K. Balachandran vs A.M. Muthayyan Mudaliar

N.S. Ramaswamy, J.—This second appeal is before us on a reference made by Ismail J. The question raised before the learned Judge was regarding the construction and effect of Section 64 of the Code of Civil Procedure. The Respondent in the second appeal obtained a money decree in Original Suit No. 516 of 1952 on the file of the Court of District Munsif, Tindivanam, and after the decree was transferred to the Court of District Munsif, Nagapattinam, he attached the suit property belonging to the judgment debtors in that case. The attachment was effected on 4th December 1959. While the attachment was subsisting, the money-decree-holder (Respondent in the second appeal took a mortgage of the suit property from the judgment-debtors in the money decree for a sum of Rs. 1,500 but this mortgage was not in discharge of the money decree that he had obtained in Original Suit No. 516 of 1952 but in dis charge of several other debts due to him.

Subsequent to the abovesaid mortgage in favour of the Respondent, the judgment debtors in the money suit effected two other mortgages, one dated 5th August 1962 and the other dated 15th August 1962 in favour of third parties.

The property was brought to sale in pursuance of the money decree (in Original Suit No. 516 of 1952). The proclamation for the sale was made on 8th June 1966 and it was ultimately sold on 25th July 1966 the auction purchaser being the Appellant before us. In the proclamation it is mentioned that the mortgage dated 19th January 1961 in favour of the Respondent herein is subsisting and the proposed sale in Court auction was only subject to the said mortgage. It is further mentioned that the two subsequent mortgages, one dated 5th August 1962 and the other dated 15th August 1962, are invalid as they have been effected after the attachment.

The present second appeal arises out of the suit filed by the present Respondent on the mortgage, dated 9th January 1961. He impleaded not only the two judgment debtors in the earlier money decree but also the mortgagee under the two subsequent mortgages, one dated 5th August 1962 and the other dated 15th August 1962, as well as the Court auction purchaser of the property, the fifth Defendant in the suit who is the Appellant before us. The question before the Courts below was whether the mortgage was binding on the Appellant or not. The trial Court found that it was not binding but on appeal the learned District Judge, East Thanjavur at Nagapattinam held that it was binding on the Appellant.

When the second appeal came up before Ismail J., the contention on behalf of the Appellant was that once the attachment was effected, continued and in pursuance of the attachment the Court sale took place, full effect must be given to Section 64 of the CPC and there is no question of the decree holder waiving the benefit resulting from the attachment, since the benefit of the attachment is not available only to him but is available to all the persons claiming under the attachment. The contention on behalf of the Respondent (the decree-holder mortgagee) was that the attachment is for the benefit of the attaching decree-holder and therefore it is open to him to waive the benefit and take a private alienation of the property from the judgment debtors and the auction purchaser who comes on the scene subsequently and purchases the property with the knowledge of the private alienation cannot question the same. As there is no direct authority on this point, the learned Judge felt that it was desirable that the question should be decided by a Bench and that is how the second appeal is before us.

The earliest case throwing light on this question is Anund Lall Doss v. Jullodhur Shaw 14 M.I.A. 543. That was a case arising u/s 240 of Act VIII of 1859 corresponding to Section 64 of the present Code of Civil Procedure. Section 240 was in the following terms:

After any attachment shall have been made by actual seizure, or by written Order as aforesaid, and in the case of an attachment by written Order after It shall have been duly intimated and made known m manner aforesaid, any private alienation of the property attached, whether by sale, gift, or otherwise, and any payment of the debt or debts or dividents or shares to the Defendant during the continuance of the attachment shall be null and void.

One of the differences between this section and Section 64 of the present Code is while in the present Code, the alienation subsequent to the attachment is held to be void only as against all claims enforceable under the attachment, Section 240 of Act VIII of 1859 generally stated that the alienation during the continuance of the attachment shall be null and void. It may be noted at the outset that Section 64 of the present Code is narrower in its effect regarding alienations during the continuance of attachment than Section 240 of the earlier Code quoted above. In spite of the above said Section 240 of the old Code being more general in terms regarding an alienation during the continuance of an attachment being void, their Lordships of the Judicial Committee in the above case Anund Loll Doss v. Jullodhur Shaw 14 M.I.A. 543, at page 549 held:

The question is, whether those words, any private alienation of the property attached, whether by sale, gift, or otherwise, shall be null and void, are to be taken in the widest possible sense as null and void against all the world, including even the vendor, or to be taken in the comparatively limited sense attached to them by the Courts in India? Their Lordships adopt the language of the Chief Justice, who, in the judgment of the Court, expresses his opinion that the object was to make the sale null and void, so far as it might be necessary to secure the execution of the decree, relates only to alienation which would affect the Creditor who obtained the attachment. That appears to their Lordships to be the true meaning of the section. It could scarcely be held, in fact it was scarcely maintained in argument, that a sale made to a bonafide purchaser by the vendor could be set aside by the vendor himself; the words must, therefore, necessarily be read with some limitation. It appears to their Lordships that their construction must be limited in the manner indicated by the Chief Justice, on the ground, that they were intended for the protection of the creditor who had obtained an execution and not for the protection of all persons who at any future time might possibly obtain executions.

Dinobundhu Shaw Chowdhry v. Jogmaya Dasi ILR 29 Cal. 154 is another case before the Privy Council u/s 276 of Act XIV of 1882 corresponding to Section 64 of the present Code of Civil Procedure. In that case, the judgment debtor had effected two mortgages even before the property was attached in pursuance of the money decree against him, and after the attachment was effected, he executed a mortgage for Rs. 40,000 for paying off the two earlier mortgages. Then the property was sold in Court auction and the purchaser in that Court auction was fully aware of the abovesaid mortgage for Rs. 40,000 though it has been effected during the pendency of the attachment. The facts disclosed that the Court auction purchaser was aware of the intention of the parties that the mortgagee was to get a first charge over the property. The contention before the Judicial Committee was that whatever be the intention of the parties, Section 276 of the then Code rendered the mortgage void against the auction purchaser. This was repelled and the observations of their Lordships are these:

The last point urged by the Appellant''s counsel was that, whatever the intentions of the parties may have been, Section 276 of the Civil Procedure Code, rendered the mortgage for Rs. 40,000 wholly void as against the Appellant. So to construe this section would be quite wrong. So far as the mortgage for Rs. 40,000 prejudiced the execution creditor, it is void as against him, but the section does not render void transactions which in no way prejudice him; and to hold the mortgage void so as to confer upon him a benefit, which no one ever intended he should have, is entirely to ignore the object of the section and to pervert its obvious meaning. It is impossible to hold that the effect of that section is to give an execution creditor an unincumbered fee simple instead of an equity of redemption against the intention of the parties.

The next case that has to be referred to is Gangayya v. Venkataramayya 44 M.L.J. 80. That is a case arising u/s 64 of the present Code itself. There, while an attachment of the property was in force, a third party purchased the property by private sale but with the consent of the attaching creditor. The question was whether because the property was under attachment at the time when the private sale was effected, Section 64 of the CPC is a bar against the purchaser''s plea that the property could not be proceeded against in execution. A Division Bench of this Court held at page 82:

As already stated the question that really arises is one of the construction and effect of Section 64, Code of Civil Procedure. We are inclined to think that the view taken by the Munsif of this section is the correct one. The section is really one intended to benefit the decree-holders so that they may not be impeded by any alienation pending attachment in executing their decrees. That benefit being for the decree holder we are inclined to think that he could waive the benefit; and as in the present case, the decree-holders had entered into an actual contract with the purchaser, they cannot be permitted to go back upon their contract and insist upon the application of Section 64 in their favour. To allow them to do so would be clearly to perpetrate a fraud. We see nothing in section 64 that necessitates such a construction as that.

In Lal Mehar Chand Vs. Lala Joti Prasad, , the facts are these; Two persons had obtained money decrees against a particular judgment debtor. One of the decree-holders, R first attached the judgment debtor''s property and brought the same to sale. The property was sold in Court auction and R himself purchased it. But before the sale was confirmed, the judgment debtor sold the property by private sale to a third party and paid off the decree debt due to R. Hence the Court sale was set aside. In the meanwhile the other decree-holder by name J.P. filed execution, even before the Court sale under R''s decree, and asked for reteable distribution but as the Court sale had been set aside, on R. decree-holder, having been paid off (after the judgment debtor sold the property under the private sale), the Court held that there was no question of reteable distribution. Latter J.P. without any fresh attachment of the property, brought the same property to sale, had it sold in Court auction and purchased it himself. The purchaser of the property in the private sale filed a claim. But his claim was not accepted. In the suit to set aside the summary order, the question was whether the private sale was void u/s 64 of the Code of Civil Procedure. A Division Bench of the Allahabad High Court held that it was not. At page 1060, the learned Judges observed:

The effect of Section 64, Civil Procedure Code, is to declare private alienations of property of attachment void as against claim enforceable under that attachment. We will first consider the case of creditor at whose instance the attachment has been made. Now if the judgment debtor makes an alienation of the attached property then it will be void as against him, because the alienation is "contrary to such attachment". It is however perfectly open to a decree-holder to enter into a compromise with the judgment-debtor and accept an alienation which had been made by the latter as the alienation may have been made in order to get money with a view to pay the amount due to the attaching creditor. One of the objects of Section 64, Civil Procedure Code, is to prevent an alienation which might defeat the claim of the attaching creditor. Where therefore an alienation has been made after the attachment and the judgment-debtor satisfies the debt of the attaching creditor out of the sale proceeds then such an alienation cannot be said to be contrary to such attachment. The alienation was in fact the means by which the decree in execution of which attachment was made was satisfied and such alienation is good against the attaching creditor. An alienation made after the attachment is not void against the whole world, but is voidable at the option of the attaching creditor or of persons whose claims are enforceable under that attachment. The attaching creditor is interested in realising the money. If he is paid the amount due to him, then, there is nothing in taw to prevent him from asking the Court to enter satisfaction of his claim and to raise the attachment. It becomes a matter of indifference to him whether the alienation made after the attachment was good car bad.

It may be noticed that the last of the above cases namely Lal Mehar Chand Vs. Lala Joti Prasad, would have no application to the facts of the present case because in that case the private alienation when the attachment was in force was to discharge the very decree debt for which the attachment had been effected. Therefore, as pointed out in that case, such an alienation being for satisfying the very debt for which the attachment had been effected cannot be said to be contrary to such an attachment. But in the present case, the private alienation by way of mortgage vas not for discharging the decree debt for which the attachment had been effected. It was for discharging certain other debts. Even so, the question would be whether in the circumstances of the case the alienation in favour of the Respondent herein could be said to be hit by Section 64 of the Code.

It is abundantly clear that neither Section 64 of the Code nor the corresponding provision in the earlier enactments made private alienation void for all purposes. Section 64 specifically says that the transaction is void only as against all claims enforceable under the attachment. As pointed out in the first of the case quoted above, a private alienation, when an attachment is in force is, not void against the whole world. But the further question is whether the benefit of the attachment is available only to the attaching creditor. The plain words of Section 64 show that it would be incorrect to say that the attachment was only for the benefit of the attaching creditor. In a case where a private alienation is effected while an attachment is in force, certainly the auction purchaser of the attached property can invoke Section 64 of the Code of successfully to contend that the private alienation is void as against him.

But we are clearly of the opinion that even though Section 64 of the Code can be invoked, not only by the attaching decree holder but also by others in respect of claims enforceable under the attachment, before the Court sale takes place and an auction purchaser comes into the picture, it is open to the attaching decree holder to vaive the benefit of the attachment as against a private alienation during the pendency of the attachment. It cannot be gain said that the attachment is primarily for the benefit of the attaching creditor. As pointed out by the Judicial Committee in Anund Lall Doss v. Jullodhur Shaw 14 M.I.A. 543 the provision is intended for the protection of the creditor who had obtained an execution. In Dinobundhu Shaw Chowdhry v. Jogmaya Dasi ILR 29 Cal. 154 also the Judicial Committee affirmed the above position. Gangayya v. Venkataramayya 44. M.L.J. 80 referred to above is a case more to the point, and also already noticed that was a case where there was a private alienation when the attachment was in force but the attaching decree holder had consented for such a private alienation.

The Division Bench held that as Section 64 is really one intended to benefit the decree holders so that they may not be impeded by any alienation in executing their decrees and the benefit being for the decree holders they can waive the benefit. As in that case the decree holders had entered into an actual contract with the purchasers (under which the decree-holders had waived the benefit under the attachment) they were not permitted to go back upon that contract and insist upon the application of Section 64 in that case. Even though the facts of the present case are slightly different, we think, the principles enunciated in that case clearly apply here. The difference between the present case and that case is that while in that case the private alienation was in favour of the third party, here the alienation in question is in favour of the attaching creditor himself. If the attaching creditor can make a valid contract with the third party alienee under which the attaching creditor waives the benefit of an attachment, we tail to see why it should not be held that in the present case also the attaching decree holder (the Respondent herein) had validly waived the benefit of the attachment as far as the private alienation mortgage dated 19th January 1961 is concerned.

It is true, in the present case, that the attaching'' creditor (the Respondent) and the judgment debtors in the money decree had entered into an agreement on the day immediately next to the date of impugned mortgage, under which agreement it was provided that the attachment will continue. As by executing the impugned mortgage no part of the decree debt was discharged but only other debts of the attaching decree holder have been discharged, the parties said under the abovesaid agreement, that the attachment is continued and the judgment debtors shall clear the decree debt by making payment in instalments. Learned Counsel for the Appellant contended that in view of the specific provision in the above agreement providing for the continuance of the attachment, it is not now open the Respondent to say that the private alienation (mortgage dated 19th January 1961 which was effected during the pendency of the attachment is valid. We do not think that there is any substance in this contention. As has been held in a number of cases there cannot be raising of attachment outside Court. Therefore, the parties'' agreement that the attachment was continued or not is immaterial regarding the question whether the attachment is in force or not. But the question here is whether in spite of the attachment being in force whether the attaching decree holder can waive the benefit of such attachment as against a private alienation. Gangayya v. Venkataramayya 44 M.L.J. 80 is a clear authority to show that the decree-holder can so waive attachment outside Court. Therefore we agree with the view of the Division Bench expressed therein. It is also significant to note that the agreement between the attaching creditor (the Respondent herein) and the judgment debtors was after the impugned mortgage. By executing the said agreement which was on a date later to the impugned mortgage it cannot be said that the intention of the parties was that the benefit of the attachment should be available even as against the said mortgagee.

Learned Counsel for the Appellant referred to (Pulipaty) Subbayya Vs. Kandi Subba Reddi and Others, and Ramachandra Gochhikar and Others Vs. Ramachandra Biswal and Others, in support of his contention that the attaching decree holder cannot validly waive the benefit of the attachment But those two decisions would not support such a contention. The judgment in (Pulipaty) Subbayya Vs. Kandi Subba Reddi and Others, is a very short one and the facts of the case are not stated. However, the decision only says that there cannot be partial raising of an attachment by consent of parties outside Court and that only the Court can raise the attachment unless it becomes inoperative otherwise. This has been followed in Ramachandra Gochhikar and Others Vs. Ramachandra Biswal and Others, . But as we said earlier, we are not concerned with the question whether an attachment can be raised outside Court by consent of parties. In the present case the Respondent herein does not say that the attachment has been raised partially or fully. Raising of attachment is one thing and waiving the benefit of attachment in respect of an alienation is another thing. While it is clear that by consent of parties an attachment cannot be raised outside Court, it is equally clear that the attaching creditor can waive the benefit of the attachment as against a private alienation. In fact in the Orissa case referred to above, the principle that the attaching creditor can waive the benefit of the attachment is approved though indirectly. Whatever that be, we are in complete agreement with Gengayya v. Venkataramayya 44 M.L.J. 80 in which a Division Bench of this Court has clearly held that there can be such waiver of the benefit of the attachment. If (Pulipaty) Subbayya Vs. Kandi Subba Reddi and Others, and Ramachandra Gochhikar and Others Vs. Ramachandra Biswal and Others, have to be construed as going contra to the decision in Gengayya v. Venkataramayya 44 M.L.J. 80 they cannot be held to be good law. (Pulipaty) Subbayya Vs. Kandi Subba Reddi and Others, is by a single Judge.

On behalf of the Respondent, it was contended that apart from the question of waiver of the benefit of the attachment as against the impugned mortgage, the Court sale have been only subject to that mortgage and the Appellant having purchased only the equity of redemption it is not open to him to invoke Section 64 of the Code and say that the mortgage in void. But we think that this contention cannot be accepted. If there was no valid waiver of the benefit of the attachment, the mere fact that the property was sold in the Court auction subject to the impugned mortgage would not debar the auction purchaser from contending that the mortgage is not operative as against him. If there was no valid waiver of the benefit of the attachment, the mortgage becomes void u/s 64 of the Code though not against the whole world, against all persons (including the auction purchaser) claiming under the attachment. Therefore, the mere fact that the sale proclamation said that the sale was subject to such a morgage (which is void) would not mean that the auction purchaser is bound by the mortgage. When the law says that the alienation is void it would not become valid merely on the ground that the Court sale was made subject to such mortgage. In Shivlal Gulabchand Vs. Taniram Sadashiv, there was a mortgage of the property during the pendency of the attachment. In the Court sale, the property was sold subject to the said mortgage. The Bombay High Court held, rightly if we may say so with respect, that the Court auction purchaser was not bound by the said mortgage. It is so because a void transaction cannot be validated in the above manner.

Daso Polai v. Narayana Patro ILR 57 Mad. 1975. Chekku Vs. Puliyaseri Parvathi alias Amma Ammal, and Visalakshi Achi Vs. Arunachalam Chettiar (Died) and Others, were referred to in the course of the arguments, but they are regarding the question as to under what circumstances the auction purchase would be debarred from questioning the validity of prior mortgage. They are not cases coming u/s 64 of the Code but relate to alienations made prior to the attachment. The binding nature of such alienations on the auction purchaser would depend upon several considerations with which we are not concerned in the present case. All that we wish to say is that those decisions would have no application to a case coming u/s 64 of the Code and even if the property is sold in Court auction subject to the impugned alienation, if the alienation is void u/s 64 of the Code, the auction purchaser can certainly take advantage of the said provision in spite of the fact that he purchased the property in the court auction subject to such alienation.

The result is, the second appeal fails and it is dismissed with costs.