of the same.'

In Nagendra v. Lakshmi, AIR 1933 Mad 583 (FB), the Madras High Court held that in deciding the priority between the purchasers of same property in execution of mortgage decrees by different mortgagees to which mortgagor alone made a party -- deciding factor is priority in date of sales and not dates of mortgages.

In Eapen Varghese v. Kunjutti Sanku, (1939) 29 TLJ 263 a Full Bench of the Travancore High Court after laying down that the doctrine of lis pendens does not apply to legal proceedings to enforce mortgages, held that the first purchaser will be entitled to possession as against the latter purchaser. The dictum laid down by the Full Bench is as follows :--

'We are now satisfied about the correctness of two principles. One is that the doctrine of lis pendens does not apply to legal proceedings to enforce mortgages. We are therefore of the view that a sale in pursuance of a mortgage decree, the mortgage having been executed before the institution of the suit, is not affected by the doctrine of lis pendens. We are in perfect agreement, on the above question, with the view expressed by the Madras High Court in 56 Mad 115 and the dissenting opinion of Mukerji, J. In ILR 53 All 1023 : (AIR 1931 Allahabad 466). The same view was expressed by a Division Bench of this Court in C.R.P. 361 of 1110. The second principle on which we are satisfied is that the first purchaser will be entitled to possession as against the later purchaser. The above principle must follow as a necessary corollary on the first and the justification for separately mentioning it lies in the circumstances that some British Indian High Courts have, while maintaining that the principle of lis pendens applies, nevertheless held that the first purchaser is entitled to possession. See ILR 56 Mad 846 : (AIR 1933 Madras 583) (FB) and the majority opinion in ILR 53 All 1023 : (AIR 1931 Allahabad 466). To the above extent therefore we dissent from 18 TLJ 736 and agree with the Full Bench decision in 25 TLJ 1277 and 27 TLJ 185'.

In Ulahannan Chacko v. Raman Pillai Padmanabhan Pillai, 1953 Ker LT 695 : (AIR 1953 Trav Co 554), the Travancore High Court after adverting to the relative rights of prior and puisne mortgages suing without impleading each other held as follows :--

'..... The option is with the prior mortgagee who is the earlier purchaser to elect whether he should redeem the puisne mortgagee who is the later purchaser or get redeemed by the latter. The puisne mortgagee would no doubt be entitled to redeem the prior mortgagee. But by virtue of the earlier Court sale the prior mortgagee would obtain the ultimate equity of redemption which belonged to the mortgagor and as owner of that equity of redemption he would be entitled to redeem the subsequent mortgagee'.

The aforesaid dictum was followed in Chacko v. Pramena, 1957 Ker LT 185 : (AIR 1957 Kerala 48) were the Division Bench of this Court following 29 TLJ 263 and 1953 Ker LT 695 : (AIR 1953 Trav. Co. 554) cited supra held that the prior mortgagee's suit as well as auction purchase in execution of his decree being earlier in point of time, he is entitled to redeem the puisne mortgagee. In the aforesaid case prior mortgagee's suit was the earlier one and the sale in execution of the decree in the prior mortgagee's suit was earlier in point of time and therefore, it was held that he is entitled to redeem the puisne mortgagee. In Kumaran Unni v. Muhammad Kani, 1958 Kcr LT 836 this Court held that a suit based on a mortgage of a prior date during the pendency of other proceedings is not hit by the doctrine of lis pendens. In Kochu Kurumpa v. Narayana Pillai, 1964 Ker LT 52 : (AIR 1965 Kerala 104) following the decision reported in Ulahannan Chacko v. Raman Pillai Padmanabha Pillai, 1953 Ker LT 695 : (AIR 1953 Trav Co 554) it is held as follows :--

'In suits by two mortgagees in each of which the other mortgagee is not unpleaded. the earlier purchaser has the right to be in possession. The option was with the earlier purchaser, who was the prior mortgagee to elect whether he should redeem the puisne mortgagee or get redeemed by the latter. This is not affected by the fact, that in the suit by one of them the other is not impleaded. A separate suit for enforcement of the right of redemption is not necessary, when the two mortgagees are brought face to face with each other in the same suit'.

In G. Ramamohana Rao v. K. Kanakacharyulu, AIR 1980 Andh Pra 305 a Division Bench of the Andhra Pradesh High Court held that the sale in execution of second mortgagee's decree cannot affect the rights of the prior mortgagee. It was also held that if for enforcement of the right created under successive mortgages suits are filed by the mortgagees the doctrine of lis pendens cannot apply, and that any sate effected in execution of the decree by the subsequent mortgagee cannot affect the rights of the prior mortgagee or the purchasers of the equity of redemption under the earlier mortgage. In this connection, I may usefully extract a passage from Mulla' s Transfer of Property Act, Seventh Edition at page 595 :

'When a party in interest other than the owner of the equity of redemption, is not made a party to the bill, the foreclosure is not generally for this reason wholly void. It is effectual as against those persons interested in the equity of redemption who are made parties. The sale vests the estate in the purchaser subject to redemption by the person interested in it who was not made a party to the proceedings. His only remedy, however, is to redeem. He cannot maintain ejectment against the purchaser. He cannot have the sale set aside by intervening by petition in the foreclosure-suit. His only right is the right of redemption. The sale, though it fails to be effectual in every other respect, operates as an assignment of the mortgage and all the mortgagee's right to the purchaser, who may proceed de novo to foreclose'.

Neither the bank nor the 9th respondent wanted to pursue this course of action against the KFC. What has been done is to suppress the very earlier mortgage in favour of the KFC and further show the original judgment debtors as being still in possession of the property even after the KFC obtained possession on 13-7-1977.

64. Further contention raised in this connection on behalf of the auction purchaser is that the property proclaimed for sale in OS 142/69 is the one comprised in the second mortgage in favour of the Bank and it is different from the property comprised in the first mortgage in favour of KFC and purchased by it in Court auction in O.P. 877 69. Having bestowed my anxious consideration on the above contention, I am unable to pursue myself to accede to the same. On the other hand it has to be noted that it is the same property that is being successively mortgaged in favour of more than one creditor and Section 84 of the T. P, Act makes this position quite clear. If the property purchased by the auction purchaser in OrderS, 142/69 is different from the property purchased by the KFC in O. P. 87/69 one wonders how the auction purchaser can get possession of the property purchased by the KFC in O.P. 87/69 in the way in which he obtained possession subsequent to the impugned order?

65. The statement in the sale proclamation that the original judgment debtors arc even then in possession of the property in October 1980 is a deliberate suppression of the fact that the KFC was in possession of the property even from 13-7-1977. In Ext. A11 paper publication dated 23-10-81, the decree holder bank claims to have inspected the property before the proclamation. The auction purchaser in the counter filed by him in E.A. 610/81 also claims to have inspected the property. In fact the auction purchaser now claims responsibility for the correctness of all the particulars shown in the sale proclamation. The statement in the sale proclamation that the judgment debtors are even then in possession of the property is a deliberate mis-statement intended to defeat and injure the KFC alone which was then in possession of the property for the last about 4 years ever since 13-7-1977. It is also stated in the sale proclamation that the buildings which were there in the property have been demolished by the judgment debtors since the date of the decree. The statement so made in the sale proclamation goes against what has been stated by the auction purchaser in the application for delivery filed bv him as E.A. 237/87 on 30-3-87. What is stated in the said application is that the KFC impleaded for the First time in those proceedings as the 8th respondent in that application has demolished and removed the building. a claim for damages against the KFC is also made in EA 237/87. That claim for damages is not seen pursued after the auction purchaser got delivery of the property in E.A. 237/87 and which was dismissed for default of appearance of the auction purchaser and his counsel on 10-1-1989.

66. The circumstances leading to the execution of the decree and the sale in O.S. 142/69 and the sequence of events also appear to assume significance in the present context. The Bank obtained the ex parte decree in its favour against respondents 2 to 8 in O.S. 142/69 on 23-10-1973. The KFC took out execution of the decree in its favour in O.P. 87/69 by filing E.P. 3/73 on 1-1-73. It purchased the property in Court auction on 15-3-76 and took delivery of the property on 13-7-77. Though the bank obtained a decree in its-favour as early as on 23-10-73. nothing was done by it for executing a decree till after the KFC took delivery on 13-7-77. It filed E. P. 237/79 only in 1979. Ext. A11 paper publication is dated 23-10-1981. The Court sale in favour of the auction purchaser in O.S. 142/69 took place only on 28-10-81. The Bank should very well have known even at the time when E.P. 237/79 was filed that the interest of the original mortgagors will not pass to the purchaser in the Court sale in O.S. 142/69. when the same had already passed to KFC on 15-3-76 by reason of the earlier Court sale in its favour in O.P. 87/69. The original judgment debtors (respondents 2 to 8) would also have been very much depressed by the purchase by the KFC, and its taking delivery of the properties from their possession on 13-7-77. It was in this background that the bank appears to have taken out execution in 1979. The false statements have been deliberately made in the sale proclamation to make it appear that the original judgment debtors are still in possession of the property and that there is no prior encumbrance over the property even though there was the prior mortgage in favour of the KFC and the bank was aware of it. In the counters filed by the contesting respondents in EA 610/81, it is even claimed that the bank took the second mortgage with the consent of the KFC. Even though no proof or such consent is forthcoming nevertheless the bank could not claim ignorance of the earlier mortgage in favour of the KFC. No such ignorance is also pleaded, because what is now contended on behalf of the auction purchaser is that the prior mortgage in favour of the KFC is extinguished by reason of the Court sale in O.P. 87/69. The plea of extinguishment of the prior mortgage is not at all sustainable in view of Section 101 of the Transfer of Property Act as already stated above.

67. It is also significant that while the KFC purchased the property in Court auction in O.P. 87/69 on 15-3-76 for a sum of Rs. 3,00,100/-, the 9th respondent appears to have purchased the property more than 5 years thereafter on 28-10-81 in the execution proceedings in O.S. 142/69 for a mere sum of Rs. 1,30,000/-. Even this purchase has been made free from any earlier encumbrance in favour of the KFC as already stated above. It is common knowledge that the value of immovable property has all along been shooting up since 1976 and it is incredible that a property worth more than Rs. 3 lakhs would be worth only less than its half in 1981. There is in this connection the evidence of PW2 who is one of the purchasers under Ex. A10 dated 26-1182 from which it can be seen that a property in the neighbourhood of the property sold in this case in Court auction has been sold for Rs. 3000/- per cent in 1982. PW2 speaks about the payment of consideration under Ext. A10 and PW1 has sworn that Ext. A10 property is very near the property involved in this case. PW1 has never been cross-examined on this point nor is there any evidence to the contra. This will show that the property in question would have fetched more than Rs. 27 lakhs even in 1981 when it was purchased bv the 9th respondent in Court auction in O.S. 142/69. It is true that it is stated in the sale proclamation that the buildings and other structures which were there in the property originally have been demolished and removed by the original judgment debtors since the date of the decree in O.S. 142/69. But this appears to a false statement, because going by what the auction purchaser/9th respondent himself has stated in his application for delivery (E.A. 237/87), the KFC which later came into possession of the property has demolished and removed the buildings which were in existence in the property even at the time of the sale and the confirmation of the sale in favour of the 9th respondent (vide para 3 of E.A. 237/87). The sale in favour of the 9th respondent took place on 23-10-1981 and the sale was confirmed only in 1987 after the impugned order has been passed by the Court below dismissing E.A. 610/ 81. This will show that even according to the auction purchaser/9th respondent, the buildings were there in the property at the time of sale in his favour and also even at the time of confirmation of that sale much latter in 1987. How can the decree holder bank or any one else even pretend that the property with all the buildings thereon would be worth only Rs. 1,30,000/- when the same property has been purchased by the KFC more than 5 years earlier in 1976 for Rs. 3,00,100/-? It is therefore clear beyond doubt that the property has been deliberately undervalued and the extent of the undervaluation is so great that coupled with the other false particulars given in the sale proclamation it necessarily leads to an inference of fraud committed with intent to defeat and injure the interests of the KFC.

68. It is apparent from the circumstances discussed above that even before the Court sale, the 9th respondent was taking an interest in the matter in connivance with the bank and in collusion with the original judgment debtors. The prior mortgage in favour of the KFC and the possession of the property with the KFC singe 13-7-77 have been deliberately suppressed from the Court in a calculated move made by the auction purchaser to get possession of the property later on even from the KFC even though it was not a party to O.S. 142/69 and the execution proceedings leading to the Court sale in favour of the 9th respondent. The decree holder bank is now nowhere in the scene. The judgment debtors are only too happy that the sale in O.S. 142/69 has taken place as seen from the counter filed by them supporting the Court sale in favour of the 9th respondent. They have already lost the property in favour of the KFC as per the first Court sale in O.P. 87/69. They have nothing to lose further when they support the Court sale in favour of the 9th respondent in O.S. 142/69. They have even ventured to contend in the counter filed by them that the KFC has been set by the 9th respondent auction purchaser to have the sale set aside. Non disclosure of relevant and material particulars with a view to obtain an advantage amount to fraud. A Court sale procured by playing fraud on the Court like a judgment and decree obtained by fraud, to be treated as nullity and declared non est. See S. P. Changalvaraya Naidu v. Jagannath, (1994) 1 SCC 1 : (AIR 1994 SC 853).

69. I shall presently see under the facts and circumstances disclosed whether the interests of the KFC are affected by the sale in favour of the 9th respondent in O.S. 142/69? The KFC was very much interested in the property since it had obtained the equity of redemption from the original mortgagor and also held its own mortgage right. The only defect in respect of that sale, was that the second mortgagee bank was not impleaded as a party in O.P. 87/69. That proceeding was taken under the State Financial Corporations Act wherein there was no provision to implead any one other than the original debtor. Nevertheless, the result of that defect, if at all it is a defect can only be that the bank as second mortgagee would still be free to redeem the prior mortgage in favour of the KFC even after the Court sale in O.P. 87/69. But instead of making an earnest attempt to redeem the first mortgage in favour of the KFC, what is now attempted is to wrest possession of the property from the KFC without redeeming the mortgage in its favpur. It is to succeed in this attempt that false particulars are given as stated above in the sale proclamation. Such false particulars are given only with intent to defeat and injure the interests of the KFC alone. In order to be entitled to file an application under Order 21, Rule 90, CPC, it is not at all even necessary that the applicant should have even a legal interest in the property sold in Court auction. Thus an attaching creditor of the original judgment debtor has been held to be entitled to apply for setting aside the sale under Order 21, Rule 90, CPC. (See AIR 1939 Madras 250 (FB) -- Ayyappa Naicker v. Kasiperumal Nayakar, AIR 1966 Madras 84 -- Ismail Rowthen v. Mynoon Bivi, AIR 1963 Madras 156 (FB) --Sailappan v. Subbiah and AIR 1932 Calcutta 47; Basanta Kumar v. Prosonna Kumar.) The attaching creditor is affected by the sale not because he has any interest in the property sold (attachment by itself creates no interest in the property attached), but because of the possibility of his getting a decree and the right to proceed against the property attached. It is the duty of the Court to see that the Court sale is conducted in all fairness to all parties concerned irrespective of whether they have any present subsisting interest in the property sold or whether they may acquire such interest only in future. The position of the KFC in the instant case is much stronger. At the time of the Court sale in O.S. 142/69, which took place on 28-10-1981, the KFC had already come to purchase the same property in Court auction in O.P. 87/1969 and come into possession of the property on 13-7-1977 by delivery through Court. The only defect in its title was that it was liable to be redeemed by the second mortgagee bank. The only right of the bank was to redeem the KFC under the circumstances but instead of doing that what the bank did was to proclaim the property as if it is in the actual possession of the original judgment debtors and was not subject to any prior mortgage at all. The Bank did so with a view to see that the auction purchaser who bids in auction in O.S. 142/69 can try to wrest possession of the property from the KFC without redeeming the earlier mortgage in its favour or paving the amount due to it. After the sale on 28-10-81 the KFC filed this application E.A. 610/81 to set aside the sale. The same has been dismissed as per the order challenged in this appeal on 28-1-87. Thereafter the auction purchaser/9th respondent filed E. A. 237/87 on 30-3-87 for delivery of the property. He got an ex parte order for delivery even against the KFC impleaded for the first time in that application for delivery on 31-3-87 and got possession pursuant to that order on 2-4-87. These are developments that took place after the impugned order was passed and the KFC could file this appeal against that order only on 6-4-87. But since the order passed by the Court below on E.A. 610/87 is challenged in this appeal, the application to set aside the sale is still pending before the Appellate Court and the Appellate Court under the circumstances is bound to take judicial notice of what transpired in the meanwhile. The appeal is only a continuation of the proceedings before the original Court. (See AIR 1976 SC 49, Rameshwar v. Jotram, paras 7 to 9), AIR 1975 SC 1409, P. Venkateswarlu v. Motor & General Traders and AIR 1941 FC 5, Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri. The Supreme Court has also held in Deshbandhu Gupta v. N. L. Anand and Rajendar Singh, (1994) l SCC 131 at page 150: (1993 AIR SCW 3458 at p. 3474), that developments that have transpired after the sale should also be taken note of in order to see whether the sale is vitiated by any material irregularity or fraud as contemplated in Order 21, Rule 90 CPC. The very manner in which the 9th respondent/auction purchaser managed to get possession of the property after the impugned order was passed by the Court below clearly demonstrates the fraud practised by him in connivance with the decree holder in the matter of publishing and conducting the sale.

70. The phrase used in Order 31, Rule 90, CPC is 'any person whose interests are affected by the sale'. But for the sale in question, the auction purchaser could not have obtained possession of the property from the KFC. The sale in question is the very foundation for his claim to get delivery of the property even from the KFC. Such being the case it is well nigh impossible to hold that the interests of the KFC are not affected by the sale. This question can also be considered from another angle as well. As already pointed out, the auction purchaser never challenged the position that the interests of the KFC are not affected by the sale in the counter filed by him. On the other hand he chose to contend that the KFC is bound by the decree in O.S. 142/69 in as much as it has purchased the property in question in execution of the decree in O.P. 87/69 while the lis in O.S. 142/69 was pending. The question whether the sate in favour of the KFC is affected by lis pendens is a question raised by the auction purchaser even before the Division Bench and that is one of the questions referred to the Full Bench at present. Arguments were advanced and several decisions were relied upon on behalf of the KFC to contend that sales in mortgage actions are not governed by the principle of lis pendens. If the KFC were not to challenge the sale under Order 21, Rule 90, CPC and the Court finds that the sale in favour of the KFC is hit by lis pendens, the KFC will be held to be bound by the sale and in such a situation its only remedy could be to have the sale set aside under Order 21, Rule 90, CPC. In fact the auction purchaser/9th respondent has obtained possession of the property from the KFC only on this basis. These circumstances are more than sufficient to lead one to the inescapable conclusion that the interests of the KFC are affected by sale.

71. The meaning of the term 'affected' has been discussed by the Supreme Court in V. K. Sharma v. State (Delhi Administration), (1975) 1 SCC 784 : (AIR 1975 SC 899). If the interest of any one is touched or impugned upon in any manner whatsoever or the application is in any manner concerned with or related to the sale, it has to be held that his interests are affected by the sale. (See pages 787 & 788 (of SCC): (at p. 901 of AIR) of the decision of the Apex Court cited supra).

72. The 9th respondent/auction purchaser cannot be allowed to blow hot and cold in one and the same situation. All along he has been resisting the application to set aside the sale and enforcing his claim to get possession of the property from the KFC pursuant to that sale and even resisting the subsequent application by the KFC for re-delivery of the property only on the ground that the KFC is bound by the sale in question. Having obtained the fruits of the Court sale by getting delivery of the property and succeeded in even getting the application for re-delivery dismissed on that basis alone, it is now not open to the 9th respondent/auction purchaser to contend before this Court that the interest of the KFC are not affected by sale. In other words the 9th respondent cannot be permitted to approbate or reprobate or blow hot and cold. He is estopped from contending at present that the interests of the KFC are not affected by the sale. (See in this connection Woodroffe and Syed Amir Ali on Law of Evidence 15 Edition, Vol. 4, page 23 and the decision of the Bombay High Court in Madanmohan v. Hari Anandilal, AIR 1959 Bombay 269. The facts of that case arc more or less similar to the facts and circumstances of this case.

73. The nature of the fraud and circumstances under which it has been practiced have all been explained in great detail above. But for the fraud practiced upon the Court by misrepresenting to it that the properties are in the possession of the original judgment debtors while it was in the possession of the KFC all along from 13-7-1977, and the suppression of the prior encumbrance in its favour in enforcement of which the KFC purchased the property in Court auction and obtained delivery, the auction purchaser could not have dared to seek delivery of the property much less to get possession of the same from the KFC. It is clear beyond doubt that the KFC has sustained substantial injury by reason of the fraud practiced upon the Court while punishing and conducting the sale in O.S. 142/69. The KFC apprehended this unlawful dispossession even at the time when it filed the application to set aside the sale in the light of the false particulars shown in the sale proclamation. The apprehension so expressed by the KFC did materialise soon after its application to set aside the sale was dismissed by the Court below.

74. The only question that really arises for consideration is whether the Court sale in O.S. 142/69 is vitiated by material irregularity and fraud. The fraud is writ large on the very face of the proclamation having regard to the false particulars shown therein as discussed above.

If sale is vitiated by fraud, it has necessarily to be set aside because the KFC is probably the only person affected by the sale (even the judgment debtors support the sale in their counter) and the KFC has sustained substantial injury by reason of such fraud on account of its being threatened to be dispossessed and later on actually dispossessed from the property pursuant to the impugned Court sale.

In the result the appeal stands allowed, setting aside the order of the Subordinate Judge, Kozhikode in E.A. No. 610 of 1981 in E. P. No. 263 of 1979 in O.S. No. 142 of 1969 with costs throughout.

Order on C.M.P. No. 11026/87 in C.M.A. No. 68 of 1987. Dismissed.