The court held that a third-party mortgage claim post-property attachment cannot invalidate an execution sale, affirming the primacy of prior judicial orders over subsequent equitable interests.

JUDGMENT :

VENUTHURUMALLI GOPALA KRISHNA RAO, J.

1. This Civil Miscellaneous Appeal is filed by the appellant challenging the order, dated 18.06.2013 passed in E.A.No.826 of 2010 in E.P.No.26 of 2007 in Arbitration Application No.66 of 1999 by the I Additional District Judge, Rajahmundry (“Executing Court” for short).

2. The appellant herein is the petitioner-3^rd party objector; 1^st respondent herein is the Decree Holder; 2^nd respondent herein is the Judgment Debtor and the 3^rd respondent herein is the auction purchaser in E.A.No.826 of 2010 in E.P.No.26 of 2007 in Arbitration Application No.66 of 1999.

3. The appellant/petitioner-3^rd party objector filed E.A.No.826 of 2010 in E.P.No.26 of 2007 in Arbitration Application No.66 of 1999 praying to adjudicate that the execution of sale deed, dated 05.10.2009 held in E.P.No.26 of 2007 in AA No.66 of 1999 as null and void, non est and decide the rights of respondent Nos.1 and 3, to take possession of Execution Petition schedule property or to dispossess the petitioner there from.

4. Both the parties in the Appeal will be referred to as they are arrayed before the Executing Court.

5. The brief averments in E.A.No.826 of 2010 in E.P.No.26 of 2007 in Arbitration Application No.66 of 1999, are as under:

(i) The petitioner is a third party who is a mortgagee of Execution Petition schedule property under equitable mortgage said to have been created by Kaniganti Durganand by depositing the title deed, dated 11.06.2004. The Execution Petition schedule property belong to judgment debtor. Judgment debtor obtained loan from Bank of Baroda, Bhimavaram on 29.08.1992 by depositing the title deeds. Thereafter the said property was attached in E.P.No.41 of 2002. The Bank of Baroda filed an application before Debt Recovery Tribunal against the present judgment debtor. In that Execution Petition, he filed O.A.No.173 of 2002. In that O.A., the judgment debtor filed an application I.A.No.116 of 2004 before Debt Recovery Tribunal seeking permission to sell the property for a private sale on 29.02.2004. The Debt Recovery Tribunal granted permission on 03.03.2004 to sell item No.12 of the O.A. schedule property. Judgment debtor sold the property to one Durganand with the permission of Debt Recovery Tribunal on 07.06.2004. The said Durganand borrowed loan from State Bank of India, Kakinada and deposited the title deeds with the bank. The bank had advanced the amount to the said Durganand for purchase of the property and the title deeds under which said Durganand purchased and deposited with the bank.

(ii) In the meanwhile, the decree-holder filed the present Execution Petition and brought the property to sale in which the 2^nd respondent/auction purchaser purchased the property on 05.10.2009. Sale was confirmed on 08.09.2010. When the Amin went to obtain delivery, there was an obstruction and the present petition by the bank has been filed.

(iii) The decree holder or the auction purchaser have to take steps before the Debt Recovery Tribunal and they cannot take the property through the Court. Thus, the sale is vitiated and the sale certificate is not proper. The auction purchaser, therefore, cannot dispossess the petitioner, because, he is a subsequent mortgagee interested in the Execution Petition schedule property. Therefore, the auction purchaser who is an individual cannot purchase the property in his individual capacity as the decree holder is Yuvraj Finance Corporation Private Limited. The 1/4^th bid amount was not deposited by the highest bidder as the auction purchaser is not the decree holder, he cannot made set off.

6. The 1^st respondent/decree-holder filed counter contending tha