S.K. Ray, C.J.
1. The petitioner is a Public Limited Company, engaged in manufacture of Ferro Silicon and Silicon Metals in a factory at Theruvali in the district of Koraput. On 3-4-1967 it entered intoa contract with the Orissa State Electricity Board (opposite party) for receiving 10,000 KWH of power at the rate of Re. 0.03 p. per unit in average for 15 years. The petitioner was required to pay tariff for the aforesaid supply as mentioned in Clause 13 of the contract.
On 2-1-1974 it entered into another contract with the Board under which it is to receive 25,000 KWH of power for 15 years at the rate of Re. 0.03 p. per unit for the first five years, Re. 0.04, 5 p. per unit for the next five years and Re. 0.06 p. per unit for the last five years.
2. In both the cases the Board raised the tariff unilaterally. So the petitioner filed two suits. Suit No. 73 of 1976 was filed in the court of the Sub-Judge, Bhubaneswar under Section 20 of the Arbitration Act to refer the question of raising the tariff under 1967 contract for arbitration and to injunct the Board from demanding higher tariff other than the contract rate and from causing disconnection. Suit No. 74 of 1976 was filed in the very court for declaration that the clause in the 1974 contract authorising the Board to revise the rate should be directed to be expunged or deleted and the Board should be injuncted from demanding higher tariff at the revised rate.
3. On 31-8-1976 the Sub-Judge granted interim injunction in both the suits restraining the Board from disconnecting the power line to the Company's factory at Theruvali.
4. In O. S. No. 73 of 1976-I the interim injunction granted on 31-8-1976 was made absolute on 4-3-1977 on condition that the Company paid at the revised rate from 1-3-1977 and provided a bank guarantee for Rs. 48,38,302.26 from a nationalised bank within one month from the date of the order in favour of the opposite party to be encashed under the orders of the court. On 18-3-1977 the company filed an application under Order 39, Rule 4 C. P. C. for modification of the order dated 4-3-1977 on the ground of undue hardship and also on the ground that the State Government had in the meanwhile directed the Board to receive payments at the pre-revised rates with effect from 1-1-1977.
The Sub-Judge modified his earlier order dated 4-3-1977 to the extent indicated below:
'......... the order of injunction passedagainst the opposite party restraining him from disconnecting the supply of energy is maintained subject to the con-dition that the petitioner would pay the current demand at the contract rate as it stood before the revision of tariff commencing from 1-3-1977 till the disposal of the case or till the agreement is arrived at between the parties regarding payment of tariff whichever is earlier and also to provide bank guarantee for Rs. 48,38,302.26 paise from a Nationalised Bank on or before 30th September, 1977.'
This bank guarantee was filed in court under intimation to the defendant.
The defendant filed Misc. Appeal No. 268 of 1977 in the High Court against the order of the Sub-Judge dated 12-9-1977. This appeal was dismissed and the Company was allowed to pay the current demand at the old contractual rates from 1-3-1977. The High Court, however, directed to provide another bank guarantee for Rs. 47,94,480/-. These two bank guarantees -- one directed to be furnished by the Sub-Judge and the other by this Court -- are subsisting, being respectively valid up to 4-12-79 and 3-1-1980.
Being aggrieved by the dismissal of the Misc. Appeal No, 268 of 1977 the Board filed Civil Appeal No. 1232 of 1979 in the Supreme Court wherein the following order was passed:--
.'We are of the view that the High Court was not right in allowing the respondents to pay for the electrical energy, consumed by them at the contract rates, without insisting on furnishing security for payment of difference between the contract rates and the revised rates. We would, therefore, modify the order made by the High Court by providing that so far as the arrears of energy charges for the period up to 31st March, 1979, calculated on the basis of the difference between the contract rates and the revised rates are concerned, respondents will furnish security to the satisfaction of the Trial Court, within a period of two months from today, for the amount of the arrears minus the amount for which Bank Guarantee has already been furnished by the respondents and is subsisting. The respondents will pay the electricity charges as from 1st April, 1979 at the revised rates. If the respondents succeed in establishing that the appellant is not entitled to charge for the electricity supplied by it at the revised rates, the appellant will refund the amount of the excess charged by it to the respondent within one month of the final disposal of the controversy between the parties.'
This order was later clarified by the Supreme Court by its order dated 10-9-1979 that the security is to be for arrears of energy charges for the period up to 31st March, 1974 and does not cover the surcharge claimed by the Electricity Board.
The Company thereafter intimated the Registrar of Companies in Form No. 8 pursuant to Section 125/127 of the Companies Act that the present and future assets of the Company wherever situated were being offered as security as per order dated 10-9-1979 of the Supreme Court and necessary certificate and evidence thereof were furnished to the trial court. The charge so created was for an amount of Rs. 1,60,08,807.04 p.
5. In O. S. No. 74 of 1976 the interim order of injunction passed therein on 31-8-1976 was vacated on 24-9-1976. The Company thereupon filed Misc. Appeal No. 154 of 1976 in this Court who by its order dated 26-11-1976 granted temporary injunction providing inter alia, that the Company shall pay current demand at revised tariff rates with effect from 1-10-1976, that it shall provide bank guarantee for Rs. 42 lakhs in favour of the defendant to be encashedunder the orders of the Subordinate Judge, Bhubaneswar and that if the suitwas not disposed of within the period of six months, the bank guarantee furnished shall be extended by the Company for such further period as may be directed by the learned Sub-Judge.
This order dated 26-11-1976 was sought to be revised by the Company by filing an application on 18-3-1977, but the Sub-Judge rejected it on the ground that he had no jurisdiction to modify the order passed by the High Court. Accordingly, Misc. Appeal No. 255 of 1977 was filed by the Company and the High Court by order dated 2-3-1979 modified its earlier order dated 26-11-1976 by allowing the Company to pay the current demand at old contractual rates from 1-3-1977.
From this order the Board went up to the Supreme Court in Civil Appeal No. 1231 of 1979 in which the Supreme Court passed the order which was the same as was passed in Civil Appeal No. 1232 of 1979 as already extracted and the said order was also later clarified on 10-9-1979 in the same manner as in Civil Appeal No. 1231 of 1979.
The Company thereafter intimated the Registrar of the Companies in Form No. 8 pursuant to Section 125/127 of theCompanies Act that the present and future assets of the Company wherever situated were being offered as security as per order dated 10-9-1979 of the Supreme Court and a copy thereof was filed before the Sub-Judge.
6. When the matter of acceptance of security bonds in both the suits (O. S. No. 73/76 and O. S. No. 74/76) came up before the court, the defendant-opposite party filed the following objections; (a) The charge registered with the Registrar of Companies in respect of Rs. 1,60,08,807.04 p. (claim in O. S. No. 74/ 76) is no charge, (b) The charge so created has been made to rank subsequent not only to existing charges of the financial institution and/or bank but also to all future charges to be created, (c) The document for security must be registered(d) Security must be for a sum of Rs, 40,28,685.00 in O. S. No. 73 of 1976,(e) Properties and assets of the Company should be specified in the document for security, (f) Security bond should be executed by an officer of the Company duly authorised and legally entitled to do so,
7. The matter of acceptance of the security bond and furnising fresh bank guarantee arising in both the suits were taken up together and disposed of on the same date, viz., 27-9-1979.
The trial court after hearing the parties passed the impugned orders on 27-9-1979 which are the subject-matters of the present two Civil Revisions. By these orders the plaintiff-Company was directed to furnish bank guarantee in a form indicated therein which recited that the bank guarantee was encashable at the instance of the defendant. The court further directed therein that the security bonds shall be registered.
8. Being aggrieved by these two orders passed in two suits these revisions have been filed. As common questions are involved in both revisions they are heard together and will be governed by this order.
9. As regards the bank guarantees it is agreed by the parties that, in addition to the recitals contained therein, the following recitals would be incorporated, namely, that the amount secured by the bank guarantee shall tbe payable to the defendant-opposite party, Orissa State Electricity Board, in the event of the dismissal of the suits finally after the remedies of appeal and revision, including appeal before the Supreme Court, if any, taken by the parties, are exhausted, and it the amount covered by the guaranteehas not already been paid by the plaintiff-petitioner. The form of bank guarantee as suggested by the Sub-Judge prima facie runs counter to the order of this Court dated 26-11-1976 in Misc. Appeal No. 154 of 1976 whereunder the bank guarantee was encashable under the orders of the Sub-Judge. Accordingly, that part of the order cannot be sustained and is vacated. It is, however, made clear that as agreed to by parties, as indicated above, the amount secured by the bank guarantees shall be encashed under order of the Sub-Judge and paid to the defendant-opposite party in the event of the dismissal of the suits finally after all remedies by way of appeal and revision, including appeal to the Supreme Court, are exhausted and if the amount covered by the bank guarantees has not already been paid by the plaintiff. The bank guarantees now subsisting and in question shall be redrafted as agreed to by the parties and extended by the Company for such further period as may be directed by the Sub-Judge.
10. The second question is whether the security bonds which have been filed on 15-10-1979 pursuant to the order of the Sub-Judge shall be registered under Indian Registration Act. One security bond is for a sum of Rs. 1,60,08,807.04 p. filed in O. S. No. 74 of 1976 and the other is for a sum of Rs. 1,81,734.14 filed in O. S. No. 73 of 1976. Both have been executed in favour of the Sub-Judge, Bhubaneswar where both the suits are pending. Serious objection of the learned counsel, Mr. S. S. Roy, is taken to the direction of the Sub-Judge to register them which would cost his client to the tune of more than Rs. 14 lakhs.
11. The Supreme Court directed the plaintiff to furnish security to the satisfaction of the trial court for the amount of arrear minus the amount for which bank guarantee has already been furnished and is subsisting. The security bond has now been furnished by the Secretary of the plaintiff-Company in O. S. No. 74 of 1976 for an amount of Rs. 1,60,08,807.04 p. It recites, inter alia:--
'And now the plaintiff-Company having obtained an order of injunction against disconnection and payment of revised tariff up to 31st March, 1979 and having been called upon to furnish security as aforesaid, the plaintiff-Company out of its free-will, stands security to the extent of Rs. 1,60,08,807.04 (Rupees onecrore sixty lakhs eight thousand eight hundred seven and paise four) only creating subsequent charges of all its assets present and future, subsequent to the charges that are already created and subsisting in favour of financial institutions and Banks. The plaintiff-Company hereby covenants that all its lands, factory, buildings, plants and machineries and staff quarters, offices located at Theruvali in the District of Koraput or any other land property building wherever held by it are furnished as security to the Court. If the plaintiff-Company fails to succeed in the aforesaid suit either in this Court or in appeal or revision or otherwise as provided under the law the said security will be proceeded against and the amount payable shall be realised therefrom and paid to the defendant. This security creating charge has been filed with the Registrar of Companies as required by Sections 125/127 of the Indian Companies Act.' Then follows the Schedule. Another security bond in identical terms for an amount of Rs. 1,81,734.14 p. has been filed in O. S. No. 73 of 1976, These two bonds have been executed in favour of the court pursuant to the order of the Supreme Court and are not operative until their sufficiency is checked and accepted by the court. It is only on acceptance of the security bonds by the court that rights are created and liabilities are accrued and obliges the surety to his undertaking and places the properties offered as security at the disposal of the court for being dealt with under Section 145 C. P. C. These bonds, therefore, become part of the judicial proceeding and are incorporated with it
There is a sharp divergence of judicial opinion among the courts in India on the point whether a security bond furnished to a court under its order and accepted is compulsorily registrable under the Indian Registration Act. In this regard, the Privy Council has, in three cases, enunciated the rule that the provisions of Section 17 of the Indian Registration Act do not apply to proper judicial proceedings. In the case of Bindeshri Naik v. Gangasaran Sahu, (1898) 25 Ind App 9, their Lordships of the Judicial Committee of the Privy Council said:-- 'Although, in the view which their Lordships take, the question whether those proceedings can be founded on, without their having been registered in terms of the Act of 1877, does not necessarily arise in this appeal, they think itright to add that, having heard counsel fully upon the point, they are satisfied that the provisions of Section 17 of the Act do not apply to proper judicial proceedings, whether consisting of pleadings filed by the parties, or of orders made by the Court'
In the case of Pranal Annee v. Lakshmi Annee, (1899) 26 Ind App 101, their Lordships of the Judicial Committee reiterated the original view by saying:--
'.........the objection founded upon itsnon-registration does not, in their Lordships' opinion, apply to its stipulations and provisions, in so far as these were incorporated with, and given effect to by, the orders made upon it by the Subordinate Judge in the suit of 1885. The razinamah, in so far as it was submitted to and was acted upon judicially by the learned Judge, was in itself a step of judicial procedure not requiring registration.........'
In the case of Rani Hemanta Kumari Debi v. Midnapur Zamindary Co. Ltd., (1919) 46 Ind App 240 (241) a suit was compromised. A petition setting out the terms of the agreement in the suit was recited in full in the decree made in the compromised suit. Subsequently, a suit was brought for specific preformance of the agreement. Question was whether Section 49 of the Indian Registration Act precluded this decree containing the terms of agreement from being given as evidence of the agreement since the agreement referred to certain lands which were not the subject-matter of the compromised suit. It was held that Section 17(2)(b) of the Indian Registration Act which provides that Section 17(1) Clauses (c) and (d) are not to apply to a decree of a court extends to the whole of a decree not merely that part which is operative. This conclusion of their Lordships was in agreement with the rule propounded in Pranal Annee's case ((1899) 26 Ind App 101).
Relying upon these Privy Council decisions the Bombay High Court in the case of Jayappa Lokappa Narsinganawar v. Shivangouda Dyamangouda, AIR 1928 Bom 42, said that documents of this kind (security bond) executed in favour of the court are not executed between the decree-holder and the surety but between the surety and the court and are steps in the judicial proceedings and, therefore, they fall within the purview of the broad general principle laid down by the Privy Council in the aforesaid cases thatproceedings of the court do not require registration.
This view has been followed by number of other High Courts in the following cases; Kasturi Lal v. Goverdhan Dass, AIR 1934 Lah 138 (FB); Dadoo Balaji Korku v. Kanhaialal Dhanaram, AIR 1947 Nag 26 (followed in Hijijiwa-khan v. Gulabchand Harakchand, AIR 1961 Madh Pra 2); Basant Lal Khacheru Ram v. Jagdish Parshad Kishan Chand, AIR 1960 Punj 517; B. Rama Bhatta v. B. Kodandarama Bhatta, AIR 1963 Mys 332 (by K.S. Hegde and T.K. Tukol, JJ.-Division Bench); Label Art Press v. Indo European Machinery Co. (P.) Ltd., AIR 1974 Delhi 136 and Union of India v. Rajkumar Rajindera Singh, AIR 1975 Him Pra 25 (FB).
12. The opposite view has been taken in the case of A. S. P. S. S. Chettyar Firm v. Lloyds Bank, AIR 1935 Rang 168. Their Lordships relying upon the case of Nagaruru Sambayya v. Tanjatur Subbayya, (1908) ILR 31 Mad 330, and considering the Bombay and Lahore views aforesaid observed that by acceptance of the bond the court merely approved the substance and not the form of the security bond and, therefore, the execution of the bond did not constitute an act of the court or a step in judicial proceedings. This view of the Rangoon High Court found favour with Patna High Court in the case of Gauri Shankar Jhunjhunwala v. Baldeo Sahujee, AIR 1953 Pat 210. The Patna High Court in this case merely followed the view of the Rangoon High Court without much discussion. The Assam High Court in the case of Rivers Steam Navigation Co. Ltd. v. Jalim Mulla, AIR 1957 Assam 157, also examined the Lahore and Bombay views and observed that in the Lahore case emphasis had been laid on the fact that it was not the execution or registration of the document which was really material, as the fact that the document had been accepted by the court and made a part of the judicial proceeding, its decree or order, thereby ensuring certain rights to the parties, and the learned Chief Justice observed that he attached great importance to this line of reasoning contained in this decision and would have been inclined to accept the said observation without reservation, but for the fact that the Registration Act itself had been amended in 1929 The amendment which the learned Chief Justice referred to is as follows:--
'Section 17(2). Nothing in Clauses (b) and (c) of Sub-section (1) applies to any decree or order except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding.'
This amendment, in my view, reinforces the validity of the reasonings in Bombay case and Lahore Full Bench case. This amendment merely lays down an exception to the general rule of law that no decree or order of court requires registration. In Hemanta Kumari's case (supra) the Privy Council held that a decree passed in a compromised suit in which a petition setting out terms of an agreement had been recited in full and made a part of the decree would not require registration merely because the compromise petition dealt with not only the suit lands but also with other land's which were expressly excluded from the ambit of the suit claim. The purpose of this amendment was to make Clauses (a) and (b) applicable only, to such decree comprising of immovable properties other than those which were the subject-matter of the suit or proceedings. This amendment, on the other hand, indirectly gives recognition to the broad general principle culled from the Privy Council cases aforesaid. The Rangoon view was also accepted by the Allahabad High Court in the case of Bishnath Sahu v. Prayag Din, AIR 1958 All 820, but their Lordships did not fully explain the reasons which were adopted by the Lahore Full Bench case. A Full Bench of Kerala High Court in the case of R. M. Palat v. P. A. Nedungadi, AIR 1958 Ker 377 (FB), also accepted this opposite view of Rangoon High Court. It may be noticed that the learned Judges omitted to consider the aspect that until and unless the court passes an order accepting the bond it does not acquire validity or efficacy and does not become operative. The Calcutta High Court in accepting this opposite view of Rangoon High Court in the case of Kasemali v. Ajoyendu Paul, AIR 1956 Cal 375, proceeded on the basis that a security bond requires no order of the court to make it effective and the court's order of acceptance of the bond only indicates that the court considers the security necessary and does not give validity to the bond and it necessarily follows that execution of a bond in other circumstances is not a step in the judicial procedure or part of a judicial proceeding. It will be seen that in the facts of that particular case their Lordships heldthat the execution of security bond and acceptance of it by the court was not a step in judicial procedure or a part of a judicial proceeding. Their Lordships accepted the broad principle laid down by the Privy Council that if the execution of the bond formed part of a judicial proceeding it would not require registration, but they proceeded further to say that whether or not it forms part of the judicial proceeding depends on the question whether it is the order of the court which transfers rights in the property. What is to be remembered is that no right is transferred before the security bond is accepted. If mere execution of the security bond before its acceptance by the court resulted in transfer of property, then it would be futile for the court to reject it as insufficient. It is only after acceptance that rights are created and liabilities are accrued. The Calcutta High Court has omitted to take note of this aspect of the matter. Further, this Calcutta case would not govern the present security bonds which have been executed in favour of the court under order of the Supreme Court whereunder its operativeness is expressly made subject to the court's satisfaction and acceptance.
In the case of Raj Raghubar Singh v. Jai Indra Bahadur Singh, (1919) 46 Ind. App. 228, their Lordships of the Judicial Committee were considering a security bond which recited, 'I..... of my ownfree will stand surety on behalf of ......and covenant that the attached cattle shall be produced before the court......'.Subsequently a point arose that the security bond could not be enforced as it was not registered. Their Lordships said:
'For a proceeding under the Transfer of Property Act there must be a mortgagor and mortgagee......... Now, no person is mentioned in the instrument......This instrument does not purport to bind the sureties to any individual officer or to anyone. It is suggested that they are bound to the Court. But the Court is not a juridical person. It cannot be sued. It cannot take property, and as it cannot take property it cannot assign it. It remains therefore that here is an unquestioned liability, and there must be some mode of enforcing it, and that the only mode of enforcing it must be by the Court making an order in the suit upon an application to which the sureties are parties, that the property charged be sold unless before a day named the sureties find the money.'
Relying upon this decision the. Rangoon High Court in the case of Mohamed Razak v. Ram Ratan Tewari, AIR 1938 Rang 303, held that as the Court is not a juridical person a security bond to the court operates neither as a mortgage nor as a charge and need not be registered under the Transfer of Property Act. The general mode of enforcing such a bond envisaged by their Lordships has now been incorporated in Section 145 of the Code of Civil Procedure (1976 Amendment) which provides that where any person has furnished security or given a guarantee for the payment of any money, or for the fulfilment of any condition imposed on any person, under an order of the Court in any suit or in any proceeding consequent thereon, the decree or order may be executed in the manner provided therein for execution of decrees, namely, if he has furnished any property as security, by sale of such property to the extent of the security. This makes the position clear that the registration of a security bond under the Indian Registration Act is not a precondition for enforcing the provisions of the section and putting the properties furnished as security to sale by the court. Secondly, it indicates that when a security bond is furnished under an order of the court in any suit or in any proceeding furnishing of such security becomes a step in judicial procedure and incorporated as a part of the judicial proceeding and, as such, becomes exempt from registration.
13. Mr. Rath, learned counsel for opposite party, specially relies on two cases as lending support to this opposite view. One is the case of Imperial Bank of India v. Bengal National Bank Ltd. AIR 1931 PC 245. This case has no application as the question of execution of bond under orders of the court did not arise in that case. The second case is the case of M.L. Abdul Jabbar Sahib v. H. Venkata Sastri and Sons, AIR 1969 SC 1147. The present controversy was not a specific issue in that case. This case is not an authority on the point at issue. That is why this Supreme Court case was not referred to either by the Delhi High Court in Label Art Press case (supra) or by Himachal Pradesh High Court in Union of India v. Raj-kumar Rajindera Singh (supra). That this particular controversy was not expressly before the Supreme Court is clear from the fact that their Lordships of the Supreme Court have not referred to the divergent views on the point, northe Privy Council cases which are the foundation for one line of thought.
14. In the end, it is pertinent to refer to the passage under the heading, 'Security bond under C.P.C., Order 41, Rule 5' at page 109 of Indian Registration Act by Mulla, 8th Edition. In that paragraph the learned author after having referred to the conflicting decisions has said at page 110 that the Bombay view is believed to be correct.
15. The present security bonds have already been executed in favour of the court and give an undertaking to the court that all the properties enumerated in the schedule to the security bonds may be proceeded against for realisation of the amount which would be found due to the defendant. As already stated above, in the light of the order of the Supreme Court they will be operative only after the court is satisfied as to the sufficiency. Thus, upon the order being passed by the Sub-Judge accepting the security bonds they will be incorporated into the proceedings and be steps in the legal procedure. In my judgment the Bombay view followed by the Full Bench of Lahore and the Full Bench of Himachal Pradesh and by other High Courts adopting the same line of reasoning is preferable and I accept the same in preference to the opposite view represented in AIR 1935 Rang 168. I hold that the security bonds furnished to a court under its order, whether executed in favour of the court or otherwise, would not require registration under the Registration Act, because such transactions are steps in legal proceedings and the security bonds when accepted become incorporated into judicial proceedings.
16. In the result, therefore, Civil Revisions succeed and the orders of the learned Sub-Judge are set aside to the extent indicated above. The security bonds filed here on 15-10-79 pursuant to his orders are remitted back to him for being considered as to their sufficiency after hearing parties and objections from the defendant, if any. If he does not agree to the present forms of the security bonds in which they have been executed, he may suggest the proper form and grant time to the plaintiff to furnish security bonds in that form. He is also to consider whether the person executing the bonds is competent to execute them and will' give special attention as to the description of the properties given as security for purpose of identification.
Civil Revisions are, accordingly, allowed in part. Consolidated cost is assessed at Rs. 100 (one hundred).
Civil Revisions are allowed in part with cost.