Thursday 19 August 2021

Whether purchaser of mortgaged property can claim the right of redemption even after passing the decree of foreclosure?

  The equity of redemption is a right which is subsidiary to the right of ownership. Such right is not over and above the right of ownership purchased by the plaintiff. The expression equity of redemption is a convenient maxim but an owner, who has stepped into the shoes of the mortgagor, after the purchase from the mortgagor but before filing a suit for foreclosure is entitled to redeem the property in terms of Section 60 of the Act. The second issue which needs to be addressed is,

(ii) Whether the decree obtained in a suit for foreclosure operates as res judicata and the right of redemption stands extinguished by the decree of the Court? {Para 19}

20. The High Court has held that the decree for foreclosure will operate as res judicata on account of the fact that the appellant filed an application for stay of the execution proceedings. The Executing Court has dismissed such an application. Such dismissal of the application in execution proceedings would operate as res judicata. It was also held that the appellant has lost right of redemption which is coextensive with the right of foreclosure.

21. An application for stay of execution does not have any trapping of a decree as is contained in Order XXI Rules 101 & 103 of the Code. The said provision reads as under:

“101. Question to be determined.-All questions (including questions relating to right, title or interest in the property) arising between the parties to a proceeding on an application under rule 97 or rule 99 or their representatives, and relevant to the adjudication of the application, shall be determined by the Court dealing with the application, and not by a separate suit and for this purpose, the Court shall, notwithstanding anything to the contrary contained in any other law for the time being in force, be deemed to have jurisdiction to decide such questions.
xx xx xx
103. Orders to be treated as decrees. – Where any application has been adjudicated upon under rule 98 or rule 100, the order made thereon shall have the same force and be subject to the same conditions as to an appeal or otherwise as if it were a decree.”

22. The only effect of filing of an application for stay of the execution would be that the appellant can be said to be aware of the fact that there is a decree for foreclosure passed against him which has not been stayed by virtue of the order of the Court. There is no determination of the claim as is contemplated in terms of Order XXI Rule 97 or Rule 99 of the Code having force of decree. The declining of stay of execution will not operate as res judicata only because Section 11 Explanation VII of the Code is applicable to the execution as well.

23. Therefore, the findings recorded by the High Court that the appellant is bound by the decree passed in the suit for foreclosure  is not tenable inter alia because the appellant was not impleaded as a party, though mandated under Section 91 of the Act and Order XXXIV Rule 1 of the Code. The mortgagee was aware of the transaction of purchase in view of the judgment of this Court in Dr. Govinddas as well as for the reason that the possession of the appellant was recorded in the revenue record. The subsequent conduct of mortgagee who has taken possession from the appellant also corroborates the fact that the mortgagee was aware of the factum of sale and possession of the appellant but still have chosen not to implead him as a necessary party. Still further, it is apparent from the pleadings itself that the original mortgagor had colluded with the mortgagee. Therefore, the right conferred by Section 60 of the Act does not stand extinguished by decree of the Court which is to be binding and had to be passed in the presence of the necessary parties and should not be collusive.


Supreme Court of India
Narayan Deorao Javle (Deceased ) ... vs Krishna on 17 August, 2021
Author: Hemant Gupta
Bench: Hemant Gupta, A.S. Bopanna

Read full Judgment here: Click here
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