1. The property of the insolvent in this case vested, no doubt, in the receiver under Section 354 of the Code of Civil Procedure. All the right title and interest of the insolvent might thereon have been sold in every part of his estate Each creditor; entered in the schedule, framed by the Court under Section 352, would then have stood in the position of a judgment-creditor against the insolvent for the amount entered opposite Such creditor's name in the schedule. A judgment-creditor however, has not a right to deprive a mortgagee, or other holder, of a charge on the judgment-debtor's property, of his rights under' his security; and the receiver, acting for the judgment-creditors as a body, has no more right than they acting collectively, Would have to annul a mortgage. He must pay off a mortgage-debt in every instance as the equitable condition, of his making the property mortgaged as distinguished, from the equity of redemption available for the general body of the creditors. It is, indeed, only in so far as the property is in excess of the amount secured upon it that it can be regarded as assets of the insolvent at all. By the mortgage the ownership has been divided into portions, whereof only one still belongs to the mortgagor, while the other belongs to the mortgagee.
2. It would seem, then, that, under Section 356, Clause (d), of the Code of Civil Procedure, the receiver ought, as a condition-of dealing with mortgaged property in every case, to pay off the mortgage, even when the mortgagee has not sought to be placed in the schedule, and so rank as a judgment-creditor. The mortgagee's position is essentially different from that of the unsecured creditor, as in Chotalal v. Nahansa Printed Judgments for 1882 p 89. But in the present case it appears further that, after the sale of a small portion of the quassi-insolvent's property, the proceeds enabled the receiver to pay off the creditors, or to satisfy them, and he then, under the order of the Court, restored, to the defendant here the property which had been temporarily vested in the receiver. That property embraced the defendant's interest as mortgagor and as lessee in eight out of the nine fields now in question. He had mortgaged them for ten years, and taken a lease from the plaintiff for the same term. His interest in one was sold: in the other eight his interest was the same when they were restored to him as when they were taken from him by the receiver. There had not been any sale of these fields so as to create an intervening interest in return for a valuable consideration, such, that it would thenceforward pass free--if it could at all pass free--from the incumbrance in favour of the mortgagee, now plaintiff. The defendant therefore is in, as he was before, as tenant of the plaintiff, subject to the terms of the lease, and amongst others to the plaintiff's right of re-entry on default in payment of the stipulated rent.
3. We, therefore, reverse the decree of the District Court, and restore that of the Subordinate Judge, with costs throughout on the respondent.