The petitioner is the legatee under a will of two ladies, Ammani and Chinnammu of a mortgage executed in their favour on 8th June 1931 by the respondent. The mortgage was repayable on 13th July 1932. The respondent was adjudged insolvent on 3rd January 1933 but the adjudication was annulled on 27th August 1943. The suit out of which this civil revision petition arises was filed on 13th July 1944 for a money decree, the plaintiff having given up his security. The suit was dismissed by the lower Court on the ground that it was barred by limitation. The petitioner relied on S. 78(2) of the Provincial Insolvency Act and sought an exclusion of the period from the date of the order of adjudication to the date of the order of annulment. It is not denied that if that exclusion is made, the suit would be in time. It was however contended by the respondent, and that contention found favour with the Court below, that S. 78(2) of the Act did not apply because the debt is one provable but not proved under the Act. It is admitted that the petitioner had not proved the debt in the insolvency of the respondent. The petitioner's contention in the Court below was that the debt is not one provable under the Act. This contention was not accepted by the lower Court. The same point is raised before me on the petitioner's behalf.
It seems to me that the question is directly covered by the decision in Chokkalinga v. Manicka (1) in which Leach C.J and Happell J. held on a consideration of Ss. 28(2) and (6), 34(2), 44 and 47 that a secured debt is not ordinarily provable in insolvency and that it is provable only in the three contingencies contemplated by Sub-Ss. (1), (2) and (3) of S. 47; or in other words that except where a secured creditor realises his security or relinquishes it or values it he is not bound to prove his debt in the insolvency of his debtor. Chockalinga v. Manicka no doubt arose under S. 44 of the Act and did not deal with any question of limitation; but the point that arose in that decision would equally apply where the question that falls to be considered in applying the provisions of S. 78(2) of the Act is whether a mortgage debt is or is not provable in insolvency.
The lower Court assumed that at the instance of a prior mortgagee the mortgaged property had been sold up in execution of his mortgage decree sometime before the order of annulment. It seems this assumption is not correct and from a certified copy of the suit register relating to that suit the petitioner's Counsel states that neither the petitioner nor his predecessors-in-title were parties to the suit of the prior mortgagee and that their rights therefore are left unaffected by that decree and any execution proceedings which might have followed it.
Apart from this, however, and even assuming that there was a mortgage decree obtained by the prior mortgagee binding on the petitioner and that in execution of it the entire mortgaged property was sold away it seems to me that the principle of Chockalinga v. Manicka must be applied and the exclusion of the period claimed by the petitioner allowed in his favour. That decision is not distinguishable on the ground that it did not deal with a case where there were two mortgage decrees or with a case where the security was no longer available to the mortgagee by reason of its having been sold away by a prior mortgagee. As I understand it, that decision recognises only three exceptions to the general rule which dispenses with proof of a mortgage debt in insolvency proceedings. It is not possible to say that the present case falls under any of those exceptions and it is clearly not a case to which Sub-S. (1) of S. 47 could apply because it cannot be said that the petitioner realised his security and there was still a balance due to him.
For the above reasons I hold that the suit is in time, set aside the decree of the lower Court and pass a decree as prayed for with costs, here and in the Court below against the estate of the deceased first respondent in the hands of the second respondent. Court-fee payable on the plaint will be paid by the second respondent out of the said estate. Interest will be payable at six per cent per annum from date of suit till payment on the amount of Rs. 1,000 which is the principal claimed.
N.R.R