Tekait Mahabir Prasad Narayan Deo vs Chota Nagpur Banking Association, Ltd.

Dawson-Miller, C.J.—These are three appeals on behalf of the defendant from a decision of the Additional Subordinate Judge of Hazaribagh, dated the 11th November 1925, directing that a preliminary mortgage decree passed in the year 1905 should be made absolute in favour of the plaintiffs. The long delay in applying to make absolute the decree is due to the fact that in 1905, after the preliminary decree was obtained, the defendant''s estate was placed under a manager under the provisions, of the Chota Nagpur Encumbered Estates Act and no provision was made for liquidating the mortgage debt before the estate was released from management on the 25th June 1924. The plaintiffs then applied under Order 34, Rule 5 of the CPC for sale of the mortgaged property in satisfaction of their preliminary decree The defendant raised various objections which will be dealt with later but the trial Court decided in favour of the plaintiffs and granted them a decree.

The appellant Tekait Mahabir Prasad Narain Deo is the proprietor of an estate in the Hazaribagh district known as Gadi Satgawan. In 1905 the estate which was then held by the appellant''s father was heavily encumbered. Amongst other liabilities was the mortgage decree in question for a sum of over Rs. 1,31,000 passed by the Subordinate Judge of Hazaribagh on the 1st April 1905 in Suit No. 58 of 1901 in favour of certain plaintiffs whose interests, except in so far as they have since been adjusted, are now represented by the respondents in these appeals. There were live sets of plaintiffs altogether, each set obtaining under the decree a specified interest. The respondents represent the interest of three of the different sets of plaintiffs whose claims are still outstanding, which accounts for the fact that there were three applications under Order 34, and three separate appeals have been preferred to this Court. The facts, however, in each case are the same and it is unnecessary to differentiate between the cases.

On the 27th December 1905, before a final decree had been passed in the mortgage suit then pending, the estate, at the request of the then holder, was vested in a manager under the provisions of the Chota Nagpur Encumbered Estates Act (B. C. Act 6 of 1876). The immediate effect of the vesting order was to bar all proceedings then pending in any civil Court in respect to the debts and liabilities of the holder and to annul all existing processes, executions and attachments in respect thereto, and to disqualify the holder from dealing in any way with the estate. The Act, however, imposes upon the manager certain duties and liabilities in connexion with the estate. He must get in the assets and discharge the liabilities in a certain order of priority set out in the Act, and provision is made for calling upon all claimants against the holder to bring in their claims within a stated time. u/s 8 the manager must, in accordance with rules made in the Act, determine the amount justly due to the several creditors and an appeal lies from his decision to the Deputy Commissioner.

Under Section 11 of the Act as it existed before it was amended by a subsequent Act of 1922, to which I shall presently refer, it was provided that when the amount due in respect to the debts and liabilities had been finally determined the manager should prepare and submit to the Commissioner a schedule of the debts and liabilities and a scheme for the settlement thereof and it further provided as follows:

And such scheme, when approved by the ''Commissioner, shall be carried into effect. Until such approval is given the Commissioner may, as often as he thinks fit, send back such scheme to the manager for revision and direct him to make such further enquiry as may be requisite for the proper preparation of the scheme.

Under Section 12, as it existed before 1922, provision is made for restoring to the holder, or his heir, the possession and enjoyment of the property, and where the property is so restored all proceedings, processes, executions and attachments, in so far as they related to debts and liabilities which the manager had not paid off or compromised and the debts and liabilities barred under the earlier section are to be revived, and in calculating the period of limitation applicable to the revived proceedings and to suits to recover and enforce the revived debts and liabilities the time intervening between the restoration and the vesting order is to be excluded. Restoration however, u/s 12 could only be made in three specified cases (1) where all the debts and liabilities mentioned in the schedule together with interest, if any due thereon, had been paid and discharged; or (2) if the Commissioner at any time before a scheme had been approved by him u/s 11 thought that the provisions of the Act should not continue to apply to the case of the holder or his heir; or (3), where an arrangement had been made for the satisfaction of the debts and liabilities which had been accepted by the creditors and approved by the Commissioner.

It followed therefore that unless the debts had been discharged or an arrangement come to for their satisfaction the Commissioner could not restore the property after ha had once finally approved of the scheme of settlement referred to in Section 11.

It would appear that the Commissioner had been in the habit in certain cases, notwithstanding the provisions of the Act, of restoring to the holder the property even after a scheme of settlement had been approved by him, and before the debts and liabilities had been discharged, or a composition made with the creditors and the effect of his so acting gave rise to certain judicial decisions which need not be considered here. In 1922, however, in so far as the Act applies to this province, it was amended by Bihar and Orissa Act 8 of 1922 which took effect from the 24th January 1923. By that Act Sections 11 and 12 were amended and remodelled, two additional Sections 11A and 11B being added. The effect of the amending Act was to do away with the provision requiring that the scheme, when approved by the Commissioner, shall be carried into effect and to give the Commissioner power, with the previous sanction of the Board of Revenue, at any time, even after approval of the scheme, to relinquish the management of the property to the holder where new circumstances came into existence, facts were disclosed, or events occurred which, in his opinion, rendered the scheme unsuitable for the settlement of the debts and liabilities.

In the present case a scheme was prepared and approved by the Commissioner, the debts having been determined at the decretal amount. The provision, however, made for the payment of interest was slightly different from that awarded by the decree, interest at a higher rate on a portion only of the principal being allowed instead of interest at a lower rate on the whole as provided by the decree. We are told that this works out slightly in favour of the defendant. It was argued that this determination of the liability by the manager was an arrangement made for the satisfaction of the debts accepted by the creditors within the meaning of Section 12 and that the plaintiffs, if entitled to anything, could not claim more than the sum ascertained by the manager, and further that the claim arising under the preliminary decree ceased to exist when this new arrangement was come to.

This contention, however, would appear to be unsound. The document put in evidence in support of it shows that it was not an arrangement made and accepted by all the creditors in the nature of a composition bat merely a determination by the manager of the amount due to the claimants u/s 8 of the Act. Thereafter, although the claims of two sets of plaintiffs were satisfied or compromised, the estate remained under management until the 24th June 1924 without any provision being made for carrying the scheme into effect so far as the debts due to the present plaintiffs are concerned. On that date, as appears from a notification in the Bihar and Orissa Gazette, the estate was released from management under the orders of the Board of Revenue, the scheme of the estate having been found unsuitable, and the estate was restored to the pessession of the present holder. It was further notified for the information of all concerned that the provisions of the Act ceased to apply to the property from the 15th May 1924 and that the proprietor should henceforth be responsible for all his debts and liabilities. If this relinquishment of the estate in favour of the holder was a valid relinquishment then no question of limitation arises, for under the provisions of Section 12 both before and after amendment, the period of limitation was suspended during the time the estate was under management.

Two further points, however, were argued before us in these appeals. First it was said that, on the 27th December 1905, when the estate became vested in the manager, no proceedings were pending in any civil Court within the, meaning of Section 3 as the preliminary decree had been passed and no application at that time had been made for a final decree. In my opinion there is no force in this contention. The preliminary decree provides that the mortgaged properties, in the event of failure to pay the decretal amount within a specified time, would be liable to be sold and the balance still due realised from the defendant. A mortgage suit does not come to an end with the preliminary decree and the proceedings are still pending at least until a final decree is made or the same becomes barred by limitation. Neither event had arisen on the 27th December 1905 when the vesting order was made.

Secondly it was argued that the amending Act of 1922 did not apply to estates vested in a manager under the Act before that date and, therefore, the relinquishment of the estate by the manager in the circumstances which arose was ultra vires and the debts and liabilities still remain barred, the plaintiffs'' only remedy being to insist upon the scheme being carried out. I can find no reference in the judgment of the trial Court to any argument upon this point taken before that Court.

We have therefore not the advantage of considering the opinion of the Additional Subordinate Judge upon it. Nor can I find in the memorandum of appeal in this Court any ground suggesting that the order of relinquishment was ultra vires. It seems to me clear, however, even if we should regard the appellant as entitled to raise the question now, that the provisions of the amending Act were intended to apply to estates already under management as well as to those which might be vested in a manager subsequently.

The amending Act merely gives the Commissioner additional powers in carrying out the provisions of the Act and in relinquishing the property to the holder when the scheme turns out to be unsuitable. These provisions relate to procedure only and no question of vested rights arises. I think therefore that the appellant''s argument on this point fails and that the manager in the circumstances was competent to release the estate to the holder.

These appeals mast be dismissed with costs.

Foster, J.

I agree.

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