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Puninthavelu Mudaliar Vs. Bhashyam Ayyangar and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Judge
Reported in(1902)ILR25Mad406
AppellantPuninthavelu Mudaliar
RespondentBhashyam Ayyangar and anr.
Cases ReferredWood v. Surr
Excerpt:
letters patent, article 15 - 'judgment'--appeal--insolvent debtors' act--11 & 12 vict., cap. 21, section 23--reputed ownership--charge on debts--civil procedure code--act xiv of 1882, section 372--devolution of interest of judgment-debtor upon official assignee. - - in this state of things it seems to me that the appellant's procedure by way of attachment was clearly misconceived and that the order for attachment of the debt in the hands of the official assignee was ineffective. this, in my opinion, is clearly not so. they then attempted to take physical possession, but failed, and on the next day, 22nd august 1895, the insolvent filed his petition and the official assignee took possession of the sale-proceeds of the insolvent's stock-in-trade, &c. 32. the decree, in so far as it is.....arnold white, c.j.1. this is an appeal from an order of boddam, j., dismissing an application by a judgment-creditor of an insolvent for an order that a sum of rs. 3,400 in the hands of the official assignee should be paid by the official assignee to the judgment-creditor (the appellant).2. a preliminary objection was taken by the official assignee that no appeal lay from the order of the learned judge. i think the order is a 'judgment' within the meaning of article 15 of the letters patent and that the preliminary objection should be overruled.3. the facts are these. by an instrument, dated march 13th, 1897, one c. bhashyam ayyangar, who was afterwards adjudged an insolvent, in consideration of a sum of rs. 5,600 found due from him to the appellant on a settlement of accounts, covenanted.....
Judgment:

Arnold White, C.J.

1. This is an appeal from an order of Boddam, J., dismissing an application by a judgment-creditor of an insolvent for an order that a sum of Rs. 3,400 in the hands of the Official Assignee should be paid by the Official Assignee to the judgment-creditor (the appellant).

2. A preliminary objection was taken by the Official Assignee that no appeal lay from the order of the learned Judge. I think the order is a 'Judgment' within the meaning of Article 15 of the Letters Patent and that the preliminary objection should be overruled.

3. The facts are these. By an instrument, dated March 13th, 1897, one C. Bhashyam Ayyangar, who was afterwards adjudged an insolvent, in consideration of a sum of Rs. 5,600 found due from him to the appellant on a settlement of accounts, covenanted to repay this sum to the appellant in quarterly instalments and mortgaged to the appellant his stock-in-trade and all outstandings and moneys then due and owing and thereafter to become due and payable to the mortgagor. The deed also provided that so long as the principal and interest remained unpaid the mortgagee should be permitted to inspect the books of account and other stock and effects and property of the mortgagor. The mortgagor remained in possession.

4. On July 25th, 1899, the appellant brought a suit (143 of 1899) against Bhashyam Ayyangar on his mortgage-deed. In August 1899, upon an ex-parte application by the appellant, an order by way of injunction was made in the suit restraining the mortgagor from disposing of the stock-in-trade and outstandings and debts payable to him. This injunction was afterwards dissolved. In the same month the appellant gave notice to Mr. Nelson, who was indebted to the mortgagor in the sum of Rs. 4,000 that he, the appellant, claimed this sum under the mortgage as an outstanding due to the mortgagor.

5. On September 18th, 1899, C. Bhashyam Ayyangar was adjudged an insolvent and the usual vesting order was made.

6. On October 31st, 1899, the appellant obtained a decree in his suit by which the insolvent was directed to pay to him the principal and interest due under the mortgage-deed, and in default of payment before January 31st, 1900, the mortgaged premises were ordered to be sold.

7. On February 6th, 1900, the sum of Rs. 3,400 referred to above was paid to the Official Assignee by Mr. Nelson, being a sum which had become due to the insolvent for goods supplied by him to Mr. Nelson as Principal of the Law College prior to Bhashyam Ayyangar's insolvency.

8. On September 25th, 1900, an order was made in Suit No. 143 of 1899 directing that the decree should be executed by the attachment of the Rs. 4,000 in the hands of the Official Assignee. On December 7th, the appellant applied by summons in Suit No. 143 of 1899 for an order that the Official Assignee should pay over to the appellant this sum of Rs. 3,400. The learned Judge declined to make the order. I think he was right. I do not agree with the view of the learned Judge that the case came within Section 23 of the Insolvency Act. At the time of the insolvency the property in, and the possession of, the articles of furniture sold by the insolvent to Mr. Nelson had passed to Mr. Nelson. No question of reputed ownership, therefore, arises with reference to the actual goods. The question of reputed ownership arises in connection with the debt due from Mr. Nelson to the insolvent. It would seem that under the English Bankruptcy enactments prior to the Act of 1869, all choses in action were deemed to be included in the words 'goods and chattels' Ryall v. Rowles 1 Ves. 348 : 1 W. & T.L.C. 96. The English Act of 1869 provided [Section 15(6)] that things in action other than debts due to the bankrupt in his trade or business were not goods and chattels within the meaning of the reputed ownership section and this provision was re-produced in the Act of 1883. It seems quite clear that a chose in action, if it is a debt due to the insolvent in his trade or business comes within the words 'goods and chattels' as contained in the Indian Enactments. Section 23 of the Indian Insolvency Act, 1848, is in substantially the same terms as Section 125 of the English Act of 1849 (12 & 13 Vict., cap. 106) except that, under the English Act, the reputed ownership section empowered the Court to order that the property should be sold and disposed of for the benefit of the creditors under the bankruptcy, whilst under the Indian enactment property to which the reputed ownership section applies is to be deemed to be the property of the insolvent and vests in the Official Assignee by operation of Section 7 of that enactment. In this respect the effect of Section 7 seems to be the same as that of Section 17 of the English Act of 1869 and of Sections 20 and 44 of the English Act of 1883.

9. The doctrine of reputed ownership does not of course apply unless there is a real owner distinct from the apparent owner Hamilton v. Bell 10 Exch. 545; Reynolds v. Bowley L.R. 2 Q.B. 474. For the purposes of the section the 'true owner' is the person who is entitled to determine the appearance of beneficial interest. It is not necessary that he should be an assignee in law. An equitable mortgagee is the 'true owner,' to the extent of his interest (Ex parte Union Bank of Manchester L.R. 12 Eq. 354. It seems to me that the instrument in question in the present case does nothing more than create a charge on future debts in favour of the appellant, that it does not amount to an equitable assignment of the debts, and that the equitable interest of the appellant in the debt is not such as to constitute him the true owner within the meaning of the section. The instrument does not operate as an assignment either in law or in equity. I am not prepared to say, in the absence of express authority, that the doctrine of reputed ownership can apply in the case of a 'charge' on future debts such as that created by the instrument in question in the present case. In my opinion C. Bhashyam Ayyangar was himself the 'true owner' of the debt subject to the equities created by the charge in favour of the appellant, and if this be the true view, the doctrine of reputed ownership can have no application. Assuming I am wrong in this view the effect of the notice given by the appellant to Mr. Nelson has to be considered. It has been established by a long series of decisions that notice to the person who owes the debt will take the case out of the section. See Belcher v. Bellamy 17 L.J. Ex. 219; Alletson v. Chichester L.R. 10 C.P. 319 Ex parte Union Bank of Manchster L.R. 12 Eq. 354 In re Seaman[1896] 1 Q.B. 412 Tailby v. Official Receiver L.R. 13 App. Cas. 523. The notice of course must be an effective notice--that is to say, it must be such a notice as would prevent the party who owes the debt from paying any one but the party giving notice.

10. In the present case it is in evidence that before the adjudication a notice was sent on behalf of the appellant to Mr. Nelson that the debt was claimed by the appellant. Assuming the appellant was the true owner of the debt and C. Bhashyam Ayyangar the apparent owner, the legal effect of this letter was, in my view, to take the debt out of the order and disposition of the apparent owner before the insolvency.

11. But although I do not agree with the view taken by the learned Judge with reference to the question of reputed ownership, I think he was right in dismissing the application. By virtue of Section 7 of the Act, upon the adjudication and the vesting order made thereunder, the right, title and interest of the insolvent in and to the debt due from Mr. Nelson to him became vested in the Official Assignee. Assuming that the effect of the instrument of March 13th, 1897, was merely to create a charge and that the instrument did not operate as an assignment, either legal or equitable (and this, I think, is the true view), the right which vested in the Official Assignee was a right to sue for the debt.

12. After Bhashyam Ayyangar's interest in the debt became vested in the Official Assignee, the appellant, by virtue of the decree in his mortgage suit, acquired the right to have the debt sold. Before the debt was sold, the Official Assignee's chose in action was reduced into possession by the fact of the payment to him by Mr. Nelson. In this state of things it seems to me that the appellant's procedure by way of attachment was clearly misconceived and that the order for attachment of the debt in the hands of the Official Assignee was ineffective. The appellant has the rights of a secured creditor in the insolvency of C. Bhashyam Ayyangar and he is entitled to enforce these rights if he adopts the proper procedure. I express no opinion as to whether he would have been entitled to enforce his rights by execution proceedings in the suit in which he obtained his mortgage decree if, after the adjudication, he had made the Official Assignee a party to the suit. During the pendency of the appellant's suit and before he obtained his decree, C. Bhashyam Ayyangar's interest in the debt due to him from Mr. Nelson, subject to the appellant's equitable rights therein, devolved by operation of law upon the Official Assignee. The appellant might have applied under Sections 32 and 372 of the Code of Civil Procedure to have the Official Assignee added as a party. He did not do so. It seems to me that Section 372 applies to the devolution of an interest by reason of an adjudication in insolvency and a vesting order thereunder, and if the case of Miller v. Budh Singh Dudhuria I.L.R. 18 Calc. 43 is to be regarded as a decision the other way, I think that decision is wrong. In Miller v. Lukhimani Debi I.L.R. 28 Calc. 419 the attachment was before the vesting order. In the present case the order for attachment was after the vesting order. It has been argued on behalf of the appellant that the Official Assignee is bound by the decree, though not a party to the suit, inasmuch as the devolution of interest took place pendente lite. This, in my opinion, is clearly not so. In the first place, the subject-matter of the suit was not real property. In the second place, the interest devolved by operation of law, and so far as the Official Assignee is concerned the devolution was in invitum. For the reasons I have stated I do not think the appellant is entitled to an order for the payment over of this money by virtue of his so-called 'attachment,' and if he is not entitled by virtue of his 'attachment' there is, so far as I can see, no provision of law or principle of equity which entitles him to the order for which he asked on an application made in a suit to which the person who was called upon to pay over the money was not a party.

13. I think the application was rightly dismissed by the learned Judge and that this appeal ought to be dismissed with costs.

Bhashyam Ayyangar, J.

14. I am also of the same opinion.

15. Whether Section 23 of the Insolvency Act applies to the case or not, depends upon two questions:

(i) Who was the 'true owner' of the chose in action--viz., the debt of Rs. 4,000, due to the judgment-debtor, which debt among other things is comprised in exhibit A which purports to be a mortgage security executed by him to the plaintiff (appellant).

(ii) Whether in case the plaintiff was the 'true owner,' the said chose in action was with his consent and permission 'in the possession, order or disposition' of the defendant (the judgment-debtor) at the time the petition of insolvency was filed by him.

16. In the decree which was passed in favour of the plaintiff the said mortgage security was treated as a regular mortgage-deed by providing for redemption by the defendant and re-conveyance to him by the plaintiff, if the amount decreed were paid on or before the day fixed in the decree, and ordering a sale of the goods and chattels comprised in the schedule. The chose in action now in question is assumed to be comprised in the said schedule though it is not specifically included in it.

17. If exhibit A can be construed as an assignment, or transfer by way of mortgage of the debt in question, along with other chattels to the plaintiff, as security for the mortgage debt, (Section 134 of the Transfer of Property Act) or as an agreement to make such assignment, the plaintiff would undoubtedly be the 'true owner,' and the defendant, the 'reputed owner' of the chattels therein comprised, within the meaning of Section 23 of the Insolvency Act, and the solution of the second question also rendered easy by the fact that before the defendant was adjudicated an insolvent, notice of the plaintiff's claim appears to have been duly given by the plaintiff on the 2nd and 5th August 1899 to Mr. Nelson who owed to the defendant the debt in question. If exhibit A were construed as a mortgage the plaintiff would be the 'legal' owner and if it could be construed as entitling him to obtain a mortgage, he would be the 'equitable' owner. In regard, however, to the debt in question, which did not exist at the time when the security was given, but was a future debt which came into existence and became owing before the adjudication of insolvency, the plaintiff, under either construction of the instrument can be regarded only as an 'equitable mortgagee.' The expression 'true owner' has been definitively settled to apply as much to an equitable owner as to a legal owner Ex parte Union Bank of Manchester L.R. 12 Eq. 354 Bhavan Mulji v. Kavasji Jehangir Jasawala I.L.R. 2 Bom. 542.

18. If the plaintiff be the true owner, there would be no difficulty in regarding the mortgagor in possession, i.e., the defendant, as reputed owner.

19. Though exhibit A purports to give the plaintiff a mortgage of all the stock-in-trade, existing and future debts, &c;, yet there are in it no words transferring to the plaintiff the ownership or any interest in the chattels. The ownership and the right to possession are fully reserved by the defendant, and the plaintiff is only given the right to inspect the defendant's books of account and other stock-in-trade and effects, during the time the security is in force. Even in default of payment the creditor is not given any right to take possession of the goods and chattels.

20. It seems to me that the instrument can be construed only as creating in favour of the plaintiff, a charge or hypothecation without passing to him 'either an absolute or a special property in the subject of the security or any right of possession, but only a right of realisation by judicial process in case of non-payment of the debt' Judgment of Lord Holt, in Johnson v. Shippen 2 Ld. Raym. 982; Stainbank v. Fenning 11 C.B. 51; Stainbank v. Shepard 17 Jur. 1032.

21. In Burlinson v. Hall L.R. 12 Q.B.D. 347 Day, J., in distinguishing, for the purposes of Section 25, sub-section 6 of the Judicature Act (1873), an absolute 'assignment' by way of mortgage of a debt, from a transaction 'purporting to be by way of charge only' on the debt, defined a mere 'charge' as follows (at page 350):

It is said that the assignment 'purports to be by way of charge only.' It is said that it is a mere 'charge.' I do not agree. A 'charge' differs altogether from a 'mortgage.' By a charge, the title is not transferred, but the person creating the charge merely says that out of a particular fund he will discharge a particular debt. But a charge differs from an 'assignment.' A charge on a debt confers rights on the person to whom the charge is given, to have it enforced by assignment--not by action against the debtor, but by proceeding against the person who created the charge, to assign the debt.' This was fully concurred in by A.L. Smith, J. per Lord Hatherly, L.C. in Tennant v. Trenohard L.R. 4 Ch. App. 537.

22. It will be seen that even a mere charge or hypothecation is treated as an 'equitable assignment' under the English Law (Fisher on 'Mortgages,' 5th edition, paragraph 225). It may be that under the Indian procedure the proceedings against the person who created the charge should be not to enforce assignment of the debt, but for sale of the debt as a chattel. But that really comes to an involuntary assignment by the person who created the charge. In a case arising under the Indian Insolvency Act (11 & 12 Vict., cap. 21) I prefer to be guided by English cases rather than by deductions to be drawn from the Indian Code of Civil Procedure.

23. During the argument of this appeal, I was under the impression that in the case of a mere charge, the charge-holder is not the true owner, but that the person who created the charge continues to be the true owner, that he cannot therefore be regarded as the reputed owner and that the section therefore would be inapplicable. But on further reflection I have come to the conclusion that in Section 23 the expression 'true owner' standing in antithesis to 'reputed owner' in the same section, is not used in any technical sense, but in its true and popular sense as indicating the person who for all practical purposes is the real and substantial owner of the goods and chattels, i.e., the person having the real and substantial interest in them, whether in the eye of law or of equity, the person creating the charge who technically continues to be full owner or the mortgagor, as the case may be, being entitled merely to the difference if any between the full price of the goods and chattels, and the amount charged thereon in favour of the creditor. A charge-holder is as much the substantial owner of and has as substantial an interest in the goods and chattels as the mortgagee thereof and if either of them allows the mortgagor or the person creating the charge to remain in possession of the goods and chattels, under circumstances which will lead to his being 'reputed' as owner and to his being enabled to command credit thereby, he will be estopped from asserting his substantial interest or ownership in the property as against the Official Assignee.

24. This being the principle underlying Section 23 of the Insolvency Act it can make no difference whether the person allowing the goods and chattels to remain in the 'possession, order or disposition' of the person adjudged an insolvent, is a mere charge-holder, or a Mortgagee or absolute and full owner. In Ex parte Union Bank of Manchester L.R. 12 Eq., 354 already referred to, Sir James Bacon, C.J., explains the policy of the 'order and disposition' clause in the Insolvency law as follows: (page 357) 'The 'order and disposition' clause has been frequently objected to and reprobated, yet from the commencement of Bankruptcy law it has been maintained as a principle that property suffered to remain in the visible possession of a bankrupt is divisible among his creditors, and so the law is now. I had at first doubts whether the equitable mortgagee in this case was the true owner; but my doubts have been removed by the series of decisions quoted by Mr. De Gex in which the mortgagee has been held to be the true owner.' Kennedy, J., as Commissioner in Insolvency in In re Murray I.L.R. 3 Calc. 58 dealing with the order and disposition clause in connection with goods pledged by the insolvent and re-delivered to him on commission sale, made the following significant observation as to the principle of that clause, (at page 63) 'I believe it to he impossible and against the spirit of the Act, by any Conveyancing device to give a lien for money advanced upon goods previously the property of the bankrupt and returned to or permitted to remain with him. The power of so borrowing money would be much more dangerous than that of raising money by sales at an undervalue equivalent to the amount which would be advanced on pledge.'

Where a mortgagor, is by the mortgage-deed entitled to remain in possession till demand, it has been held he is in possession with the consent of the true owner--the mortgagee Freshney v. Carrick 1 H.&N.; 653. It was formerly held in some cases that when the mortgagee has covenanted to allow the mortgagor to remain in possession, the 'order and disposition' clause did not apply; but these cases cannot now be relied on Ashton v. Blackshaw L.R. 9 Eq. 510 Ex parte Homan L.R. 12 Eq. 598 Ex parte Harding L.R. 15 Eq. 223. Where there is a mortgage of chattels with a proviso for quiet enjoyment by the mortgagor till default, or where the mortgagor takes under the mortgage-deed an interest in the chattel determinate upon his default in payment, and on notice from the mortgagee, the mortgagor, no doubt, is in a sense the true owner, as the mortgagee cannot until the term of interest of the mortgagor is determined, bring trover Fenn v. Bittleston 7 Exch. 152 and if the mortgagee seizes the chattels without due notice of payment, the mortgagor can bring trespass against him Briefly v. Kendall 17 Q.B. 937. But within the 'reputed ownership' clause in the Bankruptcy law, it has been held that in these cases the mortgagor is not the true owner, 'on the ground that such interest of the bankrupt was really illusory, and substantially, if not technically, permissive, that the law will not allow a mortgagor of chattels to stay in possession and so evade the rule and that where the mortgagee can enter into possession by giving a short notice or (as it was put by Mr. Justice Willes) where the mortgagee consents to put himself in a position in which he has no immediate right to the possession of the goods, they are in reality in the possession of the mortgagor with the consent of the true owner Spackman v. Miller 12 C.B.N.S. 659. So far as the general creditors are concerned, the mortgagor in such a case, has the reputation of absolute ownership, though as between himself and the mortgagee, he has a real though limited interest.' Bobbins on 'Mortgages'--page 185.

25. I have not been able to find any English case in which the question of 'reputed ownership' presented itself for consideration, in connection with a mere charge or hypothecation of a chose in action or other chattels, as distinguished from an assignment thereof by way of mortgage. But having regard to the authorities above quoted and the policy of the 'order and disposition' clause, it seems to me that no distinction can be made between the two classes of cases. A mere charge or hypothecation being regarded under the English equity jurisprudence as an 'equitable assignment,' it must be held that the decision of Sir James Bacon, C.J., in Ex parte Union Bank of Manchester L.R: 12 Eq., 354 above quoted, is applicable as much to a mere charge or hypothecation of a chose in action, as to an equitable mortgage by a deposit, with a banker, of a certificate of shares in a joint stock gas company.

26. In In the Matter of Ambrose Summers I.L.R. 23 Calc. 592 Mr. Justice Sale, as Commissioner in Insolvency, gave effect, as against the Official Assignee, to a letter of lien over stock-in-trade, &c.;, given by an insolvent to his creditor by way of collateral security for a promissory-note and for future advances. The insolvent also undertook by his letter to execute, whenever called upon by his creditor to do so, an assignment of all his business with such conditions as the creditor might require. The letter was written on the 31st December 1889, and in July 1895 the creditor called upon the insolvent to execute an assignment by way of mortgage of the whole of his business, stock-in-trade, &c.; But the insolvent, though he approved of the draft mortgage-deed, subsequently refused to execute it. On 21st August 1895, the attorneys of the creditor served a notice on the insolvent, demanding possession on behalf of the creditor, which was refused. They then attempted to take physical possession, but failed, and on the next day, 22nd August 1895, the insolvent filed his petition and the Official Assignee took possession of the sale-proceeds of the insolvent's stock-in-trade, &c.; Upon these facts, Justice Sale held that the letter 'must be regarded in the first place as a letter of hypothecation, whereby the insolvent pledged to the bank the then existing assets of his business as collateral security for the debt then due to the bank and for any future advances the bank might make to the insolvent. Accordingly on the authority of Ex parte North Western Bank L.R. 15 Eq. 69 the letter created an equitable charge on such assets in favour of the bank.' He therefore held that the bank was entitled to preferential payment of 'so much of the funds in the hands of the Official Assignee as can be shown to represent assets of the insolvent's business, which were in existence at the date of the letter of hypothecation.' The ground of decision, which is not expressly stated, does not seem to be that the case so far as it related to the charge on the assets which were in existence at the date of the hypothecation, was outside the 'reputed ownership' clause. I gather from the observation (at page 600) as to the attempts made by the bank to take possession, that the ground of decision was that the bank 'did enough to show that the business or stock-in-trade of the insolvent was not in the order or disposition of the insolvent at the date of his insolvency, with the permission and consent of the bank.' As regards the agreement contained in the letter, to execute an assignment of future business, Justice Sale held that it was invalid, as against the Official Assignee, as an act of bankruptcy within the meaning of Section 9 of the Insolvency Act.

27. In my opinion, therefore, the plaintiff was the true owner of the debt due to the defendant from Mr. Nelson. The point now to be considered is whether, before the defendant was adjudged an insolvent, it was taken out of his order and disposition by the plaintiff, the true owner. This question is concluded in favour of the plaintiff by the decision of the House of Lords in Tailby v. Official Receiver L.R. 13 App. Cas. 523. In that case, by a mortgage dated 13th May 1879, Izor assigned for valuable consideration, to the predecessors in title of the appellant, his stock-in-trade and all the book debts owing or which might, during the continuance of the security, become due or owing to the said mortgagor. In the months of October and November 1884, Izor supplied a firm of Wilson Brothers & Co., upon credit, with goods to the value of 10-7-11. The appellant gave notice of the assignment to that firm and received payment of the amount to himself. Sometime after the date of the notice, Izor was adjudged bankrupt and the respondent who was trustee of the estate, sued the appellant for repayment of the amount received by him from Wilson .Brothers & Co. The amount due by them to the insolvent, being a chose in action, did not come within the scope of the Bills of Sale Act and though it was not in existence at the date of the assignment, was capable of being the subject of present assignment in equity. Lord Watson (at page 534) held that 'in the case of book debts as in the cases of choses in action generally, intimation of the assignee's right must be made to the debtor, or obligee in order to make it complete. That is the only possession which he can attain so long as the debt is unpaid and is sufficient to take it out of the order and disposition of the assignor. In this case the appellant's right if otherwise valid, was, in any question with the respondent duly perfected by the notice to Wilson Brothers & Co., before Izor became a bankrupt,'

28. Such notice, appearing to have been given in this case to Mr. Nelson, before the defendant was adjudged an insolvent, the debt was not in the possession, order or dispossession of the insolvent at the time of the vesting order.

29. Even in the view that there was a mere charge upon the debt as distinguished from an assignment of the same by way of mortgage, it is taken out of his order and disposition, if not by the alleged notice to Mr. Nelson, at any rate by the suit which was brought against the defendant to enforce the charge prior to his being adjudicated an insolvent (per Day, J., in Burlinson v. Hall L.R. 12 Q.B.D. 347 already referred to).

30. If the plaintiff otherwise had a valid charge on the debt in question, it is not extinguished by Section 23 of the Act and under Section 7 it would have vested in the Official Assignee, subject to the plaintiff's charge.

31. The question which has now to be considered is whether the decree which the plaintiff obtained against the defendant, subsequent to his adjudication as an insolvent, enforcing the charge by directing a sale, is binding upon the Official Assignee and if so, whether he can be ordered in proceedings in execution of that decree to pay to the plaintiff the amount of Rs. 4,000, which was paid by Mr. Nelson into the hands of the Official Assignee, notwithstanding the notice which, it is alleged, was given to him by the plaintiff, prior to the adjudication of the defendant as an insolvent.

32. The decree, in so far as it is a mere money decree, is perfectly valid against the insolvent and I agree with the decision of the Calcutta High Court in Miller v. Budh Singh Dudhuria I.L.R. 18 Calc. 43 followed in Chandmull v. Ranee Soondery Dossee I.L.R. 22 Calc. 259 that in an action purely 'in personam' against the insolvent, whether he was adjudged an insolvent prior to the institution or during the pendency of the suit, the Official Assignee need not be made a defendant either in addition to or in lieu of the insolvent, that in fact it is wrong to do so and that Section 372 of the Civil Procedure Code is applicable only to the case of an assignment of an interest in the subject-matter of the suit during the pendency of the suit. If the attachment which was made of the debt due from Mr. Nelson is to be regarded as an attachment made in execution of the first part of the decree as a mere money decree, it has necessarily to be released from attachment (under Section 280 of Civil Procedure Code) by reason that the vesting order was prior to such attachment. Further, if, as the plaintiff says, he has a charge upon the debt, Section 99 of the Transfer of Property Act, or at any rate the principle therein involved, is a bar to his bringing the debt to sale in execution of his decree as a mere money decree and he can bring it to sale only in enforcement of his charge thereon.

33. The decree, as a mortgage decree directing the sale of the chattels, including the debt in question, is void and inoperative as against the Official Assignee, inasmuch as the whole right, title and interest of the defendant therein devolved by operation of law upon the Official Assignee during the pendency of the suit and before the decree was passed. Unless therefore the doctrine of 'lis pendens' is applicable when chattels personal form the subject-matter of the suit and to cases of assignment by operation of law, the decree against the insolvent enforcing the mortgage or charge by an order for sale, can be no more binding upon the Official Assignee or be capable of being executed against him, than it would have been if the defendant had been adjudged an insolvent prior to the suit and the suit had been brought against him and him alone subsequent thereto and the decree obtained. If the doctrine of lis pendens be applicable to the case, the decree can of course be executed against the Official Assignee in the same manner as against the judgment-debtor himself (Section 333 of the Civil Procedure Code); and the fact that the Official Assignee received payment of the debt from Mr. Nelson, will make no difference and he can be directed in execution of the mortgage-portion of the decree to pay over the amount to the decree-holder (Section 277, Civil Procedure Code) just as the judgment-debtor himself can be so ordered, if he had received such payment from Mr. Nelson.

34. The decision of the Court of Appeal in Wigram v. Buckley [1894] 3 Ch. 483 is a direct authority that the doctrine of Us pendens does not apply to personal property 'other than chattel interests in land.' The decision of the Master of Rolls in 'Wood v. Surr 19 Beav. 551 is an equally direct authority on the other question that where a mortgagor becomes bankrupt pending the suit, the trustee in bankruptcy is not bound by a decree for foreclosure, in his absence. (Robbins--Mortgages,' page 1012; Fisher--' Mortgages,' 5th edition, concluding portion of paragraph 1651.)

35. The principle of the decision in Wood v. Surr 19 Beav. 551 is that the Official Assignee being one appointed 'in invitum' and not a 'voluntary purchaser' as in the case of a transfer by act of parties or by an 'involuntary sale' in execution of a decree, the doctrine of lis pendens cannot affect him and the party seeking to bind him (the Official Assignee) by the result of the suit, pending which the interest of its subject-matter has devolved on him by operation of law, ought, to take proceedings to join him as a party to the suit (under Section 372 of the Civil Procedure Code) and obtain the decree against him.

36. A charge or mortgage created by the insolvent, prior to his adjudication as an insolvent, may, under the bankruptcy law, be void against the Official Assignee though, under the general law, it may be binding on the insolvent himself. A decree, therefore, purporting to enforce such charge or mortgage will bind the Official Assignee, only if it was passed in a proceeding between the secured creditor and the Official Assignee, in which the validity of that charge or mortgage, as against the Official Assignee, was adjudged.

37. The learned Judge was therefore right in dismissing the plaintiff's application and I agree that this appeal should be dismissed with costs.


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