NANAK CHAND Vs. CHHEDA LAL

JUDGEMENT

(1.) One Amanul Haq was insured with the Standard Life Insurance Co., of Calcutta for a sum of Rs. 4,000. He owed a certain debt to the Alliance Bank of Simla, Ltd., and he owed certain other debts to Nanak Chand, Chheda Lal, Narotam Saran and Mangal Sen. He assigned his life policy to the Alliance Bank, Ltd., as security for the payments of its debt. On the death of Amanul Haq, Nanak Chand, Narotam Saran, Chheda Lal and Mangal Sen obtained decrees against his estate. In execution of his decree Nanak Chand got the life policy then held by the Alliance Bank, Ltd., attached, and got prohibitory orders issued to the Alliance Bank Ltd. not to receive, and to the Standard Insurance Co. not to pay, the amount due on that policy. Narotam Saran, Chheda Lal and Mangal Sen applied at the same time for a rateable distribution of the money due on that policy which may be realized in execution of the decree of Nanak Chand.

(2.) The Standard Insurance Company, Ltd., offered to pay the money due on the policy to the Alliance Bank, Ltd., and the Bank offered to pay into Court the balance clue on the policy after satisfaction of its own claim. Notwithstanding that offer the Court before which the execution proceedings were pending, directed on the application of Nanak Chand that the life policy should be sent for from the Alliance Bank, Ltd., and sold by auction. The sale was subsequently effected on the 29 July 1920, and the life policy was purchased by Nanak Chand himself for a small sum of Rs. 1,000, although the amount admittedly due on that policy including the profits, was Rs. 4,365. The amount claimed by the four decree- holders was Rs. 6,061-12-6 exclusive of the money due to the Bank. The Bank was paid Rs. 962-2-0 found due to it out of the sale-proceeds and the balance of the money, after deducting the expenses of the sale, was rateably distributed between the four decree-holders.

(3.) The complaint, of Narotam Saran and Chheda Lal, two of the decree-holders, who had applied for rateable distribution of the money due on the life policy, is that in order to purchase the property at a very low price Nanak Chand deceived the Court executing the above decrees and obtained from it an order for the sale of the said policy without any information having been given to the other decree- holders. It is further urged that the sale was effected in spite of the offer of the Alliance Bank, Ltd., to remit the balance due on that policy after realizing it from the Insurance Company and satisfying what was due to the Bank itself, to the Court, and that Nanak Chand and Mangal Sen, who were close friends, had colluded to defraud the other decree-holders of their right to a fair share in the money due on that policy. The trial Court found that the sale was irregular, inasmuch as it was held before the expiry of 15 days from the date on which the proclamation for sale was notified. It further held that there were circumstances indicating a strong presumption against the bona fides of Nanak Chand, who got the policy sold for a low price in collusion with certain bidders, who were bidding alternately, to put up a show and that Narotam Saran and Chheda Lal were entitled to their shares of the money due on the policy, irrespective of the amount realized by the sale. The lower appellate Court upheld that decree. It pointed out that the auction-sale was a very mechanical affair and that Nanak Chand had deliberately kept the other creditors in the dark as to the proceedings which he had, taken for the sale of that policy. It further observed that equity demanded that there should be a rateable distribution as if the Bank itself had paid over the money, and that Narotam Saran and Chedda Lal were entitled to get their share of the money due on the life policy irrespective of the price fetched at the sale.