1. Sub-rule (1) of Rule 5 of O. XLI, C. P. C., empowers the appellate Court to stay the execution of the decree under appeal, while sub-rule (2) confers a similar power upon the Court which passed the decree, provided an application is made before the expiration of the time allowed for appeal. Sub-rule (3) qualifies the power conferred by sub-rules (1) and (2). It says:
'(3) No order for stay of execution shall be made under sub-rule (1) or sub-rule (2) unless the Court making it is satisfied.
(a) that substantial loss may result to the party applying for stay of execution unless the order is made;
(b) that the application has been made without unreasonable delay; and
(c) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.'
The form in which security contemplated by sub-rule (3) (c) is to be furnished, is prescribed in Appendix 'G'. Form No. 2, thereof, which is the relevant one, reads as follows:-
'No. 2: Security Bond to be given on order being made to stay execution of decree (O. 41, R. 5).
This Security bond on stay of execution of decree executed by .............. witnesseth:-
That the plaintiff in Suit No. of 19, having sued............. , the defendant, in this Court and a decree having been passed on the day of 19, in favour of the plaintiff, and the defendant having preferred an appeal from the said decree in the Court, the said appeal is still pending.
Now the plaintiff-decree-holder having applied to execute the decree, the defendant his made an application praying for stay of execution and has been called upon to furnish security. Accordingly, I, of my own free will, stand security to the extent of Rs. , mortgaging the properties specified in the schedule hereunto annexed, and covenant that if the decree of the first Court be confirmed or varied by the Appellate Court the said defendant shall duly act in accordance with the decree of the Appellate Court and shall pay whatever may be payable by him thereunder, and if he should fail therein then any amount so payable shall be realised from the properties hereby mortgaged, and if the proceeds of the sale of the said properties are insufficient to pay the amount due, I and my legal representatives will be personally liable to pay the balance. To this effect I execute this security bond this
Day of 19
2. The question that arises for consideration in this Civil Revision petition is, whether the security bond so furnished requires to be registered, or not? There has been a sharp conflict of opinion between the several High Courts in India on this question. So far as the Madras High Court is concerned, it was ruled by a Division Bench, as far back as 1908, that such security bonds are required to be registered, and that decision has held the field till now. Before the learned District Judge, however, it was contended that in view of the reasoning contained in the decisions of the Delhi and Himachal Pradesh High Courts, in label Art press v. I. E. Machinery Co., : AIR1974Delhi136 and Union of India v. R. Rajindera Singh, AIR 1975 Him Pra 25 (FB), it must be held that the security bonds furnished under O. XLI, R. 5 C. P. C., do not require to be registered. The learned District Judge, bound as the was by the decision of the Madras High Court, rejected the contention. Hence this revision.
3. It was brought to my notice by the learned counsel for the petitioner that the registration of security bonds is causing severe hardship to the parties, besides putting them to substantial expense by way of stamp and registration charges and that, the provisions of the Agricultural Lands and Urban Land Ceiling Acts have further complicated the matter. In this view of the matter, I thought it fit to re-examine the issue to find out whether it was possible to accept the line of reasoning propounded by the Delhi and other High Courts. For that purpose I requested Sri. J. V. Suryanarayana Rao to assist the Court, which he has graciously accepted. He canvassed for confirming the correctness of the reasoning of the Madras High Court.
4. On a consideration of the rival reasoning, I find myself unable to agree with the correctness of the view propounded by the Delhi and other High Courts, and I am convinced that the reasoning given by the Madras High court (and other High Courts taking the same view) is the one consistent with law.
5. The form prescribed by Appendix 'G' expressly speaks of 'mortgaging the properties specified in the schedule' thereto. In other words, the property mentioned in the schedule to the security bond is mortgaged to serve as security for due performance of the decree appealed against. Now, if the immoveable property of a value of more than Rs. 100 is so mortgaged, it undoubtedly requires to be registered under Section 17 of the Registration Act, as well as by Sec. 59 of the Transfer of Property Act. (Section 4 of the Transfer of Property Act says that, among other provisions, Section 59 of the Act shall be read as supplemental to the Indian Registration Act, 1908). Section 17(1)(b) requires any non-testamentary instruments, which purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property, to be registered, and Section 49 declares that a document requires by Section 17 to be registered, but not registered, shall not affect any immovable property comprised therein, nor shall it be received as evidence of any transaction affecting such property. The security bonds or mortgages contemplated by O. XLI, R. 5 C. P. C. are not exempted from the operation of the above provisions and are, therefore, governed by them.
6. Besides the above legal position, there is yet another weighty consideration why such documents are to be registered. As pointed out by the Madras High court in Nagaruru Sambayya v. Tangatur Subbayya, (1908) ILR 31 Mad 330, public interest, viz., protection of the third parties, requires that such documents are registered. Registration operates as a public notice. Unless the transaction is registered, the third parties may not be aware of it and may be defrauded by unscrupulous transferors of property. Ordinarily, a person purchasing a property would obtain a non-encumbrance certificate from the concerned registration office, and proceed on that basis. It would not be reasonable to require such parties not only to ascertain the encumbrances from the Registration Office but also from the several Courts in the State. From a perusal of the provisions of the Civil Procedure Code, including the pro forma prescribed in Appendix 'G', I do not find it obligatory that the property to be furnished as security should be situated within the territorial jurisdiction of the Court. Even if such a limitation were to be inferred for any reason, even then the position would be no less difficult. Public interest thus requires that such security bonds, which really amount to mortgages, should be registered in the appropriate Registration Office. For the above reasons the High Courts of Madras (in Nagaruru Sambayya v. Tangatur Subbayya, (1908) ILR 31 Mad 330); Calcutta (in Kasemali v. Ajoyendu, : AIR1956Cal375 ); Allahabad (in Bishnath Sahu v. Prayag Din, : AIR1958All820 ); Kerala (in R. M. Palat v. P. A. Nedungadi, : AIR1958Ker377 (FB)); Assam (in Rivers Steam Navigation Co. Ltd. v. Jalim Mulla, AIR 1957 Assam 157); Patna (in Chiranjilal v. Chittaranjan, : AIR1960Pat305 ) and Rangoon ( in A. S. P. S. S. Chettyar Firm v. Lloyds Bank, AIR 1935 Rang 168), have ruled that such security bonds are required to be and ought to be registered. There is also a judgment of a learned single Judge of our High Court in Narahariappa v. Mohamed Moulana. : AIR1967AP5 , affirming the Madras view, Kumarayya, J., (as he then was), while referring to the contrary view taken by the Bombay High Court, preferred to follow the Madras view.
7. The High Courts which have taken the contrary view, are Bombay (in Jayappa v. Shivan Gouda, AIR 1928 Bom 42), Lahore (in Kasturilal v. Goverdhan Das, AIR 1934 Lah 138); Madhya Pradesh (in Haji Jiwakhan v. Gulabchand, : AIR1961MP2 ); Nagpur (in Dadoo Balaji v. Kanhaialal Dhanaram, AIR 1947 Nag 26); Delhi (in label Art press v. I. E. Machinery Co., : AIR1974Delhi136 ); Himachal Pradesh (in Union of India v. R. Rajinera Singh, AIR 1975 Him Pra 25); Orissa in (Indian Metals & Ferro Alloys v. O. S. E. Board, : AIR1960Ori44 ); and Punjab (in Basant Lal v. Jagadish Parshad, ). The two main reasons given by these High Courts are: (I) that, the Court is not a juridical person and, therefore, cannot be a transferee or holder of the property; and (ii) since the security bond furnished by the parties requires to be accepted by the Court, it forms part of the order of the Court and is a step in judicial proceedings and therefore does not require registration under Section 17 of the Registration Act. It was held that, notwithstanding its non-registration, the bond is valid and enforceable. So far as the first ground given by these Courts is concerned, it is no doubt true that the Court is not a juridical person, but that technicality has been solved by the Madras High Court by issuing a circular in 1948 (referred to in the decision of the Madras High Court in Kambham Ramamurthi v. Sagiraju, AIR 1949 Mad 152), directing that such security bonds should be taken in the name of the Presiding Officer of the Court, and shall endure for the benefit of the succeeding officers as well. The security bond prescribed by Form No. 2 in Appendix 'G' does not specify in whose favour the bond is executed. The said instructions of the Madras High Court, therefore, are not inconsistent with the provisions of the Code and, in fact, go to effectuate the legal position, besides advancing the public interest referred to above. Secondly, with due respect, I find it difficult to accede to the argument that merely because the Court accepts the security bond, the bond becomes a part of the order of the Court so as to be exempt from registration under Section 17(2)(vi) of the Registration Act. Since the security bond is executed to the satisfaction of the Court, it is the Court which has to accept it. In other words, the Court, is the other party to the document. By such acceptance alone, it cannot be said that the bond itself becomes a part of the order. The order of the Court is only to furnish the security to its own satisfaction or to the satisfaction of a particular Court, and the approval or acceptance of the bond merely amounts to saying that the property furnished as security is sufficient and accords with the orders of the Court. I find it difficult to agree that because the security bond is furnished in pursuance to an order of the Court, the bond itself become a part of the order. I am, therefore, unable to agree with the reasoning of these Courts, though it is true that adopting this view would go a long way in relieving the parties of unnecessary expense and trouble. Probably, the situation can be remedied by appropriately amending the Stamp and Registration Rules, exempting such security bonds from the stamp and registration charges. Such a course would not only meet the requirements of law but would also guard against any fraud being committed by unscrupulous transferors, thereby protecting the interests of innocent third parties.
8. For the above reasons, the Civil Revision Petition fails and is, accordingly, dismissed but, in the circumstances of the case, there shall be no order as to costs.
9. Revision dismissed.