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Judgment
Veeraswami, J.—Company Application No. 245 of 1963 is for passing a preliminary decree on a mortgage, dated April 11, 1949 executed
by the first Respondent Ramamirthammal in favour of the Bank which is in liquidation. On February 14, 1955 in Company Application No. 3943
of 1954, the list of debtors was settled by this Court in which item 22 related to the debt owing by Ramamirthammal. There was a brief reference
that the debt was secured by a mortgage beyond that, no particulars, as required by Rule 3 in the Fourth Schedule u/s 45D(2) of the Banking
Companies Act, 1949, were given. As a matter of fact, the decree passed by this Court on February 14, 1955, was a money decree. The decree
also did not provide for future interest. This application is made on the ground that there was some omission on the part of the Court from passing
a mortgage decree and also providing for subsequent interest. This application was heard on a previous occasion and it emerged as a result of the
discussion in Court that the official liquidators should file an application for settling the mortgage debt of Ramamirthammal. They have, therefore,
filed Company Application No. 207 of 1964, in which they pray that they may be permitted to amend the settled list of debtors by adding the
particulars as required by Rule 3. They also pray, rather curiously, for adding a provision in the decree for payment of further interest. The above
applications are resisted by the third Respondent S. Alagammai Achi, who claims to hold a security bond, dated June 21, 1952.
Section 45D of the Banking Companies Act provides for the settlement of list of debtors. This section has operation notwithstanding any other
law. That means the section has overriding effect. Sub-section (2) of the section says that subject to the rules made u/s 52, the official liquidator
shall, within six months from the date of the winding up order file from time to time in the High Court a list of debtors containing such particulars as
are specified in the Fourth Schedule. A proviso follows to the effect that such lists may, with the leave of the High Court, be filed after the expiry of
the said period of six months. On receipt of a list, the High Court causes notices to be issued to the persons affected and after an enquiry; as
provided by rules made u/s 45U, it may make an order settling, the list of debtors. In so settling, it has power to settle a list in part as against such
of the persons whose debts have been settled without settling the debts of all the persons placed on the list. While settling the list, the High Court
shall pass an order for payment of the amount due by each debtor, which will have the force of a decree. Such an order will be, subject to an
appeal, final and binding for all purposes as between the parties. Under Sub-section (7) of Section 45D, the High Court has power to pass any
order in respect of a debtor on the application of the official liquidator for the realisation, management, protection, preservation or sale of any
property given as security to the banking company and to give such powers to the official liquidators to carry out the aforesaid directions as the
High Court thinks fit. Sub-section (10) states that Section 45D will not apply to a debt which has been secured by a mortgage of immovable
property, if a third party has any interest in such immovable property. Section 45D, in effect, makes the Limitation Act inapplicable to debts owing
to a banking company in liquidation.
In the light of these provisions, the liquidators say that they are entitled to ask this Court to exercise its discretion to excuse the delay in filing an
application for settlement of the list of the particular debtor Ramamirthammal and to pass a decree based on the mortgage executed by her. The
objection of the third Respondent is that the official liquidators having originally failed to show in the application for settlement of debtors the
particulars required by Rule 3 in Schedule IV, they should be deemed to have given up their claim on the security and in any case they cannot ask
either for an amendment of the personal decree passed in February 1955 or a fresh mortgage decree on the basis of a fresh application for
settlement of debtors. The argument derives support from a principle analogous to Order II, Rule 2 of the Code of Civil Procedure. It is contended
that Order XXXIV, Rule 14 which is applicable to suits cannot be invoked by the Official Liquidators. I find no difficulty in rejecting the contention
of the third Respondent. Neither Order II, Rule 2 nor Order XXXIV, Rule 14 of the CPC will be directly applicable to proceedings u/s 45D. But
I think, the principles of those rules can well be extended to settlement of list of debtors and passing of orders u/s 45D(4). Section 45D(1) only
says that the section will have overriding effect over any other law which is contrary to its provisions. Order XXXIV, Rule 14 clearly enables the
mortgagee who has obtained a decree for the payment of money in satisfaction of a claim arising under his mortgage, to bring a suit for the sale of
the mortgaged property notwithstanding anything contained in Order II, Rule 2. To such a case, therefore, the bar under Order II, Rule 2 will not
be applicable. If the mortgagee gives up his right over the security, it is quite another matter. But where without giving up his right, he sues for
recovery of money due under the mortgage, his right to file a separate suit for bringing the property to sale in order to realise the debt is preserved.
The contention for the third Respondent that the omission on the part of the official liquidators when the list was settled on the earlier occasion to
ask for a mortgage decree barred the present application, cannot, therefore, be accepted.
The next contention for the third Respondent is based on Section 45D(10). Prima facie, the argument for the third Respondent that if a third
party has an interest in the immovable property which is subject to a mortgage, Section 45D will have no application appears to be plausible. Sub-
section (10)(a) reads as follows:
Nothing in this section shall:
(a) apply to a debt which has been secured by a mortgage of immovable property, if a third party has any interest in such immovable property.
The argument is that a subsequent encumbrance has an interest in immovable property and, therefore, literally, such a person will be within the
ambit of this provision. In my opinion, this is not a correct construction to place on Section 45D(10)(a). It does not seem to apply to a case of
subsequent encumbrancer. As it appears to me, the whole object of Section 45D is to enable the High Court, on an application for settlement of a
list, to pass a decree against the debtors settled in the list, including mortgage debts and there is no indication in Section 45D that merely because
the subsequent encumbrancer is having an interest in the immovable property, no order for payment of money can be made u/s 45D(4).
Apparently, Sub-section (10)(a) has application to a third party who claims a paramount title or has an interest which would be in conflict with the
earlier mortgage, as for instance a third party who claims that the mortgagor had no right or interest in the property mortgaged but he has. In my
view, Sub-section 10(a) does not cover the case of a second or subsequent encumbrancer. This objection too, therefore, fails.
It is then argued for the third Respondent that Company Application No. 207 of 1964 is too belated and that this Court will not be justified in
exercising its discretion and excusing the delay. As I already mentioned, Section 45D(2) requires the official liquidators to file an application for
settlement of lists of debtors within six months from the date of the winding up order. The proviso to the sub-section reads:
Provided that such lists may, with the leave of the High Court, be filed after the expiry of the said period of six months.
Whether the application now made is treated as one for amendment of the earlier list or for settlement of a list of debtors afresh, the question of
delay will have to be considered in the light of the proviso. The proviso undoubtedly vests a discretion in this Court. But the discretion has to be
exercised only for proper reasons. The application now made comes after nearly nine years of the settlement of the list of debtors in 1955. Though
time was given, the report of the official liquidators has not set out any ground whatever explaining the delay. On the other hand, during the
arguments what was suggested was that in the circumstances of this case, they even thought of asking this Court to write off the debt as it was felt
that it might not be possible to realise the debt. If that were the reason, the delay was a deliberate one. If that were not the reason, as the report
stands at the moment, there is no ground mentioned which will justify this Court to exercise the discretion vested in it by the proviso to Section
45D(2) .
It is not as if the official liquidators are without a remedy. As I said, there is no period of limitation applicable to such debts by reason of Section
45-C. There is nothing in the Banking Companies Act which takes away the right of the banking company under liquidation from instituting a suit
on the mortgage and recovering the money by sale. In the circumstances, in the absence of any reason for the delay, which alone will enable this
Court to consider whether it could be excused, Company Application No. 207 of 1964 has to be dismissed. It follows that the prayers in
Company Application Ho. 245 of 1963 cannot also be ordered and this application too is dismissed. No costs.