EMBASSY HOTELS PVT.LTD. versus MIS. GAJARAJ & CO. & ORS.

Citation: [2014] 14 S.C.R. 603 · Decided: 12-11-2014 · Supreme Court of India · Bench: M.Y. EQBAL · Disposal: Appeal(s) allowed

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Judgment (excerpt)

[2014] 14 S.C.R. 603 
EMBASSY HOTELS PVT.LTD. 
v. 
MIS. GAJARAJ & CO. & ORS. 
(Civil Appeal No. 5884 of 2004) 
NOVEMBER 12, 2014 
[M. Y. EQBALAND SHIVA KIRTI SINGH, JJ.] 
Specific Performance - Suit for specific performance 
of an agreement for sale -
The suit land earlier morlgaged 
A 
B 
by the owner of the land with the financing Corporation against C 
a loan - On non-payment of the loan by the owner, the iand 
sold in courl auction in the suit filed by the Corporation -
Auction sale confirmed upto Supreme Courl -
Suit for 
specific performance dismissed by trial courl, but allowed by 
High Courl- Held: In view of proviso to s. 60 of Transfer of 0 
Property Act, the right to redeem the mortgage got 
extinguished by the auction sale -
The auction sale having 
attained finality by courl orders, cannot be ignored by another 
courl in a collateral proceeding - Thus the High Courl was 
not right in decreeing the suit for specific performance -
E 
Transfer of Property Act, 1882- s. 60 proviso - Code of Civil 
Procedure, 1908- Or. 21 r. 89. 
Allowing the appeal, the Court 
HELD: 1. It cannot be said that the first defendant 
being a mortgagor will continue to have a right of F 
redemption although the sale of mortgaged property to 
a third party through a court auction became final. 
Section 60 of the Transfer of Property Act protects the 
right ofredemption available to a mortgagor by providing 
that the mortgagor can exercise such a right by paying G 
.the mortgaged money at any time after the principal 
money has become due. But the proviso clarifies that 
the right conferred by that Section is.available only if it 
has not been extinguished by act of the parties or by 
. 603 
H 
604 
SUPREME COURT REPORTS 
(2014] 14 S.C.R. 
A decree of the court. The act of the parties would cover 
act of the mortg~gor and the mortgagee, if they are 
unable to settle the dispute arising out of money claim 
covered by the mortgage and by their action, allow the · 
mortgaged property to be sold through auction in favour 
B of a third party. Hence, it is not possible to accept the 
case of the plaintiff-respondent that in spite of sale of. 
the suit property becoming final through court auction, 
for the purpose of grant of specific relief to the plaintiff 
in the present suit, the first defendant would be deemed 
c to still retain the right to redeem the mortgage and 
transfer the suit property to the plaintiff regardless of the 
right, title and possession already legally vested in the 
auction purchaser~the appellant. [Para 18 and 19] 
[613-C; 613-C-G] 
D 
2. No doubt, if a fraud is alleged and proved, it can 
be sufficient to get rid of most solemn of proceedings 
including court proceedings. But in case of order of a 
court of competent jurisdiction, this must be done only 
by throwing a direct challenge to the proceedings by 
E instituting a suit for that purpose or through any 
appropriate legal 'proceecHi{ which may permit such 
direct challenge. Judgments of courts cannot be ignored 
by another court in a collateral proceeding and that also · 
· on mere suspicion of fraud or collusion, as has been 
F done in this case. [Para 20][613-G-H; 614-A-B] 
Union of India v. Major S.P Sharma 2014 (6) SCC 
351 - relied on. 
3. The orders passed in the execution proceedings 
relating to the mortgage suit were by a competent court 
G which rejected the plaintiff's daims. Such orders cannot 
· be ignored in a collateral proceeding. It is to be kept in 
mind that the order confirming the sale and rejecting the 
plaintiff's application under ·order 21 Rule 89 for one 
reason or the other was conftrmed'by this. Court also. 
H 
EMBASSY HOTELS PVT.LTD. v. M/S. GAJARAJ & CO. 
605 
The High Court while allowing the suit for specific A 
performance ignored the aforesaid cardinal principle o.f 
law. [Para 22][614-D-F] . 
4. No doubt Section 20 of the Specific Relief Act 
vests the Court with a jud.icial discretion in granting or 
not granting specific performance. But in the present B 
case the plaintiff cannot gain anything from this Section 
because the suit property or substantial part of the same 
had already been auctioned and first defendant had no 
longer any title or ownership over the same and hence it 
was not possible to grant a decree for a specific C 
performance. [Para 27][616-C-F] 
Dadi Jagannadham v. Jammulu Ramulu and Ors. 
2001 (7) sec 11 : 2001 (2) suppl. SCR 60; . · 
Chandra Mani Saha v. Anrjan Bibi AIR 1934 PC 
134; VS. Subraman_

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