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Mishrilal Onkarlal Bapna and anr. Vs. Bhupraj Nathulal Nalvaya - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtMadhya Pradesh High Court
Decided On
Case NumberCivil Revn. No. 133 of 1959
Judge
Reported inAIR1959MP420
ActsProvincial Insolvency Act, 1920 - Sections 2, 20, 28(6), 52 and 56
AppellantMishrilal Onkarlal Bapna and anr.
RespondentBhupraj Nathulal Nalvaya
Appellant AdvocateG.M. Chafekar and ;Vijayawargi, Advs.
Respondent AdvocateK.A. Chitale and ;S.L. Pamecha, Advs.
DispositionRevision dismissed
Cases ReferredKistna v. G. Kodandaramayya
Excerpt:
.....payment of the decretal amount and that on certain conditions being satisfied the plaintiff mortgagee shall be entitled to execute the decree by sale of the mortgaged property......instalments. the decree further provided that till the repayment of the decretal amount, the property mortgaged with nathulal 'shall remain attached as security for the payment of the amount; that the defendant mortgagors shall have no right to transfer, dispose of or deal in any way with the property; and that in default of any term of the compromise or payment of any instalment the whole amount then due shall be payable a once and recoverable from the defendant mortgagors by the sale of the property made security for the debt.'it appears that the judgment debtors made a default in the payment of the instalments. thereupon the mortgagee filed an application for execution of the decree praying for the sale of the property held as security for the payment of the decretal amount. at.....
Judgment:
ORDER

P.V. Dixit, J.

1. The facts and circumstances giving rise to this revision petition are that the petitioner Mishrilal effected two mortgages on certain properties belonging to him and situated in Mandsaur in favour of the non-applicant's father Nahulal. The total amount secured by these mortgages was Rs. 1,25,000/-. On 13th November 1951 the mortgagee instituted a suit against Mishrilal and his sons in the court of the district judge of Mandsaur to enforce the mortgages. In that suit a compromise decree was passed on 9th April 1952.

By that decree the defendants became severally and jointly liable to pay to the mortgagee Nathulal Rs. 137437/- together with interest on Rs. 125,000/- at the rate; of ten annas per cent per month from 7th October 1951 till realisation. The decretal amount was to be paid in certain instalments. The decree further provided that till the repayment of the decretal amount, the property mortgaged with Nathulal 'shall remain attached as security for the payment of the amount; that the defendant mortgagors shall have no right to transfer, dispose of or deal in any way with the property; and that in default of any term of the compromise or payment of any instalment the whole amount then due shall be payable a once and recoverable from the defendant mortgagors by the sale of the property made security for the debt.'

It appears that the judgment debtors made a default in the payment of the instalments. Thereupon the mortgagee filed an application for execution of the decree praying for the sale of the property held as security for the payment of the decretal amount. At the instance of the mortgagee, a receiver of the property, the sale of which the mortgagee sought in execution of the decree, was appointed for the collection of rents and profits of the property.

2. On 25th March 1957 the petitioner Mishrilal filed an insolvency petition in the court of the district judge of Indore. On the insolvency petition being admitted, the interim receiver appointed in the insolvency proceedings presented an application under Section 52 of the Provincial Insolvency Act 1920 before the Additional District Judge of Mand-saur for delivery of possession of tne property which Mishrilal had mortgaged with Nathulal and which was about to be sold in execution of the compromise decree passed by the district judge on 9th April 1952. The additional district judge of Mandsaur rejected this application of the interim receiver. It is against this order that the present revision peiition is directed.

3. Mr. Chafekar, learned counsel for the petitioners, argued that the compromise decree, which was passed on 9th April 1952 in favour of Nathulal, did not make him a secured creditor; that the decree continued the attachment of certain properties which had been previously mortgaged with Nathulal; that a receiver of that property was also appointed in execution proceedings of the compromise decree; and that, therefore, the property being in possession of the executing court, it had no other alternative but to direct the delivery of the property to the interim receiver when he made an application under Section 52 of the Insolvency Act and when the conditions laid down by that section had been fulfilled. It was also said that the question whether the opponent was or was not a secured creditor and whether the property could be delivered under Section 52 could be determined by the insolvency court alone and not by the executing court.

4. There is no force in any of these contentions. Under Section 28(2) of the Act, on the making of an order of adjudication, the whole of the property of the insolvent vests in the court or in the official receiver. This sub-section has to the read with Sub-section (6) which provides that nothing contained in Section 28 of the Act shall affect the power of any secured creditor to realise or otherwise deal with his security in the same manner as he would have been entitled to realise or deal with it if the section had not been passed.

In other words, the right of a secured creditor to realise or otherwise deal with his security is in no way affected by the order of adjudication and the mortgagee can sue on and realise his security (see Kashinath v. Ganesh, ILR 1939 Nag 540: AIR 1939 Nag 207). As the insolvency court has no power to restrain a mortgagee of the insolvent's property from selling it in exercise of its power of sale, it follows that it has no power to remove a receiver appointed in a suit or execution proceedings at the instance of the mortgagee from the possession of the mortgaged property see Nrishinha Kumar Singha v. Debprosanna Mukherji, ILR 62 Cal 483: (AIR 1935 Cal 460). Here the petitioner Mr. Zavar was appointed an interim receiver.

Now, under Section 20 of the Insolvency Act. the property of the debtor does no; vest in the interim receiver as it clues in a receiver appointed after adjudication under Section 56 of the Act. If, therefore, after the adjudication of the insolvency the right of a secured creditor to realise or otherwise deal with his security is unaffected, though the other property of the insolvent has vested in the official receiver, then a fortiori the interim receiver appointed before adjudication in whom the property of the debtor does not vest cannot claim the right to take possession of any mortgaged property that is with the secured creditor of the insolvent.

Such being the rights of a secured creditor and of the receiver appointed before or after the adjudication, Section 52 ot the Insolvency Act cannot in its very nature apply to mortgage decree-holders or to decree-holders holding a charge or lien on the property of the debtor as security for the payment ot the debt due from him. In Official Receiver, Tanjore v. R. M. Nagaratna Mudahar, AIR 1926 Mad 194 it was said that the inapplicability of Section 52 of the Insolvency Act to mortgage decree-holders was obvious enough and it was further observed that there was nothing in the wording of Sections 28(6), 47 and 51(2) of the Insolvency Act to show that the exemption from the operation of Section 52 did not extend to money decree-holders holding a charge or lien on the property of the debtor as security for a debt due from him. Under Section 28(6) the power of any secured creditor to realise or otherwise deal with his security is unaffected by the order of adjudication. Now, a 'secured creditor' has been defined in Section 2(e) of the Act as a person holding a mortgage, charge or lien on the property of the debtor or any part thereof as security for a debt due to him from the debtor. It follows, therefore, that money decree holders holding a charge or lien on the debtor's property are exempted from the operation of Section 52.

5. Now, in the instant case, the compromise decree, which was passed on 9th April 1952, was clearly not a simple money decree. The suit in which it was passed was a suit to enforce two mortgages executed in favour of Nathulal. The decree provided that the property, which was mortgaged with the plaintiff, 'shall continue to remain attached' for the payment of the decretal amount and interest and the judgment debtor shall have no right to deal with or dispose of that property in any way. The fact that the decree used the words ^^cnLrwj tjs fMks esa dwdZ gqMZ jgsxhA**does not make the decree a simple money-decree. It is not as if the plaintiff mortgagee gave up his security and the property, which had been formerly mortgaged with him, was attached in execution proceedings of the compromise decree.

The property remained attached by virtue of the mortgage itself and the compromise decree in effect provided that the property shall remain mortgaged and hypothecated as security for the payment of the decretal amount and that on certain conditions being satisfied the plaintiff mortgagee shall be entitled to execute the decree by sale of the mortgaged property. Even if the decree cannot be regarded as a mortgage decree, it has beyond doubt the character of a decree giving to the decree-holder a charge or a lien on the properties of the debtor specified in the decree as security for the payment of the decretal amount and Section 52 cannot be invoked by the interim receiver for delivery to him of the property mortgaged with the opponent. The mere fact that in execution proceedings a receiver was appointed at the instance of the mortgagee for the collection of rents and profits of the mortgaged property does not attract Section 52, when it is in its nature inapplicable. The question whether the interim receiver is a necessary party to the execution proceedings is, however entirely different and does not arise for consideration here.

6. The contention that it is the insolvency court alone which can decide the question whether a person is or is not a secured creditor and whether an order under Section 52 for delivery of certain property to the receiver should be made must be rejected on the very wording of Section 52. An application under Section 52 has to be made to the Court which is executing the decree and it is that court which has to decide whether in regard to an application under Section 52 the conditions laid down by that section are fulfilled and whether the provisions of the section are applicable.

The insolvency court has no jurisdiction to make, an order under Section 52 (see Mathuresh Chakravarty v. S. R. Mills Co. Ltd., AIR 1935 Cal 150). Learned counsel for the petitioners referred me to the observations in Official Receiver, Kistna v. G. Kodandaramayya, AIR 1935 Mud 651 that in an application under Section 52 where the conditions prescribed therein have been fulfilled, the executing court has no other duty to perform than to direct the delivery of the property in question to the receiver, and that the executing court is not competent to investigate or decide questions of title in dispute between the insolvent judgment-debtor and any other co-judgment-debtor or stranger.

These observations were made in a case where the dispute was as regards the title to the property of which delivery was sought under Section 52, between an insolvent father and his son. In the Madras case, the question whether Section 52 affected the rights of secured creditors and whether the executing court has jurisdiction to determine the point whether a person was or was not a secured creditor did not at all arise for consideration.

7. For these reasons, I am of the opinion that the learned additional district judge of Mandsaur was right in rejecting the petitioner's prayer under Section 52 of the Act for delivery of the property in question. This revision petition is, therefore, dismissed. In the circumstances of the case, I make no order as to costs of this petition.


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