NOONEY VEERARAJU Vs. BODA VENKATARATNAM

JUDGEMENT

(1.) The defendant is the appellant. The suit is rather of an unusual nature and as its maintainability is in question in this appeal, it is necessary to set out the circumstances which constitute its background. A simple mortgage bond dated 2 4/03/1931, securing a sum of Rs.8,000/- in discharge of previous simple money debts was executed by the defendant for himself and as guardian of his undivided minor son, Suryanarayanamurthy. As aresult of a creditors application, the defendant was adjudged insolvent on 23/03/1933, in L. P. No. 19 of 1931. Pending the insolvency petition, the present plaintiff filed I. A. No. 18of 1939 on 9/02/1939, before the Official Receiver, valuing his security under S. 47, Provincial Insolvency Act at Rs. 8,500 and proved for the balance of the money due to him under the mortgage bond as an unsecured creditor, i.e., for a sum of Rs.11,518-11-6. During the insolvency an other son was born to the defendant. Suryanarayanamurhty, the elder son, filed, O. S. No. 4 of 1940 on the file of the Sub Court, Rajamundry, for partition of the joint familky properties impleading besdies his father and brother, the Official Receiver, the creditors of the familkty and alienees of some portioins of the family property. The plaintiff was thus made a party thereto and an issue was raised as to whether the present plaintiffs mortgage debt was binding on the plaintiff in that suit.At about the same time, the present plaintiff filed O. S. No. 22 of 1941 in the same court against this defendant and his sons, a suit to enforce his mortgage. In the plaint therei, he stated that the mortgage debt was not liable to be scaled down under the terms of Act 4 of 1938 against this defendant for the reason that a dividend had already been declaredin the insolvency proceedings. He admitted that so far as defendants 2 and 3 in that suit (sons of the present defendant) are concerned, the amont was liable to be scaled down. He however limited the claim against all of them to the lesser amount stating that he did so without prejudice to his right "to claim the entire amount under the terms of the bond as unscaled less the suit amount as now scaled down in the insolvency of defendant 1 in consonance with the valuation of the security made by" him before the Official Receiver. The partition suit and the mortgage suit were tried together and preliminary decrees were passed in both of them. There was no appeal taken against the preliminary mortgage decree, but there was an appeal filed to the High Court of Madras against the preliminary decree in the partition suit by the plaintiff therein. One of the creditors also filed an appeal against the latter decree. The present plaintiff obtained a final mortgage decree in the course, but before the sale which took place thereunder was confirmed, the Official Receiver deposited in court the entire decretal amount and thus satisfied the decree in toto.Meanwhile the present defendant filed I. A. No. 15 of 1942 for annulment of his adjudication. Though that application was dismissed by the Insolvency Court, the District Court, East Godavari, on appeal, directed the annulment of the adjudication on 7/10/1944, while making an order at the same time that the properties of the defendant were to continue to vest in the Official Receiver under S. 37, Provincial Insolvency Act. A revision was taken against that order of the District Judge to the High Court of Madras in C. R. P. No. 1621 of 1944. That revision petition came on for hearing a few days before the two appeals above mentioned were disposed of and the High Court while confirming the order of annulemtn, set aside the direction of the District Court vesting the property in the official Receiver. On the appeals, the decree of the trial court was modified and it was declared "that the 1/3rd share of the plaintiff and the 1/3rd of defendant 1 of the debts" except the mortgage debt in favour of the present plaintiff be scaled down under the Madras Agriculturists Relief Act and that the plaintiff and defendant 3 be liable each to the 1/3rd share of the said debts as scaled down and that defendant 1 (father) be liable for a 1/3rd share of the said debts without the statutory reduction. The decree of the High Court further provided that the Official Receiver should continue as commissioner for carrying out the directions under the decree. In the present suiut, the plaintiff claims against the father the 1/3rd share of the debt due under the mortgage bond from the defendant without the statutory reductioin less the amoutn received from the Official Receiver as stated above.

(2.) Three main cotnentions were raised on behalf of the defendant in the court below and they are repeated here. In the first place, it is contended tht the suit is barred under the provisions of O. 2, R. 2, Civil P. c. In the second place, it is urged placing reliance on -- Subbaiah Goundan v. Ramaswami Goundan, AIR 1954 Mad 604 (A), that because of the subsequent annulment of adjudication the right of the defedant to claim that he is an agriculturist is not lost and that he is entitled to claim in the present suit that the mortgage bond is liable to be scaled down. Thirdly, the late of interest is stated to be unconscionable and liable to be reduced under the Usurious Loans Act.

(3.) We propose to deal with the second contention first. On the facts above stated, it is clear that the insolvent along with his sons would be an agriculturist within the meaning of the Madras Agriculturists Relief Act save for the order of adjudication and the consequential vesting of the properties in the Official Receiver. But the order of adjudication having been subsequently annulled, the question is what is the effect of the annulment as regards his claim to be treated as an agriculturist entitled to relief under that Act. This point is directly covered by an authority in favour of the appellant reported in Arunachalam Chettiary v. Narayanaswami Goundar, AIR 1951 Mad 63 (B), an authority which was not available to the learned Subordinate Judge at the time of his decision in this case. That decision has ruled that where an adjudication is annulled under S. 35 and no vesting order is made under S. 37, Provincial Insolvency Act (5 of 1920) the property does not merely revest in the insolvent but it reverts to him, that the effect of the annulment relates back to the date of adjudication and that therefore the insolvent must be deemed to have had a saleable interest in that property for the purpose of being treated as asn agriculturist entitled to the benefits of the Madras Agriculturists Relief Act. The view taken in the above Full Bench decision has since been affirmed in -- Subbaiah Goundan v. Ramaswamy Goundan, (A), another Full Bench decision of the same Court.Applying that decision to the facts of this case, it is clear that the defendant would be entilted to claim that he was an agriculturist on the material dates. But, it is argued for the respondent that it is not open to the appellant to contend that he is an agriculturist as the matter is Res Judicata, having been decided against him in prior proceedings between the parties. The contention is that there was a decision in the earlier suits to which reference has already been made that the defendant was not an agriculturist. It has to be noticed that the mortgagee (present plaintiff) was defendant 7 in the partition suit and respondent 7 in A. S. No. 89 of 1943, one of the two appeals taken against the judgment in the partition suit to the High Court. The 5th paragraph of the decree of the High Court runs thus: "Thus theone-third share of the plasintiff and the one-third share of defendant 3 of the debts described in plaint schedule B attached to the decree of the lowers court excepting the mortgage debt in favour of defendant 7 which has ripened into a decree in O. S. No. 22 of 1941 on the file of the lower court and which was already scaled down be