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Seth Kishori Lal and anr. Vs. Haji Muhammad Nazir and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Case NumberFirst Appeal No. 282 of 1943
Judge
Reported inAIR1950All97
ActsUttar Pradesh Encumbered Estates Act, 1934 - Sections 14(7), 16 and 18; Transfer of Property Act - Sections 48; Debt Law
AppellantSeth Kishori Lal and anr.
RespondentHaji Muhammad Nazir and ors.
Advocates:S.B.L. Gaur, Adv.
DispositionAppeal dismissed
Excerpt:
.....cases referred to above and it does not arise in the present case as well. the property out of which the various money decrees passed under the encumbered estates act would be satisfied is not that property only over which the various mortgagees had rights of priority in view of section 48, transfer of property act. no question, therefore, of priority can arise when the decrees are not to be satisfied out of the proceeds from any particular property......in favour of these mortgagees were ranked in class 4, without any ranking inter se among those debts in class 4. it was ordered that all the debts of class 4 would be treated as of equal rank. it is against this order of the special judge, first grade, that this appeal has been filed by seth kishori lal and seth babu lal.2. the contention for the appellants is that the debt due to them should have been given priority in class 4 over the debts due to the other mortgagees in view of section 48, transfer of property act. we are not inclined to agree with this contention.3. the cases of sant prasad v. dallu sahu, 1947 a. l. j. 176 and makhan lal v. keshabdeo : air1948all133 , do not support the appellants' contention. in those cases it was held that debts falling under the same class.....
Judgment:

1. Seth Kishori Lal and Seth Babu Lal, as mortgagees under a mortgage deed executed by Yusuf Ali Khan on 23rd February 1929, with respect to Khewat No. 24 in mohal Naukheel village, Sikandra Rao filed their written statement of claim in proceedings under the Encumbered Estates Act on the application of Yusuf Ali Khan. Haji Mohammad Nazir and Mohammad Basbir also filed their written statements of claim on the basis of mortgage deeds executed in their favour in 1931, and later with respect to khewat 24 of mohal Naukheel and other property. Money decrees were passed on the basis of these claims by the Special Judge, and the debts in favour of these mortgagees were ranked in class 4, without any ranking inter se among those debts in class 4. It was ordered that all the debts of class 4 would be treated as of equal rank. It is against this order of the Special Judge, first grade, that this appeal has been filed by Seth Kishori Lal and Seth Babu Lal.

2. The contention for the appellants is that the debt due to them should have been given priority in class 4 over the debts due to the other mortgagees in view of Section 48, Transfer of Property Act. We are not inclined to agree with this contention.

3. The cases of Sant Prasad v. Dallu Sahu, 1947 A. L. J. 176 and Makhan Lal v. Keshabdeo : AIR1948All133 , do not support the appellants' contention. In those cases it was held that debts falling under the same class need not be ranked inter se, if that was not possible under any recognised principle of law, and that the Special Judge would just group them as a class and that in that case all those debts would be paid off pro rata if there was not sufficient money to pay them in full. The views expressed in these cases were accepted in Madan Lal v. Chhotey Lal, Civil Revn. No. 273 of 1946 by a Bench of which one of us was a member, and it was observed in that case :

'Section 16 of the Act does not indicate any principles on the basis of which each individual debt should get a definite place for itself in order of priority. Except for Section 48, Transfer of Property Act, no other provision of law has been shown to us which could be helpful in determining the priority of various debts. Even Section 48, Transfer of Property Act, which applies to debts on mortgages, would not apply to all such debts It applies only to such mortgage debts which are over the same property. The only practical way of ranking other debts in the same class inter se can possibly be to rank them according the dates of the debts, but even this will fail if several debts of the same class are of the same date. It, therefore, appears that the provision in Section 16 requiring the Special Judge to rank all debts for priority does not necessarily mean that the Special Judge must give one particular place to each debt and that he cannot in any circumstance bracket or group together several debts.'

4. Priority which is contemplated under Section 48, Transfer of Property Act and which may possibly be allowed in the ranking order under Section 16, Encumbered Estates Act will, in the nature of things, be available in a very limited class of cases under the Encumbered Estates Act, as would appear from the observations in the case of Sant Prasad Sahu: (1947 A. L. J. 176).

'Where there were only secured debts and they were all secured on the same property and that was the only property which was available for the payments of the debts, it may be that the Special Judge might feel justified in ranking the debts so that the prior mortgages were paid off before the subsequent mortgages, but in no other circumstances that we can at the moment envisage would it be possible to apply any principle under which debts in the same class could be ranked in priority among themselves.'

These observations do not mean that when these conditions are satisfied the mortgage debts must be ranked inter se within the same class. The observations simply mean that they can be ranked without difficulty, but whether such ranking would come under Section 16, Encumbered Estates Act has not been considered because the actual question did not arise. It may be mentioned here that the same question did not arise in either of the two other cases referred to above and it does not arise in the present case as well. Except for the fact that the debts due to these three claimants are based on mortgage deeds there is no other affinity among them. The debts are not secured on the same property. Just one property is common in all these three debts. The property out of which the various money decrees passed under the Encumbered Estates Act would be satisfied is not that property only over which the various mortgagees had rights of priority in view of Section 48, Transfer of Property Act. The property in these proceedings includes many items. The Collector does not satisfy the claim? of mortgagees under class 4 out of the proceeds of the property mortgaged to them. These mortgagees and all other creditors of the debtor applicant under the Encumbered Estates Act are paid out of the total proceeds realised from the property of the debtor applicant according to the provisions of the Encumbered Estates Act. No question, therefore, of priority can arise when the decrees are not to be satisfied out of the proceeds from any particular property.

5. It has been contended that the rights given to transferees under Section 48, Transfer of Property Act, are not taken away by any provisions of the Encumbered Estates Act and that, therefore, those rights should be taken into consideration during the ranking of debts under Section 16, Encumbered Estates Act. The entire scheme of the Encumbered Estates Act tends to take away such rights, and limits the powers of the Special Judge with respect to the disposal of questions before him to the procedure laid down in that Act itself. Once the Special Judge has passed money decrees under Section 14(7), the rights which the creditors possess are limited to the right of recovering such decretal amounts according to the manner laid down in the Encumbered Estates Act. Section 18, En-cumbered Estates Act deprives them of all other rights, the section being that the effect of a decree of the Special Judge under Sub-section (7) of Section 14, shall be to extinguish the previously existing rights, if any, of the claimant, together with all rights, if any, of mortgage or lien by which the same are secured. It follows, therefore, that whatever rights the mortgagees had as mortgagees ceased to exist, once the decrees under Section 14 (7) were passed, and such rights which cease to exist should include the right of priority under Section 48, Transfer of Property Act.

6. We, therefore, see no ground to disturb the order of the Court below, and dismiss the appeal with costs.


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