Chinnayya Gounden vs N.S. Krishnaswamy Iyengar

S. Ramachandra Ayyar, C.J.—This appeal, which has been filed on the strength of a certificate issued by Ramakrishnan J., under Clause 15 of the Letters Patent, arises out of a suit instituted by the Respondent under Order XXI, Rule 103 of the Code of Civil Procedure, for a declaration of his right to possession of the properties which formed the subject-matter of this litigation.

The properties now in dispute originally belonged to one Marimuthu, who included the same in a mortgage which he and others had executed on 16th December 1936, in favour of the Respondent. Exactly three years later, the mortgagee filed an application before the Debt Conciliation Board at Salem for settlement of the amount due to him under the mortgage. The debtor disclosed his other liabilities to the Conciliation Board. But, for some reason not discoverable from the record, the Board proceeded to settle only the liability of the debtor under the mortgage referred to above. An agreement u/s 14(1) of the Madras Debt Conciliation Act was reached on 6th December 1940. It was duly registered under Sub-section (2) of that section on 23rd December 1940. Under that provision:

an agreement made under Sub-section (1) shall, within thirty days from the dare of the making thereof, be registered under the Indian Registration Act, 1908, by the Chairman of the Board in such manner as may be prescribed and it shall then take effect as if it were a decree of a civil Court and be executable as such.

After a lapse of nearly three years, the Respondent applied for execution of the agreement in the District Munsif''s Court, Salem, and purchased after obtaining the necessary leave of Court, the properties himself. The sale certificate issued to him is, dated 27th September 1944.

Meanwhile, one Imam Khan Sahib had obtained a money decree against the said Marimuthu some time during the year 1937. Although this debt was referred to in the statement of the debtor before the Debt Conciliation Board, no notice was issued to the creditor nor the amount due to him was settled by the Board. Imam Khan Sahib applied for execution of his decree and got the same properties attached and brought to sale. The Appellant, who was the first Defendant in the suit, obtained title to the suit properties under the sale in those execution proceedings. He was able to obtain possession of the properties from the judgment-debtor soon after the sale.

When the Respondent applied for delivery of possession of the properties purchased by him, in execution of the agreement registered by the Debt Conciliation Board, he was met with obstruction from the purchasers in execution of the money decree against Marimuthu the Appellant being one of them, The former applied for removal of such obstruction but without success.

The suit out of which this appeal arises was then instituted for setting aside that summary order. The trial Court dismissed the suit holding that the mortgage created by Marimuthu in favour of the Respondent wag a sham and nominal transaction and that, therefore, the subsequent proceedings taken to recover the debt due thereunder were null and void. The Respondent appealed to the District Court at Salem. The learned District Judge upheld the truth and validity of the mortgage. He also held that the purchase by the Respondent in execution of the agreement before the Debt Conciliation Board would prevail over the rights of the purchasers in the sale held m execution of the money against the same debtor. The Respondent was accordingly given a decree as prayed for by him. The Appellant then appealed to this Court. Ramakrishnan J., upheld the view of the District Judge that the mortgage was supported by consideration and proceedings in execution of the agreement recorded by the Debt Conciliation Boand would vest title in the Respondent, which would prevail over the Appellant''s predecessor''s purchase. But the learned Judge, however, noticed that the Lower Appellate Court, while disposing of the appeal, had omitted to consider two vital defences to the action put forward by the Appellant, namely, that by reason of his having discharged another mortgage over the properties, he would be entitled to rights by way of subrogation secured by the mortgage discharged, and secondly, that he has effected certain improvements to the property for which he was entitled to compensation before possession was directed Co be delivered by him. As a consequence, the learned Judge remanded the appeal for determining the questions referred to above before passing an appropriate decree.

The only point argued and that which falls for determination in this appeal against that judgment is, whether the purchase by the Appellant''s predecessor-in-title in execution of the money decree obtained against Marimuthu would be affected by lis pendens by reason of the agreement before the Debt Conciliation Board, Salem, in the application filed by the Respondent. There was considerable argument before Ramakrishnan J., as to whether the Debt Conciliation Board could be regard as a Court so that the pendency of proceedings taken for settlement of debts before it could become a lis. The learned Judge, after a detailed consideration of the relevant provisions of the Debt Conciliation Act, held that the Board functioning under that enactment was a Tribunal exercising judicial powers while passing an award and that, therefore, the doctrine of lis pendens would apply to the property involved in the proceedings pending before it. Learned Counsel appearing for the Appellant has not challenged the correctness of that view. It is also conceded that it would be open to a secured creditor to apply for the settlement of the debt due on his mortgage, and, if, on that application, a settlement is effected and award passed, the secured creditor will be entitled to enforce that award.

The contention of Mr. Kuppuswami Ayyar who appeared for the Appellant is that an agreement or award registered u/s 14(2) of the Act will not amount to a final decree on the mortgage, and that, by virtue of the statute, such an agreement can only be executed as if it were ft decree. Not being a mortgage decree there could be no lis in regard to the property till an execution petition was filed. Learned Counsel also argued that as before that date the Appellant''s predecessors-in-title had become the owners of the properties by purchase in execution of the money decree, there was nothing which the Respondent could obtain by his later purchase. Alternatively it was contended that even if the Respondent''s purchase is treated as one, in execution of a mortgage decree, inasmuch as the Appellant had not been given an opportunity to redeem that mortgage, he should now be allowed to do so. The first part of the contention proceeds on a misapprehension. The agreement of amicable settlement made u/s 14 of the Act in the present case itself empowered the Respondent to bring the properties to sale, if there was default in the payment of the amount settled. It is unnecessary to consider whether the proceedings before the Board would constitute and have the same effect as a suit on the mortgage. From the terms of the agreement, the Respondent had undoubtedly created charge which was available to him for realising the amounts due.

It is now well-settled that a purchaser at a sale in execution of a mortgage or charge decree is in a different position from that of a purchaser at a sale in execution of a money decree. In the former case, the title of the purchaser relates back to the date of the creation of mortgage or charge, while in the fatter, such title vests in him only as on the date of purchase. In Jadunath Ray v. Paramasewar Mallik I.I.R.(1940) 1 Cal. 255, 262 (P.C.), Sir George Rankin observed:

While the purchaser at an execution sale under a mere money decree gets no more than the right, title and interest of the judgment-debtor at the date of the sale, the purchaser under a mortgage decree gets the right, title and interest in the mortgaged properties which the mortgagor had at the date of the mortgage and charged thereby. Buying the mortgaged property free from incumbrances he gets, as it is sometimes put, the title both of the mortgaged and of those interested in the equity of redemption.

It is needless to point out, that, in order to secure such a title, the mortgagee should have impleaded, in the suit instituted by him, all the parsons entitled to redeem. In other words, a sale in execution of a mortgage decree passes to the purchaser the rights of the mortgagee as well as that of the mortgagor as j they existed on the date of the mortgage provided that every person interested in the equity of redemption had been made a party to the suit in accordance with the provisions of Order XXXIV, Rule 1 of the Code of Civil Procedure.

It is, however, argued that inasmuch as the procedure prescribed by the Debt Conciliation Act for settlement of the mortgage debts of a debtor does not envisage the impleading of persons interested in the equity of redemption or of affording an opportunity to them to redeem the mortgage, the rule above stated cannot apply to sales conducted in execution of an agreement registered under the Debt Conciliation Act. There will be force in that contention, if it were necessary for the Respondent to rely on the mortgage as against a person who had obtained an interest in the property before the date of the decree. Here assuming that the charge was created by the agreement; alone, the Appellant had acquired no interest in the property even by the date thereof.

Mr. Kuppuswamy Ayyar then contended that an agreement, arrived at u/s 14 of the Act can never be regarded as a charge or mortgage decree except for the limited purpose of its execution.

Sub-section (2) of Section 14 says that the agreement:

shall then take effect as if it were a decree of a civil Court and be executed at sack. These words clearly indicate that the agreement should take effect as a decree. The fiction thus created is not only for the limited purpose of execution. In Nanjappa v. Sreeranga ILR (1946) Mad. 265 it was held that an agreement entered into in the proceedings before the Debt Conciliation Board would constitute a decree of Court. In that case there was an agreement with respect to a mortgage transaction sanctioned by the Board. It provided for the sale of the property in the event of default of payment of debt within a particular time. A sale took place in execution of that agreement but before it was confirmed the debtor deposited, under the provisions of Order XXXIV, Rule 5 of the Code of Civil Procedure, the amount due together with the prescribed solatium. The learned Judges held that the provisions of Order XXXIV, Rule 5 of the CPC would apply to the case, as the agreement was in effect a final mortgage decree. The correctness of this decision has been challenged before us on the ground that Section 14(1) of the Act must be read only as creating a fiction for the limited purpose of execution. In that connection reliance was placed on Kadir Mohideen Marakkayar v. Muthukrishna Ayyar ILR (1902) Mad. 230, where, in constituting Section 30 of the income tax Act, which provided that the Collector might, in default of payment of tax, recover the amount as if it were an arrear of land revenue, it was held that the effect of section 30 was not to convert the income tax liability into an arrear of land revenue but merely to extend the procedure prescribed by the Revenue Recovery Act for recovery of arrears of income tax. We do not, however, see how that principle can apply to the present case. Here, the statute states that the award shall take effect as if it were a decree and he executable as such. It is evident from the terms of the section that the agreement was to be a decree not merely for the purpose of execution but for other purposes as well. It is a recognised rule of interpretation of statutes that tautology is not to be readily attributed to the Legislature. If it was intended by the, legislature that the agreement was to be regarded as a decree only for the limited purpose of execution, there was no need for the section to have enacted the first clause, it shall then take effect as if it were a decree instead of merely saying that it shall be executable as such. The intention disclosed by the words must, therefore, be that an agreement registered in accordance with the provisions of Section 14(2) of the Act would itself constitute a, decree. We, therefore, agree with the view taken in Nanjappa Goundan v. Sreeranga Chettiar I.L.R (1946) Mad. 265.

It is plain from the facts which we have stated at the beginning of this judgment, that on the date when the agreement was registered there was no puisne encumbrancer over the properties in suit. The rights of the Appellant''s predecessors-in-title had not come into existence, as the Court auction sale in their favour was only subsequent to that agreement. When, therefore, the Respondent executed that agreement and purchased the properties mortgaged, he should be deemed to have acquired the rights of the mortgagor at least as on the date of the agreement: see Har Pershad Lal v. Dalmardan Singh ILR (1905) Cal. 891 and Gulam Rasool Saheb Vs. Hamida Bibi, where the same principle was laid down with respect to a mortgage decree. That would mean that the right obtained by the Appellant''s predecessors-in-title was a defeasible one and liable to be defeated on a sale taking place in pursuance of the agreement sanctioned u/s 14(2) of the Debt Conciliation Act.

The appeal, therefore, fails and is dismissed. There will be no order as to costs.