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Rajendrachandra Sarkar Vs. Bipinchandra Shaha Bhaumik - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Reported inAIR1934Cal64
AppellantRajendrachandra Sarkar
RespondentBipinchandra Shaha Bhaumik
Cases ReferredRaj Raghubar Singh v. Jai Indra Bahadur Singh
Excerpt:
- .....to the plaintiff's application and desoribed in the schedule below, and i agree that, if the said suit be decreed, whatever title and interest i may have in the properties .-stated in the schedule below shall remain/liable for the said decretal amount. if i do not amicably pay up the said decretal amount you shall be competent to realize the said decretal amount with costs by the auction-sale of the title and interest i have in the properties described in the schedule below.2. on 7th august 1931 a decree for a sum of rs. 8,065 was passed in favour of the respondents; and, on 3rd february 1932, the present execution case was started, which has led to the present appeal. on 13th february 1932 one of the creditors of the appellant applied in the insolvency jurisdiction of the high court to.....
Judgment:

Mitter, J.

1. This is an appeal on behalf of the judgment-debtor and arises out of certain proceedings taken in the course of execution of a decree for money obtained against him. In order to appreciate the points in controversy in the present appeal a few facts must be stated. It appears that a suit was brought against the appellant for a certain sum of money of about Rs. 12,000 by the decree-holders-respondents. In that suit a rule was issued for attachment of the appellant's property before judgment. In pursuance of an order made in the course of the suit, under the provisions of Order 38, Rule 5, Civil P. C, certain properties were furnished as securities, in the event of a decree being ultimately obtained by the decree-holders. The security bond is to be found in the appendix to the paper-book. The only portion which is material and needs to be quoted is this:

I, accordingly execute this security bond by hypothecating as security whatever right, title and interest I personally have in the properties stated in the schedule to the plaintiff's application and desoribed in the schedule below, and I agree that, if the said suit be decreed, whatever title and interest I may have in the properties .-stated in the schedule below shall remain/liable for the said decretal amount. If I do not amicably pay up the said decretal amount you shall be competent to realize the said decretal amount with costs by the auction-sale of the title and interest I have in the properties described in the schedule below.

2. On 7th August 1931 a decree for a sum of Rs. 8,065 was passed in favour of the respondents; and, on 3rd February 1932, the present execution case was started, which has led to the present appeal. On 13th February 1932 one of the creditors of the appellant applied in the Insolvency Jurisdiction of the High Court to have the appellant adjudicated an insolvent and, on 1st March 1932, the judgment-debtor was adjudicated an insolvent. On 9th March 1932 the solicitor for the petitioning creditor intimated to the Court, which was executing the decree of the respondents, that the judgment-debtor had been adjudicated an insolvent. On the 24th March 1932 execution was stayed. On 6th May 1932 the decree-holder respondent applied for cancellation of the stay order on the ground that by virtue of the security bond, which had just been referred to, they were secured creditors and were not bound by any orders that may be passed in course of the insolvency proceedings as they stand outside bankruptcy. On 7th May 1932 this order, which was made ex parte, was withdrawn. On 14th May 1932, a direction was given that notice do issue to the Official Assignee for settling the sale proclamation under the provisions of Order 21, Rule 66, Civil P. C, and this notice was served on the Official Assignee in whom the appellant's estate had vested after the order of adjudication. On 24th November 1932 the Official Assignee wrote a letter in which he drew the attention of the Judge to the provisions of Section 17, Presidency-towns Insolvency Act-Act 3 of 1909. The contention which was raised before the lower Court was based on this letter and was to the effect that unless the leave of the insolvency Court was obtained, having regard to the provisions of Section 17, this execution could not proceed. This is one of the contentions which has been raised before us. As this was overruled by the Subordinate Judge, a further objection was taken before the lower Court to the execution, on the ground that the security bond cannot be enforced in execution, but can only be enforceable by a suit having regard to Section 67, T.P. Act. This, contention was also overruled by the Subordinate Judge, who has directed the execution to proceed and has held that the order of adjudication does not affect the right to execute the decree against the judgment-debtor by sale. He has accordingly withdrawn, as has already been stated, the stay order. Against this order the present appeal has been brought.

3. Mr. Bhattacharjya, who has addressed a very forcible argument to us, has raised substantially two contentions which deserve notice. In the first place he contends that the question as to whether the respondents are secured creditors could not be decided in the absence of the Official Assignee in whom the appellant's estate has vested after the order of adjudication ; and for that purpose it was necessary to obtain the leave of the High Court in its original jurisdiction having regard to the first part of the provisions of Section 17 Presidency Towns Insolvency Act. We are of opinion that this contention cannot be accepted, for the proviso to Section 17 makes it clear that the earlier part of the section shall not affect the power of any secured creditor to realize or otherwise deal with his security in the same manner as he would have been entitled to realize or deal with it as if the section had not been passed. The effect of this provison came up for consideration before their Lordships of the Judicial Committee of the Privy Council in a recent case, where their Lordships were considering the corresponding provisions of the Provincial Insolvency Act; and in the case of Kala Chand Banerjee v. Jaganath Marwari , the remarks which were made by their Lordships are pertinent to the matter now in controversy and may be usefully quoted here. In the case of Kala Chand Banerjee v. Jagannath Marwari , their Lordships, after quoting the provisions of Section 16, Sub-section. (5), Provincial Insolvency Act, which is the same as the proviso to Section 17, Presidency Towns Insolvency Act, proceeded to observe as follows:

The learned Judges of the High Court interpret this clause as inferring that the secured creditor is entitled to deal with the security as though there had been no vesting in the Court or the receiver. Their Lordships are clearly of opinion that this construction of the clause cannot be supported. That the rights of the secured creditor over a property are not affected by the fact that the mortgagor or his heir has been adjudicated an insolvent is, of course, plain, but that does not in the least imply that an action against him may proceed in the absence of the person to whom the equity of redemption has been assigned by the operation, of law. The latter alone is entitled to transact in regard to it, and he, and not the insolvent, has the sole interest in the subject-matter of the suit. To him therefore must be given the opportunity of redeeming the property. The contrary view would encourage collusive arrangements between the secured creditor and the insolvent and might involve the sacrifice of valuable equities of redemption which ought to be made available for the benefit of the unsecured creditors of the insolvent with whose interests the receiver is charged.

4. It appears therefore clear that the Official Assignee is a necessary party to the present proceedings and the decree-holders respondents have taken all the steps which lay in their power of making the Official Assignee a party to these proceedings. It is not necessary that leave of the Court has to be obtained and the earlier part of Section 17 applies only to such debts as are provable in insolvency. It has been strenuously argued on behalf of the appellant with reference to some of the provisions of the statute made in Section 46 and other sections-that the debts of secured creditors respondents are also debts which are provable in insolvency. That is a position which cannot be sustained for, as it has been said, and rightly said, that generally a secured creditor stands outside the bankruptcy. See the case of White v. Simmons (1871) 6 Ch 555. He may rely upon the security and need not prove for the whole debt. A scured creditor who comes in under the insolvency has only three courses open to him, namely (l) that he may realize the security and then prove for the balance ; (2) he may surrender the security and prove for the whole debt, and (3) he may state the whole valuation at which he has assessed the security and then prove for the balance after deducting the assessed value. The provisions of Section 46, to which reference has been made, really refer to a secured creditor who has taken any of the three courses to which we have just referred. It does not apply to a secured creditor who wants to enforce his security. We are of opinion therefore that the first ground which is based on the want of leave of the High Court in its original jurisdiction must therefore fail.

5. The next and the most substantial ground on which this appeal is rested is that, having regard to the form of the security, the proper remedy for the decree-holders was to proceed to enforce the security by a suit instituted Under Section 67, T. P. Act. The Subordinate Judge has, in rejecting this contention, relied on two decisions: one of this Court and the other of their Lordships of the Judicial Committee of the Privy Council. In the first case of Jyoti Prakash Nandi v. Mukti Prakash Nandi , it was held, that in circumstances similar to the present, that the security bond, which is in the form which the present security bond takes, namely (a bond in favour of the Court) could be enforced in execution. It is said that that case is distinguishable from the present case, seeing that, in that case, the security bond was executed after the decree and, in the present case, this bond was taken prior to any decree having been passed in the suit. It was taken as a security at the stage of the proceedings under Order 38, Rule 5 of the Code. But to this a complete answer is furnished by the decision of their Lordships of the Judicial Committee in the case of Raj Raghubar Singh v. Jai Indra Bahadur Singh AIR 1919 PC 55. There, as will appear from an examination of the passage in their Lordships judgment, at p. 167, that the security bond was taken for mesne-profits during the pendency of an appeal, and their Lordships of the Judicial Committee said that, although the bond is not in favour of any particular person, but was in favour of the Court, there must be some mode of enforcement and that the only mode of enforcement 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. It is said that there must be an assignment by the Court in favour of the present respondents. That argument is not supported by any authority and it is said in this very case that:

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 there is an unquestionod 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.

6. It follows therefore that the Subordinate Judge was quite right in coming to the conclusion that this security bond could be enforced in the course of execution. It seems to us somewhat strange that the present appellant should contest the execution proceedings seeing that he has got absolutely no interest in the property and, as has been pointed out in the passage to which I have already referred in the decision of their Lordships of the Judicial Committee in the case of Kala Chand Banerjee , that the only person who has get an interest to contest this execution is the Official Assignee and, as the Judicial Committee pointed out,

he and he alone is the person who has the right to contest the application or prefer an appeal against the order refusing the objection.

7. In these circumstances the appeal should be dismissed. There will be no order as to costs. No order need be made on the application.

Henderson, J.

8. I agree The respondents do not contend, and never have contended, that the Official Assignee was not a necessary party to their application. In fact, they took all the steps that lay within their power to bring him before the Court. It appears from a letter which he wrote to the learned Subordinate Judge that he stated that he was not in a position to take any steps in the matter without the leave of the insolvency Court; and that objection has now been taken on the part of the judgment-debtors. I entirely agree that that is not the meaning of Section 17, Presidency Towns Insolvency Act. It is quite clear that the learned Subordinate Judge had jurisdiction to determine what order was to be passed on the application for execution made by the respondents. Supposing that the insolvency Court refused leave to the Official Assignee to appear, clearly it would not have any effect on the rights of the respondents; the only effect would be that the equity of redemption would not be represented in the proceedings. On the other points, I have nothing to add to what has fallen from my learned brother.


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