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  • SECTION 99 TRANSFER OF PROPERTY ACT
  • Order II, rule 2, sub-rule (3), of the Civil Procedure Code,
  • Order XXXIV, rule 14, of the Civil Procedure Code,
  • Order II, rule 2, of the Civil Procedure Code,
  • Order II, rule 2, and the provisions
  • Order II, rule 2, sub-rule (3).
  • TRANSFER OF PROPERTY ACT
  • Order II, rule 2, applies)
  • rule 14 of Order XXXIV
  • Order XXXIV, rule 14(1),
  • Order II, rule 2,
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Cites
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
Judges
Acts
  • SECTION 99 TRANSFER OF PROPERTY ACT
  • Order II, rule 2, sub-rule (3), of the Civil Procedure Code,
  • Order XXXIV, rule 14, of the Civil Procedure Code,
  • Order II, rule 2, of the Civil Procedure Code,
  • Order II, rule 2, and the provisions
  • Order II, rule 2, sub-rule (3).
  • TRANSFER OF PROPERTY ACT
  • Order II, rule 2, applies)
  • rule 14 of Order XXXIV
  • Order XXXIV, rule 14(1),
  • Order II, rule 2,
Smart Summary

Structured Summary of the Opinion (Beaumont, C.J.; Blackwell, J.)

Factual and Procedural Background

Plaintiffs received a pledge on April 11, 1930 to secure Rs. 50,000 over machinery, types and other articles of the Shri Venkateshvar Press; the pledgors were a firm described in the record as Shrikissondas (the original defendants). The plaintiffs sued on August 1, 1930 to enforce the pledge.

On August 19, 1930 another suit was begun by Murlidhar Shrinivas (an infant) claiming, among other reliefs, that the plaintiffs' mortgage was not binding on him (referred to in the opinion as defendant No. 4's suit). On August 25 an order in the plaintiffs' suit appointed one of the plaintiffs receiver and manager of the press (with a proviso that the receiver not act while interest and instalments were paid). On September 9 a Court Receiver was appointed in defendant No. 4's suit (by consent). On the same day defendants Nos. 2 and 3 were adjudicated insolvent.

The plaint in the present suit was then amended to add defendants Nos. 2, 3, 4 and 6 and the Official Assignee (defendant No. 5) claiming through the insolvents. On October 7 an order in this suit directed the receiver appointed in defendant No. 4's suit to pay Rs. 1,500 per month to the plaintiffs out of funds of the press; that arrangement was subsequently confirmed by an order made in defendant No. 4's suit on November 11, 1930. A decree dated April 9, 1931 (the decree under challenge) declared an amount of about Rs. 11,497 to be due to the plaintiffs, contained directions as to amounts due to defendant No. 6 (a subsequent mortgagee), provided for redemption and for continued payments of Rs. 1,500 per month by the receiver in defendant No. 4's suit, and included provisions for redemption of defendant No. 6's charge and for sale if not redeemed.

Legal Issues Presented

  1. Whether sums of Rs. 1,500 per month paid by a receiver in a separate suit (defendant No. 4's suit) out of moneys in the receiver's hands could properly be credited to the plaintiffs' debt and, relatedly, whether the Official Assignee could require the plaintiffs to repay any portion of those sums on the ground that they were paid out of assets not subject to the plaintiffs' charge.
  2. Whether a subsequent mortgagee (defendant No. 6) who obtained a personal decree in a summary suit can, without the leave required by Order II, rule 2 of the Civil Procedure Code, subsequently enforce his mortgage/security in the same or another suit (including by counter-claim or by seeking foreclosure), and whether Order XXXIV, rule 14(1) of the Civil Procedure Code (which permits a mortgagee to institute a suit for sale notwithstanding Order II, rule 2) applies to mortgages of movable property or is confined to mortgages of immovable property.
  3. Whether the Court in the present suit had jurisdiction to order a receiver appointed in a distinct suit (defendant No. 4's suit) to make continuing payments out of the net income of the press (i.e., whether the decree could direct a receiver in another suit to make payments out of assets not covered by the plaintiffs' security).

Arguments of the Parties

Appellant (Official Assignee of defendants Nos. 2 and 3)

  • Contended that the monthly payments of Rs. 1,500 made by the receiver in the other suit were paid out of properties not subject to the plaintiffs' charge and therefore improperly reduced the amount found due to the plaintiffs; this, the appellant said, indirectly benefited the second incumbrancer (defendant No. 6) and prejudiced the unsecured creditors of the insolvents.
  • Argued that Order XXXIV, rule 14 should be read as confined to immovable property and that the orders directing payments by a receiver in another suit (and payments out of assets not covered by the plaintiffs' security) were improper and beyond jurisdiction.

Defendant No. 6 (as argued by Mr. Coltman)

  • Asserted that defendant No. 6, having obtained a personal decree in a summary suit for the amount he paid under a guarantee, was nonetheless entitled to enforce his mortgage/security in this suit (he filed a counter-claim seeking leave to rely on the summary-suit proceedings and to enforce his charge).
  • Contended that (a) it should be assumed that leave to omit suing on the mortgage (as required by Order II, rule 2) had been obtained under Order II, rule 2(3); and (b) alternatively that Order XXXIV, rule 14(1) permits a mortgagee to institute a suit for sale notwithstanding Order II, rule 2, and that rule 14 should be read to cover mortgages of movable as well as immovable property; and (c) if Order XXXIV did not apply, English practice on successive incumbrancers (successive rights of redemption and foreclosure) should be followed so that the court in one action could work out the rights of multiple incumbrancers.

Respondent / Plaintiffs (as reflected in the record)

  • The plaintiffs received the Rs. 1,500 monthly payments under orders of the Court (first under an order in this suit of October 7 and then under an order in the other suit of November 11) and credited those sums in reduction of their debt; the record records the plaintiffs accepting payment from the court-appointed receiver rather than from the insolvents.

Other counsel positions (as recorded)

  • Mr. Engineer (for the appellant) argued that Order XXXIV should be confined to immovable property and that the heading and historical origin of Order XXXIV supported that construction.
  • On the practice point, both sides referred to English authorities and secondary authorities (Seton's Judgments and Orders) regarding how successive incumbrancers are dealt with in one proceeding; the judges considered these authorities in the context of whether a puisne (subsequent) mortgagee can, as defendant in a prior mortgagee's suit, claim foreclosure-type relief without being a plaintiff.

Table of Precedents and Authorities Cited

Precedent / Authority Rule or Principle Cited For Application by the Court
Order II, rule 2, Civil Procedure Code (including sub-rule (3) and the Explanation) Requires that every suit include the whole claim arising from the cause of action; if a party omits relief (such as enforcing a collateral security) without leave, he cannot later sue for it; the Explanation treats an obligation and a collateral security as one cause of action. The Court applied this rule to hold that defendant No. 6, having obtained a personal decree and not showing leave to omit suing on the mortgage, could not enforce his mortgage by way of a counter-claim or otherwise proceed as a plaintiff to enforce it. His rights are therefore limited to those obtainable without suing to enforce the mortgage (e.g., proving the mortgage and redeeming).
Order XXXIV, rule 14(1), Civil Procedure Code Provides that where a mortgagee has obtained a decree for payment arising under the mortgage, he shall not be entitled to bring the mortgaged property to sale otherwise than by instituting a suit for sale in enforcement of the mortgage, and that he may institute such suit notwithstanding anything in Order II, rule 2. The Court considered whether this rule took the case out of Order II, rule 2. It concluded that Order XXXIV must be read in context and applied only to mortgages of immovable property (see Transfer of Property Act origin and heading of Order XXXIV), so rule 14 did not assist defendant No. 6 (whose charge was on movable property).
Transfer of Property Act — section 99 (historical origin of Order XXXIV rule 14) and section 100 (definition of "charged") Section 99 (as the historical source of Order XXXIV rule 14) and section 100 (defining "charged" as applying to immovable property) show that the provisions were originally confined to mortgages/charges of immovable property. The Court used the historical origin in the Transfer of Property Act and the chapter headings to support construing Order XXXIV as confined to immovable-property mortgages, reinforcing the conclusion that Order XXXIV rule 14 does not extend to mortgages of movable property.
In re Lloyd v. Lloyd (English case, cited) Illustrates English authority that successive incumbrancers are dealt with by giving successive rights of redemption and making successive orders for foreclosure; supports the proposition that a person holding a subsequent charge may be entitled to redeem and get payment from a surplus on sale. The Court relied on the English case as supportive authority for the proposition that defendant No. 6, as a person with a subsequent charge whose right to enforce the mortgage is restricted, is nonetheless entitled to prove his mortgage and (if the property is sold and proceeds exceed the plaintiffs' claims) to receive the balance to the extent of his charge.
Seton's Judgments and Orders (3rd volume, cited for practice) Describes the general English practice where multiple incumbrancers are present: mesne incumbrancers must successively redeem or be foreclosed; a first mortgagee seeking foreclosure must make all persons interested in the equity of redemption parties. The Court acknowledged this practice but held that, in the absence of statutory provision extending similar procedural rights to a defendant whose right to sue is barred, a puisne mortgagee could not, merely by being a defendant in the first mortgagee's action, claim foreclosure rights as if he were a plaintiff. The practice was persuasive but not decisive in expanding the defendant's rights.
Fletcher v. Birkenhead Corporation (English case, cited) Relied upon by counsel for the proposition that headings in statutes should be used only to resolve ambiguity and not to override plain unambiguous language. The Court considered the argument relying on this case but concluded (after reviewing the history and context) that the heading and historical origin could legitimately be read to limit the general words of Order XXXIV to immovable-property mortgages; therefore, the Court did not accept the opposing contention that the heading could be ignored in this instance.
Union Steamship Company of New Zealand v. Melbourne Harbour Trust Commissioner (English case, cited) Part of the line of authorities relied on by counsel arguing the plain words should control and headings should not be used to restrict language. The Court referenced this and related authority as representing one line of cases on the use of headings; after weighing the history and context, the Court preferred a construction limiting Order XXXIV to immovable-property mortgages.
Eastern Counties, etc., Companies v. Marriage (English case, cited) Represented the other line of authorities relied on which accept a role for headings and historical context in construing statutory provisions. The Court relied upon this approach (and the historical derivation from the Transfer of Property Act) to justify reading the heading and history into Order XXXIV and confining its operation to immovable property.

Court's Reasoning and Analysis

The Court's reasoning proceeds in distinct parts corresponding to the two objections raised by the appellant.

1. Payments of Rs. 1,500 per month and the plaintiffs' credit

- The payments of Rs. 1,500 were made under an order of October 7 in the present suit and were confirmed and continued by an order of November 11 in defendant No. 4's suit. The Court records that the October 7 order appears to have been made without proper summons and possibly without jurisdiction because it purported to order a receiver in another suit to make payments; the November 11 order, however, was made in the other suit (Suit No. 1808 of 1930) and was not appealed by the Official Assignee, who thereby became bound by it.

- Beaumont, C.J. accepts the practical explanation that the plaintiffs were paid because they had a charge on machinery and assets actually being used by a receiver to carry on the business; if plaintiffs had insisted upon immediate legal enforcement of a strict right (i.e., taking possession of the charged machinery), the business would have been paralysed. The receiver (in the other suit), with the concurrence of parties in that suit, agreed to make payments as an arrangement to keep the business going while reducing the plaintiffs' debt.

- Because the plaintiffs received the payments from an officer of the Court under orders of the Court (and not from the insolvents personally), Beaumont held it was "quite impossible" for the Court in this appeal to order the plaintiffs to repay those amounts. Blackwell, J. reached the same conclusion but emphasized that the appellant had not appealed the relevant order in the other suit and had consented to a subsequent consent order of February 12, 1931 continuing the payments; on this basis Blackwell held the appellant was precluded from challenging the past payments.

2. Jurisdictional problem as to continuing payments out of the press income

- Both judges agreed that the Court sitting in the present suit had no jurisdiction to direct the receiver in another suit to continue making payments out of the net income of the press when such income is not part of the plaintiffs' charge. Beaumont described that part of the decree (ordering continued payments by the other-suit receiver from press income) as wrong and to be struck out; Blackwell concurred that this portion was "wholly bad" as it directed payments out of assets not covered by the plaintiffs' security and ordered a receiver in another suit (whose parties were not before the Court) to make payments.

3. Rights of defendant No. 6 (subsequent mortgagee) under Order II r.2 and Order XXXIV r.14

- The Court framed the legal difficulty: Order II, rule 2 (with its Explanation) treats an obligation and its collateral security as one cause of action, and, unless leave is obtained under sub-rule (3), a party who obtains a personal judgment without suing on the security cannot later sue to enforce the security.

- Beaumont examined the record and found no evidence that defendant No. 6 had obtained leave under Order II, rule 2(3) to omit suing on his mortgage when he prosecuted his summary suit; the summary-suit plaint contained no endorsement of leave (the usual practice), and the defendant himself pleaded and testified only to having obtained a personal judgment; hence the Court must assume that no leave was obtained.

- Mr. Coltman argued that Order XXXIV, rule 14(1) permits a mortgagee to bring a suit for sale notwithstanding Order II, rule 2, and that rule 14 should be read to include mortgages of movable property. The Court undertook a contextual and historical analysis: Order XXXIV was taken from the Transfer of Property Act (section 99) and appears in the Civil Procedure Code under the heading "Suits relating to Mortgages of Immoveable Property." The Transfer of Property Act provisions (and the definition of "charged") relate to immovable property. Reading the Order in its historical and textual context, the Court concluded that Order XXXIV is confined to mortgages of immovable property and therefore does not operate to take defendant No. 6's case out of Order II, rule 2.

- The Court nevertheless held that Order II, rule 2 does not extinguish the mortgage itself; rather, it prevents suing to enforce the mortgage without leave. Consequently, defendant No. 6's mortgage remains "alive" and he is entitled to such rights as he can obtain without suing to enforce it. The Court determined that in the plaintiffs' suit defendant No. 6 (as a defendant) may prove his mortgage and, if the property is sold in that suit and proceeds exceed the plaintiffs' claim, the surplus must be paid to defendant No. 6 to the extent of his charge (i.e., defendant No. 6 has the first right to redeem the plaintiffs' mortgage insofar as his charge permits).

- However, the Court rejected the submission that defendant No. 6, merely by being a defendant, could claim as of right the more extensive remedies generally available to a plaintiff (for example, claiming foreclosure of subsequent incumbrancers or seeking a final decree to enforce his mortgage). The judges reasoned that if a puisne mortgagee claims foreclosure he is in substance suing to enforce his mortgage and cannot circumvent the limitation imposed by Order II, rule 2 by invoking his position as a defendant. The Court therefore confined defendant No. 6's rights in the decree to: (a) the right to prove his mortgage in the plaintiffs' suit; (b) the first right to redeem the plaintiffs' mortgage; and (c) the right to any balance of the proceeds of sale if the plaintiffs' mortgage is not redeemed.

4. Costs and ancillary directions

- The Court directed that defendant No. 6 shall pay half of the costs of the appellant, with no order as to the other half. The decree as originally drawn was varied in the particular respects described above.

Holding and Implications

CORE HOLDING: The decree under appeal was varied.

The Court's principal dispositive rulings (direct effects on the parties) were:

  • The Court rejected the Official Assignee's entitlement to require the plaintiffs to repay the monthly Rs. 1,500 payments that had been made by the receiver under court orders; those payments properly reduced the plaintiffs' debt and cannot now be clawed back in this suit.
  • That part of the decree purporting to order the receiver appointed in another suit (defendant No. 4's suit) to continue making payments out of the net income of the press (income not covered by the plaintiffs' charge) was held to be beyond the jurisdiction of the Court in this suit and was struck out / varied.
  • Defendant No. 6's counter-claim to enforce his mortgage was barred by Order II, rule 2 because he obtained a personal decree in a summary suit without showing leave to omit the mortgage; Order XXXIV, rule 14(1) was construed as confined to mortgages of immovable property and thus did not permit him to proceed to enforce a mortgage of movable property notwithstanding Order II, rule 2.
  • Nonetheless, defendant No. 6's mortgage remained effective; he was entitled to prove his mortgage in the plaintiffs' suit, to the first right to redeem the plaintiffs' mortgage, and to receive any balance of sale proceeds (to the extent of his charge) if the plaintiffs' mortgage were not redeemed. He was not entitled, as a defendant, to press for foreclosure or a final decree enforcing his mortgage in the way a plaintiff could (that would amount to suing to enforce the mortgage and be barred without leave).
  • Costs: defendant No. 6 to pay half of the appellant's costs; no order as to the other half.

Broader legal implications reflected in the opinion: the Court adopted a construction that Order XXXIV of the Civil Procedure Code should be read in light of its heading and historical origin (derived from the Transfer of Property Act) and confined that Order to mortgages of immovable property. The Court also emphasized the procedural effect of Order II, rule 2 (and its Explanation) in preventing a party who obtains only a personal decree from later suing to enforce collateral security unless leave was obtained.

Disposition and Formal Conclusion

The final order recorded in the judgment is: "Decree varied." The judges (Beaumont, C.J. and Blackwell, J.) concurred in the modifications specified above and ordered costs as noted.

Attorneys of Record (as listed in the opinion)

  • Attorneys for Official Assignee: Messrs Captain & Vaidya.
  • Attorneys for plaintiffs: Messrs Khandwalla & Chhotalal.
  • Attorneys for defendant No. 1: Messrs Vachha & Co.
  • Attorneys for defendant No. 4: Messrs Hiralal M. Mehta & Co.
  • Attorneys for defendant No. 6: Messrs Malvi & Co.
Decree varied.

This summary is confined to the matters expressly addressed in the provided opinion and does not introduce information not contained in that opinion.

    Official Assignee Of Bombay v. Chimniram Motilal

    Beaumont, C.J:—

    This is an appeal by the Official Assignee as representing the estates of defendants Nos. 2 and 3, who are insolvents, from a decree passed by Mr. Justice Rangnekar, but as it was an ex parte decree the matters which have been argued before us were not discussed before the learned Judge. Two objections are taken by the appellant to the decree; the first is against the plaintiffs in the suit, and the second is against defendant No. 6 in the suit who was a subsequent mortgagee. I will deal with the case against the plaintiffs first.

    On April 11, 1930, the plaintiffs were given a pledge to secure Rs. 50,000 on the machinery, types and other articles appertaining to a printing press known as Shri Venkateshvar Press, the pledgors being a firm called ??? Shrikissondas, who were the original defendants to the suit. On August 1, the plaintiffs commenced this suit to enforce their pledge. On August 19, another suit was commenced by the person who afterwards became defendant No. 4 in this suit—Murlidhar Shrinivas, who was an infant, the relief in his suit including a claim that the plaintiffs' mortgage was not binding on him. I will refer to that suit as defendant No. 4's suit. On August 25, an order was made in the present suit appointing one of the plaintiffs receiver and manager of the press. The order included a provision that the receiver was not to act as long as the defendants paid interest and instalments of principal as therein provided. I may point out in passing that the order seems to have been wrong in appointing a manager, because the plaintiffs' pledge did not include the business of the press, it only included certain assets of that business, and there was, I think, no case for the appointment of a manager. On September 9, the Court Receiver was appointed receiver of the press in defendant No. 4's suit, that order being made by consent. On the same day defendants Nos. 2 and 3 in the present suit were adjudicated insolvents. Shortly after that, the plaint in this suit was amended by leave of the Court, and defendants Nos. 2, 3, 4 and 6 were added, and also the Official Assignee defendant No. 5 as claiming through the insolvent defendants Nos. 2 and 3. On October 7, an order was made in this suit that the receiver appointed in defendant No. 4's suit should, among other things, pay Rs. 1,500 a month to the plaintiffs. Those payments were to be made out of the funds standing to the credit of the Shri Venkateshvar Press. That order again appears to be an order made without jurisdiction. I gather from the form of the order that it was a consent order made without any summons having been taken out, and I think that these consent orders in chambers ought not to be made unless a summons is taken out. If a summons had been taken out in this case, the ??? Judge's attention would have been drawn to the fact that he was being asked to order a receiver in another suit to pay certain money to the plaintiffs in this suit and he would have appreciated that he could not do that without having the persons interested in the other suit before the Court. However, that order was made, and no great harm was done, because on November 11, an order was made in defendant No. 4's suit which confirmed the payments directed to be made by the order in this suit of October 7, and directed such payments to be continued. There was another order made by consent in defendant No. 4's suit on February 12, 1931, which is not, I think, material, and then on April 9, the decree appealed from was made in this suit. By that decree it was declared that a sum of Rs. 11,497 odd was due to the plaintiffs together with certain costs, and then there was a declaration as to the amount due to defendant No. 6—I will refer to the facts relating to his position presently—and then there was provision for redemption by the plaintiffs and defendant No. 6 and a provision that the payments of Rs. 1,500 per month by the receiver appointed in defendant No. 4's suit should continue. Then there are provisions for the redemption of the charge in favour of defendant No. 6 and for sale at the instance of the plaintiffs if not redeemed, or of defendant No. 6 if not redeemed.

    Now, so far as the plaintiffs are concerned, the objection taken to the order is that these sums of Rs. 1,500 per month paid under orders of the Court out of moneys in the hands of the receiver in defendant No. 4's suit ought not to have been deducted, as they were from the amount due to the plaintiffs, and that therefore the sum of Rs. 11,497 odd declared to be due to the plaintiffs should in fact have been a greater sum. At first sight it is difficult to see why it is to the appellant's interest that the plaintiffs should have a greater sum found due to them than the sum they admit to be due, but the contention of the appellant, representing the unsecured creditors of defendants Nos. 2 and 3, is that in fact these sums of Rs. 1,500 per month have been ??? out of properties not subject to the plaintiffs' charge, and that they have really benefited the second incumbrancer, namely, defendant No. 6, and that in the result the unsecured creditors have lost by those payments. Therefore the appellant claims that the plaintiffs should be ordered to repay a part at any rate of these payments, and that although thereby their debt will increase, still they can only prove for any balance which may remain after realising their security. To my mind that claim is wholly untenable. The plaintiffs were paid these sums of Rs. 1,500 per month because they had a charge upon the machinery and assets which were being used by the receiver in defendant No. 4's suit to carry on the business, and if the plaintiffs had insisted on their legal rights, and obtained a receiver of that machinery and those assets, the business would have been paralysed; therefore, the receiver in defendant No. 4's suit, no doubt with the concurrence of the parties in that suit, was prepared to pay this sum of Rs. 1,500 a month to the plaintiffs in reduction of their debt, and, the plaintiffs having received that sum, not from the insolvents, but from an officer of the Court who made the payments under orders of the Court, it seems to me quite impossible for this Court to order the plaintiffs to repay anything.

    The only criticism I have to make on the decree, in so far as it affects the plaintiffs, is in respect of the provision that the receiver in defendant No. 4's suit is to continue to make payments with prejudice (whatever that means) out of the net income of the press towards satisfaction of the decretal amount and costs pursuant to the order of October 7, 1930. As I have already pointed out, I think the Court in this suit has no jurisdiction to order a receiver in another suit to make payments to the plaintiffs in this suit, and a fortiori to order those payments to be made out of the income of the press which is no part of the plaintiffs' charge. That part of the order, I think, is wrong and must be struck out.

    I now come to ??? position of defendant No. 6, the point against him being quite distinct from that against the plaintiffs. On May 29, ???, defendant No. 6 was given a form of charge, which is Ex. No. 1, on the Shri Venkateshvar Printing Press (such charge being subject to the plaintiffs' charge) in order to secure a sum of a lac of rupees which defendant No. 6 had guaranteed to the bank of the defendant firm. It is not disputed that sum was subsequently paid by defendant No. 6, and therefore his security became effective. On September 12, 1930, defendant No. 6 obtained a decree in a summary suit for payment of one lac of rupees odd, being in respect of the amount paid by him under the guarantee. I have already stated that defendant No. 6 was joined as a defendant in this suit in October 1930, and on January 7, 1931, he put in a counter-claim in this suit. In that counter-claim he mentions the decree obtained in the summary suit on September 12, 1930, and he craves leave to rely on the proceedings in the said suit and on the decree when produced; and his counter-claim then asks that his security against the press may be enforced.

    Now the first point taken against the sixth defendant by the appellant is that, having regard to the fact that he obtained a personal judgment for the amount of his debt, he cannot sue to enforce his security, having regard to Order II, rule 2, of the Civil Procedure Code. So far as material that Order provides that every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action, and then in sub-rule (3) it is provided that a person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs; but if he omits, except with the leave of the Court, to sue for all such reliefs, he shall not afterwards sue for any relief so omitted; and then the explanation provides that for the purposes of this rule an obligation and a collateral security for its performance and successive claims arising under the same obligation shall be deemed respectively to constitute one cause of action. Having regard ??? that explanation it is, I think, clear that, (if the rule applies at all), defendant No. 6, having obtained a personal judgment for his debt, cannot, without the leave of the Court, sue to enforce his mortgage security.

    The first point taken by Mr. Coltman on behalf of defendant No. 6 is that we ought to assume that the leave of the Court was obtained under Order II, rule 2, sub-rule (3). But, in my opinion, we cannot make any such assumption. The defendant has himself pleaded the personal judgment, and not only that, but when he went into the witness-box he gave evidence that he had obtained a personal judgment. He craves leave to rely on the proceedings in the summary suit, which entitles this Court to look at the plaint in the summary suit, and the plaint contains no record of leave having been given. It is not disputed that the normal practice is to endorse such leave on the plaint. It seems to me that defendant No. 6 having pleaded that he has obtained a personal judgment, it is then a condition precedent to his enforcing his mortgage (if Order II, rule 2, applies) that he should show that leave has been obtained, and as he has not shown it, we must assume that it was not obtained.

    The next point taken by Mr. Coltman is that Order II, rule 2, does not apply because he is entitled under Order XXXIV, rule 14(1), to claim a sale of the mortgaged property, notwithstanding the personal judgment. That rule provides:—

    “Where a mortgagee has obtained a decree for the payment of money in satisfaction of a claim arising under the mortgage, he shall not be entitled to bring the mortgaged property to sale otherwise than by instituting a suit for sale in enforcement of the mortgage, and he may institute such suit notwithstanding anything contained in Order II, rule 2.”

    If that rule applies it takes this case out of Order II, rule 2, and justifies defendant No. 6's counter-claim. But the answer made by Mr. Engineer on behalf of the appellants is that Order XXXIV ??? to mortgages on immoveable property, a point upon which, curiously enough, there appears to be no authority. If one reads rule 14 of Order XXXIV alone in the absence of any context, there would certainly seem to be no reason for confining it to mortgages of immoveable property. The words used are “mortgagee”, “mortgage” and “mortgaged property” all of which are applicable, as much to moveable as to immoveable property. Nor do I myself see any sufficient reason in the nature of things why the prohibition contained in rule 14 against bringing the mortgaged property to sale otherwise than in a suit for sale in enforcement of the mortgage should not apply as much to a mortgagee of moveable property as to a mortgagee of immoveable property. But in construing this rule we must have regard to the context in which it appears, and I think also to its historical origin. Order XXXIV was incorporated in the Civil Procedure Code in 1908, and the provisions of the Order were taken from the Transfer of Property Act. Rule 14 was section 99 of the Transfer of Property Act and that section appears in Chapter IV of the Act which is headed “Of Mortgages of Immoveable Property and Charges.” “Charged” is defined in section 100 of the Act and applies only to charges of immoveable property. So that, Order XXXIV was substituted for sections in the Transfer of Property Act which dealt only with mortgages of immoveable property, and I think a presumption arises that in taking these provisions out of an Act relating to property and incorporating them in an Act relating to procedure the legislature did not intend to extend the scope of the provisions, although, no doubt, that presumption would be rebutted if the legislature had used language to show that it did intend to extend the scope of the provisions. Now, not only is there no reference in Order XXXIV to moveable property, but the Order is headed “Suits relating to Mortgages of Immoveable Property”. Then the substantive provisions of the Order use such words as “mortgagee”, “mortgage security” and “mortgage property” ??? any distinction being drawn between mortgages of moveable and immoveable property, and it seems to me that in those circumstances we must read the heading as in effect defining those general words and Limiting their operation to mortgages on immoveable property. We were referred to a certain number of cases as to the effect of headings in an Act of Parliament, and Mr. Coltman contends, relying particularly on the case of Fletcher v. Birkenhead Corporation that the Court can only look at a heading in order to assist in the construction of some word or phrase which is doubtful or ambiguous, and he says that the words of Order XXXIV, “mortgage”, “mortgage security” and so forth are not ambiguous, but it seems to me that is putting the case on too narrow a ground and that we are entitled to look at the heading in order to confine the generality of the language used in the body of the Order. Reading Order XXXIV in the light of the heading, and having regard to the history of the Order, we must, in my judgment, construe it as confined entirely to mortgages of immoveable property. That being so, I think that the counter-claim of defendant No. 6 necessarily fails.

    But then Mr. Coltman says that even if that be so, Order II, rule 2, does not destroy the rights of defendant No. 6 under his mortgage; all that it does is to prevent him from suing to enforce those rights, and in so far as he may have rights which he can obtain without suing to enforce them Order II, rule 2, is no bar. I agree with that contention. I think that the mortgage of defendant No. 6 is still alive and that defendant No. 6 is entitled to all rights thereunder which he can obtain without suing to enforce them. So that the question really comes to this: what rights has defendant No. 6 as a defendant in the plaintiffs' suit, treating his counter-claim as gone? Now, the plaintiffs are suing to enforce what is in substance a first mortgage, and they are bound, therefore, to make defendant No. 6 a defendant as a person ??? be entitled to a subsequent mortgage. Defendant No. 6 is, in my opinion, entitled in the plaintiffs' suit to prove his mortgage, and, having proved his mortgage, I think that the Court is bound to decree to defendant No. 6 the first right to redeem the plaintiffs' mortgage. I think further that if the property is sold in the plaintiffs' suit, and the proceeds are brought into Court, and those proceeds are more than sufficient to pay the plaintiffs what is due to them, then the balance will have to be paid to defendant No. 6 as the person having a first charge on the equity of redemption, to the extent of course of his charge, and I think the order must so provide. The English cases cited by Mr. Coltman, and particularly the case of Lloyd, In re. Lloyd v. Lloyd, support that view. But, has he any further right? Mr. Coltman says that if Order XXXIV does not apply, then there are no rules as to the methods of enforcing a mortgage on personal property or as to the parties who should be brought before the Court, and that being so, he says we should follow the English practice in similar cases. Undoubtedly the English practice, where there are several mortgages, is to work out the rights of the parties by one order, that is to say, by giving successive rights of redemption and making successive orders for foreclosure. The general practice is stated in the third volume of Seton's Judgments and Orders (7th Ed.) at page 1909 in these terms:—

    “Where there are more incumbrancers than one, the mesne incumbrancers must successively redeem all prior to them, or be foreclosed; and must be redeemed by, or will be entitled to foreclose, all subsequent to them: and a first mortgagee seeking to foreclose must therefore necessarily make all persons interested in the equity of redemption parties to the action.”

    That undoubtedly is the practice of the English Courts, but the question which we have to determine is whether a puisne mortgagee whose right to enforce his mortgage is gone is entitled as of right merely in his capacity as a defendant in the first mortgagee's action to claim to foreclose the mortgagor. I am not aware myself any authority on the point, and the industry of counsel has failed to produce one. I should have thought that the point must have arisen in the somewhat analogous case of a second mortgage which is time-barred. I do not know of any case in which an order has been made giving a defendant, second mortgagee whose mortgage has become unenforceable, a right to foreclose subsequent mortgagees or the mortgagor, and in the absence of authority it seems to me that it is not a right which the defendant can claim in his capacity as a defendant. As long as defendant No. 6 confines himself to his rights as a defendant he is on safe ground, but directly he puts himself into what is substantially the position of a plaintiff, then he must fail having regard to Order II, rule 2. It seems to me that as soon as a puisne mortgagee claims to foreclose he is really suing to enforce his mortgage, and that we ought not to allow him to take advantage of his position as defendant in the prior mortgagee's suit to obtain something which the legislature has denied him the right, to claim as a plaintiff. That being so, I think that we must modify the decree made by the learned Judge by confining the rights of defendant No. 6 to a right to redeem the plaintiffs' mortgage and a right to receive any balance of the proceeds of sale derived from the sale of the property if the plaintiffs' mortgage is not redeemed. Mr. Engineer was prepared to go further than that and take an order in the terms of Form 9 in Appendix D to the Civil Procedure Code, but I think that form goes too far in a case such as this. In particular I think that a defendant whose right to enforce his mortgage is barred under Order II, rule 2, is not entitled to insist on provision 5(a) in that form, namely, that if the defendant-mortgagee pays into Court to the credit of this suit the amount adjudged due to the plaintiff but defendant No. 1 (the mortgagor) makes default in the payment of the said amount, defendant-mortgagee shall be at liberty to apply to the Court to keep the plaintiffs' mortgage alive for his benefit and to apply for a final decree. In view of Order II, rule 2, we cannot say that defendant No. 6 is entitled to apply for a final decree.

    As regards costs, defendant No. 6 shall pay half of the costs of the appellant and there will be no order as regards the costs of the other half.

    Blackwell, J.:—It has been contended by the appellant, the Official Assignee of the estate and effects of defendants Nos. 2 and 3, that the learned trial Judge was wrong in allowing the plaintiffs to get credit for certain interim payments that were made by the receiver in another suit out of the unsecured assets of the insolvents. But by an order dated November 11, 1930, which was made in the other suit, namely, Suit 1808 of 1930, an order which was opposed by the Official Assignee, the appellant in the present suit, it was ordered that the receiver out of the funds in his hands should pay Rs. 1,500 to the plaintiffs per month under a consent order dated October 7, 1930, which had been passed in the present suit. It is to be observed that the appellant was not a party to that order, and in my judgment it was an order which ought not to have been made. It was an order directing a receiver in another suit to make the payments therein provided. Not only were the parties in the other suit not before the Court but all the parties to the present suit were not before the Court either, and that order was made merely upon the affidavit of one of the partners of the plaintiff firm, it not being opposed by one Murlidhar Shrinivas who without being a party to the present suit had previously made an application in it. That is unfortunately the kind of order which is constantly made on the Original Side. Those orders come to be made because there is no summons taken out before the order is made. What happens is that attorneys go into the chambers of the learned Chamber Judge, present an order which they say is consented to and the learned Judge makes the order. He is not in a position to know whether the parties who ought to have been served have been served or whether it is otherwise a proper order. I hope that this practice will cease. However, the payment which was ordered to be made under that order of October 7, 1930, was later ordered to be made under the order, dated November 11, 1930, to which I have already referred, in a suit to which the appellant was a party. It has been contended by Mr. Engineer for the appellant that order of November 11 was expressed to be made without prejudice to the rights and contentions of the parties, and he contends that those words give to the appellant the right to challenge the payments made by the receiver. There are, however, no words in the order itself which expressly reserves such a right. The order for those payments as it seems to me would have been useless if they could have been challenged later, and but for an order directing such payments to be made, the plaintiffs might have insisted upon their right to a receiver and have paralysed the working of the press. In my opinion the words “without prejudice to the rights and contentions of the parties”, whatever they may mean, cannot mean that the appellant was to be at liberty to challenge the payments mader under those orders at a later date. The appellant did not appeal against the order of November 11, 1930, and, in my opinion, he is bound by it.

    It is next to be observed that the appellant consented to an order dated February 12, 1931, under which the payments by the receiver were continued upon the terms of the order of November 11, 1930, with certain immaterial variations. In my opinion the appellant is precluded by those orders from challenging now the payments which were ordered to be made and were made by the receiver in the other suit. In any event I fail to see how the appellant can seek in this suit to compel the plaintiffs to abandon the amounts paid to them by a receiver under orders of the Court for which they have given credit and to ask in this suit for a decree for a larger amount than Rs. 11,497 odd which they say is due to them. Accordingly, in my opinion, this contention of the appellant fails.

    On the other hand, in my view, the appellant does rightly complain of that part of the decree which orders the receiver in the other suit to make payments in the future out of assets not covered by the security on which the plaintiffs sue. That part of the order is, in my opinion, wholly bad not only because it directs payments out of assets not covered by the plaintiffs' security, but also because it directs a receiver in another suit, all the parties to which are not before the Court in this suit, to make the payments therein set out. To that extent, therefore, it seems to me that the present decree must be varied.

    As regards defendant No. 6, this case has been argued upon the footing that when defendant No. 6 brought a summary suit for the amount due to him by the mortgagors he did not obtain the leave of the Court to omit to sue in that suit on the mortgage as required by Order II, rule 2, sub-rule (3), of the Civil Procedure Code, if he wished to reserve his rights to enforce his mortgage in a Court of law. Mr. Coltman has argued that this is immaterial having regard to Order XXXIV, rule 14, of the Civil Procedure Code, which entitles a mortgagee to institute a mortgage suit notwithstanding anything contained in Order II, rule 2. Mr. Coltman contends that Order XXXIV extends to mortgages of moveable property. He submits that the word “property” throughout the Code means any kind of property and that is its plain meaning in rule 14 and in the other rules of Order XXXIV where the word “property” occurs. Accordingly, Mr. Coltman contends that you are not entitled to read the heading of Order XXXIV which is of “Suits relating to Mortgages of Immoveable Property” into each of the rules of that Order, because, as he contends, the words “mortgaged property” appearing therein plainly and unambiguously mean any kind of mortgaged property. In this connection he relies on the class of cases of which Union Steamship Company of New Zealand v. Melbourne Harbour Trust Commissioner and Fletcher v. Birkenhead Corporation(2) are instances. On the other hand, Mr. Engineer relies on another line of cases of which Eastern Counties, etc., Companies v. Marriage(3) is an instance. In my opinion, in order, to determine this question we must have some regard to the history of this matter and to circumstances under which the provisions of Order XXXIV came to be inserted in the Civil Procedure Code. The learned Chief Justice in his judgment has set out the history and I need not again refer to it. In Maxwell on the Interpretation of Statutes, 7th Edn., at p. 44, the question what effect is to be given to headings in a statute is dealt with as follows:—

    “The headings prefixed to sections or sets of sections in some modern statutes are regarded as preambles to those sections,”

    and a number of authorities are cited in support of that proposition. Then at p. 37 it is stated:—

    “The preamble of a statute has been said to be a good means of finding out its meaning, and, as it were, a key to the understanding of it; and, as it usually states, or professes to state, the general object and intention of the Legislature in passing the enactment, it may legitimately be consulted to solve any ambiguity, or to fix the meaning of words which may have more than one, or to keep the effect of the Act within its real scope, whenever the enacting part is in any of these respects open to doubt.”

    Then at page 39 it is said:—

    “But the preamble cannot either restrict or extend the enacting part, when the language and the object and scope of the Act are not open to doubt.”

    I think the observations made in Maxwell on the Interpretation of Statutes, to which I have referred, summarise the law on the matter accurately. Applying them to the present case it seems to me that you are entitled to read the heading of Order XXXIV into the various rules of that Order having regard to the history of the Order for the purpose of fixing the meaning of words which may have more than one meaning and for the purpose of keeping the effect of the Act within its real scope. That being my view of the matter, it seems to me that defendant No. 6 in this case is not entitled to rely upon his counter-claim, which is in the nature of a cross suit, and that Order II, rule 2, is a bar to that counter-claim.

    The question then next arises as to what are the rights of defendant No. 6 apart from his counter-claim. Mr. Coltman submits that if Order XXXIV does not apply to mortgages of moveable property, the English practice of ascertaining the rights of the parties by one order where there are several mortgages should be applied. I agree with Mr. Coltman that the effect of the explanation to Order II, rule 2, of the Civil Procedure Code, is not to extinguish the charge of defendant No. 6. I think that it merely prevents him from exercising in a Court of law any right, to relief under that charge. Mr. Coltman says that Order II, rule 2, is inapplicable to the position of defendant No. 6 in the present suit because he has not himself brought a suit but is before the Court as a defendant. It seems to me, however, that, when it was brought to the notice of the Court in evidence, as it was in the present case, that defendant No. 6 brought a summary suit and recovered a decree, it was then the duty of the Court to ascertain whether defendant No. 6 had reserved his rights to ask a Court of law subsequently to enforce his mortgage. It is plain that he did not ask the Court to reserve him any such right. That being so, in my opinion, having regard to the explanation to Order II, rule 2, and the provisions of that Order the Court ought not to allow defendant No. 6 to obtain as a defendant any relief, which he would not have been entitled to obtain as a plaintiff. Accordingly, I think that the rights of defendant No. 6 must be restricted to a right to redeem the plaintiffs' mortgage and a right to receive the balance of the proceeds of sale resulting from the sale of the property should the plaintiffs' mortgage not be redeemed. I agree that the decree must be modified in he manner indicated by the learned Chief Justice.

    Attorneys for Official Assignee: Messrs Captain & Vaidya.

    Attorneys for plaintiffs: Messrs Khandwalla & Chhotalal.

    Attorneys for defendant No. 1: Messrs Vachha & Co.

    Attorneys for defendant No. 4: Messrs Hiralal M. Mehta & Co.

    Attorneys for defendant No. 6: Messrs Malvi & Co.

    Decree varied.
    B.K.D
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    Official Assignee Of Bombay v. Chimniram Motilal
    (Aug 31, 1932)