Holding

A decree is transferred to the assignee by the deed of assignment; court recognition is not required for the transfer, and the assignee may execute the decree after giving notice under Order XXI‑Rule 16, notwithstanding any subsequent compromise between the judgment‑debtor and the original decree‑holder.

Summary

Rattan Lal sold land to Sri Ram and later agreed to reconvey it for a price. Sri Ram sued for specific performance and obtained a decree, which Rattan Lal assigned to Dhani Ram Gupta and another. The assignees filed an execution application under Order XXI‑Rule 16, giving notice to both the judgment‑debtor and the original decree‑holder. Before the application was heard, the original decree‑holder and the judgment‑debtor entered a collusive compromise, paid Rs 7,000 in open court and obtained a satisfaction record, after which the execution application was dismissed. The lower court held the assignees could still execute; the High Court held they could not until the assignment was recognised by the court. The Supreme Court held that a deed of assignment transfers the decree’s rights irrespective of court recognition, that notice under Order XXI‑Rule 16 suffices, and that a post‑notice compromise cannot defeat the assignee’s right. Consequently, the appeal was allowed with costs and the matter remitted to the High Court to decide the transfer question.

Issues considered

The effect of a deed of assignment of a decree on the assignee’s right to execute the decree.
Whether court recognition of the assignment is a prerequisite for execution.
Whether a compromise or adjustment between the judgment‑debtor and the original decree‑holder after notice of execution application bars the assignee’s right.
Whether the judgment‑debtor’s lack of notice of the assignment protects him from the assignee’s claim.

Legislation cited

Code of Civil Procedure, 1908s. 146, s. 2(3), s. 232, s. 51
Order XXI of the Code of Civil Procedures. Rule 16, s. Rule 2

Subjects

decree assignmentexecution of decreeOrder XXI Rule 16specific performancecollusive compromisecivil procedurejudgment debtorassignee rights

Judgment

4 G9

.' DHANI RAM GUPTA & ORS.
v.
A

LALA SRI RAM & ANR.
December 7, 1979
(V. R. KRISHNA fYER, R. S. PATHAK AND 0. CHINNAPPA REDDY, JJ.] B
Code of Civil Procedure 1908 (V of 1908), Order XLYI Ruh• 16-Assign-
nzent of <lecrce-Application for execution of decree by assignee-Adjustmient
between judgment-debtor and orig,inal decree-holder after notice of such appli-
cation-Exe'Cution of decree whether barred.

The appe1lants who were the assignees of a decree for specific performance C
J
of an agreement to reconvey property, filed an applica.tion for execution of the
decree under Order XXI, rule 16 of the Code of Civil Procedure. Notice of
the application was issued to the respondent-judgment-debtor as well as the
original decree-holder. The judgment-debtor filed objections contending that
the execution application was not maintainable. The application was adjourned
from time to time. In the meanwhile the original decree-holder and _the judge-
ment--debtor moved the executing court to record full satisfaction of the decree, D
stating that they had entered into a compromise and that the decree was pro-
posed to be satisfied by payment of a fixed sum of money in cash. The n1oney
was paid in cash by the judgment-debtor to the original decree-holder in
open court and satisfaction of the decree was recorded by the Executing Court
which also observed that the compromise would not have ab.y effect whatsoever
on the rights, if any, of the transferee decree-holder who had already filed the
execution application pursuant_ to the deed of assignment. The execution appli- E
cation filed by the appellants was thereafter taken up and dismissed on the
ground that the assignees had no right to execute the decree after the judgment-
debtor had satisfied the original decree-holder by entering into a compromise

--·· wit& him.

In the appeal, the District Court held that the appellants had the right to
execute the decree and that their right could not be defeated by the collusive F
compromise entered into between the judgment-debtor and. the original decree-
holder subsequent to the date of assignment and with notice of assignment.
• Jn the further appeal to the High Court by the judgment-debtor, it was held
that the assignee of the decree had no right to execute the decree until the
assignment was recognised by the Court and until that was done, it was open
to the original decree holder to put the decree in execution and it was also open G
' to the judgment-debtor to satisfy the decree fully by payment to the decree
holder or by other adjustment.

In the appeal to this Court by the assignees of the decree on the question
whether the adjustment of the· decree between the judgment debtor and the
tran~feror-decree-holder barred execution of the decree by .the transferee :

HEfD: l. The High Court was wrong in holding that the adjustment
__.i between the judgment-debtor and the transferor-decree-holder even after notice
470 SUPREME COURT REPORTS [1980] 2 s.c.R,

A of the application under Order XX!, rule 16 had been served on the transferor
and the judgment debtor barred execution of the decree by the transferee. [475 DJ

2. Property in a decree must pass to the transferee under a deed of assign-
ment when the parties to the deed of assignment intend such property to pass.
It does not depend on the Court's recognition of the transfer. Order XXt rule
16 neither expressly nor by implication provides that assignment of a decree
B does not t&ke effect until rcognized by the Court. [473 DJ

3. While Order XX! rule 16 enables the transferee to apply for executioa
of the decree, the first proviso to Order XXI rule 16 enjoins that notice of such
application shall be given to the transferor and the judgment debtor a:ftd that
the decree shall not be executed until the court has heard their objections, if ny,
to its execution. [473 El
c
4. The transfer as between the original decree-holder and the tramferee is
effected by the deed of assignment. If the judgment-debtor has notice of lhe
transfer, he cannot be permitted to defeat the rights of the transferee by CAter~
ing into an adjustment with the transferor. H the judgment-debtor bas -no
\notice of the transfer and enters into an adjustment with the transferor before
the transferee serves him with notice under Order XXI Rule 16 the judgment~
D debtor is protected. [473 GJ

In the instant case, the original decree-holder and the judgment-debtor had
colluded to deprive the appeilants of their rights under the deed of assigmnat
and the Executing Court tacitly gave its seal of approval by permitting oatil"•·
tion of the decree to be entered despite the fact that the decree had already beea
assigned to the knowledge of the judgment-debtor. The process of the COllrt
E cannot be reduced to a mockery and the procedure prescribed by the Code of
Civil Procedure does not permit this to be done. [472 CJ

Dwar Buksh Sirkar v. Fatik Jali I.L.R. 26 Calcutta 250 @ 253, 254; Awa-
palli Ramrao v. Kanumarlapudi Ranganayakulu a11d others AIR 1964 A.P. 1;
Sadagopa Chariar v. l~aghunatha Chariar -ILR 33 Mad. 62, approved.
F
Puthiandi Mammed v. Avalil Moidin ILR 20 Mad. 157, disapproved.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1113 of 1976. •
Appeal by Special Leave from the Judgment and Order dated
16-4-1976 of the Allahabad High Court in execution Second Appeal
G No. 2162 of 1974.
J. P. Goyal and S. K. Jain for the Appellants.
P. G. Gokhale and B. R. Agarwala for the Respondents.
The Judgment of the Court was delivered by

H CHINNAPPA REDDY. J.-Rattan Lal sold certain land to Sri Ram for
Rs. 10,000 /- under a registered sale deed dated 31 March, 1960.
On April 4, 1960 Sri Ram executed an agreement to reconvey the
. ,

DHAN! RAM v. MLA SRI RAM (Chinnappa Reddy,].) 471

property for a sum of Rs. 15,000/- if paid within a period of two A
years. Rattau Lal filed suit No. 18 of 1961 in the Court of First
' Additional Civil Judge, Meerut for specific performance of the agree-
ment to reconvey and obtained a decree on April 17, 1962. The
decree was confirmed in appeal by the High Court of Allahabad on
September 5, 1963. On April 25, 1963 Rattan Lai assigned the rights
which he had under the decree in favour of the present appellants, B
Dhani Ram Gupta and another. The appellants filed an application
for execution of the decree under Order XXJ, Rule 16 of the Code of
Civil Procedure on December 10, 1963. Notice of application was
,J.__, ~· i!l:ued to Sri Ram, the judgment debtor as welt as the original dec.ree-
holder Rattan Lal. Rattan Lal kept quiet but ou March 7, 1964, the c
, judgment debtor Sri Ram filed objections contending that the execu-
tion application was not maintainable. The application was adjourn-
ed from time to time. Meanwhile, on May 26, 1964, Rattan Lal the
original decree-holder and Sri Ram, the judgment debtor moved the
Executing Court to record full satisfaction of the decree. It was stated
that the parties had entered into a compromise and that the decree was D
proposed to be satisfied by payment of a sum of Rs. 7,000/- in cash
by the judgment debtor to the original decree-holder. The amount
was paid in open Court and satisfaction of the decree was duly recorded
on May 27, 1964 by the Executing Court, who, however, observed
• that the compromise would not have any effect whatsoever' on the
rights, if any, of Dhani Ram, who had already filed an execution appli- E
cation pursuant to the deed of assignment dated April 25, 1963.
Thereafter, the execution application filed by the appellants was taken
up and was dismisSed on October 9, 1964, on the ground that the
!If--- assignee had no right to execute the decree after the judgment debtor
had satisfied the original decree-holder by entering into a compromise
F
with him. On appeal the learned Additional District Judge, Meerut
held that the appellant assignees had the right to execute the decree
and that their right could not be defeated by the collusive compromise
, . entered into between the judgment debtor and the original decree
holder subsequent to the date of assignment and with notice of assign-
ment. One of the contentions raised before the learned Additional G
• District Judge was that the so called deed of assigned did not in
fact have the effect of assigning the decree to the appellants. That
contention was also negatived by the learned District Judge. On
further appeal to the High Court by the Judgment debtor, it was held
that the assignee of the decree had no right to execute the decree until
the assignment was recognised~ the Court. Until that was done, it H
was held, it was open to the onginal decree bolder to put the decree
in execution; it was also open to the judgment debtor to satisfy the
472 SUPREME COURT REPORTS [1980] 2 S.C.R.

A decree fully by payment to the decree-holder or by other adjustment.
The High Court however, did not express any opinion on the question
whether the deed of assignment did assign the right of the decree-holder
to the appellants. The assignees of the decree have preferred this
appeal after obtaining special leave under Article 136 of the Constitu-
tion.
B
Even the bare statement of the facts is sufficient to show how the
origin'al decree-holder and the judgment debtor have colluded to de-
prive the appellants of their rights under the deed of assignment and •
how the Executing Court 1'acitly gave its seal of approval by permitting __:\...,
satisfaction of the decree to be entered despite the fact that the decree ·~
c had already been assigned to the knowledge of the judgment debtor. The
process of the Court cannot be reduced to 'a mockery and we do not
think that the procedure prescribed by the Code of Civil Procedure
permits this to be done notwithstanding the argument of Shri D. V.
Patel and Shri Govind Dass, learned Counsel for the judgment-debtor
to the contrary, in support of the judgment under appeal. Their sub-
D mission was that the assignee of a decree had no rights until the assign-
ment was recognised by the Court. In subsrance, the submission of
the learned Counsel was that the recognition by the Court it was that
completed the assignment and gave the right to the assignee to execute
the decree.

Let us examine if the prov1s1ons of the Code of Civil Procedure
justify the submission of the learned counsel. Section 2(3) defines
'
"decree-holder" as meaning "any person in whose favour a decree has
been passed or an order capable of execution has been made". Sec-
tion 51 provides that the Court may, on the application of the decree-
holder order execution of the decree by various methods. Section 146
F
provides that where any proceeding may be taken or application made
by or against any person, then the proceeding may be taken or the
application may be made by or against any person claiming under him.
Order XXI of the Code of Civil Procedure deals with execution of
decrees and orders and Orders XXI r. 2 in particular provides for
'
G payment or adjustment out of Court and for the recording of satis-
faction of the decree by the Court in whole or in p'art as the case may •
be. Order XXI r. 16 with· which we are primarily concerned is as
follows :
•
"16. Where a decree or, if a decree has been passed
H jointly in favour of two or more persons, the interest of any
decree-holder in the decree is tra1!ferred by assignment in
writing or by operation of law, the trnnsferree may apply for
DHANI RAM v. LALA SRI RAM (Chinnappa Reddy, J.) 473

execution of the decree to the Court which passed it and the A
decree IDl!y be executed in the same manner and subject to
the same conditions as if the application were made by such
decree-holder :
Provided that, where the decree, or such interest as afore-
said, has been transferred by assignment, notice of such B
application shall be given to the transferor and thq judgment-
debtor, and the decree shall not be executed until the Court
has heard their objections (if any) to its execution :
Provided also that, where a decree for the payment of
money against two or more persons has been transferred to c
one of them, it shall not be executed against the others."
•
"(ExplanatioTu-Omitted) ".
We are unable to read Order XXI r. 16 as furnishing any founda-
tion for the basic assumption of the learned counsel for the respondent
that property in a decree does not pass to the transferee under the D
assignment until the transfer is recognised by the Court. Property in
a decree must pass to the transferee under a deed of assignment when
the parties to the deed of assignment intend such property to pass. It
does not depend on the Court's recognition of the transfer. Order
XXI r. 16 neither expressly nor by implication provides that assign-
ment of a decree does not mke effect until recognised by the Comt: E
It is true that while Order XXI r. 16 enables a transferee to apply for
execution of the decree, the first proviso to Order XXI r. 16 enjoinl
that notice of such application shall be given to the transferor and
the judgment-debtor and that the decree shall not be executed until the
Court has heard their objections, if any, to its execution. It is one
thing to say that the decree may not be executed by the transferee F
until the objections of the transferor and the judgment-debtor ard.
hearo, it is an altogether different thing to say that the assignment is
of no consequence until the objections are heard and decided. 'Il1e
• transfer as between the original decree-holder and the transferee is
ei!ected by the deed of assignment. If the judgment debtor has
, notice of the transfer, he cannot be permitted to defeat the rights of
G
the transferee by entering into an adjustment with the transferor. If
the judgment debtor has no notice of the transfer and enters into an
adjustment with the transferor before the transferee serves him with
notice under Order XXI r. 16, the judgment-debtor is protected. This
in our view is no more than nla;n good sense. In Dwar Buksh Sirkar n
v. Patik .Tnllf'). the decree holder represented to the Court that the
fl) T.T .R. 26Calcutta250 at 253, 254.
9-21SCl/RO
474 SUPREME COURT REPORTS (1980] 2 S.C.R.

A judgment debtor had satisfied the decree by payment and wanted his
execution application to be disposed of accordingly. Before satisfac- ~ •
~ion oould be recorded a transferee of the decree from the original
decree-holder intervened a,nd claimed that satisfaction could not be
recorded as there was a valid transfer of the decree in his favour prior
to the alleged payment by the judgment debtor to the original decree-
B holder. 111e argument before the High Court was that the assignee
could not prevent the recording of the satisfaction of the decree as
he had not filed an execution application and got the assignment in
his favour recognised. The High Court o! Calcutta observed :
"The only provision in the Code referring expressly to the
c assignment of a decree is contained in section 232, and that
no doubt contemplates a case in which the Msignee applies
for execution. In such a case the Court may, if it thinks
fit, after notice to the decree-holder and the judgment-debtor,
allow the decree to be executed by the assignee. I!, how-
ever, there is an assignment pending proceedingii in execution
D taken by the decree-holder, I see nothing in the Code which
debar.s the Code from recognising the transferee as the per-
son to go on with the execution. The recognition of the
Court is no doubt necessary before he can executy the decree,
but it is the written assignment and not the recognition which
makes him the transferee in law. The omission of the trans-
..
E feree, if it was an omission, to make a formal application
for execution, was merely an error of procedure and does
not affect the merits of the case ..................... .
. . . . . . . . . . . . . . . . . . . It is argued for the_ respondent that
the transferee's title was not complete as express notice of the
F
transfer had not been given to the judgment-debtor. As al- .-
ready observed, the transfer, as between transferor and tl1e
transferee, is effected by the written assignment. If the
judgment-debtor had no notice of the transfer and being
otherwise unaware of it paid the money to the decree-holder,
the payment was, of course, a good payment, and he cannot
_G again be held liable to the transferee".
We ex]Jress our agreement with the observations made by the Calcutta
High Court.
In one of the cases cited by the learned counsel for the respon-
dent, namely Arvapalli Ramrao v. Kanumarlapudi Ranganayakulu and
H others,('), a Full Bench of the Andhra Pradesh High Court disagree-
ing with the observations made in Puthiandi Mammed v. Avalil
(I} AIR 1964 A.P. 1.
DHANI RAM v. LALA SRI RAM (Chinnappa Reddy, J.) 475

Moidin,('), and agreeing with the observations made in Sadagopa A
Chariar v. Raghunatha Chariar(') held that when a decree was trans-
ferred by an assignment in writing the property in the decree passed
to the transferee at the time of assignment and that recognition of the
Court was not necessary to complete the transaction of assignment
but was required to enable the assignee decree-holder to proceed witll
the execution. We agree. B
The learned counsel for the respondent relied upon Katlir Mira
Sahib v. Peer Mohd.( 3 ), Ch. Mohd. Ishrat Ali & Ors. v. Molvi Sayed
Raza( 4 ) and Duvvuru Balasubramanya Reddy v. Duvvuru Munu•
swami Reddy & Ors.('). We do not think that it is necessary for us to
refer in any detail to them cases. The basic assumption in Ch. Mohd. c
lshrat Ali & Ors. v. Molvi Sayed Raza and Duvvuru Balc.subramanya
Reddy v. Duvvuru Muniswami and Ors. (supra) and was that the trans-
fer was complete only on recognition by the Court. We have pointed
out that it is not so. In Ch. Mohd. lshrat Ali & Ors. v. Molvi
Sayed Raza (supra) there are some observations which are helpful
to the respondent but the question presently under consideration did
not arise and we need say no more than that. D

We are of the view that the High Court was wrong in holding that
• the adjustment of the decree between the judgment-debtor and the
transferor deqee-holder even after notice of the application under
Order XXI, r. 16 had been served on the transferor and the judgment-
debtor barred execution of the decree by the transferee. The question E
whether there was any transfer of the decree under the deed of assif,ll-
ment was not decided by the High Court and we, therefore, allow the
appeal and remit the matter to the High Court for decision upon this
,question only. The appeal is allowed with costs as indicated.

XV.K. Appeal allowed.
F
•

•

(I) !LR 28 Mad. 157.
(2) !LR 33 Mad. 62.
(3) AIR 1933 Mad. 523.
(4) AIR 1945 Oudh 225.
(5) AIR 1960 A.P. 305.