Narottan Das and Others vs Krishna Prasad and Others

Mohammad Noor, J.—This appeal is from the order of the Subordinate Judge of Bhagalpur directing the names of the appellants to be added as judgment-debtors in an execution proceeding. The facts are these: The respondent Kishun Pershad obtained a decree against Partap Narayan Chaudhury and another for a sum of Rs. 9,562.14-0. The decree directed that the decretal amount was to be paid in annual instalments provided that the judgment-debtors filed in Court within one month a registered security bond hypothecating certain property as security for the realization of the decretal debt. This order was obviously passed under Order 20, Rule 11, Civil P.C. The defendants complied with the conditions and filed the security bond hypothecating their property for the satisfaction of the decree. There was some question raised between the decree-holder and the judgment-debtors whether the terms of the decree were complied with and the bond was filed in time. I need not enter into it, as it has been held in an earlier proceeding that it was done.

The judgment-debtors made a default in the payment of the instalments and the decree-holder who is the principal respondent before us, put the decree in execution and proceeded to sell the hypothecated property without first getting it attached. An objection was raised on behalf of the judgment-debtors that the property could not be sold without an attachment. This was upheld by the executing Court on 2nd November 1932, but the order was reversed on appeal by this Court on 16th March, 1934. The judgment is reported in Krishna Prasad v. Pratap Narayan 1934 Pat 608. In the meantime the execution case was dismissed on 20th March 1933 for default of the decree-holder. When this Court decided that an attachment was not necessary, the execution case was restored on 10th July 1934. In the meantime the appellants purchased the hypothecated property in execution of their own simple money decree. When the execution case was restored, the decree-holder applied that as the appellants had purchased the hypothecated property of the judgment-debtors they should be deemed to be their representatives and should be added as such in the execution proceeding. To this the appellants raised various objections, but we are concerned only with one of them namely that they should not be added as judgment-debtors in the execution proceeding. The objections were disallowed and the appellants were added as judgment-debtors as representatives of the original judgment-debtors. They have appealed against the order.

During the course of the execution in which the appellants purchased the property the decree-holder of this case applied that his charge upon the property in question should be notified. This was ordered to be done, but somehow or other it was not notified. The appellants however knew of it. No question has therefore been raised before us that the appellants had no notice of the charge of the decree-holder on the property which they had purchased. The only question involved in this appeal is whether the decree-holder respondent is entitled to proceed with his execution against the hypothecated property in the presence of the appellants. The decision of the issue depends upon the determination of the nature of execution of a simple money decree for the satisfaction of which security has been given under the provision of the Code of Civil Procedure. Mr. Mullick appearing on behalf of the appellants has contended that if the hypothecated property can at all be sold in execution of the decree, that property cannot be treated as if it is a mortgaged property. As such it cannot be sold without institution of a fresh suit as provided in Order 34, Rule 14. But if the decree be executed as a simple money decree without any reference to the fact that the property sought to be sold is hypothecated to the decree-holder, the appellants cannot be treated as representatives of the judgment-debtors and cannot legally be brought on the record. The learned advocate for the respondents has, however, contended that the principle of Order 22, Rule 10, applies in this case and the suit must be treated as pending till the decree is satisfied. He contends that when a property is given in security for the satisfaction of a simple money decree the decretal debt thereby becomes a charge upon the property and the charge can be enforced in execution of the decree itself, and a transferee of the hypothecated property being the representative of the judgment-debtor the decree-holder is entitled to have him added as a party to the execution proceeding in order to give him an opportunity of redemption.

The first question to be considered is whether the hypothecated properties can be sold in execution of the decree. So far as this Court is concerned it seems to be settled that if the decree is not for a claim arising out of the mortgage the hypothecated property can be sold in execution of the decree and a fresh suit is not necessary. It was held in Braja Sunder Deb v. Sarat Kumari 1916 Pat 252, that the effect of Rules 14 and 15, Order 34, Civil P.C., read with Section 100, T.P. Act, is that where Immovable property has been made security for payment of money and the beneficiary has obtained a decree for the payment of money so secured he shall not be entitled to bring the property to sale otherwise than by instituting a suit for sale in enforcement of the security. But the Immovable property musk have been made security for payment of the money before the decree was obtained, otherwise the provisions do not apply. Chapman, J., held that in order to attract the provisions of Order 84, Rule 14 the claim must arise out of the mortgage, but when security is given after the decree was passed this rule has no application. This was a case in which the decree, which was for maintenance, created a charge upon some property and the objection was that the property could not be sold without a suit u/s 67, T.P. Act. In a later decision in Ganga Deo Narayan Singh v. Joti Lal Sahu 1917 Pat 596, the same learned Judge, Chapman, J., held that the property given in security by a surety could be sold in execution of the decree if the judgment-creditor has exhausted all remedies against the judgment-debtor. There are, however, observations to the effect that the sale would not be of the mortgaged property and the judgment-creditor ran the risk of the right of redemption being subsequently held to remain alive, otherwise there was no objection to his proceeding in this manner. These two cases, in my opinion, clearly lay down that if a property is given in security for the satisfaction of a decree subsequent to the decree or in the decree itself the property can be sold without recourse to a fresh suit. In Hari Shanker Rai v. Mt. Tapai Kuer 1926 Pat 31, it was held that when a decree created a charge for maintenance it could be executed without a separate suit and the decree-holder could bring to sale the property charged through the agency of the executing Court without first having resort to a suit under the provision of Section 67, T.P. Act. It was further held that where the claim arose out of a money decree the provisions of Order 34, Rule 14, which prohibits the enforcement of a mortgage except in the manner provided by the Code did not apply. To the same effect is the decision in Tata Iron and Steel Co. v. C.J. Smith 1930 Pat 108. Mr. Mullick appearing on behalf of the appellants has drawn our attention to the case of Gokul Nath Jha v. Pranmal Marwari 1916 Pat 61, where a property was given in security by the defendant before the decree was passed. It was held that the property could not be sold without a fresh suit. But Roe, J., while agreeing with the judgment of the late Jwala Prasad, J., said as follows:

The mortgage being prior to the compromise decree the debt arises out of the mortgage. Therefore under Order 34, Rule 14, Civil P.C., the mortgaged property cannot be sold.

In the present case the security was given after the decree was passed, or at any rate the security was taken as a condition of the decree being an instalment one. There was some difference of opinion in Calcutta, but the majority of the decisions seem to be in favour of the view that the property given in security for the satisfaction of a decree can be sold without having recourse to a separate suit. In the case of Jyoti Prakash Nandi v. Mukti Prakash Nandi 1924 Cal 485, it was held that properties covered by a security bond given for stay of execution of a decree could be proceeded against without instituting a suit u/s 67, T.P. Act. There is in principle no difference between a security bond given to secure a stay of execution and a bond given to secure the decree being made an instalment one. The same view has been taken by the Allahabad High Court in Beti Mahalakshmi Bai v. Badan Singh 1924 All 105, by the Rangoon High Court in Daw Ohn Bwin v. U Bah 1929 Rang 126 and by the Madras High Court in the case of Subramanian Chettiar v. Raja of Ramnad 1918 Mad 442, a case which was relied upon in the Calcutta case already referred to. Sir John Wallis, the then Chief Justice of the Madras High Court, observed:

It would be a most mischievous state of law if such a thing were necessary and it would fetter the discretion of the Court in accepting Immovable property as security for the execution of the decree.

His Lordships relied upon the decision of the Judicial Committee in Sadasiva Pillai v. Ramalinga Pillai (1876) 2 IA 219 and held that the matter is one for decision in the execution proceeding. This case was followed in The Official Receiver, Tanjore v. Nagaratha Mudaliar 1926 Mad 194. The principle seems to have been accepted by their Lordships of the Judicial Committee in Raghubar Singh v. Jai Inder Bahadur Singh 1919 PC 55. In that case a third party had given security for due performance of a decree. The decree-holder filed an application for ascertainment of mesne profits and their realisation from the hypothecated properties making the sureties parties to the execution proceedings. Their Lordships held that it was permissible. This case, in my opinion, lays down two principles: one is that hypothecated property can be proceeded against in execution of the decree itself without having recourse to a separate suit, and secondly that the surety can be made a party to the execution proceedings. These cases leave no manner of doubt in my mind that the properties given as security by the judgment-debtor can be sold without a separate suit. The next question is whether the execution of a decree can be as if it was a simple money decree without having regard to the fact that the property sought to be sold was hypothecated for the satisfaction of the decree, or whether the property can be proceeded against as if it was subject to a charge. The bond in the present case seems to me to be similar to the bond which was before their Lordships in the case above referred to. In this bond nobody has been named as a mortgagee. The judgment-debtor simply said that he was mortgaging the property for the satisfaction of the decree and promised that till the decree was satisfied he would not mortgage or in any way encumber it. Under similar circumstances their Lordships held that such a bond created a charge on the property hypothecated and that it could be sold in execution of a decree by making the surety party to the execution proceeding and giving him time to redeem. In the case before us the judgment-debtors themselves have given security.

If the contention of the learned Advocate for the appellants be accepted that in such a case the execution can only proceed as if the decree was a simple money decree without having any regard to the fact that the decretal-amount was a charge upon the property sought to be sold, a number of complications will arise. In this particular case no property is left in the judgment-debtors. Their right, title and interest in the property whatever it was has been sold in execution of a simple money decree and has been purchased by the appellants. If the contention of the appellants be accepted the property cannot be sold at all. We shall therefore be landed into this position: that if a property be given in security for the satisfaction of a decree under the provisions of the Code of Civil Procedure, it can only be proceeded against as long as it is with the judgment-debtor or with the surety, but as soon as the property is transferred to a third party it cannot be proceeded against in execution of the decree and a suit will become necessary. This position, as pointed out by Sir John Wallis in the Madras case, will be a very mischievous one. Security for due performance of a decree is taken to facilitate the realization of the decree, and not to make its realization more difficult. The decree-holder is entitled to have his decree realized by the easiest method known in law. If a property given in security by the judgment-debtor can only be sold in execution of the decree as long as it is in his possession, there is no object in taking security as the property of the judgment-debtor can always be sold in execution of a simple money decree. The only advantage will be to convert the decree into a claim and necessitate afresh suit and thus prolong the litigation. In my opinion, there is nothing in any provision of the Code which makes it necessary to institute a fresh suit when the hypothecated property has passed out of the hands of the judgment-debtor or the surety. The second difficulty will be this. If the execution be in all respects as that of a simple money decree though against a hypothecated property an attachment will be necessary. This Court has however held in 8 Pat 801(5), already referred to, that where a judgment-debtor executes a mortgage bond as security for due performance of a decree, the bond is enforceable in execution proceedings and the decree-holder may realize the properties given in security without attaching them or instituting a suit u/s 67, T.P. Act. This case lays down three propositions (1) that a suit is not necessary, (2) that the security bond can be enforced and the security property can be realized and (3) that an attachment is not necessary. The first proposition has already been dealt with. The second lays down that it is not only the money decree which is executed but the security bond is enforced and that can only be enforced against the property and the decree-holder can follow the property wherever it may be. The third position makes it clear that the property shall be deemed to be attached from the time the security bond was given and an attachment in the course of execution is not necessary. Das, J., when dealing with this topic, said:

The second point is that attachment is a necessary preliminary to an execution proceeding. This is undoubtedly so; but we must find out a reason for the rule which requires a decree-holder to attach properties as a preliminary to taking execution proceedings. There is no doubt whatever that the whole object of attachment is to prevent an alienation and to make a particular fund available to the decree-holder; but this fund was available to the decree-holder as soon as the security bond was executed. It was impossible for the judgment-debtor after executing the security bond to alienate the property covered by the security bond to the embarrassment of the decree-holder. This has been dealt with by Wallis, C.J., in Subramanian Chettiar v. Raja of Ramnad 1918 Mad 442, and I entirely agree with his conclusion.

Wort, J., agreed with this decision, and while sitting with my brother Varma again took the same view in this very case in Krishna Prasad v. Pratap Narayan 1934 Pat 608. A purchaser at an auction sale in execution of a simple money decree purchases nothing more than the right, title and interest of the judgment-debtor, but when he purchases a property which has already been given in security for the satisfaction of a decree he purchases it subject to the charge of this decree and he is bound by that charge; and when this charge is enforced it can be enforced even when the property is in his hands. In Subramanian Chettiar v. Raja of Ramnad 1918 Mad 442, just referred to above, Wallis, C.J., speaking of the execution proceedings observed:

The effect of Immovable property being given as security is something more than an attachment, because it makes the property applicable solely in discharge of the judgment-debt and not liable to rateable distribution among other judgment-creditors. But the realisation by the Court of such security in execution is of the same nature as sale by the Court of the Immovable property attached, that is to say, it transfers the right, title and interest of the judgment-debtor who has given security.

In The Official Receiver, Tanjore v. Nagaratha Mudaliar 1926 Mad 194, already referred to in connexion with the necessity of a suit, it was also held that the executing Court was not bound to stop the sale of the property on receiving notice of the insolvency of the judgment-debtor u/s 52, Insolvency Act, as the decree-holder who was proceeding against the property given in security for the satisfaction of his decree was a secured creditor. This finding clearly shows that when a money decree is being executed against a property given in security for the satisfaction of a decree it is not being executed as a simple money decree but as a decree against the property on which it is a charge. There are observations in this case to the effect that the decree-holder when he has received a security for his decree becomes a secured creditor and is to be treated as such. This proposition can also be deduced from the decision of the Allahabad High Court in Mahadeo Prasad v. Anandi Lal 1925 All 60. There a property which was subjected to a charge for the satisfaction of a decree was subsequently purchased by a third party and the sale of the property in execution of the decree was set aside at the instance of this purchaser. The decree-holder brought the suit for a declaration that he could sell this property in execution of his decree. This was allowed. I shall presently show that a suit for this purpose is unnecessary and the question can be dealt with in the execution proceeding itself.

The next question for consideration is whether the appellants, who have purchased the hypothecated property in execution of their simple money decree, can be added as judgment-debtors to the execution proceedings. Once we come to the conclusion that the security given for the satisfaction of a decree by the judgment-debtor can be enforced in execution proceedings it follows that if the hypothecated property has been transferred subject to the charge the transferee, whether he be a purchaser at an auction in a simple money decree or by a voluntary transfer, can as a representative of the judgment-debtor be made a party to the execution proceedings; otherwise, as I have said, the property cannot be sold because the judgment-debtor has no saleable interest left in it. The learned Subordinate Judge has referred to the two decisions, one of the Allahabad High Court and the other of the Calcutta High Court, Gulzari Lal v. Madho Ram (1904) 26 All 447 and Ishan Chandra Sarkar v. Madhab Sarkar (1897) 24 Cal 62, which lay down that the transferee from a judgment-debtor is his representative. Mr. Mullick appearing on behalf of the appellants has contended that those decisions refer to the execution of a mortgage decree and not to that of a simple money decree. But the execution of a simple money decree against a property given in security for the satisfaction of that decree partakes of the nature of an execution of a mortgage decree. I see no necessity that in order to enforce the decree against a transferee of the hypothecated property the decree-holder should be compelled to bring a separate suit. Section 146, Civil P.C., says that, except as otherwise provided in the Code or any other law, where any proceeding may be taken against any person, then the proceeding may be taken against any person claiming under him.

It cannot be disputed that the appellants claim the hypothecated property through the judgment-debtors. Though Order 22, Rule 10, may not strictly apply, but there is no reason why the same principle should not govern the execution proceedings. The present execution which was started against the judgment-debtors can be continued against the transferees of the hypothecated property. Any question, which may arise between the decree-holder and the transferee, can be dealt with u/s 47, Civil P.C., being a matter relating to the execution and satisfaction of the decree. Section 47 of the Code should be liberally construed and the decree-holder should get his relief as expeditiously as possible. Their Lordships of the Judicial Committee in Prosunno Kumar Sanyal v. Kali Das Sanyal (1892) 19 Cal 683, observed:

It is of the utmost importance that all objections to execution sales should be disposed of as cheaply and as speedily as possible. Their Lordships are glad to find that the Courts in India have not placed any narrow construction on the language of Section 244 (present Section 47).

Following this decision a wide and liberal construction has always been placed upon this section. In Subramanian Chettiar v. Raja of Ramnad 1918 Mad 442 Sir John Wallis referring to Section 244 of the old Code (now Section 47), said:

If we look at the question on principle and independently of authority, it is difficult to see how the realisation of the security given to the Court pursuant to an order of the Court, for the purpose of satisfying the decree-holder can possibly be said to be a matter not relating to the execution, discharge or satisfaction of the decree, or not to be a question arising between the parties to the decree.

Sir John Wallis referred to a very old decision of their Lordships of the Judicial Committee in Sadasiva Pillai v. Ramalinga Pillai (1876) 2 IA 219. This was a case under the Code of 1861. The question was whether a defendant who had given a security bond for subsequent mesne profits could be proceeded against in execution proceedings. It was held that it could be done. In this case the appellants are bound so far as the property in question is concerned by the hypothecation of the judgment-debtors. I have already referred to the case of Raghubar Singh v. Jai Inder Bahadur Singh 1919 PC 55, where the sureties were proceeded against, and their Lordships definitely ordered by amending the decree of the lower Court that the hypothecated property was liable and not the sureties themselves, and pointed out that the proper course would have been to order that the property charged be sold unless before a day named the sureties find the money. In a Full Bench decision of the Madras High Court in Veyindra Muthu Pillai v. Maya Nadan 1920 Mad 324 it was held that a purchaser from a decree-holder purchaser under a money decree was the representative of the judgment-debtor for the purpose of enquiry into a question relating to the execution of a distinctive decree affecting the same property and the term "representative" in Section 47, Civil P.C., was not to be identified with "legal representative" in Section 2(11) of the Code In Ishar Das v. Parma Nand 1926 Lah 134, it was held that a purchaser of a property after it was attached was a representative of the judgment-debtor. I have discussed this point in detail as the question is of some Importance, but, so far as this Court is concerned, the matter is concluded by a decision of a Division Bench (Courtney-Terrell, C.J. and Scroope, J.) in Misc. Nagar Mal v. Benares Bank, Misc. Appeal No. 227 of 1930, decided on 22nd December 1931.. The facts were exactly similar to the facts of the present case. The judgment-debtor had given some property as security for the satisfaction of the decree. The Benares Bank purchased it in execution of a simple money decree. Its previous attachment before judgment was ineffective. It was held that the property could be proceeded against in execution of the decree in the presence of the Benares Bank in order to give it an opportunity of redemption.

The learned Chief Justice observed that the real question was one of execution of the decree, and not whether the decree was a mortgage one or a simple money decree. In the present case the judgment-debtors themselves gave property in security and the appellants, who are transferees of the property subject to the right of the decree-holder, can, in my opinion, be proceeded against. The lower Court should fix a period not exceeding six months for the payment of the decree and order that the properties given in security will be sold unless redeemed by the date fixed. Subject to this direction I would dismiss this appeal with costs.

Varma, J.

I agree.