Beaman, J.:— This is a suit by the plaintiff against the Official Assignee to recover a sum of Rs. 2,000 secured by the mortgage of a decretal debt by an instrument dated the 9th of June 1910. The defendant replies that the suit is barred by section 17 of the present Presidency Towns Insolvency Act, as no leave has been obtained. In support of that contention I am referred to a recent judgment delivered by my brother Davar, J., in which he takes that view. It appears that shortly afterwards upon a motion before Heaton, J., this judgment was cited and that learned Judge, without expressing any opinion of his own, thought it right to follow it. It can only be with the greatest reluctance and the utmost deference to the opinion of my brother Davar, J., that I do not adopt the same view, but I feel unable to accept the conclusion reached by Davar, J. After giving his judgment my best attention, I am sensible that there is much to be said for the view he takes and that he has said it as well and as forcibly as possible, yet it appears to me that before that conclusion can be established the language of section 17 with its proviso needs so much interpretation even going the length of inserting words, which are not to be found in the section or the proviso itself, that I should hesitate long before departing from the plain and only meaning of the language used by the Legislature. The concluding words of the proviso seem to me to be conclusive; for if there were no such section as section 17 how could it be said that a secured creditor might not realise his security in the ordinary way by means of a suit? In some cases it is not easy to say how he could do so by any other means. Take for example the case of an equitable mortgage. Having read the proviso with the section very carefully and duly considered all the reasoning contained in the judgment of my learned brother Davar, J., it still seems to me that section 17, which is taken verbatim from section 9 of the English Bankruptcy Act of 1883, does and is intended to save all the rights of secured creditors as they existed and were enforceable before the passing of that Act.
The defendant appealed against the judgment and decree of the learned Judge.
Kanga, with Taraporevala, for the defendant-appellant.
The principal questions are—
(1) Was Rs. 2,000 paid on the 1st of June 1910?
(2) No leave having been obtained is the suit not maintainable in view of section 17 of the Presidency Towns Insolvency Act?
The proviso to section 17 only refers to realisation outside the Court. If a suit has to be filed the mortgagee must obtain the leave of the Court. Power of a secured creditor does not mean a right to sue.
The Transfer of Property Act (IV of 1882), sections 67 and 68, speak of a mortgagee's right to sue, not power to sue. (Refers to proviso as to powers in sections 6 to 9 of the Trustees and Mortgagees Powers. Act, XXVIII of 1866.) The Civil Procedure Code speaks of right to sue, not power to sue. Even the Official Assignee must have leave to sue before filing a suit.
Under section 18 of the Act the Court could order a stay even ill a foreclosure suit.
Courses open to a secured creditor, Rule 3, 2nd Schedule and section 86 of the Act.
Refers to sections 12 and 72 of the Bankruptcy Act (32 and 33 Viet. c. 71): White v. Simmons(1). Lloyd v. David Lloycl & Co.(2); Waddell v. Toleman(3).
Strangman (Advocate. General), with Desai, for the plaintiff-respondent.
Kanga replies.
Scott, C.J:— Two questions have been argued in this appeal, first, whether the plaintiff was the assignee by way of mortgage of the insolvent's decree, and, secondly, whether this suit, instituted without the leave of the Court, is barred as falling under the general prohibition of suits without such leave contained in section 17 of the Presidency Towns Insolvency Act or whether it is saved by the proviso, that the section, shall not affect the power of any secured creditor to realise or otherwise deal with his security in the same manner as he would have been entitled to realise or deal with it if this section, had not been passed.
On the first question there can be no doubt that the decision must be in the affirmative for the evidence is all one way and establishes the claim.
The Official Assignee, having executed a decree which had been assigned to the plaintiff by way of security, is in the position of a mortgagor who has sold the mortgaged property and is in possession of the sale proceeds. Until the claim of the mortgagee is satisfied, the insolvent or his Official Assignee has no right to the proceeds of the decree. It is argued that the saving proviso to section 17 does not cover the present suit because the power of a secured creditor to realise his security does-not include a suit for enforcement of his rights. We are unable to accept this view. A suit is one of the recognised methods of realisation of mortgage securities. The expression realise his security’ is quite an appropriate and well-recognised term to include all the remedies of the mortgagee. The following are examples of its use in practice in relation to mortgagees suits.
In Lloyd v. David Lloyd & Co., Jessel M.R says.: “Now, as a rule, a mortgagee has a right to realise his security, and of course, as incidental to that, a right to bring an action for foreclosure.”
In Yate Lee on Bankruptcy Act of 1883 (3rd Edn.), under G.R 73 (page 627) the following note occurs:—
“In 1852 by 15 and 16 Viet. c. 86, section 48, the court of chancery was, for the first time, authorised to direct the sale of a mortgaged property, instead of a foreclosure of the equity of redemption; and, from that time, applications by a mortgagee for realisation of a security given by a mortgagor who became bankrupt, were usually made in chancery, the reason being that in chancery the mortgagee, as plaintiff, usually had the conduct of the sale, whereas under the rules the trustee of the mortgagor had the conduct unless otherwise ordered, and that under the rules the trustee's costs were made a charge on the property, and might have priority over the mortgage, contrary to the practice in chancery which postponed them to the mortgagee's claim. This is still the case under the present rules; and a mortgagee can, therefore, generally realise his security to greater advantage, by applying to the chancery division, than by applying in bankruptcy.”
Lastly, we may refer to a rule in pari materia, viz., Rule 14(3) of the Companies Winding-up Rules, 1892, “Provided always that nothing in this Rule or in Order XLIX, rule 5, of the Rules of the Supreme Court, 1883, shall authorise the transfer of any action by a mortgagee or debenture holder for the purpose of realising his security.”
The necessity for these illustrations arises from the fact that in Suit No. 47 of 1912, Lalchand v. Balkrishna.
Davar, J.:— held that the words “power to realise” in the proviso to section 17 only had reference to the powers of mortgagees or pledgees to sell the property mortgaged or hypothecated to them without recourse to a suit. In White v. Simmons, in dealing with a proviso in the same words as that now under discussion, Lord Hatherley declined to hold that where there was “an express reservation of all rights, a mortgagee should be precluded from proceeding in equity to enforce his security
In our opinion the learned Judge in the present case was right in holding that the proviso to section 17 covers this suit as a suit by a mortgagee to realise his security.
The appeal must be dismissed with costs.
Attorneys for the appellant: Bicknell, Merwanji, Romer & Co.
Attorneys for the respondent: Surajmal & Co.
Appeal dismissed.
H.S.C