SEVADAPPA GOUNDAR Vs. KVNARAYANASWAMI AIYAR, SPECIAL RECEIVER

JUDGEMENT

(1.) The subject-matter of this appeal is a mortgage-deed executed by a person who subsequently became an insolvent. The date of the mortgage is 9th December, 1927 and the mortgagor was adjudicated insolvent in October, 1930. The appellant is the mortgagee. In June, 1931, he sued on his mortgage in the Court of the Subordinate Judge of Coimbatore. In August, 1931, the Official Receiver applied in Insolvency before the same Judge under Secs.4 and 53 of the Provincial Insolvency Act to have the mortgage set aside. In October, 1934, the Subordinate Judge decreed the appellant's suit and dismissed the application of the Official Receiver. Against the decree, no appeal was filed by the Official Receiver who contented himself with filing an appeal against the order of dismissal under the Provincial Insolvency Act. That appeal was heard by the learned District Judge of Coimbatore who reversed the decision of the learned Subordinate Judge and under Section 4 of the Act held that the mortgage was not good against the rights of the general body of the insolvent's creditors. This is now an appeal against that order of the learned District Judge.

(2.) The only point upon which there has been any serious argument in this appeal is the question of res judicata which has been dealt with by the learned District Judge in paragraph 9 of his judgment. The argument in appeal is that the learned District Judge ought to have held that as there had been no appeal against the decree of the Subordinate Judge, he was precluded by the rule of res judicata from disposing of the issue before him under Section 4 of the Provincial Insolvency Act. The learned District Judge in disposing of the appeal says that there is really no substance in this contention: As has been just now said both the petition and the mortgage suit were tried together and common evidence taken in both by the consent of parties. The governing litigation is the one on the insolvency side. As has been held in The Official Receiver, Coimbatore v Palaniswami Chetty (1925) 49 M.L.J. 203 : I.L R. 48 Mad. 750, it is the duty of the Court executing the mortgage decree to give effect under Section 4 of the Provincial Insolvency Act to the decision in the insolvency enquiry.

(3.) It seems to me obvious that apart from any specific rulings which may be cited, the plea of the appellant before the learned District Judge on the question of res judicata is one which should prevail. There was a decree of competent Court on the question of this mortgage which had not been appealed against and therefore had become final. It was final and in full force and effect at the date when the learned District Judge heard the appeal and the learned District Judge ought to have recognised this fact and dismissed the appeal on that ground.