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Kasturi Devi Jain v/s Union Bank of India

    Civil Revision No. 105/2006

    Decided On, 22 April 2010

    At, High Court of Madhya Pradesh

    By, THE HONOURABLE MR. JUSTICE PIYUSH MATHUR

    For the Appearing Parties: R.K. Goyal, M.M. Qureshi, Ajay Bhargava, Advocates.



Judgment Text

(1.) The Judgment Debtor (Guarantor) has questioned the legality and propriety of an order passed by IVth Additional District Judge, Morena on date 13-4-2006, in Execution Case No. 2-A/2000 x 2004, whereby an application preferred under Section 151 of the Code of Civil Procedure, by the Borrower/ Guarantor for treating the entire execution proceedings to be premature, has been dismissed.

(2.) One Dilip Singh Parmar has taken financial assistance from Union Bank of India for making Furniture of his Restaurant, situated at Morena, in the sum of Rupees Three Lacs and the present petitioner (defendant No. 2) had furnished and equitable mortgage of House No. 117/1 for securing the financial assistance/loan with the Bank on date 22-7-1972. The Bank has advanced the financial assistance of Rs. 1,20,000/-, Rs. 1,13,200/- and Rs. 72,490/- in the year 1996 on different dates and the borrower had admitted the liability of making payment to the Bank of the entire due amount of Rs. 3,11,903/- and a Letter of Confirmation was executed on date 26-3-1997, but when in spite of demand of return of this amount, the same was not paid, the Bank had issued a notice and a suit for the recovery of Rs. 4,57,543/- was filed.

(3.) The Trial Court issued notice to the Borrower and Guarantor and after service of summons, the defendants entered their appearance before the Trial Court, but at the subsequent stage of hearing of suit, the defendants remained absent, compelling the Court to proceed ex parte against the defendants (Borrower and Guarantor) and to pass a Preliminary Decree on date 18-12-2001, in Civil Suit No. 2-A/2000. The 4th Additional District Judge, Morena, while deciding the suit ex parte, had drawn a preliminary decree in the following manner:

(4.) Soon after passing of the preliminary decree, the Bank had initiated execution proceedings by submitting Execution Application in terms of Order 21 Rule 11, CPC and sought assistance of the Court for executing the preliminary decree, where the Court issued notice to the present petitioner, who in turn, filed an application under Section 151 of CPC by taking a preliminary objection that the preliminary decree was passed with certain conditions directing the Borrower and Guarantor to deposit the specified amounts within a period of 6 months, along with a direction that in the event of non-compliance of the direction given for depositing the money, the Bank would be entitled to secure its due amount, by putting the Mortgaged Property to auction and since the petitioners could not comply with the same, the Bank was required to first obtain the Final Decree in terms of Order 34 Rule 3, CPC and in absence of a Final Decree, the Execution Application, preferred under Order 21 Rule 11 of CPC for straight away executing the Preliminary Decree would be premature and not tenable in the eyes of law. The Executing Court has dismissed this application of the petitioner, and its legality has been questioned in the present revision.

(5.) I have heard Shri R.K. Goyal, learned Counsel for the petitioner, Shri M.M. Qureshi, learned Counsel for the respondent No. 1 and Shri Ajay Bhargava, learned Counsel for the respondent No. 2 and perused the order filed along with the Revision Memo.

(6.) Shri R.K. Goyal, learned Counsel for the petitioner submits that since the decree itself had prescribed for a particular procedure of obtaining a final decree, in the event of non-compliance of the time frame set out in the preliminary decree, as per the provisions contained in Rule 2 of Order 34, CPC, therefore, the Bank was not competent to secure execution of the preliminary decree without obtaining the Final Decree. Shri M.M. Qureshi, learned Counsel for the respondent No. 1-Bank submits that since the period of an appeal had expired, therefore, the preliminary decree had acquired the status of a final decree and the same was put to execution, as a final decree and the Court below was justified in rejecting the application of the Judgment Debtors.
(7.) A perusal of the text of the Judgment and the preliminary decree, passed in Civil Suit No. 2-A/2000 demonstrate that the Court below has specifically directed the defendants of the suit to deposit the principal amount and the interest, quantified at Rs. 4,57,543/- within a period of 6 months and the Court has further directed the defendants to deposit the amount of interest from the date of presentation of the suit till date 6-5-2000 @ 17.35% as interest within a period of 6 months and has further directed for the payment of interest pendente lite within a period of 6 months and Clause No. 5 of the preliminary decree provide that in the event of non-payment of the aforesaid amounts (within the specified time period) the Bank would be entitled for obtaining final decree, which shows that a specific procedure was prescribed by the Trial Court, which seems to be in line with the provisions contained in Rule 2 of Order 34, CPC, wherein sub-clause (ii) of Clause 2 provided that if the payment of the amount, due under preliminary decree is not made, on or before the fixed date, then the plaintiff shall be entitled to apply for a final decree.

(8.) Indisputably, the Bank has initiated the execution proceedings in relation to the preliminary decree itself by filing an application under Order 21 Rule 11 of CPC before the Executing Court, merely on the ground that the period of preferring an appeal against the preliminary decree has expired, therefore, the preliminary decree can be treated to be a final decree, although this logic or explanation do not find support from any of the provisions contained in the Code of Civil Procedure.

(9.) The Judgment Debtor has also demonstrated that Borrowers/ Guarantors had preferred an application under Order 9 Rule 13 of CPC, which was registered as MJC No. 1/2000, wherein a prayer for setting aside the preliminary decree was made on the ground that for adequate reasons, the defendants could not participate in the Trial and interestingly enough, this application was allowed by the Court by its order dated 15-7-2002 by imposing certain conditions on the defendants that they shall deposit Rupees Two Lacs within a period of 3 months and shall furnish a Bank Guarantee of Rupees Three Lacs for the balance of amount and a cost of Rs. 5,000/- was also imposed. The Court while allowing the application had further directed that in case these conditions are not complied with, within the prescribed time limit, the order of setting aside the ex parte preliminary decree would automatically come to an end and the preliminary decree shall revive, meaning thereby as if no order of setting aside preliminary decree was ever passed.

(10.) The learned Counsel for the Bank has mainly argued that firstly; the time period of preferring an appeal against the preliminary decree had expired and no appeal ever had been preferred by the Judgment Debtors and secondly; as the petitioners have failed to comply with the conditions prescribed by the Court, while allowing the application preferred under Order 9 Rule 13 of CPC, therefore, the preliminary decree has acquired the status of a final decree, where after the Bank was not required to apply to the Court for passing a final decree. The Court below has also passed the impugned order on these lines that since the preliminary decree has been revived upon non-fulfilment of the conditions, prescribed by the Court while allowing the application preferred under Order 9 Rule 13 of CPC, therefore, the preliminary decree would convert into the final decree.

(11.) A perusal of Rule 3 of Order 34 of CPC demonstrate that when the defendant fails to make the payment of the amount under the preliminary decree and the plaintiff applies for passing of the final decree to the Court, thereafter alone the stage of drawing the final decree reaches and a preliminary decree could not automatically convert into a final decree either on account of the expiration of the period of limitation of preferring an appeal or on account of non-fulfillment of any condition prescribed in an order setting aside the preliminary decree, on not being an order passed in appeal. Therefore, the order passed by the Executing Court runs counter to the Mandate of Law reflecting the Order 34 of CPC.

(12.) The scope of preferring an appeal against the preliminary decree is envisaged in Section 97 of CPC, which provide that when no appeal is preferred against the preliminary decree, the party is precluded from disputing the correctness of the preliminary decree, but this fetter could not be pressed into service to demonstrate that after expiration of the period of limitation of preferring an appeal, the plaintiff would not be required to obtain a final decree. This controversy has been analyzed by the Supreme Court in its judgment reported as (1995) 5 SCC 631, Mool Chand Vs. Dy. Director, where Paragraph Nos. 25 to 29 of this judgment throw adequate light on the controversy in the following manner:

"25. Preliminary decree is an appealable decree. Section 97 of the Code of Civil Procedure provides as under: "97. Appeal from final decree where no appeal from preliminary decree. Where any party aggrieved by a preliminary decree passed after the commencement of this Code does not appeal from such decree, he shall be precluded from disputing its correctness in any appeal which may be preferred from the final decree." 26. Thus, if an appeal is not filed against the preliminary decree and its correctness is not challenged, it becomes final and the party aggrieved thereby will not be permitted to challenge its correctness in an appeal against final decree. 27. The Privy Council in Ahmed Musaji Saleji Vs. Hashim Ebrahim Saleji held that failure to appeal against a preliminary decree would operate as a bar to raising any objection to it in an appeal filed against final decree. This Court in Venkata Reddi Vs. Pothi Reddi, has held that the impact of Section 97 is that the preliminary decree, so far as the matters covered by it are concerned, is regarded as embodying the final decision of the Court passing that decree. It observed as under: "A preliminary decree passed, whether it is in a mortgage suit or a partition suit, is not a tentative decree but must, insofar as the matters dealt with by it are concerned, be regarded as embodying ......the final decision of the Court passing that decree." This decision was relied upon Gyarsi Bai Vs. Dhansukh Lal, in which it was observed as under: "It is true that a preliminary decree is final in respect of the matters to be decided before it is made ..... It is indisputable that in a mortgage suit there will be two decrees, namely, preliminary decree and final decree, and that ordinarily the preliminary decree settles the rights of the parties and the final decree works out those rights." 29. There is, thus, a distinction between a case in which an appeal is filed against a preliminary decree and a case in which a preliminary decree is not appealed against and its correctness is not assailed. If, therefore, a notification under Section 4 of the Act is issued in a case where an appeal against the preliminary decree was not pending, the latter, viz., the preliminary decree, will remain unaffected and will not abate but if the preliminary decree had been assailed in appeal, and the appeal is pending on the date of notification, the latter, namely, the notification, will have the effect of abating the entire suit/proceedings including the preliminary decree passed therein. On the contrary, if an appeal is filed against the final decree without there being any appeal against the preliminary decree and the preliminary decree becomes 'unassailable' on account of Section 97, CPC, the notification under Section 4 would abate the proceedings relating to the final decree without in any way touching, impairing or affecting the preliminary decree. The reason, to repeat, is obvious. Once a preliminary decree is passed, the proceedings so far as declaration of rights or interests in the land are concerned, come to an end. Those rights are to be worked out by the final decree. In a case, therefore, where a preliminary decree has already been passed and only the proceedings relating to the preparation of final decree arc pending in any Court, either at the original stage or at the appellate or revisional stage, it cannot be said that proceedings relating to "declaration or determination of rights in the land" within the meaning of Section 5 (2) of the Act are pending."

(13.) The possibility of a modification in the preliminary decree in the event of making of payment or in absence of an appeal has been brought into the focus by the Court below, in its impugned order for reaching a conclusion that when no appeal was preferred against the preliminary decree and the conditions prescribed by the Court, while allowing the application under Order 9 Rule 13 of CPC were not complied with, it would be presumed that the legality and correctness of preliminary decree was questioned and upon non-compliance of the conditions, prescribed while setting aside the ex parte decree, the preliminary decree would convert into a final decree. But this analysis and belief of the Executing Court appears to be contrary to the provisions of the Code of Civil Procedure, which prescribe for, passing of a preliminary decree as well as a final decree.

(14.) The scheme of Order 34 reflect in Form No. 3-A (Appendix D of CPC) where in clause (3) of the Form, the Court has to order that the plaintiff may apply to the Court for passing a final decree, in the event of default of payment by the Defendant, therefore from this view of the matter also, this Court is of the view that without obtaining a final decree from the Court, the execution of the present preliminary decree drawn in the present form and manner was not possible and permissible. While examining the exigencies and possibilities in relation to the execution of a preliminary decree, the Supreme Court has observed in its judgment reported as (1967) 3 SCR 101, Sital Parshad Vs. Kishori Lal as follows : "6. Let us now turn to the problem before us keeping in mind the

propositions indicated above. Now in an appeal from a preliminary decree one of three things is possible. Firstly, the appeal may be allowed and the preliminary decree reversed. Secondly, the appeal may be dismissed and the preliminary decree confirmed in toto. And thirdly, there may be modification of the preliminary decree in appeal and this modification may be one of two kinds : (i) the amount decreed may be increased; or (ii) the amount decreed may be reduced. 7. There can in our opinion be no doubt that if in appeal the preliminary decree is reversed, the final decree must fall to the ground for there is no preliminary decree thereafter in support of it. It is not necessary in such a case for the defendant to go to the Court passing the final decree and ask it to set aside the final decree. Even if the defendant does not make an application to the Court for setting aside the final decree within three years because the preliminary decree has been reversed, the decree-holder cannot get the right to execute the final decree which has no preliminary decree in support of it. If an execution petition is made on such a final decree even though more than three years after the decree in appeal has been reversed, the defendant has simply to ask the Court where the execution petition is made to refuse to execute the decree on the ground that the preliminary decree in support of it has been set aside. It seems to us that in such a case it is the duty of the Executing Court to take note of the fact that the preliminary decree in support of the final decree has been reversed and it should refuse to execute the final decree even though the fact is brought to its notice more than three years after the decree in appeal reversing the preliminary decree. In such a case in our opinion no question of limitation arises."

(15.) The Supreme Court has recently had had an occasion to examine the meaning of the word "decree" as prescribed in Section 2 (2) of CPC for determining the scope of the execution of the preliminary and final decree, wherein the Court has observed that it is only a final decree which is executable and not a preliminary decree, unless the final decree is a part of the preliminary decree. The relevant paragraphs of the judgment of Supreme Court reported as (2007) 2 SCC 355, Hasham Abbas Sayyad Vs. Usman Abbas Sayyad, are quoted herein below:

"3. The short question which, inter alia, arises for consideration is as to whether the property in suit could be put on auction-sale without initiating a formal final decree proceeding. 4. "Decree" has been defined in Section 2 (2) of the Code of Civil Procedure, 1908 to mean: "2. (2) 'decree' means the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. It shall be deemed to include the rejection of a plaint and the determination of any question within Section 144, but shall not include (a) any adjudication from which an appeal lies as an appeal from an order, or (b) any order of dismissal for default. Explanation: A decree is preliminary when further proceedings have to be taken before the suit can be completely disposed of. It is final when such adjudication completely disposes of the suit. It may be partly preliminary and partly final;" 7. Preliminary decree declares the rights and liabilities of the parties. However, in a given case a decree may be both preliminary and final. 8. There can be more than one final decree. A decree may be partly preliminary and partly final. (See Rachakonda Venkat Rao Vs. R. Satya Bai). 9. A final decree proceeding may be initiated at any point of time. No limitation is provided therefor. However, w

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hat can be executed is a final decree, and not a preliminary decree, unless and until final decree is a part of the preliminary decree." (16.) Therefore, from the perusal of the facts of the case, the legal provisions and the ratio reflecting in the judgment of the Supreme Court, this Court has arrived at an irresistible conclusion that when a specific condition for obtaining a final decree is provided in a preliminary decree and the plaintiff decree holder straight away seeks execution of a preliminary decree, (upon a defendant failing to comply with conditions), then the Executing Court could not execute the preliminary decree, in absence -of a final decree, as per the Legislative intendment, reflecting in Order 34 Rule 3 of CPC. Similarly, the preliminary decree would not convert automatically into a final decree, either by efflux of time or upon further non-compliance of the conditions prescribed by a Court, while setting aside the ex parte preliminary decree, as the same would not have the effect of an appellate order, passed in relation to the preliminary decree and, therefore, a preliminary decree would certainly be required to be made a final decree, by a specific prayer/application of the plaintiff in terms of Rule 3 of Order 34, CPC and only upon drawing of a final decree by the Court (though at time it may be formal in nature), its execution could then be made, by putting the hypothecated/charged properties to the auction/sale for the realization of the due amount, described in the decree. (17.) Consequently the revision petition is allowed and the impugned order passed by the Executing Court on date 13-4-2006, in Execution Case No. 2-A/2000 x 2004 is set aside and as the Bank has preferred the execution proceedings under Order 21 Rule 11 of CPC, without applying for obtaining a final decree, the main Execution Application is also rejected on being premature, on the ground that such a preliminary decree would not be executable without obtaining the final decree.
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