PANDIT SHIVA RAO Vs. DASHANMUGHASUNDARASWAMI (OFFICIAL LIQUIDATOR)

JUDGEMENT

(1.) The appellants appeal against an order refusing to recognise them as secured creditors of the Lakshmi Forest Company Limited, which is now under liquidation under an order for compulsory winding up. On the 3 September, 1932 by a registered deed the appellants conveyed to the Company certain lands in the village of Shedimane, South Kanara District and assigned the benefit of a mortgage decree, which they had obtained in the Court of the Subordinate Judge of South Kanara. The consideration was Rs. 80,000 payable in instalments. The deed purported to charge both the immovable property and the mortgage-decree for the due payment of the balance of the consideration. It was also provided that the vendors should remit a sum of Rs. 10,000 if the Company should pay the balance falling due before the 1st April, 1933 With interest from the 30 June, 1932. The right to rank as secured creditors was challenged by the liquidator, and the appellants took out a Judge's Summons for a declaration that under the general law and also under the provisions of the deed they were secured creditors in respect of-the monies remaining due to them under the deed. The deed had not been registered in accordance with the provisions of Section 109 of the Indian Companies Act, 1913, and was therefore clearly void against the liquidator and any creditor of the Company if put forward as embodying a charge. The appellants, however, claimed that they were entitled to rank as secured creditors by reason of the lien given to an unpaid vendor by Section 55(4) of the Transfer of Property Act. This claim was disallowed by Gentle, J. The learned Judge held that they were not entitled to the statutory lien because the deed of conveyance contained a contract contrary to the provisions of Section 55(4) in that it created without any allocation a charge on both movable and immovable property and under the section the appellants could only claim a lien in respect of immovable property. The appellants challenge the decision of the learned Judge on three grounds. In the first place it is said that the mortgage decree is not movable property, but immovable property. Secondly it is said that the conveyance did not in law effect any charge. In the third place it is said that even if the decree be regarded as movable property the appellants are entitled to a lien as equity had extended the principle of the vendor's lien to movable property of this description.

(2.) Before the amendment of Section 17 of the Indian Registration Act there was a conflict of opinion whether a mortgage decree could be regarded as movable or immovable property. In Gopal Narain V/s. Trimbak Sadashiv (1876) I.L.R. 1 Bom. 267 the Bombay High Court held that the assignment of a mortgage decree required registration. The Calcutta and the Allahabad High Courts expressed opinions to the contrary. See Gous Mahommad V/s. Khawas Ali Khan (1896) I.L.R. 23 Cal. 450, Baij Nath Lohea V/s. Binoyendra Nath Palit (1901) 6 C.W.N. 5, Ram Ratan Chuckerbutty V/s. Jogesh Chandra Bhattacharya (1907) 12 C.W.N. 625, Abdul Majid v. Muhammad Faizullah (1890) I.L.R. 13 All. 89, Ahmad Khan V/s. Abdul Rahman Khan (1904) I.L.R. 26 All. 603, Mumtas Ahmad V/s. Sri Ram and Bhawani Singh (1913) I.L.R. 35 All. 524. This controversy has been decided in favour of the Bombay view by the addition made to the provisions of Section 17 of the Indian Registration Act by Section 10 of the Transfer of Property (Amendment) Supplementary Act, 1929, which came into force on 1 April, 1930. That Act added Clause (e) to Sub-section (1) of Section 17 of the Registration Act. The clause reads as follows: Non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property.

(3.) The wording here follows that used in Clause (b).