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Chunilal Deepchand Gujarathi Vs. Bibubai Gulam Husen - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberSecond Appeal No. 438 of 1935
Judge
Reported inAIR1938Bom386; (1938)40BOMLR517
AppellantChunilal Deepchand Gujarathi
RespondentBibubai Gulam Husen
DispositionAppeal dismissed
Excerpt:
.....pending on april 1, 1930-provincial insolvency act (v of 1920), section 28, 47 -secured creditors-priority of claim.; on an application filed on november 11, 1929, the applicants were adjudged insolvents and a receiver was appointed on december 13, 1930. the property of the insolvents consisted of a house, of which two persons claimed to be secured creditors. one of them, the appellant, had obtained a decree against the insolvents on april 9, 1927, which created a charge in his favour on the house subject to two previous mortgages. the respondent, the other creditor, had taken a mortgage of the house on january 29, 1928, and paid off prior mortgages on it effected in 1923 and 1926. when the receiver in insolvency proposed to sell the house, the two creditors intervened in the..........of property act cannot apply to this proceeding. the result is that the subrogation was valid without a registered deed.2. in this view of the case, it is not necessary to go into the other contention of the appellant that the lower court was wrong in holding that even though there was no pending proceeding as against these parties on april 1, 1930, section 63 is not retrospective in its operation with regard to substantive rights acquired before that date as opposed to rights of procedure.3. the order of the lower court is confirmed and the appeal is dismissed with costs.
Judgment:

Divatia, J.

1. This appeal arises under the Provincial Insolvency Act and raises a question of priority between two judgment-creditors of the same insolvents. Two brothers, Chintaman and Ganesh, mortgaged their house to one Mahadev for Rs. 4,000 on April 25, 1923. Mahadev assigned his mortgage rights to one Panse on July 24, 1924, and a further charge on the same house was created by the two brothers in favour of Panse for Rs. 4,000 on November 15, 1926. The appellant-creditor got a decree for Rs. 1,550 with costs in a suit against the insolvents on April 9, 1927, creating a charge in his favour on the same house, subject to the previous mortgages. On January 10, 1928, the respondent paid Rs, 7,700 to Panse in full satisfaction of his mortgages. This payment is found to have been made on behalf of the mortgagors. Some days later, i.e., on January 29, 1928, the mortgagors mortgaged the said house to the respondent for Rs. 10,000, and a part of the consideration was stated to be Rs. 7,700 paid by the respondent to Panse for the mortgagors and with their consent. The mortgagors filed applications in insolvency on November 11, 1929, and were adjudged insolvents on December 13, 1930, and a receiver wasi appointed, The house had all along remained in the possession of the insolvents and the receiver, therefore, proposed to sell it. Both the creditors, i.e. the appellant and the respondent, were secured creditors and could have asserted their rights outside insolvency proceedings, but both of them consented to the sale of the house by the receiver on condition that their rights would attach to the sale-proceeds which after sale amounted to Rs. 7,100. Thereafter each of these creditors claimed priority over the other. The appellant's case was that he was a prior creditor while the respondent contended that by paying off Panse, she was subrogated to the latter's rights and as Panse had priority over the appellant, she, the respondent, had priority over the appellant, There is no doubt that if the respondent was subordinated to Panse's rights, she could claim priority over the appellant. The lower Court has found that the mortgagors had presumably consented to such subrogation. But the appellant contended that under Section 92 of the Transfer of Property Act as amended in 1929, subrogation could take place only by an agreement embodied in a registered instrument, and that section, which was introduced in the Act for the first time in 1929 and came into force from April 1, 1930, was retrospective in its operation, with the result that the respondent, who had no such registered instrument in her favour, had no right of subrogation and therefore no priority over the appellant. It is clear that before the amendment, subrogation could take place without a deed and in that respect the amendment did not simply declare the law but changed it by requiring a registered instrument. The sole question, therefore, is whether Section 92 of the Transfer of Property Act is retrospective in its operation. Section 63 of the Amending Act of 1929, which deals with the retrospective effect of the new provisions, runs thus :-

Nothing in any of the following provisions of this Act, namely, Sections 3, 4, 9, 10, 15, 18, 19, 27, 30, Clause (c) of Section 31, Sections 32, 33, 34, 35, 46, 52, 55, 57, 58, 59, 61 and 62 shall be deemed in any way to affect-

(a) the terms or incidents of any transfer of property made or effected before the first day of April, 1930,

(b) the validity, invalidity, effect or consequences of anything already done or suffered before the aforesaid date,

(c) any right, title, obligation or liability already acquired, accrued or incurred before such date, or

(d) any remedy or proceeding in respect of such right, title, obligation or liability : and nothing in any other provision of this Act shall render invalid or in any way affect anything already done before the first day of April, 1930, in any proceeding pending in a Court on that date : and any such remedy and any such proceeding as is herein referred to may be enforced, instituted or continued, as the case may be, as if this Act had not been passed.

No doubt, Section 92 does not occur in the first part of this section which expressly deals with those new amendments which were not to have a retrospective effect, and, therefore, we have to see whether the present case would fall under the latter part of the section. Under that, part, any amendment, other than those expressly mentioned in the first part, would not affect anything already done before April 1, 1930, in any proceeding pending in a Court on that date. If, therefore, the proceeding, in which this question of priority between the two creditors arises, be said to be pending on April 1, 1930, the parties would not be governed by the new section and the respondent would, therefore, have priority over the appellant. The appellant relies on the view taken by the lower appellate Court that the question about priority between these two secured creditors could not be said to be pending in the Court before April 1, 1930, because under Section 28 of the Provincial Insolvency Act, a secured debt is not within the jurisdiction of the Insolvency Court unless the mortgagees applied to be brought on the record and that was not done till long after April, 1930, and that therefore the respondent's right of subrogation cannot be said to have been part of any matter pending before a| Court on April 1, 1930, The appellant, therefore, contends that the second part of Section 63 does not apply to the present case with the result that Section 92 retrospectively applies to it. We are unable to accede to this contention. It is true that, under Section 28 of the Provincial Insolvency Act, the power of a secured creditor to realise or otherwise deal with his security remains unaffected by that section as to the vesting of the insolvent's property in a receiver and under Section 47 a secured creditor may of his own choice relinquish his security for the general benefit of the creditors and prove for his whole debt. In the present case the two creditors did not relinquish their security. They only gave consent to the mortgaged property being sold on condition that their rights would attach to the sale-proceeds. Then they raised contentions as to their respective priority before the receiver. But all this does not mean that the proceedings began only when they gave their consent. The insolvency proceeding was one continuous proceeding throughout and although they came in at a certain stage in it, their appearance on the record must be, and has, in fact, been treated as having taken place in the insolvency proceeding itself and not in a subordinate or separate proceeding. The fact that the mortgaged property could not be sold by the receiver without either the consent of the mortgagees or without paying them off, does not mean that if they so consent to be paid out of the sale-proceeds without relinquishing their security, there is a new and separate proceeding qua them from the time they give their consent and that the question of their priority is decided in this new proceeding. Even taking it that a secured debt is not within the jurisdiction of the Insolvency Court, unless the creditor applies to be brought on the record, the moment he comes within such jurisdiction, he does so in the original proceeding on the record of which he applies to be brought and not in any fresh proceeding starting with his submission to the Insolvency Court. There are no two parallel proceedings from the time he comes on the scene, but the sale and the subsequent priority proceedings are all part of the same insolvency proceeding from start to finish. We think, therefore, that the claim for priority was a part of the insolvency proceeding pending on April 1, 1930, when the Amending Act came into force, and that by virtue of the latter part of Section 63 of the Amending Act, the new Section 92 of the Transfer of Property Act cannot apply to this proceeding. The result is that the subrogation was valid without a registered deed.

2. In this view of the case, it is not necessary to go into the other contention of the appellant that the lower Court was wrong in holding that even though there was no pending proceeding as against these parties on April 1, 1930, Section 63 is not retrospective in its operation with regard to substantive rights acquired before that date as opposed to rights of procedure.

3. The order of the lower Court is confirmed and the appeal is dismissed with costs.


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