S KRISHNAMACHARIAR Vs. HANUMAN BANK LTD

JUDGEMENT

(1.) THIS is an appeal against an order of the District Judge of West Tanjore in execution proceedings. The application on which the order was passed Was made by the 16th defendant for declaring a sale of certain lots of properties in execution of a mortgage decree to be void on the ground that sanction of the company court was not obtained in accordance with Section 171 read with Section 232 of the indian Companies Act. Learned Judge in the court below passed an order declaring the sale to be void and the appeal is preferred against that order by the decree holder-auction purchaser.

(2.) THE facts leading up to this dispute are these. The decree-holder obtained mortgage decree on a mortgage executed by defendants 1 to 4 and the husband of defendants 14 and 15 in 1934 for a sum of Rs. 7600. After this mortgage, defendants 1 to 4 sold the equity of redemption to defendants 5 and 6 (half and half) with direct tions to redeem the mortgage. Defendants 7 to 11 in the suit were alienees of the half share of the equity of redemption sold to the sixth defendant. The fifth defendant created an equitable mortgage in favour of the hanuman Bank in 1946 over the half share sold to him by defendants 1 to 4. In 1947 the Hanuman Bank went into liquidation. The suit on the mortgage was laid on 1st March 1950 and the Hanuman Bank got itself impleaded as the 16th defendant in that suit by reason of the equitable mortgage in its favour. Among the many contentions raised by the Hanuman Bank, there was a prayer that the properties over which the Hanuman Bank had an equitable mortgage should be sold last. A decree was passed for Rs. 19,546-14-2 on 11th July 1952. By this decree the order in which the properties were to be sold was also settled. Time for redemption was granted for payment of the mortgage amount. Money not being paid on 17th April 1953, a final decree was passed and a sale in execution of the final decree took place on 13th April 1959 and lots 2 to 17 were purchased by the decree-holder himself for a sum of Rs. 3694. As these properties were the properties in which the Hanuman Bank had interest by reason of the equitable mortgage, an application was filed by the 16th defendant to declare the sale void on the ground that leave of the liquidation court had not been obtained for proceeding against the properties over which the bank had 'security.

(3.) SECTION 171 of the Indian Companies Act (Section 446 of the new Companies act) enjoins the obtaining of the leave of the company court in charge of liquidation of the company before any suit or other proceeding is instituted against the company after the order for winding up had been made. Section 232 of the indian Companies Act (Section 537 of the new Companies Act) declares any attachment or execution put in force without leave of the court after the company has been ordered to be wound up against the estate or effects of the company shall be void. There can be no dispute on the authorities that an execution proceeding for executing a mortgage decree over property in which the Hanuman bank Ltd. , the company in liquidation, had a puisne mortgage, would be a proceeding against the company within the meaning of Section 171. The further question whether such an execution proceeding was one instituted against the estate or the effects, of the company is the only point capable of being argued. There is a direct decision of a single Judge of this Court on this point in Calicut bank Ltd. v. Narayanan Nambudiri, 1943-2 Mad LJ 448: (AIR 1949 Mad 84 ). There, Kuppuswami Iyer J. following Periasami Chettiar v. Ramaswami Goundan, ilr (1941) Mad 53: (AIR 1941 Mad 113), held that in such a case the company was also a debtor of the first mortgagee as the company was liable to pay the first mortgage debt and consequently an execution of that kind would be an execution levied against the estate of the company.