RAJENDRACHANDRA SARKAR Vs. BIPINCHANDRA SHAHA BHAUMIK

JUDGEMENT

(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 7 August 1931 a decree for a sum of Rs. 8,065 was passed in favour of the respondents; and, on 3 February 1932, the present execution case was started, which has led to the present appeal. On 13 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 1 March 1932, the judgment-debtor was adjudicated an insolvent. On 9 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 24 March 1932 execution was stayed. On 6 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 7 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 24 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/s. 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/s. 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.