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Bishnath Sahu Vs. Prayag DIn and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad High Court
Decided On
Case NumberEx. Second Appeal No. 1579 of 1954
Judge
Reported inAIR1958All820
ActsRegistration Act, 1908 - Sections 17, 17(1) and 17(2); Code of Civil Procedure (CPC) , 1908 - Order 41, Rule 6
AppellantBishnath Sahu
RespondentPrayag DIn and anr.
Appellant AdvocateC.B. Misra, Adv.
Respondent AdvocateG.P. Bhargava, Adv.
Excerpt:
civil - registration of security bond - section 17 of registration act, 1908 - security bond executed in favour of court is registrable and not exempt from registration. - - ' sub-clause (3) of rule 5 says that no order for stay of execution shall be made under sub-rule (1) or sub-rule (2) unless the court making it is satisfied that substantial loss may result to the party applying for stay of execution unless the order is made; 43 (h), it was observed that a security bond filed into court is not required to be registered until the security is accepted by the court and that it is admissible until then for the purpose of investigation into the question whether the security offered is good. the learned judge did not record the reason for passing the order on the date next to the..........sum of rs. 1750/-. bishwanath sahu stood surety and gave security of his house mentioned in the security bond dated 16th of januury, 1949. the appeal was dismissed. in execution of the decree the decree-holder prayed that the decretal amount be realised by the sale of the house given in security. bishwanath sahu objected, inter alia, on the ground that the security bond not being registered was invalid and unenforceable. the learned munsif accepted that contention of bishwanath sahu and rejected the prayer of the decree-holder to the effect that the decretal amount be realised by sale of the house given in security. the decree-holder preferred an appeal which was decided on 16th of august, 1954 by the addl. civil judge of banaras. the addl. civil judge was of the view that the.....
Judgment:

D.N. Roy, J.

1. The facts of the case, which have given rise to this reference may be briefly stated. Prayag Din obtained a money decree No. 491 of 1946 against Ram Achal from the Court of the Munsif Banaras. Ram Achal appealed to the District Judge and prayed for the stay of execution of the decree. The learned Judge ordered the stay of execution provided the appellant furnished security in the sum of Rs. 1750/-.

Bishwanath Sahu stood surety and gave security of his house mentioned in the security bond dated 16th of Januury, 1949. The appeal was dismissed. In execution of the decree the decree-holder prayed that the decretal amount be realised by the sale of the house given in security. Bishwanath Sahu objected, inter alia, on the ground that the security bond not being registered was invalid and unenforceable.

The learned Munsif accepted that contention of Bishwanath Sahu and rejected the prayer of the decree-holder to the effect that the decretal amount be realised by sale of the house given in security. The decree-holder preferred an appeal which was decided on 16th of August, 1954 by the Addl. Civil Judge of Banaras. The Addl. Civil Judge was of the view that the security bond accepted by the Court was exempt from registration under Section 17(2)(vi) of the Registration Act and, therefore the decree-holder could proceed against the property that was covered by the bond.

An Ex. Second Appeal was then preferred by Bishwanath Sahn in this Court. It came up before a learned single Judge who on account of some conflict of decisions upon the question as to whe- ther such a bond was compulsorily registrable or not, has referred the following question of law to this Bench for opinion. The question formulated is : whether a bond by which immovable property is given in security is invalid and unenforceable if it is not registered under the Indian Registration Act?

2. There is, no doubt, a difference of opinion as to whether a security bond, executed in favour of the Court hypothecating immovable property as security for the due fulfilment of a condition imposed by a Court by an order, is required to be registered. Cases decided by different Courts may be classified in two heads--the one which deal with Order 41, Rule 5 of the Code of Civil Procedure and the other which deal with Section 17 of the Provincial Small Cause Courts Act.

The proviso to Section 17(1) of the Provincial Small Cause Courts Act says that an applicant for an order to set aside a decree passed ex parte or for a review of judgment shall, at the time of presenting his application, either deposit in the Court the amount due from him under the decree or in pursuance of the judgment, or give such security for the performance of the decree or compliance with the judgment as the Court may, on a previous application made by him in this behalf, have directed.

3. Order 41, Rule 5 of the Code of Civil Procedure provides that :

'An appeal shall not operate as a stay of proceedings under a decree or order appealed from except so far as the Appellate Court may order, nor shall execution of a decree be stayed by reason only of an appeal having been preferred from the decree; but the Appellate Court may for sufficient cause order stay of execution of such decree.'

Sub-clause (3) of Rule 5 says that no order for stay of execution shall be made under Sub-rule (1) or Sub-rule (2) unless the Court making it is satisfied that substantial loss may result to the party applying for stay of execution unless the order is made; that the application has been made without unreasonable delay; and that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.

4. The cases in favour of the view, that such a security bond where property worth more than Rs. 100/- has been hypothecated, does not require registration, may first be reviewed. In Jayappa Lokappa v. Shivangouda Dyamagouda, AIR 1928 Bom 42 (A), a security bond was offered to the Court. The question of its enforcement under Section 145, Civil Procedure Code arose.

It was held that a security bond, being a part of judicial proceedings and incorporated with it, the provisions of Section 17, Registration Act, do not apply to it, as proper judicial proceedings whether consisting of pleadings filed by the parties or of orders made by the Court, do not require registration. In that case Bindesri Naik v. Gangasaran Sahu, ILR 20 All 171 (B); Pranal Annee v. Lakshmi Annee, ILR 22 Mad 508 (C) and Hemanta Kumari Debi v. Midnapur Zamindari, AIR 1919 PC 79 (D), were relied on.

5. In Kasturi Lal v. Goverdhan Das, AIR 1934 Lah 138 (FB) (E), a security bond was exe-cuted in accordance with an order passed under. Order 41, Rules 5 and 6 staying execution of a decree pending decision of the appeal, whereby the surety hypothecated his immovable property for satisfaction of such decree as might be passed by the appellate Court, and which was duly accepted by, the Court and execution stayed accordingly.

It was held that it did not require registration as it was a step in judicial proceeding, and the decree-holders could move the Court to realize the decretal amount from the immovable property of the surety mentioned in the bond, even though it had not been registered. There again AIR 1928 Bom 42 (A) and the decisions referred to in AIR 1928 Bom 42 (A), were relied upon.

6. In Dadoo Balaji v. Kanhaialal Dhanaram, AIR 1947 Nag 26 (F), a Single Judge of the Nagpur High Court following the decisions aforesaid took the view that documents which form part of a judicial proceeding do not require registration; that the giving of a security bond under Order 41, Rule 5 is a step in judicial procedure before an order for stay can be granted; that the execution of a bond does not effect transfer of rights in the immovable property described therein so as to make it available for the satisfaction of the decree that might be passed by the appellate Court, but it is an order of the Court accepting the bond which creates these rights; that the bond does not become operative unless and until it is accepted by the Court; and that accordingly a security bond hypothecating immovable property executed under Order 41, Rule 5, Civil Procedure Code does not require registration either under the Registration Act or the Transfer of Property Act.

7. A Bench of Travancore-Cochin High Court in Subramania Nadar v. Esakkimadan Nadar, AIR 1953 Trav-Co 364 (G), followed AIR 1923 Bom 42 (A) and AIR 1934 Lah 138 (FB) (E), in coming to the conclusion that a security bond executed in favour of a Court and accepted by the Court and incorporated in the order accepting the same is exempt from registration.

8. The cases, which have taken a contrary view, may now be reviewed. In Mr. A. D. Dunne v. Ameeroonis.sa Khatoon, 13 Suth WR 41 at p. 43 (H), it was observed that a security bond filed into Court is not required to be registered until the security is accepted by the Court and that it is admissible until then for the purpose of investigation into the question whether the security offered is good.

9. In Jainarain Singh v. Parmeshwar Murao, AIR 1931 Oudh 310 (I), a suit was brought on the basis of a pronote and surety bond. Defendant No. 1 had executed the pronote in favour of the plaintiffs and defendants 2 and 3 had stood surety for him and had as such executed the bond. A question arose as to whether the bond could be enforced against the property of the sureties. It was observed at page 311 of the report that the plaintiffs cannot be allowed to claim the amount in suit as a charge on property from defendants 2 and 3 for the simple reason that the bond was not registered.

10. In Badlu Singh v. Panthu Singh, AIR 1923 All 270 (J), a security bond was given under Section 17 of the Provincial Small Cause CourtsAct. The bond was one purporting to hypothecate immovable property. It was held that it was invalid without registration and it was compul-sorily registrable. It may be mentioned that Section 17 of the Provincial Small Cause Courts Act requires that the applicant shall at the time of presenting his application either deposit the amount due from him or give security to the satisfaction of the Court.

In that case the applicant gave the security bond on the date of his application. The next day, the learned Judge of the Court of Small Causes directed the applicant to deposit the amount in cash and the applicant did so in accordance with the order. The learned Judge did not record the reason for passing the order on the date next to the presentation of the application and it was under those circumstances that it was held that when the bond was one purporting to hypothecate immovable property, it was invalid without registration and that the applicant had failed to comply with the requirements of the provisions of Section 17 of the Small Cause Courts Act,

11. A view similar to the one propounded in AIR 1923 All 270 (J), was taken by a Division Bench of the Calcutta High Court in Tarapada Ghose v. Jagat Mohini Dasi, AIR 1917 Cal 195 (K). There an ex parte decree was passed by a Small Cause Court. The defendant applied to set aside the decree and filed a security bond to cover the amount due under the decree. By that document immovable property was offered as security but it was not registered. It was held that the document required registration and, therefore, the defendant had failed to comply with the provisions of Section 17.

12. In Benoy Krishna v. Bholanath, 45 Cal WN 298 (L), a security bond was filed by a receiver in pursuance of an order of the Court charging immovable properties. It was held that in order to be effective it must be registered. An earlier decision in Akshay Zamindary v. Ramanath Barman, 40 Cal WN 1281 (M), was relied upon for that view.

13. In N. Sambayva v. T. Subbayya, ILR 31 Mad 330 (N), a security bond was given to the Court under Section 545 of the Civil Procedure Code of 1882. The bond was in the following terms:

'Until the disposal of my appeal In the District Court I pledge my immovable property which is described in the schedule annexed and which is free from all encumbrances, such as mortgage etc., to others, to the Court for Rs. 1,382/4/9 which is the amount of the decree due to the plaintiff.

If the result of the appeal be against me I hereby bind myself to allow the plaintiff to recover the whole amount of the said decree which I should pay by my immovable property, and, if the said property be insufficient from me. Until the whole decree amount is discharged I will not sell or make a gift of the said property to others.'

The bond was not registered. The order of the Court 'security accepted' was endorsed on it. It was held that the security bond amounted to a mortgage within the meaning of Section 58 of the Transfer of Property Act and, not being registered, was invalid under Section 59 of the Act as a mortgage and did not affect the property.

It was further held that the bond was com-pulsorily registerable under Section 17 of the Indian Registration Act, and that the words 'security accepted' only showed that the Court thought the security to be sufficient and the bond did not derive its validity from these words, and it cannot therefore be brought within Section 17, exception (i) of the Registration Act.

14. In A. S. P. S. S. Chettyar Firm v. Lloyds Bank, AIR 1935 Rang 168 (O), a security bond affecting immovable property was executed by the judgment-debtor pursuant to the decree and it was held that it was not exempt from registration and the Court by merely approving the substance of it, cannot purport to convert it into operative, valid and admissible document of title.

15. In Nisar Ahmad v. Emperor : AIR1945All389 , where a bond by a surety was considered under the provisions of Sections 499 and 514, Cr. P. C., it was observed at page 391 of the report that if security of immovable property is given then the bond has to be registered under Section 17 of the Registration Act, and an unregistered bond cannot affect any immovable property and must, therefore, be invalid.

16. The question, which we have got to consider in the present case, is whether the application which was made by the decree-holder to realise the amount from the surety by proceeding against his property hypothecated under the bond, was an application to execute any decree or order of a Court within the meaning of those words under Section 17(2)(vi) of the Registration Act.

It may be pointed out that a document of this nature will be compulsorily registrable under Section 17(1)(b) of the Act unless it falls within the exception contained in Sub-section (2) (vi) of the Act. It is evident that the application was not to execute any decree, or order of a Court within Section 17(2)(vi) but to enforce the security bond which is covered by Section 17(1)(b) of 'the Act and it cannot 'affect any immovable property' comprised therein where the value exceeds Rs. 100/- unless it has been registered.

A similar view was taken by the Rangoon High Court in AIR 1935 Rang 168 (O). Before the Rangoon High Court, the Bombay and the Lahore decisions in AIR 1928 Bom 42 (A) and AIR 1934 Lah 138 (FB) (E), were cited as founding upon the decision of the Privy Council in ILR 20 All 171 (B); ILR 22 Mad SOS (C) and AIR 1919 PC 79 (D), in support of the proposition that such security bond is a step of judicial procedure not requiring any registration and therefore not resistrable because in ILR 22 Mad 508 (C), 'no reference is to be found to any special exemption created by the Act itself. As in ILR 20 All 171 (B), the judgment rests on a broad general principle that the proceedings of Courts do not re- quire registration. It is permissible to doubt whether the head note in ILR 22 Mad 508 (C), is not too narrowly expressed : AIR 1928 Bom 42 (A), per Crump, J.'

17. We are in accord with the view taken by the Rangoon High Court in AIR 1935 Rang 168 (O), when with great respect to the learned Judges who decided AIR 1928 Bom 42 (A) and AIR 1934 Lah 138 (FB) (E), it was observed that the deci-sions of the Privy Council in ILR 20 All 171 (B), and ILR 22 Mad 508 (C), did not support the view which they are taken to express. There is nothing in the judgment of the Privy Council as we understand it, to justify the supposition that instruments such as the security bond under consideration winch creates the rights upon which the application for execution is founded are not regis-trable merely because the bonds were executed in the course of litigation.

In ILR 20 All 171 (B), where a question arose as to the amount of interest to which certain mortgagees were entitled on the principal sum due under the mortgage, the mortgagors had constantly admitted and asserted that under the deeds in question they were not entitled to redeem except on payment of the principal sums with interest thereon at Rs. 18/- per cent. per annum until paid & that in respect of such admission and assertion they had got an extention of time with the consent of their creditors. But they contended that none of the proceedings in the subordinate Court could be referred to or founded upon, because they had not been registered in terms of Section 17 of the Registration Act, 1877.

18. In AIR 1934 Lah 138 (FB) (E), Tek Chand, J. observed that

'It is not the execution of the bond which effects the transfer of rights in the immovable property described therein, but it is the order of the Court accepting the bond which creates these rights.'

With all respect we are unable to appraise this legal position. As we apprehend the matter all that the Court does in such circumstances is to intimate that the property tendered as security is deemed to be sufficient; in other words, it approves the substance not the form of the security, the execution of the bond being the mode and the form in which the security is subsequently furnished.

We cannot, therefore persuade ourselves that in such circumstances the execution of the bond is an act of the Court or a step of judicial procedure, or that the Court merely by approving the substance of the security tendered can or purport to convert instruments such as the security bond under consideration which by law is incapable of affecting the title to immovable property into operative, valid and admissible documents of title.

It may be urged that the effect of holding such documents as those now in question to be not subject to registration would be to facilitate the commission of fraud by dishonest sureties; and further, that the legislature when amending Section 17 (2) (vi) of the Registration Act in 1929 plainly had in mind the decisions of the Privy Council to which reference has been made, and yet expressly refrained from re-enacting Section 17 (2) (vi) in general terms or in such a form as would give colour to the view held by the High Courts of Bombay and Lahore.

The Court is bound to give effect to the provisions of the statute which, in our opinion do not exempt the security bond in question from liability to registration. In our opinion, therefore, where a security bond is offered under Order 41, 6 of the Code of Civil Procedure and propertyworth more than Rs. 100/- is mortgaged, such at security bond is registrable under Section 17(1)(b) of the Registration Act and it is not exempt from registration under Section 17(2)(vi) of that Act.

19. Learned counsel has urged before us that the bond also contained a personal covenant to pay and, therefore, it can be! enforced against the person of the surety inasmuch as the application for the enforcement of the bond was made within three years of its execution. That is a question which is not before us for decision. Under the circumstances the reference is answered in terms aforesaid and the answer may be laid before the Bench concerned.


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