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Ram Saran Das v. Yudhishtir Prasad
Summary of Opinion — Full Bench on Assignment of Security Bond to Minors on Attaining Majority
Factual and Procedural Background
The Full Bench was asked to decide the following question (as referred by the court): “Where a court obtained a security bond which hypothecated immovable property to secure a proper disposal of money, due to minors, deposited with it, whether an assignment of the security bond in favour of the minors on their attaining majority in order to enable them to realise the money from the surety must be made by way of a regularly stamped and registered deed of sale or may be made by an order passed by the court.”
The core factual matrix in the opinion is as follows (stated in the text): sums of money had been deposited to the credit of certain minor plaintiffs in execution proceedings. Their mother (referred to as Mst. Saraswatij in one passage and as Mst. Saraswati in another) applied for permission to take out the amount; the court required security under Order XXXII, Rule 6 of the Civil Procedure Code. On her behalf Hakim Jiwan Lal executed a registered security (mortgage) bond (dated 13 November 1922) under which he made himself liable for the amount and hypothecated immovable property for realisation by the court.
After the minors attained majority they applied for permission to sue the surety because their mother had taken out the money and it had been paid to the surety, who had separately agreed to refund it but had failed to do so. Because the surety had transferred part of the hypothecated property, the court considered that relief could not be obtained under section 145 of the Civil Procedure Code and that a regular suit to enforce the charge was necessary. The court gave permission (with the surety's consent) to the applicants to sue, subject to a condition that the suit should not be instituted before six months had expired.
When the plaintiffs instituted the suit against the surety and his son, the defendants objected that the suit was not maintainable because the security bond standing in the name of the court had not been formally assigned to the plaintiffs by a regularly stamped and registered deed. That objection produced the legal question referred to the Full Bench.
The opinion contains two slightly differing recitals of the deposited amount: one passage records “Rs. 30,000 and odd” and another (Mukerji, J.'s summary) records “Rs. 13,000 and odd.” Both descriptions appear in the opinion text.
The Bench consisted of Sir Shah Muhammad Sulaiman, A.C.J. (delivering the main opinion), Mukerji, J., and Boys, J., the latter two concurring with the answer provided.
Legal Issues Presented
- Whether an assignment of a security bond, held by a court to secure money deposited on behalf of minors and made in favour of those minors when they attain majority, must be effected by a regularly stamped and registered deed of sale; or
- Whether such an assignment may instead be made by an order passed by the court (thereby enabling the beneficiaries to sue on the bond).
Arguments of the Parties
Appellant's Arguments
- The defendants (the appellant in the appeal) objected that the suit could not be maintained because the security bond standing in the name of the court had not been formally assigned to the plaintiffs by a regularly executed and registered deed of assignment (i.e., they contended a registered deed was necessary to create a right of action in the plaintiffs).
Plaintiffs' Position
- The plaintiffs (former minors) sought permission to sue the surety after attaining majority and relied upon the court's order (stating, with the surety's consent, “permission is granted to the applicants as prayed”) as authorising them to sue on the bond. Implicitly, their position was that the court's order assigning or authorising enforcement of the security sufficed and no separate registered deed of assignment was required.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Amarnath v. Thakur Das | Held that the right to sue for enforcement of a contract entered into in a security bond could only be enforced after the bond had been properly assigned. | The Court noted Amarnath's holding but observed that the Bench in Amarnath did not specify that assignment must be by a registered document executed by the court; Amarnath did not expressly require a registered instrument for assignment by the court. |
| Sheo Baran Singh v. Munshi Singh (unreported) | Followed the decision in Amarnath v. Thakur Das (i.e., the principle that enforcement requires proper assignment). | The opinion records that Sheo Baran Singh followed Amarnath; it is cited to show earlier judicial approach but not as establishing that assignment must be by registered deed. |
| Sarat Chandra Roy Chowdhury v. Rajoni Mohan Roy | Contains a passage stating that the law does not require that there should be a written assignment by the District Judge (with a reference to section 35 of the Guardians and Wards Act). | The Court cited the short passage as support for the proposition that a written assignment by the District Judge is not strictly required; the opinion notes that limited reasons were given in that judgment beyond the statutory reference. |
| Raj Raghubar Singh v. Jai Indra Bahadur Singh | Illustrates an order for sale (and enforcement) issued without even a formal suit; used to support the view that assignment can be by order. | The Court relied on this case to show that the assignment in practice may be effected by order of the court (and that such orders are outside the ambit of the Transfer of Property Act where transfers are by a court's order). |
Court's Reasoning and Analysis
The Court's analysis proceeded in structured steps; the following summarizes the reasoning found in the opinion without adding material not present in the text.
- Nature of the security bond and potential character as mortgage:
- The Court observed that a security bond hypothecating immovable property may fall within the definition of a mortgage under section 58 of the Transfer of Property Act.
- Effect of transfers by court order under Transfer of Property Act:
- The Court relied on section 2(d) of the Transfer of Property Act, which provides that nothing in the Act would affect transfers made by operation of law or by, or in execution of, a decree or order of a court of competent jurisdiction. Thus, even if an assignment would ordinarily require registration, that necessity does not apply where the transfer takes place by or in execution of a court order.
- Whether assignment by the court amounts to sale, gift or exchange:
- The Court reasoned that the court's assignment of the bond to beneficiaries is not a sale as defined in section 54 of the Transfer of Property Act because there is no consideration, price paid or promised, nor is it a gift or exchange. The court receives no consideration and assigns only the right to realise the security. Consequently, there is no legal provision demanding that such an assignment be in writing or by a registered instrument.
- Section 9 of the Transfer of Property Act was cited to the effect that transfers may be made without writing when the law does not expressly require writing.
- Registration law considerations:
- Even assuming the assignment constituted a transfer of an interest in immovable property within the meaning of section 17 of the Indian Registration Act, the Court held that the assignment is by order of the court and therefore falls within an exemption (section 17(2)(vi) is cited in the opinion) from registration requirements.
- Legislative context and existing statutory analogues:
- The Court noted statutory provisions (section 35 of the Guardians and Wards Act; section 292 of the Succession Act; and sections 78 and 79 of the old Probate and Administration Act) expressly providing for assignment of security bonds in favour of persons authorised by the presiding officer. These provisions indicate that the legislature contemplated the presiding officer effecting assignments by judicial act rather than by executing a registered deed in every case.
- The presence of standard forms of security bonds in the appendices to the Code of Civil Procedure (many in favour of the presiding judge) was relied upon to infer that it was unlikely the legislature intended a universal requirement of a registered deed of transfer executed by the presiding officer.
- Character of orders of assignment:
- The Court emphasized that orders for assignment are typically passed after the court considers the circumstances and conditions in the interest of the beneficiaries; such orders are part of judicial proceedings and not mere administrative acts. Consequently, an order assigning the bond is a judicial act capable of transferring the right to sue for recovery without requiring a separate registered deed.
- Conclusions by the individual judges:
- Sir Shah Muhammad Sulaiman, A.C.J., concluded that assignment of a security bond standing in the name of the court can be made by a mere order without any registered deed of transfer.
- Mukerji, J., after recounting the facts and analysing statutory provisions (including Order XXXII, Rule 6 CPC, section 35 Guardians and Wards Act, section 292 Succession Act, and section 2(d) Transfer of Property Act), likewise concluded that the court's order authorising a person to sue suffices and no formal deed is necessary; he agreed with the Chief Justice.
- Boys, J., concurred in the answer.
Holding and Implications
Holding: The Court answered the referred question in the following terms (by the Court): the assignment need not be made by a regularly stamped and registered deed of sale but may be made by an order passed by the court.
Consequences and immediate effect:
- As a direct result of this holding, where a security bond stands in the name of the court to secure money deposited on behalf of minors, the court may assign the security (or authorise a person to sue on it) by an order; a separate stamped and registered deed of assignment is not a statutory prerequisite for the beneficiaries to sue on the bond.
- In the present case this means that the plaintiffs' right to sue the surety could be supported by the court's order of assignment/permission rather than being defeated solely because no formal registered deed of assignment was executed by the presiding officer.
The opinion states the ruling and analyses statutory provisions to support it. The text does not purport to specify whether it creates any broader novel precedent beyond answering the referred question; it confines itself to the question and the statutory and precedential support set out in the reasoning.
Sir Shah Muhammad Sulaiman, A.C.J:— The question referred to the Full Bench is: “Where a court obtained a security bond which hypothecated immovable property to secure a proper disposal of money, due to minors, deposited with it, whether an assignment of the security bond in favour of the minors on their attaining majority in order to enable them to realise the money from the surety must be made by way of a regularly stamped and registered deed of sale or may be made by an order passed by the court.”
It appears that Rs. 30,000 and odd had been deposited to the credit of certain minor plaintiffs in the execution proceedings. Their mother, Mst. Saraswatij who was their guardian ad litem in the suit, applied to the court for permission to take out the amount. Security was demanded from her under order XXXII, rule 6 of the Civil Procedure Code; and on her behalf one Hakim Jiwan Lal executed a registered security bond dated the 13th of November, 1922, under which, he made himself liable for the whole amount and agreed that the court would be at liberty to realise the said sum from the property hypothecated by him under the document.
After the attainment of majority the plaintiffs applied to the court for permission to bring a suit against the surety because the amount had been taken out by their guardian and paid to the surety himself, who had executed a separate agreement to refund the amount. As the surety had subsequently transferred a part of the hypothecated property, it was not considered sufficient to proceed against him personally under section 145 of the Civil Procedure Code, but it became necessary to enforce the charge by a regular suit. The court granted permission to the applicants, stating that with the consent of the surety permission was granted to the applicants as prayed. A condition was however laid down that in order to give time to the surety to pay up, the suit should not be instituted before the expiry of six months. When the suit was; instituted by the plaintiffs against the surety and his son, an objection was raised that the suit was not maintainable inasmuch as the bond in question had not been formally assigned to the plaintiffs. It is this question of law which has been referred to us for an answer.
There is no doubt that in the case of Amarnath v. Thakur Das (1), which has been followed in the unreported case of Sheo Baran Singh v. Munshi Singh (2), it was held that the right to sue for the enforcement of a contract entered into in a security bond could only be enforced after the bond had been properly assigned. That was a case in which a security bond had been taken from a guardian under the Guardians and Wards Act of 1858 (Act No. XL of 1858), in which there was no provision corresponding to section 35 of the Guardians and Wards Act of 1890 for the assignment of such a security bond. The Bench in Amarnath's case did not lay down exactly how the assignment was to be made by the court. It was not said in express terms that without a registered document executed by the court no right of suit would accrue to the assignee.
There is also a short passage at the end of the judgment in Sarat Chandra Roy Chowdhury v. Rajoni Mohan Roy to the effect that the law does not require that there should be a written assignment by the District Judge. No reasons apart from a reference to section 35 of Act VIII of 1890 were given.
A security bond hypothecating immovable property may very well come within the definition of a mortgage as given in section 58 of the Transfer of Property Act. But section 2(d) of that Act provides that nothing in the Act would affect any transfer by operation of law, or by, or in execution of, a decree or order of a court of competent jurisdiction. Even if the assignment of the bond were to amount to a transfer which would ordinarily have to be effected by a registered document, there would be no such necessity if the transfer takes place by, or in execution of a decree or order of a court.
The mere fact that the money deposited to the credit of the minors was allowed to be taken out by their guardian on furnishing security, would not necessarily involve a liability on the court to refund the amount in case it was lost. It is therefore very difficult to hold that the assignment of the security bond by the court to the beneficiaries would amount to a sale, as defined in section 54 of the Transfer of Property Act. The court does not transfer it in consideration of any price paid or promised. Indeed the court receives no consideration for it at all, and if there was no initial liability on the court to refund the amount no such liability can be said to have been discharged by the assignment. Nor can it be treated as a pure gift or a deed of exchange. It follows that there is no provision of law which requires that such, assignment should be either in writing or by a registered instrument. Section 9 of the Transfer of Property Act lays down that a transfer of property may be made without writing in every case in which a writing is not expressly required by law.
It follows that an assignment of a security bond of this kind made by the court to the person entitled would not be such a transfer as can be effected only by means of a written and registered instrument. In Raj Raghubar Singh v. Jai Indra Bahadur Singh there was an order for sale without even a formal suit. The assignment is in reality by order of the court and the provisions of the Transfer of Property Act do not apply to it.
It is doubtful whether, when the court instead of itself proceeding to enforce the security assigns it to another so as to authorise him to sue upon it, there is necessarily a transfer of an interest in immovable property within the meaning of section 17 of the Indian Registration Act. But assuming that it is, that section would not be applicable to it because the assignment is really by an order of the court, and the order is exempted from registration under section 17(2)(vi).
Provisions for the assignment of security bonds of this kind are to be found not only in section 35 of the Guardians and Wards Act but also in section 292 of the Succession Act and sections 78 and 79 of the old Probate and Administration Act. The legislature obviously contemplated that a security bond may be in favour of the presiding officer of the court itself and may be assigned by him to any person whom he considers to be a fit person or entitled to sue upon it. We also find that various forms of security bonds are given in the appendices E, F, G and H attached to the Code of Civil Procedure, and many of them are in favour of the presiding Judge himself. It is therefore difficult to believe that the legislature intended that there should in every case have to be a registered deed of transfer executed by the presiding officer and duly registered.
Orders passed for assignment of security bonds are as a rule passed on applications made to the court after the court has considered all the circumstances and made up its mind as to the conditions which it would impose in the interest of the beneficiaries. Such an order cannot be treated merely as an administrative act, but is a part of a judicial proceeding.
I am therefore of opinion that an assignment of a security bond standing in the name of the court can be made by a mere order without any registered deed of transfer.
Mukerji, J.:— The facts, briefly, are these. To the credit of two minors a sum of Rs. 13,000 and odd was deposited to the court of the Subordinate Judge of Aligarh in suit No. 183, of 1904. Their mother, Mst. Saraswati, was anxious to realise the money from the court, and on her application to the court for payment of the money to her as the guardian of the minors the court directed her to furnish security. One Hakim Jiwan Lal appeared and furnished the security bond which has been made the subject matter of the suit out of which this appeal has arisen. Hakim Jiwan Lal gave a regularly executed and registered mortgage bond in favour of the court by which he undertook that “the court shall be at liberty to realise the said sum from the property hypothecated…” The two minors who were parties to the suit of 1904 attained majority and then they applied to the learned Subordinate Judge, in whose court the money had been deposited, asking that the money might be realised and indeed over to them or, in the alternative, they might be permitted to sue the surety to recover the money. It appears that the mother, having realised the money, lent it to Hakim Jiwan Lal himself. Jiwan Lal paid only a part of the interest and not the balance of interest and the principal amount. To the suit of the plaintiffs a son of Hakim Jiwan Lal was made a party and he raised the objection in appeal that there should have been a regular deed of assignment executed and registered by the court, namely the Subordinate Judge of Aligarh, before the suit could be maintained. The question is whether this was really necessary or whether the order of the court which runs as follows, namely “With the consent of the surety permission is granted to the applicants as prayed”, was enough.
We have to consider what should be the nature of the document which, according to the defendant appellant, should have been executed by the learned Subordinate Judge. The Subordinate Judge held money belonging to the minors. He was not sure that the mother would properly invest the money and, therefore, he required security to be furnished. Strictly speaking, it would be the duty of the court to realise the money from the person who stood surety and to hand over the money to the plaintiffs, because, ordinarily, the plaintiffs should not be put to the trouble of bringing a suit to recover the money which was their own and which was in the custody of a court. The Subordinate Judge, in order to realise the money, could either bring a suit of his own, on the mortgage bond, or he could direct any of his officers, say the munsarim or the nazir, to bring a suit, on his behalf, and to realise the money. The money so realised would of course be handed over to the plaintiffs. In the present case the money was deposited in course of the suit and a security bond was taken, it appears, under the provision of order XXXII, rule 6 of the Civil Procedure Code. In that case there is no clear provision as to how the security is to be realised. In the case of a security being taken under section 35 of the Guardians and Wards Act of 1890, or of security being taken under section 292 of the Succession Act of 1925, there is a provision to the effect that the court may assign the security to some person who shall be entitled to sue on the said bond. There is nothing to debar the Subordinate Judge of Aligarh from acting similarly and assigning the bond to his nazir or to a pleader of the court, (to be remunerated out of the proceeds of the suit), to sue on behalf of the court and to realise the money.
Now, if this be possible, the question is, what would be the nature of the transaction by which the court would authorise the nazir or the pleader of the court to realise the money? Can it be said that the transaction would be one of sale or gift, within the meaning of the words used, in the Transfer of Property Act? Surely, the answer would be in the negative. The “assignment”, therefore, would be merely an authorisation on the part of the court to such person, as it deems fit, to collect the money by way of suit.
If this be the right interpretation of the word “assignment” which, I take it, really means transfer, then it cannot be said that, under the Transfer of Property Act, the document by which the assignment is created must be a registered deed.
Further, the question a rises whether there need be any document at all. I do not suggest that the assignment may be made orally; what I mean is, whether there need be any document purporting to be a deed of assignment, apart from a mere order of the court authorising a particular person to institute a suit. In my opinion the order of the court alone would do and no deed is called for. If the authorisation (assignment) may be made by an order of the court, it would not be required to be registered under the registration law and would, besides, be not affected by the provisions of the Transfer of Property Act itself. Under section 2(d), Transfer of Property Act, the provisions of the Act are not to affect any transfer made by an order of a court of competent jurisdiction.
For these reasons, I agree with the learned Chief Justice in answering the question in the way he proposes to answer it.
Boys, J.:— Concurred in the answer.
By the Court:— The answer to the question referred is that the assignment need not be made by a regularly stamped and registered deed of sale but may be made by an order passed by the court.
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