1. The short question that arises in this Civil Miscellaneous Second Appeal is, whether E. P. No 384 of 1963 is barred by time and inexecut-able against the mortgaged property.
2. The material facts are: One K. Venkata Ratnam by depositing the title-deeds of his only house, borrowed certain amounts from the Canara Industrial & Banking Syndicate, Guntur (hereinafter referred to as 'the Bank'.) For the recovery of the amount due under the mortgage account, the Bank filed mortgage suit O. S. No. 163 of 1952 in the Court of the Subordinate Judge at Guntur, against K. Venkataratnam and his son. A preliminary mortgage decree was passed on 31-1-1953 and a final decree on 26-9-1953.
3. In I. P. No. 20 of 1952 filed by a creditor, K. Venkataratnam was adjudged Insolvent on 27-6-1953 and the property of the insolvent vested in the Official Receiver.
4. The Bank filed E. P. No. 384 of 1963 on 26-4-1963 in execution of the final mortgage decree dated 26-9-1953.
5. In I. A. No. 1009/1966 in I. F. No. 20/1952 the Official Receiver objected to the executability of the decree in O. S. No. 163/1952 on the ground that it was time-barred. The Bank opposed the petition contending that the order of this Court dated 5-7-1962 (Ex. B-21) operated as res judicata and debarred the official Receiver from contending that the decrpe was inexecutable against the mortgaged property and, therefore, the Additional Subordinate Judge had no jurisdiction to enquire into the matter. The Additional Subordinate Judge held that, in view of the direction of the High Court in A. A. O. No. 268 of 1966, he had jurisdiction to enquire into the matter. The Additional Subordinate Judge then overruled the objection raised by the Official Receiver and dismissed I. A. No. 1009/1966 and ordered further steps in the E. P.
6. A. S. No. 5 of 1973 filed by the Official Receiver was dismissed by the District Judge, Guntur. Hence this Civil Miscellaneous Second Appeal by the Official Receiver.
7. The learned Counsel for the appellant. Official Receiver, raised the following contentions before me, viz., (i) the District Judge erred in holding that the question whether the E. P. against the judgment-debtors was barred by time, cannot be raised by the Official Receiver because the order in Ex. B-21 constituted res judicata and the decree is executable against the charged property (ii) after being adjudged insolvent, and after his power to dispose of his son's interest in the property vested in the Official Receiver, the judgment-debtor. K. Venkataratnam, could not make any ac-knowledgment under Section 19 of the Old Limitation Act of 1908, so as to give a fresh starting point for the computation of the period of limitation; (iii) as a matter of fact, the Exhibits relied upon by the respondent-Bank as acknowledgment of the liability of the J. D. Venkatarat-nam, do not fulfil the requirements of an 'acknowledgment' within the meaning of Section 19 of the Limitation Act; (iv) after holding that Exts. B-3 and B-4 were acknowledgments and B-5 to B-11 were not acknowledgments and that, the E. P. filed in 1963 was time-barred, the District Judge erred in holding that under Section 14 of the Limitation Act. the Execution Petition was within time and (v) in any case. K. Venkataratnam's acknowledgments of the liability would not bind his son.
8. Before appreciating the contentions in this Miscellaneous Second Appeal, some more facts have to be stated.
9. The respondent-Bank filed I. A. No. 199/1954 in O. S. No. 163/1952 for im-pleading the Official Receiver as defendant No. 3 in the suit. The petition was dismissed by the Court with the observation that, since the insolvent's property vested in the Official Receiver even before the date of the preliminary decree, the Bank must apply for setting aside the final decree and for passing a fresh final decree. The respondent-Bank then filed (i) I. A. No. 842/1954 for setting aside the previous final decree; (ii) I. A. No. 138/ 1955 to implead the Official Receiver as defendant No. 3 in the suit; and (iii) I. A. No. 843/1954 for passing afresh final decree against the J. Ds and the Official Receiver. All those three petitions were dismissed by the Additional Subordinate Judge and the C. R. P. No. 1173/ 1957, C. M A. No, 274/1957. and Appeal No. 41/1958, filed against the common order passed in those applications, were also dismissed by this Court, by its order dated 5-7-1962 (Ex. B. 21) with the following observations:--
'.....Judged thus, it is plain thatthe course adopted by the plaintiff which resulted in the final decree is quite in accord with the provisions of law and there is no justifiable ground for avoiding or ignoring the final decree, or reopening the proceedings for final decree.....'
In E. P. No. 384/1963, the judgment-deb-tor. K. Venkataratnam filed a counter opposing the E. P. as time barred. That objection was overruled by the executing Court and the judgment-debtor, K. Venkataratnam filed A. A. O. No. 268 of 1966 in this Court, A Division Bench of this Court, by its order dated 5-4-1968, directed the E. P. No. 384/1963 to be kept pending subiect to the result of the order that may be passed in I. A. No. 1009/ 1966. This Court further directed theSubordinate Judge to decide both the binding nature of the mortgage decree as well as the question whether E. P. No. 384/1963 was in time, or not.
10. The first question that has to be considered in this appeal is, whether the order Ex. B-21 operates as res judicata and is a bar against the Official Receiver contending that E. P. No. 384/1963 is barred by time.
11. It is now well settled that the provisions of Section 11, Civil Procedure Code are not exhaustive with respect to an earlier decision operating as res judicata between the same parties, on the same matter in controversy in a subsequent regular suit. On the general principle of res judicata, and previous decision on a matter in controversy, decided after full contest or after affording fair opportunities to the parties to prove their case, by a Court competent to decide, will operate as res judicata in a subsequent regular suit. The nature of the former proceedings is immaterial; (See Gulab Chand v. State of Gujarat, : 2SCR547 :
12. In cases of Judgments inter partes the later adjudication should be taken as superseding the earlier, whether or not the earlier adjudication was pleaded as & bar to the trial of the suit in which the later adjudication was made; (See: Moturi Sheshayya v. Venkatadri Appa Rao, 31 Mad LJ 219 = (AIR 1917 Mad 950).
13. In the earlier proceedings, I. A. Nos. 842 and 843 of 1954 and 138 of 1955, which came up to this Court in C. R. P. No. 1173/1957, C. M. A. No. 274/ 1957 and Appeal No. 41 of 1958, this Court, in its order dated 5-7-1962 (Ex. B-21), held that the final mortgage decree dated 26-9-1953 was quite in accord with the provisions of law, although the official Receiver was not made a party to the final decree proceedings, because a mortgagee was outside the Insolvency Act. The decision reached after full contest and hearing the parties operates as res judicata in the later proceedings, I. A. No. 1009/1966 and precludes the Official Receiver from contending that the decree is inexecutable against the charged property on the ground that the equity of redemption vested in him and he was not made a party to the final decree proceedings. Since no decision has been made on that point in A. A. O. No. 268 of 1966, the order in A. A. O. 268 of 1966 has not superseded Ex. B-21. To that extent alone the earlier decision in Ex. B-21 operated as res judicata. The question whether E. P, No. 384 of 1963 was barred by time or not, was neither agitated, nor could be agitated in the earlier proceedings because, by that time, no E. P. was filed. The District Judge was, therefore,not right in holding that the order in Ex. B-21 operated as res judicata. The question whether E. P. No. 384/1963 was barred by time or not has, therefore, to be considered and decided in the subsequent proceedings, i. e. I. A. No. 1009/ 1966.
14. Under Article 182 of the Limitation Act, 1908, the time-limit for execut-ing a decree is three years, when the certified copy of the decree is not registered, and that time runs from the date of the decree or order. Under clause (2) of Article 182 of the Limitation Act, where there has been an appeal against the decree sought to be executed, the time commences to run from the date of the final order passed in the appeal. Under clause (5) of the said Article, the time commences to run from the date of the final order passed on an application to take any steps in aid of execution of the decree or order. Obviously, clause (2) of Article 182 of the Old Limitation Act does not apply to this case, because no appeal has been filed against the final decree dated 26-9-1953 which is sought to be executed in E. P. No. 384/1963. Appeal in a collateral proceeding for setting aside the final decree, or for passing a fresh final decree, would not bring the case under clause (2) of Article 182 of the Limitation Act.
15. Can then the proceedings taken in I. A. Nos. 842 and 843 of 1954 and 138 of 1955 be considered as 'steps in aid of execution' of the decree sought to be executed The learned Counsel for the respondent Bank contended that they are 'steps in aid of execution', whereas the learned Counsel for the appellant contended that they are all proceedings either for demolition or destruction of the final decree which is sought to be executed and, therefore, cannot be held to be steps in aid of execution of the decree, sought to be executed.
16. The wording of Article 182 (5) of the old Limitation Act, shows that it is not necessary for the purpose of saving limitation under Article 182 (5) that an application taken as a step in aid of execution should be made in a pending Execution Petition. In Kartar Singh v. Sultan Singh, AIR 1967 Punj 375, the judgment-debtor made an application for setting aside the decree. The decree-holder resisted that application, and the same was dismissed. Groyer, J. (as he then was) of the Punjab High Court, held that:--
'..... If he had taken any stepswhich would remove an obstacle to the further execution of the decree, he would be entitled to the benefit of this provision (i.e., Article 182 clause (5) of the old Limitation Act) .....'
In holding so, the learned Judge relied upon the decision in Pannalal v.Smt. Saraswati Devi, : AIR1960All572 ; Ghanshyam v. Mukha, (1881) ILR 3 All 320; and Jagdev Narain v. B. Kuer, AIR 1928 Pat 612, in which it was laid down that any step taken by the decree-holder to remove an obstacle thrown by the judgment-debtor or in the way of the execution of the decree, would be a step in aid of execution of the decree. In : AIR1960All572 ; Dhavan, J., held that:
'..... the words 'to take somestep in aid of execution of the decree' in the third column against Article 182 of the Limitation Act, should be interpreted liberally in favour of the decree-holder......'
17. In Koppula Venkataswami v. Kukkapalli Polayya, (1962) 2 Andh WR 41 = (AIR 1962 Andh Pra 357), a Division Bench of this Court, consisting of P. Chandra Reddy, C. J., and Narasim-ham, J., held that:--
'..... If the proceedings havethe effect of facilitating or advancing the execution to any extent or removing some obstacle from the way of execution, it may be well regarded as a step in aid of execution .....'.
18. An application by one of the decree-nolders for his appointment as a Receiver to safeguard the properties for the purpose of the realisation of the decree therefrom in execution has been held, in Ayi Goundan v. Solai Goundan, AIR 1945 Mad 139 (FB), to be a step in aid of execution. In Jodh Singh v. Bhagwan Dass, AIR 1937 Lah 404; in a suit on a mortgage, a final decree was already passed by the Court, but the decree-holder, being under misapprehension wrongly applied to the Court for a final decree, under Order XXXIV, Rule 4 (c) of the Civil Procedure Code, but otherwise duly prayed for the execution of the decree. The trial Court having already passed a final decree, rejected that application. On those facts, the learned Judges of the Lahore High Court held that the application, though irregular, was made in accordance with law to the proper Court for execution, or was at least a step in aid of execution within the meaning of Article 182 (5) of the Limitation Act, and the formal application for execution brought within three years from the date of this application, was in time.
19. The facts of the present case are: that, after the passing of the preliminary mortgage decree dated 31-1-1953 against K. Venkataratnam and his son, in favour of the respondent-Bank, one of the judgment-debtors, i.e., K. Venkata-ratnam, was adjudged insolvent on 27-6-1953. Thereafter the final mortgage decree was passed on 26-9-1953. The Bank bona fide thought that, after the adjudication of one of the judgment-debtors as insolvent, the Official Receiver should be made a party to the decree and the ab-sence of the Official Receiver as a party might be an obstacle in the way of executing the decree obtained by it against the judgment-debtors' mortgaged property. Whether the Bank was right in thinking so or not, is besides the point and irrelevant. In order to remove that obstacle against the execution of the decree and for facilitating the easv execution of the decree, the decree-holder (Bank) filed I. A. No. 199 of 1954 in the suit, to amend the final decree. That petition was, however, dismissed by the Court with certain observations that the Bank should file an application for setting aside the final decree and for passing a fresh final decree. In view of those observations, the decree-holder Bank filed I. A. Nos. 842 and 843 of 1954 and 138 of 1955 Those applications were filed to set aside the final decree and to pass a fresh final decree against the J. Ds. and the Official Receiver, after making the Official Receiver a party-defendant to the suit. The object of the decree-holder in filing those three applications was to remove the obstacle that could possibly be laid by the judgment-debtors or the Official Receiver, against the sale of the mortgaged property in execution of the decree. Those applications were finally disposed of by this Court, by its order dated 5-7-1962, i.e., B-21. Those applications were dismissed. The fact of their dismissal is not, however, so very material. The words 'application to take step in aid of execution' must be liberally construed to promote the ends of justice, and not to defeat a valid and lawful decree obtained by the Bank. I, therefore, hold that I. A. Nos. 842 and 843 of 1954 and 138 of 1955 were steps in aid of execution of the decree. Those applications have been finally disposed of by this Court, by its order dated 5-7-1962 Ex B-21. E. P. No. 384/1963 has been filed on 26-4-1963 i.e., within less than a year from the date of the final order passed on those applications. The time, therefore, commenced to run from 5-7-1962 and the E. P. filed on 26-4-1963 being within less than a year from 6-7-1962 is, therefore, not barred by time under Article 182 (5) of the old Limitation Act.
20. The other questions as to the validity of the acknowledgments etc., are unnecessary in the view that I have taken. However, since lengthy arguments, running over some days have been advanced, I would like to consider those arguments also and give my finding thereon.
21. Before finding out the validity of the acknowledgments, it is necessary to know whether, in fact, the Exhibits relied upon by the respondent-Bank, amount to 'acknowledgments' within the meaning of Section 19 of the Limitation Act, 1908.
22. The relevant portion of Section 19 of the old Limitation Act, reads thus:
'Sec. 19 (1):-- Where before the expiration of the period prescribed for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing, signed by the party against whom such property or right is claimed, or by some person through whom he derives title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.
(2) xxxxxExplanation:-- (1) For the purposesof this Section, an acknowledgment maybe sufficient, though it omits to specifythe exact nature of the property or right,or avers that the time for payment delivery, performance or enjoyment has notyet come or is accompanied by refusal topay, deliver, perform or permit to enjoy,or is coupled with a claim to set off or isaddressed to a person other than the person entitled to property or right.
Explanation: (2) xx xx
Explanation: (3) xx xx
22-A. The requirements of a valid acknowledgment to give a fresh starting point for the period of limitation, have been stated by the Supreme Court in Tilak Ram v. Nathu. AIR 1967 SC 835 thus:--
'..... The section requires (i) anadmission or acknowledgment, (ii) that such acknowledgment must be in respect of a liability in respect of property or right; (iii) that it must be made before the expiry of the period pf limitation and (iv) that, it should be in writing and signed by the party against whom such property or right is claimed. Under the Explanation, such an acknowledgment need not specify the exact nature of the property or the right claimed.'
23. The above decision was followed by the Supreme Court in its later decision in L. C. Mills v. Aluminium Corporation of India. : 2SCR623 :
24. In S. F. Mazda v. Durga Pro-sad. : 1SCR140 : Gajendragadkar. J. (as he then was), speaking for the Supreme Court observed that:--
'..... It is a mere acknowledgment of the liability in respect of the right in question. ..... The Statementon which a plea of acknowledgment is based must relate to a present subsisting liability, though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of iural relationship between the parties, such as that of debtor and creditor, and it must appear that the statement is made with the intentionto admit such iural relationship. Such intention can be inferred by implication from the nature of the admission and need not be expressed in words. If the statement is fairly clear then the intention to admit the iural relationship may be implied from it. .....'
'..... In construing the wordsused in the statement made in writing on which a plea of acknowledgment rests, oral evidence has been expressly excluded, but surrounding circumstances can always be considered.'
'.....Stated generally. Courts lean infavour of a liberal construction of such statements, though it does not mean that where no admission is made one should be inferred, or where a statement is made clearly intending to admit the existence of jural relationship such intention should be fastened on the maker of the statement by an involved or far-fetched process of reasoning.'
25. In the Shivakashi Match Exporting Co. v. R. Mohanlal Bros., : AIR1963Mad403 , a Division Bench of the Madras High Court, on the following facts:--
'..... the defendant by his letter dated 3-6-1951 acknowledged the receipt of a sum of Rs. 1001/- by way of advance under the contract. In reply to this letter, plaintiff sent a letter protesting that he was guilty of breach of contract and reiterating his claim in respect of the advance amount paid The defendant^ advocate then wrote to the plaintiff on 30-7-1951 a letter which, as he stated, 'was in continuation of my letter dated 3-6-1951.....'
'..... It is clear from this thatthe letter dated 3-6-1951 was treated as part of the letter dated 30-7-1951. Therefore, it would follow that if the letter dated 3-6-1951 were to be regarded as containing an acknowledgment of the obligation to pay back the sum of Rs. 1001/-, the advance paid, the acknowledgment can be treated as having been made on 30-7-1951 as well, as the second letter expressly says that it was in continuation of the former thereby impliedly adopting the same .....'.
26. In Achuthan v. Abdu, AIR 1925 Mad 675: Madhavan Nair. J., held that:
'..... An acknowledgment underSection 19 in itself should import that the person making the acknowledgment is then under an existing liability and such liability cannot be read into it by proof aliunde.'..... The mere statement of afact that a decree was passed against a party on a certain date for a certain amount, is not an acknowledgment that the decree is capable of execution so as to come within Section 19. It is a merestatement of fact that a decree was passed and not an acknowledgment that there was a present liability under the decree.'
27. It is in the light of the aforesaid decisions that the question has to be considered whether, the Exhibits relied upon by the respondent-Bank, amount to acknowledgments of liability by the debtor.
28. The date of the final decree is 26-9-1953. Under Article 182 of the Old Limitation Act, the period prescribed for executing such decree is three years, i.e., an Execution Petition should be filed before 26-9-1956 Ex. B-1 is I. A. No. 1591 of 1954, dated 16-8-1954, filed by the debtor in I. P. No. 20 of 1952. In paragraph (6) of that petition, it was stated that:--
'..... Only item of immovableproperty owned by the petitioner is a terraced house in Brodipet. Guntur. The petitioner borrowed a sum of Rs. 12,500/- from the Canara Industrial Syndicate Bank, Guntur and offered security of the terraced house at Brodipet by wav of equitable mortgage. The said Bank has filed O. S. No. 163/52 for the recovery of the claim and a preliminary decree has been passed on 31-1-1953. Application for final decree is pending before the Court.'
'..... The total unsecured liabilities of the petitioner amount to Rupees 1,00,000/- while the secured debt due to the Canara Industrial Syndicate Bank amounts approximately to Rs. 15,000/-. After satisfying the secured debt, the proceeds from the terraced building would not be more than Rs. 15,000/- and the money realised would not be sufficient to pay the creditors at the rates of Annas 2 and pies 5 in a rupee.'
The debtor, with those averments, prayed that the proposal of scheme made by him be approved. Undoubtedly, this petition filed in Court, in the Insolvency proceedings, by the insolvent, is an admission of liability. Sufficient details of the liability have been given and he prayed for the approval of the scheme for payment of those debts. It is conceded by the other side that it amounts to an acknowledgment within the meaning of Section 19 of the Limitation Act. Therefore, limitation starts from 16-8-1954.
29. Now I come to Ex. B-4, i.e., I. A. No. 835 of 1956 in I. P. No. 20 of 1952 dated 28-3-1956. In paragraph (2) of this petition, made by him, the insolvent referred to the proposal of composition of creditors filed in I. A. No. 1591 of 1954 for acceptance by the Court. This petition also amounts to an acknowledgment because it refers to the earlier petition. Ex. B-1. The contents of Ex. B-1 must be considered to have been incorporated in Ex. B-4. Since Ex. B-4 was filed on 28-3-1956 the period of limi-tation must be held to have commenced on run from 28-3-1956.
30. Similar is the petition, Ex. B-7 i.e., I. A. No. 709 of 1957, dated 30-3-. 1957. So the time should be considered to commence from 30-3-1957.
31. In Ex. B-12, I. A. No. 289 of 1959, dated 27-1-1959, in paragraph (9) the insolvent, K. Venkataratnam, stated thus:--
'..... The amount due to the CanaraIndustrial Syndicate Bank Ltd. Guntur under the preliminary decree passed in O. S. No. 163 of 1952 on the file of the Sub-court, Guntur. amounts to Rs. 15,000. After deducting the amount due to the secured creditor there will not be sufficient assets to enable a distribution at any rate over and above 3 Annas in a rupee. .... The creditors Nos. 1 to30 have expressed their willingness to the terms proposed hereto before and to discharge the petitioner from all liability.'
This is clear admission of his liability to the respondent-Bank and amounts to an acknowledgment. The limitation, therefore, commenced to run from 27-1-1959.
32. Exs. B-4 and B-7 which make a reference to the earlier petitions filed, wherein the acknowledgment has been made, serve as acknowledgments within meaning of Section 19 of the Limitation Act, in view of the decision of the Madras High Court in : AIR1963Mad403 .
33. Ex. B-18 is another petition, I. A. No. 1562 of 1961 filed by the debtor in the insolvency proceedings on 22-4-1961. This petition refers to the scheme for composition of creditors in Ex. B-12, i.e., I. A. No. 289/1959. This would, certainly, amount to an acknowledgment. Thus, the period of limitation will commence to run from 22-4-1961. The Execution Petition (E. P. No. 384/19631 has been filed on 26-4-1963 i.e., within three years from 22-4-1961. I, therefore, hold that the above Exhibits, viz., Exs. B-1, B-4. B-7, B-12 and B-18 are 'acknowled-ments' within the meaning of Section 19 of the old Limitation Act. Each subsequent petition is within three years from the date of the preceding petition. The above acknowledgments not only show that there was a jural relationship between the person acknowledging the liability and the creditor but also show an admission on the part of the debtor of his subsisting liability. I, therefore, hold that these acknowledgments, if valid in law, would save the limitation and the E. P. would be considered as within time.
34. I will now consider the question of validity of the acknowledgments. The learned Counsel appearing for the appellant. Official Receiver, contended that, after executing the mortgage over the house, what was left in the mortgagorK. Venkataratnam, was only the equity of redemption. The equity of redemption vested in the Official Receiver by virtue of the order of adjudication passed on 27-6-1953. The effect of adjudication and the vesting of the property in the Official Receiver is that the mortgagor, K. Venkataratnam, has lost all interests in the mortgaged property and at the time when the acknowledgments were made by him. he was not competent to make such acknowledgments, because there was n i jural relationship between K. Venkataratnam and the respondent-Bank. I will now consider the authorities relied upon by the appellant's counsel in support of this argument.
35. There was once a conflict of judicial opinion on the question whether a mortgagor could, after he had lost all his interest in the mortgaged property, make a valid acknowledgment under Section 19 of the Limitation Act so as to give a fresh starting point of limitation to the mortgagee to enforce his claim. That controversy was set at rest by the decision of the Privy Council in Bank of Upper India v. Skinner, (1942) 2 Mad LJ 559 = (AIR 1942 PC 67) wherein it was held that:--
'..... Acknowledgments made bya mortgagor after he had parted with all his interest in the mortgaged property to a purchaser, do not bind the purchaser.'
36. To the same effect was the Full Bench decision of the Madras High Court in Pavayi v. Palanivela Goundan. AIR 1940 Mad 470 (FB). The Full Bench of the Madras High Court held in that case that a mortgagor who has lost all interest in the mortgaged property, cart-not, by acknowledgment within the meaning of Section 19 or by payment of interest or principal within the meaning of Section 20, bind the person on whom his interest has devolved.
37. The above Full Bench decision was followed by the Supreme Court in Monimala Devi v. Indu Bala, : 5SCR635 . The Supreme Court has laid down that:--
'..... A mortgagor whose interest in the equity of redemption is transferred by assignment, sale or otherwise to another person, is not a 'person liable to pay the debt' within the meaning of Section 20. Part payment made by him towards principal or interest, therefore, does not extend the period of limitation for enforcement of the mortgagor against the transferee of the equity of redemption. If by the transfer or assignment of his interest the mortgagor has lost all his Interest in the mortgaged property, part payment will not extend the period of limitation, for, at the date of the payment he is not the 'person liable to pay the mortgage debt'.'
The words 'person liable to pay the debt' occurring in Section 20 of the Limitation Act are not found in Section 19 of the Limitation Act. Under Section 19 to give a fresh starting point of limitation, the acknowledgment must be by a party against whom such property or right is claimed. This difference in language, between those two sections, has to be borne in mind in deciding this case.
38. There is no doubt that the words 'a person liable to pay' in Section 20 (1) of the Limitation Act are of wide import and that, the Official Receiver, in whom the estate of the mortgagor vested on his adjudication, comes within the sweep of those words, so as to give a fresh starting point of limitation for the suit on mortgage under Section 20 (1) of the Limitation Act; See: Dikshitulu v. Subbayya Setti, (1955) 1 Andh WR 626.
39. The question before me is not whether the Official Receiver in whom the estate of the insolvent vests, can acknowledge under Section 19 or make payment under Section 20 of the Limitation Act so as to give a fresh starting point of limitation, but the question is whether the insolvent, after adjudication, can acknowledge so as to furnish a fresh starting point of limitation. In other words, does the mortgagor, after being adjudged insolvent, cease to be 'a person liable to pay' within the meaning of the provisions of the Provincial Insolvency Act?
40. In Avadai Ammal v. K. L. S. Subburamier, : AIR1971Mad485 , the Division Bench of the Madras High Court did not propose to decide the question whether, after the vesting of the property of the insolvent in the Official Receiver pursuant to an order of adjudication, the insolvent could validly acknowlede a debt, secured or not. This decision, therefore, would not render any assistance to the Official Receiver in this case.
41. In Ramgopal v. Muttu Krishna, : AIR1957Mad1 , the effect of Section 23(2) of the Provincial Insolvency Act has been stated thus:--
'..... The effect of Section 28(2)is that so far as the properties are concerned, insolvent completely goes out of the picture. His ownership in the properties, at least temporarily, ceases and becomes fully vested in Court for the Official Receiver. In other words, the Court or the Official Receiver stands in the shoes of the insolvent and he has all the rights and privileges which the insolvent may have. .....'
It was further held in that case that the Official Receiver was not an aeent of the insolvent when he gave the acknowledgment of the insolvent's liability and that, the Official Receiver was a party against whom such property or right could beclaimed so as to furnish a fresh starting point of limitation under Section 19.
42. None of these decisions, in my opinion, helps the Official Receiver (appellant) in this case. Not a single case has been cited before me by the learned Counsel for the appellant Official Receiver, which has laid down that, after the mortgagor has been adjudged insolvent, he loses his power to make an acknowledgment under Section 19 of the Limitation Act, so as to furnish a fresh starting point of limitation. The cases cited by the learned Counsel for the Official Receiver, only show that till the order of adjudication is made, an insolvent can always make an acknowledgment under Section 19. Those cases are not authorities for the proposition that, after adjudication, the mortgagor cannot make an acknowledgment under Section 19 of the Limitation Act.
43. In Subbaiah v. Ramasami, : AIR1954Mad604 , a Full Bench of the Madras High Court considered the effect of a mortgage decree passed against a mortgagor who had been adjudged insolvent, and without the Official Receiver being made a party to it. In that case, it has been held that:--
'..... Where during the pendencyof a suit on mortgage, the mortgagor is adjudged insolvent but the decree is passed without making the official assignee a party to the suit, and the decree-holder purchases the property in execution of the decree, the decree and the proceedings are not null and void in the sense that they have no legal effect at all. The proceedings are only ineffective to bind the equity of redemption which is vested in the Receiver. As he was not a party to the proceedings, the property could not be validly sold so as to confer title on the auction-purchaser and such a sale has no effect on the property in the absence of the Receiver. .....'
44. By the above decision it is clear that the property of a mortgagor, who has been adjudged insolvent, can be proceeded against by the mortgagee without the Official Receiver, and the only effect of it is that the equity of redemption which vested in the Official Receiver, would not be affected by sale in execution of the mortgage decree.
45. In his separate judgment, Subba Rao, J. (as he then was), in the above Full Bench decision observed that:--
'..... Insolvency does not operate as Civil death. The insolvent's property vests in the Official Receiver for the purpose of administering the estate and for meeting the claim of the creditors. The Act does not affect the capacity of the insolvent to enter into contracts and otherwise deal with the property. He is in a position of a person who has alienated all his property, or otherwise lost it, but his position cannot be equated to that of a minor or a lunatic. .... If theproperties that vested in the Official Receiver are sold as if they were the properties of the insolvent, the sale would be valid and the judgment-debtor cannot question the validity of the sale. .....'
46. In my opinion, none of these cases cited by the parties, discusses the position of an insolvent in regard to his power to acknowledge a mortgage debt after being adjudged insolvent. This brings me to the question as to what is the effect of adjudication under the Provincial Insolvency Act.
47. Sub-sections (2) and (6) of Section 28 of the Provincial Insolvency Act are important for the disposal of this appeal. Those Sub-sections read thus:
'Section 28(1): xx xx
(2) On the making of an order of adjudication, the whole of the property of the insolvent shall vest in Court or in Receiver as hereinafter provided and shall be divisible among the creditors and thereafter, except as provided by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable under this Act, shall, during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceedings except with the leave of the Court and on such terms as the Court may impose.
(6) Nothing in this section shall affectthe power of any secured creditor to realise or otherwise deal with his securityin the same manner as he would havebeen entitled to realise or deal with it ifthis section had not been passed. .....'
48. The general scheme of the Act is that the secured creditor stands outside the insolvency proceedings, unless he himself chooses to submit to the jurisdiction of the Insolvency Court. The conditions on which a secured creditor can come in insolvency proceedings to prove his debt and claim a dividend, are laid down in Sub-sections (1) to (5) of Section 47 of the Act. Under those conditions only he can participate and have a share in the distribution of the insolvent's estate. If the secured creditor does not comply with those conditions, he is excluded from having a share in dividend. Unless the secured creditor submits himself to the jurisdiction of the Insolvency Court, the latter has no right to interfere with the former's claim. Even where the Receiver issued notice to the mortgagee, whose debt was included in the schedule of liabilities filed by the debtor, to prove his claim but he failed to appear, hisfailure to so appear and prove his debt in insolvent cannot take away his right to enforce the security; (See Sheo Raj Singh v. Gowri Sahai, (1899) ILR 21 All 227). On adjudication the equity of redemption only vests in the Receiver. The value of the insolvent's right to redeem that property can only be his assets available for distribution. Thus, the Insolvency Court has, ordinarily, no jurisdiction to restrain a mortgagee from proceeding with a suit to enforce his mortgage, or to prevent him from selling the property, except where the validity of the mortgage is called in question. In view of Section 28(6) of the Provincial Insolvency Act, I am unable to agree with the learned Counsel for the appellant, Official Receiver, that the mortgagor is not 'a person liable to pay' the mortgage debt after his adjudication. It is always open to the mortgagee to enforce his security without submitting himself to the jurisdiction of the Insolvency Court. In such a case, the mortgagor is the 'person liable to pay' within the meaning of Section 19 of the Limitation Act against whom the mortgagee's right is claimed. I, therefore, overrule the objection of the learned Counsel for the appellant that the mortgagor, K. Venkataratnam, had no power to acknowledge the mortgage debt after he was adjudged insolvent so as to furnish a fresh period of limitation under Section 19 of the Limitation Act. All the acknowledgments which have been discussed at some length in the preceding paragraphs of this judgment, are acknowledgments of liability made before the expiry of the period prescribed, of the extended period under Section 19 of the Limitation Act, in respct of the property, by the person against whom such property or right is claimed. Those acknowledgments not only admit the jural relationship between the mortgagor, K. Venkataratnam, and the decree-holder Bank, but also his liability thereunder. They are therefore, in my opinion, valid acknowledgments which could be relied upon by the decree-holder Bank so as to enlarge the period of limitation under Section 19.
49. Recourse to Section 14 of the Limitation Act, for saving the Execution Petition from the bar of limitation is, therefore, not necessary in this case. I, therefore, do not propose to consider the decision in Madhav Rao v. Ramkrishna, : 1SCR564 , relied upon by the learned Counsel for the Official Receiver.
50. I, therefore hold that the Execution Petition No. 384 of 1963 is within time under Article 182 (5) of the old Limitation Act and the acknowledgments made by the insolvent are valid acknowledgments within the meaning of Section 19 of the Limitation Act, and aconsideration of those acknowledgments does establish the case of the decree-holder Bank that the Execution Petition is within time.
51. The last question that has been argued, was that the insolvent's admission of liability under Section 19 of the Limitation Act, did not bind his son, in view of Section 28A of the Insolvency Act. In Venkata Suryanarayana v. Official Receiver, : AIR1965AP451 , a Division Bench of this Court, consisting of Satyanaryana Raju, C. J. and Chandra-sekhara Sastri, J., observed that:
'..... Under Section 28A of theProvincial Insolvency Act, 1920, the share of the son of the insolvent in the joint family property does not vest in the Official Receiver. What vests in the Official Receiver is only the father's power to sell the son's share for discharging father's debts which are not illegal and immoral. But once the son files a suit for partition and thus becomes divided in status from the father, the father's power to sell the son's share to discharge his debts, though incurred before the division in status, ceases and the father can no longer sell the son's share for the discharge of his debts.'
52. It has not been the case of K. Venkataratnam, the mortgagor, or his son that the debts contracted by K. Venkataratnam from the respondent-Bank were either immoral or illegal. K. Ven-kataratnam's son has not filed suit for partition. Till he files a suit for partition, the father's power to sell the son's share, which vests in him under Section 28A, is not affected. Moreover, that question does not arise here, because K. Venkataratnam's son also was a judgment-debtor in the mortgage decree. In view of my finding that. E. P. No. 384 of 1963 is within time, the son's interest in the family property also can be proceeded against in enforcement of the mortgage, without reference to the Official Receiver. I, therefore, find no force in any of the contentions raised on behalf of the Official Receiver. The appeal, therefore, fails and is, accordingly, dismissed.
53. Before closing the judgment, I would like to observe that the conduct of the appellant, Official Receiver, disclosed in this case, is not a commendable one. The Official Receiver is an officer of the Court. The Courts exist only for promoting justice and to see that the just claims and decrees obtained by the creditors are discharged by the debtors. In the instant case, the Official Receiver has been conducting the proceedings over a long number of 21 years from 1953 onwards, with a view to defeat the lawful decree obtained by a secured creditor. To a question asked by me as to whether theunsecured debts have been proved in this case, the learned counsel for the Official Receiver submitted that there were no properties other than the secured house which vested in the Official Receiver and, therefore, no unsecured debts have been proved till now. If that is so, it is obvious that there is no estate or funds of the insolvent in the hands of the Official Receiver which could be utilised for the purpose of conducting these proceedings. Wherefrom he obtained funds for conducting this long litigation, is not known. The creditors, who have not proved their debts in the insolvency, cannot be considered to have advanced moneys for this litigation, because they have neither proved their debts till now, nor is it established that those debts are true and genuine. It, therefore, follows that the insolvent is behind this litigation to avoid the discharge of a lawful decretal debt.
In the result, the appeal fails and is accordingly dismissed with costs. Leave granted.