1. The facts necessary for the decision of these appeals may be stated: Two brothers, Mathew and Kuruvilla, had an Overdraft account with the South Indian Bank Limited; as security for the amount borrowed they created an equitable mortgage of their properties on 14-10-1950. The South Indian Bank sued for recovery of the amount due under the transaction in O.S. No. 39 of 1954 of the District Court of Anjikaimal which suit was later transferred to the Subordinate Judge's court of Ernakulam where it was registered as O. S. No. 85 of 1958. Defendants 1 and 2 in that sun are Mathew and Kuruvilla and the 6th defendant is Johar and Sons, Ernakulam. The first defendant executed a mortgage on 18-1-1951 for Rs. 43,899-2-10 in favour of the Palai Central Bank Ltd. The Bank sued on the mortgage in O. S. No. 63 of 1953 of the District Court of Anjikaimal and the suit was later transferred to the Subordinate Judge's court of Ernakulam where it was registered as O.S. No. 84 of 1958. Mathew and Kuruvilla are defendants 1 and 2 in that sum and Johar and Sons the 8th defendant. Johar and Sons happened to be impleaded in the two suits as assignee -- decree-holder in O.S. No. 6 or 1128 of the District Court of Trichur and decree-holder in O. S. No. 68 of 1952 of the District Court of Anjikaimal. These two were unsecured decrees obtained against Mathew. Items 1 and 2 of Schedule A and items 1, 2, 3, 6, 7, 8, 10 and 11 of Schedule B were attached in execution of O.S. No. 6 of 1123 on 3-4-1950 and one item had been sold in execution and purchased by the manager of Johar find Sons who deposited the sale amount. Johar and Sons had also applied for ratable distribution far the decree amount in O.S. No. 68 of 1952.
The money realised in execution was not disbursed as Mathew had in the meanwhile applied for being adjudicated an insolvent in I.P. No. 13 of 1952 of the District Court and an interim receiver had been appointed in insolvency. Johar and Sons contended in the suits filed by the South Indian Bank and the Palai Central Bank that the respective mortgages on which the banks sued were void as the same were executed after the attachment of Mathew's interest in the properties, in execution, of the decree in O.S. No. 6 of 1123. Though O. S. No. 68 of 1952 was instituted after the dates of the two mortgages, Johar and Sons had a case that the mortgages were void in respect of the decree in that suit also as there was an application for rateable distribution in respect of that decree which thus became a claim enforceable under the attachment in O.S. No. 6 of 1123. The Palai Central Bank applied under Order XXI, Rule 89 of the Code of Civil Procedure for setting aside the sale in O.S. No. 6 of 1123 and deposited the requisite amount under the rule. The sale was cancelled and Johar and Sons preferred a civil miscellaneous appeal in the High Court of Travancore-Cochin as CMA. No. 146 of 1955. Ext. P. 16 is copy of the judgment of the High Court in the civil miscellaneous appeal. The order setting aside the sale was confirmed and certain directions were given for disbursement of the amount paid by the auction purchaser and the Palai Central Bank. It may also be mentioned that the Palai Central Bank claimed in their suit the amount so deposited for setting aside the sale.
The contentions of Mathew and Kuruvilla who are defendants 1 and 2 in the two suits may now be referred to. Kuruvilla contended that he was only a surety and that his properties should be sold in the South Indian Bank's case only after exhausting all remedies against the first defendant and his properties. The Palai Central Bank contended that the South Indian Bank should proceed against the second defendant's properties in the first instance. Overruling the contentions of Johar and Sons, the two suits were decreed. The Palai Central Bank, the second mortgagee, was given a decree for the amount sued for and out of the amount decreed, Rs. 4,513-6-6 being the amount deposited for cancellation of the sale, in O.S. No. 6 of 1123 and interest thereon was made a first charge on the first defendant's share of the properties. The South Indian Bank was also given a decree as prayed for with the direction that the second defendant's properties should be sold first. A.S. Nos. 8 and 10 have been preferred by Johar and Sons from the respective decrees in O.S. Nos. 84 and 85 of 1958. A.S. No. 39 of 1959 is by the second defendant Kuruvilla against the direction in the decree in O. S. No. 85 of 1958 that his properties should be sold first A.S. No. 419 of 1958 arises from an order dismissing the execution petition filed by Johar and Sons for execution of the decree in O. S. no. 68 of 1952 and directing them to proceed in insolvency as the judgment debtor has been adjudicated an insolvent. All the appeals were heard together.
A. S. No. 39 of 1959.
2. Kuruvilla the appellant, who was the second defendant in O.S. No. 85 of 1958 has raised two points (1) that the court below should have directed the sale of the first defendant's properties in the first instance and (2) that the direction in the decree to sell his properties first, is wrong.
3. As regards the first point his case is that he was only a surety for Mathew, the first defendant, and that the latter's properties should be sold first. Defendants 1 and 2 are equally liable tinder the mortgage and the second defendant is not entitled to any special equity especially as that would be an unwarranted restriction on the right of decree-holder to proceed against any of the properties mortgaged.
4. Coming to the second point the court below appears to have applied the principle of marshalling. This is not a case to which Section 81 of the Transfer of Property Act would apply as the right to claim for marshalling is subject to the condition that there must be a common debtor. Mathew alone is the mortgagor in the transaction on which the Palai Central Bank has sued, and Section 81 cannot therefore apply to this case. The Palai Central Bank which took the later mortgage has no special equity to Justify (sic) prayer that Kuruvilla's properties should be sold first. In our opinion the right of the plaintiff to proceed against any of the properties mortgaged ought not to be interfered with in any manner. The direction that the appellant's properties should be sold first should therefore be set aside. The appellant is entitled to succeed to this extent.
A. S. No. 419 of 1958:
5. This appeal is by Johar and Sons and is directed against the order disallowing execution of the decree in O. S. No. 68 of 1952. The appellant was directed to seek his remedy in insolvency. When the property of Mathew, the judgment-debtor in this case, was brought to sale in O. S. No. 6 of 1123 the Official Receiver who is the additional respondent in this appeal, objected on the ground of insolvency proceedings in which he had been appointed interim Receiver. The execution court held that it was competent to sell the property and ordered that distribution of the sale proceeds should depend on further orders in insolvency. The property was sold and purchased by the assignee-decree-holder. The Palai Central Bank deposited the amount for which the property was proclaimed for sale and 5 p. c. of the same as commission and applied for cancellation of the sale. The sale was cancelled and the auction-purchaser preferred CMA. No. 146 of 1955 from the order. Ext. P. 16 is copy of the judgment of the High Court. Upholding the cancellation of the sale, the following order was made in supersession of the order of the execution court:
'(i) The appellant, the decree-holder-purchaser, be refunded the amount deposited by him as sale price without any conditions.
(ii) That out of the amounts deposited by the mortgagee (1st respondent-Bank) 5 per cent of the sale price be paid over to the appellant, that too, without conditions.
(iii) The question to whom the decree-debt paid into court by the 1st respondent-bank should go will be decided afresh by the lower court, in appropriate proceedings, that is, in the execution proceedings itself or in the insolvency proceedings. It is reported that the judgment-debtor has already been adjudicated an insolvent. If so, the latter will be the proper forum.'
The cancellation of the sale has thus become final and the execution court wag empowered to pass final orders regarding the disbursement of the amount deposited by the Bank. The Official Receiver, who was represented be-fore us, submitted that he had no objection to sale amount being paid to the decree-holder in O. S. No. 6 of 1123. Though this court had indicated that this question could be decided by the insolvency court, the Official Receiver being a party to this appeal, we consider it proper to make this direction. We accordingly order that the sale amount deposited by the Palai Central Bank for setting aside the sale be paid to the assignee-decree-holder in O. S. No. 6 of 1123. The decree in O. S. No. 68 of 1952 being an unsecured one, the appellant must obtain relief only in insolvency as directed by the lower court.
6. The further question whether the appellant is entitled to treat the mortgages taken by the South Indian Bank as well as the Palai Central Bank as void will be considered in dealing with the other two appeals.
A. S. Nos. 8 and 10 of 1959.
7. The mortgages in favour of the South Indian Bank and the Palai Central Bank were on 14th October, 1950 and 18th October, 1951, respectively while the attachment in O. S. No. 6 of 1123 was on 3rd, April 1950. The contention of the appellant is that the mortgages are void against claims enforceable under the attachment which includes claims for rateable distribution. When properties were brought to sale in execution of O. S. No. 6 of 1123 there was a claim for rateable distribution for the decree amount in O. S. No. 68 of 1952 and it is contended (that the mortgages are therefore void as against claims under the latter decree also. Reliance was placed on the Explanation to Section 64 of the Code of Civil Procedure Section 64 reads as follows:
'Where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment-debtor of any debt, dividend or other monies contrary to such attachment, shall be void as against all claims enforceable under the attachment.
Explanation: For the purposes of this section, claims enforceable under an attachment Include claims for the rateable distribution of assets.'
This argument cannot be accepted as the attachment came to an end with the satisfaction of the decree in O. S. No. 6 of 1123. A claim enforceable under an attachment presupposes the existence of an attachment and if the attachment itself does not subsist there cannot be any claim enforceable under is in dealing with the other appeals we have stated that after the sale in execution of the decree in O. S. No. 6 of 1123, the Palai Central Bank deposited the requisite amount including commission under Order XXI, Rule 89 of the Code or Civil Procedure and got the sale set aside. It has been held in Pita Moti v. Chunilal, ILR 31 Bom 207, Ganesh Bab Naik v. Vithal Vaman ILR 37 Bom 387, Roshan Lall v. Ram Lall, ILR 30 Cal 262, Hari Saha v. Faizlur Rahman, ILR 40 Gal 619, Pannalal v. Lakshmisona, AIR 1952 C 1840 and T. Dhanalakshmi v. P. Subbarayrrrdu, AIR 1954 Mad 581 that Section 73 is to be read subject to Order 21, Rule 89 and that money de-posited under Rule 89 is not liable to be rate-ably distributed. ILR 31 Bom 207 and ILR 30 Cal 262 are cases decided under the old Code i.e., before the Explanation to Section 64 was added. Order 21, Rule 89 (1) (b) clearly states that the deposit of ''the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered' is 'for payment to the decree-holder.' Counsel for the appellant relied on the decisions to the contrary in Sadasheo Appa v. Punjabrao, AIR 1932 Nag 156, Atmaram v. Uderaj AIR 1933 Nag 347, and Atmaram v. Uderaj, AIR 1933 Nag 349, Bhattoo v. Raghunandan, AIR 1933 Pat 303 and Chittagong Urban. Co-operative Bank Ltd. v. Indo Burmah Traders Bank Ltd., AIR 1938 Cal 521. Of these the decisions of the Patna and Nagpur Courts were considered in AIR 1954 Mad 581 and dissented from. The principle laid down by the Bombay, Calcutta and Madras Courts, is, if we may say so with respect, the correct one and we follow the same.
8. The appellant has a case that the amount deposited by the Palai Central Bank is insufficient to pay the decree-holder. The deposit was under O. 21, R. 89, and the order setting aside the sale has become final. It is too late in the day to contend that the amount was insufficient. Such a contention, if: available, should have been raised when the prayer for cancellation of the sale was being enquired into. We were also told that a subsequent order has been passed to refund the excess amount deposited by the Bank and that such order has become final. The deposit of the amount under Order 21, Rule 89 by the Palai Central Bank thus satisfies the decree in O. S. No. 6 of 1123 and the attachment also necessarily comes to an end. It follows that the claims enforceable under the attachment must also cease to exist, and that the mortgage cannot be treated as void as against the claim under O. S. No. 68 of 1952.
9. The appellant has a further Contention that the attachment revives when the sale held pursuant to the same is set aside. This may be so when the sale is set aside under Rule 90 of Order XXI as in such a case there is no satisfaction of the decree. A deposit under Rule 89 operates to extinguish the decree and it is inconceivable that the attachment would thereafter subsist. The effect of Sections 64 and 73 of the Code of Civil Procedure has been considered in several cases. In Proboth Chandra Malik v. Debendra Nath, 163 Ind Cas 587 (Cal) a Bench of the Calcutta High Court has held that persons entitled to rateable distribution have the right to impeach the private alienation only if the attachment under which they make a claim is subsisting. The same view was taken in Bhupal v. Kundan Lal, AIR 1921 All 45. In that case a decree-holder brought the judgment-debtor's properties to sale and the same were sold but the sale was set aside on satisfaction of the decree.
Subsequently the judgment-debtor mortgaged the properties to a stranger. There was application for rateable distribution and after execution of the mortgage the applicant attached the same properties and brought them to sale claiming that the mortgage was void under Section 64. His contentions were overruled. In Subramania Ayyar v. Annavi Pillai, AIR 1942 Mad 522, it was held that the effect of setting aside the sale under Order XXI, Rule 89 was to put an end to the attachment and that even if there were applicants for rateable distribution the attachment must come to an end when the claim of the decree-holder who had effected the attachment was satisfied.
Ramayya v. S. Namayya, AIR 1943 Mad 165 was a case in which there was an application for rateable distribution when the judgment-debtor's properties were brought to sale. The sale was set aside under O. 21, R. 89 and thereafter the judgment-debtor mortgaged the properties. The decree-holder who had applied for rateable distribution then attached the properties and he contended that the mortgage was void as against him, as it was made after the earlier attachment, he being entitled to rateable distribution. In that case Leach, C. J. and Lakshmana Rao, J. held:
''The appellant says that as he applied in time for rateable distribution the alienations made by the judgment-debtor in favour of the plaintiffs must be deemed to be void under Section 64. In our opinion Section 64 does not help the appellant. Section 64 does not say that the alienation shall be void absolutely. What it says is that they shall be void as against all claims enforceable under the attachment. When the attachment is set aside by reason of the decree-holder having been paid in full, the attaching decree-holder has no claim against the judgment-debtor and therefore there is no claim enforceable under the attachment The appellant was not paid and he had a claim against his judgment-debtor, but as the attachment had been set aside it was not a claim which could be enforced under the attachment and unless it was enforceable under the attachment, Section 64 could not apply.
Happel, J. has based his decision on the fact that when the decree-holder was paid and the auction-purchaser withdrew his money from court there was nothing to distribute. That is true, but we prefer to put it on the ground that the court was no longer concerned with the alienations in favour of the plaintiffs because these alienations were only void against the appellant under Section 64, so long as he had a claim which was enforceable under the attachment. He had no such claim when these suits were brought and the alienations could not be challenged under that section. It follows that we agree with the opinion expressed by the Bombay High Court in Khushalchand Premraj v. Nandram Sahebram, ILR 35 Bom 516, that the moment the attachment ends all claims which were enforceable under it ceases to be enforceable.'
10. There is thus ample authority for the position that the appellant cannot take advantage of the earlier attachment and question the mortgages in favour of the two banks. No other point arises in these cases.
11. In the result the four appeals are decided as stated below:
(1) The direction in the decree in O. S. No. 85 of 1958 to sell the second defendant's properties first is set aside. The decree-Holder will be free to proceed against any property charged under the decree. A. S. No. 39 of 1959 is allowed to this extent and the decree in O. S. No. 85 of 1958 will stand modified accordingly. Parties will bear their costs.
(2) Subject to the direction that the decree amount in O. S. No. 6 of 1123 deposited by the Palai Central Bank Limited will be paid to the decree-holder in that case in full satisfaction of his claim, the order of the court below is confirmed and the appeal is dismissed without costs.
(3) A. S. Nos. S and 10 of 1959 are both dismissed with costs.