Rivers Steam Navigation Co. Ltd. and Another vs Jalim Mulla and Another

Sarjoo Prosasd, C.J.—The only point which we are concerned to decide at present in these appeals is whether the security bonds executed by the decree holder Respondents in pursuance of our order dated 9th July, 1956 are valid. The security bonds in question were executed to enable the decree-holders to withdraw the decretal amount deposited in court and to secure repayment of the money withdrawn in case the decrees were reversed on appeal.

It may be observed that the decrees are money decrees and we therefore refused to stay execution thereof, but we provided that in case the decretal amount is deposited in, court the decree-holders would be entitled to withdraw the same on furnishing security to the satisfaction of the executing court. We understand that the decretal amounts were deposited in court and in order to take out the money, the decree-holders executed the security bonds in question.

The validity of the security bonds has been challenged on the ground that the documents were unregistered and u/s 17 (1) (b) of the Registration Act the documents which hypothecated certain immovable properties had to be registered. On behalf of the decree-holders it was claimed that the documents did not require registration; they beings security bonds executed in favour of the Court and the Court having accepted the same1 by its order in question, no registration of the documents was necessary even though they purported to give in security certain Immovable properties.

On behalf of the decree-holders reference is made to the exception provided in Section 17 (2) (vi) of the Registration Act and it is urged that the security bonds in question are covered by this exception. The learned Subordinate Judge by its order dated 5th September 1956 has accepted the validity of the security bonds and has decided in favour of the decree-holders. The judgment debtor have therefore moved us against this order.

There is a divergence of judicial opinion on the point. We considered it proper to hear the learned Advocate General also inasmuch as the question affected the Government revenue as well. We have had the advantage of listening to the learned Counsel appearing on behalf of the parties and also of the assistance of the learned" Advocate General as amicus curiae.

Dealing with the question of registration. the learned Subordinate Judge has purported to rely upon certain decisions of the Bombay and the Lahore High Courts which seem to favour the view that a document of this character which is given in security in connection with stay of execution proceedings under Order 41, Rule 5, CPC did not require stamp or registration Inasmuch unless the document is accepted by the Court not only in regard to the sufficiency of its security hut also in regard to its validity, the document cannot be operative and confer any rights on the parties.

This view has not been accepted by the Madras, Rangoon, and the Calcutta High Court who have taken the opposite view. They arc of opinion that in a matter like this the Court merely decides about the sufficiency of the amount of security offered; but it cannot give validity to a document which per. se is invalid and therefore the document had to be registered before it could be acted upon by the Court. I would briefly refer to those decisions in'' order to appreciate the different view points.

In Jayappa Lokappa Narsinganawar Vs. Shivangouda Dyamangouda Patil, it was held that a security bond, being a part of judicial proceedings and incorporated with it, the provisions of Section ''17, Registration Act, do not apply to it as proper judicial proceedings whether consisting of pleadings filed by the parties or of orders made by the Court do not require registration.

The learned Judges there recognized that the security bond given in such cases fell within, the scope of S. 17 (1) of the Registration Act, 1003 and prdinarily such -a document would be compulsorily registered; but they relied upon several decisions of the Privy Council in support of the view that the document was exempt from registration, in view of the fact that it formed part of a judicial proceeding.

The first- case referred to is a decision of the rive Council in ''Bindesri Naik v. Gangasaran Sahu 25 Ind App 9: ILR 20 AH 171 (B). This was a case decided with reference to the provisions of the Indian Registration Act of 1877 and for the purposes of the case before them there was no substantial difference between the terms of the Act of 1877 and the Act of 1908. Lord Watson who delivered the judgment of the Court remarked that the provisions of Section 17 of the Act did not apply to proper judicial procedures, whether consisting of pleadings filed by the parties, or of orders made by the court.

This dictum was in general terms and apparently as it was recognized by the learned . Judges themselves was not based on .any specific provisions of the Act. The learned Judges ob-: served that it was difficult to bring such petitions within the words ''decree or order of the Court or any award''. The next case is a decision in ''Pranal Annee v. Lakshmi Arnee ILR 22 Mad 508: 26 Ind App 101 (C).

It Is not necessary to refer to the acts of the case. Here again, Lord Watson who delivered the judgment of the Board held with reference to a razinamah which was unregistered that, .except in so far as its terms were incorporated In the consent decree founded thereon, was ineffectual in law to fives to tide lauds in'' suit. In other words, it was implied that if nil the terms thereof had been submitted to the Court and made the foundation of an order the razinamah though unregistered would have been a stem In the judicial procedure not neuron registration.

In regard to this case also it was ivories that the order was made not the reference any special exemption created by the on Act it-self and,, the judgment as in Naik''s case rested on a be principle that the proceedings of the court did require registration. Lastly reference was made to the decision of the Privy Council in ''Hemantu Kumarl Debl v. Midnapur Zamindarl ILR 47 Cal 485: 46 Ind APP 240: (AIR 1919 PC 79) (D).

In that case also it was held that the provisions of Section 17 (2) (vi) of the Registration Act, extend to exempt from registration the whole of the decree of a Court and not merely that part of it which is the operative part of the decree and relates to the scope of the suit. Consequently S. 49 of the Registration Act did not preclude the decree from being given as evidence of the agreement, which related to properties outside the scope of the suit, even though it was unregistered.

On the analogy of these cases the learned Judges of the Bombay High Court held that the surety bond which though not embodied in the Court''s order, but nonetheless the Court''s order being based thereon, did not require registration as it was held to be exempt u/s 17 (2) (vi) of the Indian Registration Act. This decision was for similar reasons followed in ''Kasturi Lal v. Goverdhan Dass AIR 1934 Lah 138 (E), a Full Bench decision of that Court - where it was, held that a security bond executed in accordance with an order passed under Order 41, Rules 5, 6 of the. CPC staying execution of a decree pending decision of an appeal whereby the surety hypothecates his Immovable property for satisfaction of such decree as might be passed by. the appellate Court, and which is duly accepted by the Court and execution stayed accordingly does not require registration as it is a step in judicial proceeding, and the decree-holders can move the Court to realise the decretal amount from the immovable property of the surety mentioned in the bond, even though it had not been registered. Telr. Chand J" who delivered the judgment in that case observed that.

it is not the execution of the bond which effects the transfer of rights in the immovable property described therein, so as to make it available for the satisfaction of the decree which might be passed by the appellate Court, but it is the order of the Court accepting the bond which creates these rights.

He pointed out that

even if the bond had been duly registered immediately after its execution, it would not become operative until and unless it was accepted by the Court. If by reason of the insufficiency of the security or on other ground the Court chose not to accept the bond, it would remain a wholly ineffectual and inoperative document, despite the fact that it contained all the terms of the transaction and had been duly executed and registered

The point therefore which the lamed Judge emphasized was that it was not the execution or registration of the document which was really material as the fact that the document had been accepted by the Court and made a part of the judicial proceeding its decree or order thereby insuring certain rights to the parties.

These observations of Tek Chand J., have been doubted in subsequent decisions of Calcutta , and Rangoon; but speaking for myself I attachemu importance to the line of reasoning contained in this Full Bench decision and I would have been inclined to accept the observations of the learned Judge without reservation but for the fact that Section 17 (2) (vi) of the Registration Act itself was amended in 1929.

Prior to the amendment, Clause (vi) stood as follows:

Nothing in Clause (b) and (c) of Sub-section (1) applies to any decree .or order of a Court and any award,

But by the amendment the clause now runs differently. The amendment says-

Nothing in Clause (b) and (c) of Sub-section (1) applies to any decree or order except a decree or order expressed to be made on a compromise and comprising Immovable property other than that which is the subject-matter of the suit or proceeding.

It is to be remembered that in ILR 47 Cal 485: (AIR 1919 PC 79) (D) the Privy Council held that even though a part of the compromise related to property which was beyond the subject-matter of the suit, since it had been incorporated in the compromise decree and although not being part of the operative portion thereof, did not require registration. The legislature must have been conscious of this decision.

In spite of this, it narrowed the scope of the exemption clause and provided that if the compromise decree or order referred to the property other than that which was the subject-matter of the suit or proceeding, it would require registration. In this case the properties which have been given in security were evidently not the subject-matter of the litigation and the question is whether by the mere adoption of the security bond by the court it would be saved from registration under this exemption clause.

The answer evidently would be in the negative; because on the terms of this clause if the compromise decree or order refers to any property which is not the subject-matter of the suit, it would require registration. The analogy in my opinion applies to the present case; and this distinction was prominently noticed by Page, C. J., In A. S.. P. S. S. Chettyar Firm v. Lloyds Bank AIR 1935 Rang 168 (P).

The learned Chief Justice therefore observed that the Privy Council decisions aforesaid on which the Bombay and the Lahore High Courts relied have to be read subject to Section 17 (2) (vi) of the Registration Act as amended in 1929 and held that simply by approving'' the substance of the security tendered, the Court could not convert instruments, which were otherwise by law incapable of affecting the title to Immovable property, into operative, valid and admissible documents of title; and that the legislature when amending Section 17 (2) (vi) plainly had in mind the decision of the Privy Council to which reference has been made earlier and yet expressly; refrained from re-enacting S. 17 (2) (vi) in general terms or in such a form as could give colour to the view held by the High Courts of Bombay and Lahore.

According to the learned C. J., the Court was bound to give effect to the provision of the statute which did not exempt the security bonds in question from liability for registration. Though I may respectfully demur in regard to some of the other reasonings given in that judgment criticizing the judgment of Tek Chand J., I feel that I am bound reaccept this view of the learned Chiei? Justice. to the application of Section 17 (2) (vi) of the Registration Act this view of the Rangoon High Court has found favour in a recent decision of the Calcutta High Court in Kasemali Vs. Ajoyendu Paul and Others, In this case also the learned Judges held that in order to make the security bond effective and valid, it should be registered and consequently, the filing of an unregistered security bond is not sufficient compliance with the condition laid down in Section 17 (1) (b) of the Indian Registration Act uncle is not exempt u/s 17 (2) (vi) of the Act.

I need not refer to the various other cases cited at the Bar where are not really germane to the question under investigation. Whatever the law may have been prior to the amendment of 1929 the decisions after the amendment are all one way, namely that such a security bond does require registration.

I understand that in this State the practice so far is that such security bonds are accepted as valid without registration, but in the view we have taken of the law, it is apparent that the procedure is invalid and the security bonds in question have to be stamped and registered according to law when they purport to hypothecate for moveable property as falling u/s 17 (1)(b) of the Registration Act.

This procedure will also obviate the chances of risks to which bona fide transferees might have been exposed otherwise in dealing with such properties, fn our opinion therefore these security bonds should be properly stamped and registered and if necessary fresh security bonds may be executed by the decree-holders.

Deka, J.

I agree.