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Ragunath Das And Others v. Sundar Das Khetri And Another
Factual and Procedural Background
This action concerns recovery of a leasehold colliery. The plaintiffs (the appellants in this appeal) claimed title to the property through the Official Assignee appointed in the insolvency of the lessees. An order under the Insolvent Debtors (India) Act, 1848, dated 8 September 1904, vested the property in the Official Assignee. At the date of that vesting order the colliery had already been attached in execution in execution case No. 303 of 1904 in which the lessees were judgment-debtors and the present respondents were judgment-creditors; an order for sale of the judgment-debtors' interest had been obtained in those execution proceedings. The Official Assignee, by order of the insolvency court, sold the property and the appellants claim title through that purchaser.
The respondents, however, obtained various orders in the execution proceedings: on 12 September 1904 the Judge stayed the sale directed in the execution proceedings; later, by orders dated 30 September 1904 and 3 November 1904, they obtained orders for issue and service on the Official Assignee of a notice calling on him to show cause why he should not be substituted in place of the judgment-debtors. A sale was later conducted in the execution proceedings, the respondents (having leave to bid) purchased, the sale was confirmed on 8 April 1905, and a certificate referring to the right, title and interest of the judgment-debtors as the property sold was obtained on 25 April 1905. The appellants disputed the respondents' title, and the case proceeded through the courts, with the Board (Their Lordships) ultimately advising that the appeal be allowed and setting aside the High Court decree of 4 June 1912 and restoring the Subordinate Judge's judgment of 8 September 1909.
Legal Issues Presented
- Whether the vesting order of 8 September 1904 under the Insolvent Debtors (India) Act, 1848, vested the colliery in the Official Assignee free from any charge in favour of judgment-creditors who had earlier obtained attachment and an order for sale in execution proceedings.
- Whether the execution sale subsequently conducted (after attempts to serve notices on the Official Assignee and orders to substitute him) could validly vest title in the respondents, given the vesting order and the procedural steps actually taken.
- Whether the notices and procedural steps taken by the respondents (including the notice they procured to be served and the substitution and sale orders obtained without further process) were sufficient to bind the Official Assignee and validate the execution sale.
- Whether a statute of limitations defence, as to certain machinery included in the Official Assignee's sale and sought to be recovered by the appellants, was available to the respondents in these proceedings.
Arguments of the Parties
Appellants' Arguments
- The appellants derive title through the purchaser at the sale conducted by the Official Assignee pursuant to the insolvency proceedings and the vesting order dated 8 September 1904 under the Insolvent Debtors (India) Act, 1848.
- Because the property vested in the Official Assignee by operation of law, any prior attachment and order for sale in the execution proceedings did not create a charge binding on the land against the Official Assignee or the property vested in him.
Respondents' Arguments
- The respondents relied on the earlier attachment in execution proceedings and on orders for sale obtained in those execution proceedings and on their purchase at the execution sale to claim title.
- They procured orders to issue and serve a notice calling on the Official Assignee to show cause why he should not be substituted in place of the judgment-debtors, and proceeded to obtain substitution and a direction that the sale continue; they treated those steps as sufficient to proceed with execution against what they regarded as the judgment-debtors' interest.
- Separately, in relation to certain machinery included in the Official Assignee's sale, the respondents suggested the statute of limitations might be a bar to the appellants' claim, though this defence was not raised earlier in the proceedings.
- At one point counsel for the respondents admitted that attachment in execution followed by an order for sale does not confer on a judgment-creditor any charge on the land (citation given by the court to Sarkies v. Mussumat Bandno Bace).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sarkies v. Mussumat Bandno Bace [1869] 1 N. W. P. H. C. R. 172 | Attachment in execution and subsequent order for sale do not confer on the judgment-creditor any charge on the land; an attachment prevents private alienation but does not invalidate an alienation by operation of law. | Accepted by the court and used to support the conclusion that the vesting order under the Insolvent Debtors Act deprived judgment-creditors of any charge against the property. |
| Goodall v. Mussoorie Bank Ltd. [1887] 10 All. 97 | Discussed in relation to the applicability of Sections 32 and 372 of the Civil Procedure Code after final decree; shows doubt about applicability. | Cited to show there is considerable doubt whether Sections 32 or 372 apply after final decree; the court noted no proceedings were taken under those sections here. |
| Malkarjun Bin Shidramappa v. Narhari Bin Shivappa [1900] 25 B. 337 = L. R. 27 I. A. 216 | Raised by respondents' counsel but not seen as bearing on the present appeal by Their Lordships. | Court observed that the case had nothing bearing on the present appeal and did not rely on it. |
| Gopal Chunder Chatterjee v. Gunamoni Dasi [1892] 20 C. 370 | Establishes that a notice under Section 248 of the Code is necessary for the Court to obtain jurisdiction to sell property by way of execution as against the legal representative of a deceased judgment-debtor (analogy used for necessity of proper notice to bind a party). | Applied by the court by analogy to demonstrate that a proper notice under Section 248 (or equivalent procedure) was required to bind the Official Assignee; absence of such proper notice rendered the execution sale irregular and inoperative. |
Court's Reasoning and Analysis
The court's analysis proceeds from the legal effect of the vesting order under the Insolvent Debtors (India) Act, 1848, and from the procedural requirements for binding third parties in execution proceedings:
- The 8 September 1904 order under the Insolvent Debtors Act vested the colliery in the Official Assignee. The court treated that vesting as operating by law to transfer the property free from any charge in favour of the judgment-creditors who had earlier obtained attachment and an order for sale. The court relied on the principle (citing Sarkies) that attachment and an order for sale do not create a charge on land sufficient to defeat a subsequent vesting by operation of law.
- Because the property had vested in the Official Assignee, the judge in the execution proceedings correctly stayed the execution sale on 12 September 1904: the judgment-debtors no longer had any interest in the property which could be sold. The court also noted section 49 of the Insolvent Debtors Act required such a stay where the debt was included in the insolvents' schedule.
- The court examined the steps taken to bring the Official Assignee before the execution court. It held that to bind the Official Assignee the proper process would have been an order for the issue and service of a notice under Section 248 of the Civil Procedure Code, 1882 (the Code then in force), calling on him to show cause why the decree should be executed against him. The notices actually obtained and served by the respondents were not proper Section 248 notices and did not call upon the Official Assignee to show cause why the decree should be executed against him.
- The court considered but rejected reliance on Sections 32 and 372 of the Code as alternative procedural routes: there was doubt about their applicability after final decree (Goodall cited) and, in any event, no proceedings appear to have been taken under those sections in this case (and no summons to appear and answer, if required, was served on the Official Assignee).
- Although the court assumed the notice procured by the respondents was duly served, it found that the Official Assignee took no steps in response and there is no evidence he knew an order for sale had been made. After the time to show cause expired, the respondents obtained an order substituting the Official Assignee and directing the sale to proceed, without further notice to him; the court found those steps inadequate and procedurally irregular.
- The sale in execution (at which the respondents became purchasers) was confirmed and a certificate issued referring to the judgment-debtors' right, title and interest as the property sold. The court found the sale to be "altogether irregular and inoperative" for three articulated reasons:
- The property had passed to the Official Assignee, so it was wrong to allow the execution sale to proceed as against the Official Assignee; the judgment-creditors had no charge on the land.
- No proper steps had been taken to bring the Official Assignee before the court and obtain an order binding him; accordingly, he was not bound by the execution proceedings.
- The judgment-debtors at the time of the sale had no right, title or interest which could be sold or vested in a purchaser; hence, the respondents acquired no title to the property.
- The court distinguished the present case from the cited authorities (notably the 27 Indian Appeals decision) where proper notice under the relevant provision had been served and the court had assumed jurisdiction to determine who was the legal representative, so that a sale held in execution could stand if purchasers had no notice of irregularity. In contrast, here no proper Section 248 notice was served and the respondents were responsible for procedural irregularities.
- Regarding the respondents' suggestion that the statute of limitations barred recovery of certain machinery: the court observed this point was not taken earlier in the proceedings, was not an issue settled by the trial court, and was not included among the respondents' grounds of appeal; the court therefore considered it too late to raise and noted it would require inquiry as to the nature of the machinery.
Holding and Implications
APPEAL ALLOWED
The Board advised that the appeal should be allowed. The decree of the High Court dated 4 June 1912 was to be set aside with costs both in the Board and in the courts below, and the judgment of the Subordinate Judge of Burdwan dated 8 September 1909 was to be restored.
Consequences for the parties:
- The respondents' execution sale and the certificate obtained in April 1905 were held irregular and inoperative, and the respondents thereby acquired no title to the colliery by that execution sale.
- The appellants' claim, founded on the vesting order under the Insolvent Debtors Act and the subsequent sale by the Official Assignee (through whom the appellants derive title), is upheld to the extent reflected by restoring the Subordinate Judge's judgment.
- Costs were awarded against the respondents both in the Board and in the courts below.
The opinion did not purport to establish a broader novel precedent beyond applying existing principles (as reflected in the authorities cited) concerning the effect of vesting orders, the limits of attachment and execution sales, and the procedural requirements to bind third parties such as an Official Assignee. The court expressly declined to entertain a late-raised statute of limitations defence regarding certain machinery.
Lord Parker:-
The action in which this appeal arises is an action for the recovery of a leasehold colliery. The plaintiffs (the present appellants) claimed title to the property under the Official Assignee in the insolvency of the lessees. The order vesting the property in the Official Assignee was made under the Insolvent Debtors (India) Act, 1848, on the 8th September, 1904. At the date of this order the colliery had been attached in execution case No. 303 of 1904, in which the lessees were the judgment-debtors and the defendants (the present respondents) were the judgment-creditors and an order had been obtained for the sale of the interest therein of the judgment-debtors. Counsel for the respondents admitted that attachment in execution of a money-decree followed by such an order for sale does not confer on the judgment-creditor any charge on the land, (See Sarkies v. Mussumat Bandno Bace [1869] 1 N. W. P. H. C. R. 172. An attachment prevents and avoids any private alienation, but does not invalidate an alienation by operation of law such as is effected by a vesting order under the Act of 1848, and an order for sale, though it binds the parties does not confer title.
It follows that under the order of the 8th September, 1904, the property vested in the Official Assignee free from any charge in favour of the judgment-creditors. The Official Assignee in due course, by order of the Court having jurisdiction in the insolvency, sold the property, and the appellants derive title through the purchaser. Their title is thus prima facie a good and valid title, but it is disputed by the respondents under the following circumstances.
On the 12th September, 1904, the Judge in the execution proceedings stayed the sale therein directed, until further order. This was the proper and indeed the only thing he could do, for the judgment-debtors had no longer any interest which could be sold. Further, if, as was no doubt the case, the judgment-debt was included in the schedule filed by the insolvents under the Act, their Lordships are of opinion that he was bound to stay the sale under Section 49 of the Act. At any rate the execution could not proceed until the Official Assignee had been properly brought before the Court and an order binding on him had been obtained. In their Lordships' opinion, this could only be done by obtaining an order for the issue of, and by serving him with a notice under Section 248 of the Civil Procedure Code of 1882, which was the Code then in force. It was suggested in argument that he might have been made a party to the proceedings either under Section 32 or under Section 372 of the Code, but even if these sections are applicable after final decree as to which there is considerable doubt (See Goodall v. Mussoorie Bank Ltd. [1887] 10 All. 97, no proceedings seem to have been taken thereunder. What the judgment-creditors did was this : they applied to the Judge in the execution case for an order, and on the 30th September, 1904, and again on the 3rd November, obtained an order for the issue and service on the Official Assignee of a notice calling upon him to show cause why he should not be substituted in the suit for the judgment-debtors. This was not a proper notice under the 248th section. A notice under that section should have called upon the Official Assignee to show cause why the decree should not be executed against him. Had the Official Assignee been served with such a notice it is at least probable that he would as in their Lordships' opinion be certainly could have shown good cause why the decree should not be executed, the property having under the Act and vesting order been transferred to him for the benefit of the creditors of the insolvent generally. It is possible that the notice might be upheld as a proper notice preliminary to adding the Official Assignee as a party under the 32nd section if that section were applicable but in order to bind a party added, under the 32nd section he has after being added, to be served with a summons to appear and answer and it is not suggested that any such summons was served. Similarly it is not suggested that any order to carry on proceedings was obtained under the 372nd section.
Having obtained leave in that behalf the respondents proceeded to serve the notice in question, and their Lordships will assume that the notice was duly served on the Official Assigne. The Official Assignee took no notice of it, possibly because he had no objection to being substituted as a party, and expected to be served with notice of any further application against him. There is no evidence that he knew that an order for sale had been already made. The time fixed by the notice for cause to be shown having expired, the respondents, without further notice to the Official Assignee, applied for and obtained an order not only substituting the Official Assignee as a party in the place of the judgment-debtors but directing the sale to proceed. The sale accordingly proceeded. There had to be a fresh sale proclamation by reason of the 291st section of the code : Such proclamation is not in evidence, but their Lordships must presume in default of evidence to the contrary that the property offered for sale was the property ordered to be sold, that is to say, the right and interest of the judgment-debtors in the colliery. At the sale the respondents (the judgment-creditors) having obtained leave to bid, became the purchasers. The sale was confirmed by the Court on the 8th April, 1905, and on the 25th April, 1905, the respondents obtained the usual certificate which refers to the right, title and interest of the judgment-debtors as the property sold. Their Lordships are of opinion that this sale was altogether irregular and inoperative. In the first place the property having passed to the Official Assignee, it was wrong to allow the sale to proceed at all. The judgment-creditors had no charge on the land and the Court could not properly give them such a charge at the expense of the other creditors of the insolvents. In the second place no proper steps had been taken to bring the Official Assignee before the Court and obtain an order binding or him, and accordingly he was not bound by anything which was done. In the third place the judgment-debtors had at the time of the sale no right, title or interest which could be sold to or vested in purchaser and consequently the respondents acquired no title to the property.
Their Lordships' attention was called in this connection to the case of Malkarjun Bin Shidramappa v. Narhari Bin Shivappa [1900] 25 B. 337 = L. R. 27 I. A. 216, but in their opinion there is nothing in that case which had any bearing upon the present appeal. As laid down in Gopal Chunder Chatterjee v. Gunamoni Dasi [1892] 20 C. 370, a notice under Section 248 of the Code is necessary in order that the Court should obtain jurisdiction to sell property by way of execution as against the legal representative of a deceased judgment-debtor. In the case in 27 Indian. Appeals such a notice had been served, and the Court had determined, as it had power to do for the purpose of the execution proceedings, that the party served with the notice was in fact the legal representative. It had therefore jurisdiction to sell though the decision as to who was the legal representative was erroneous. There being jurisdiction to sell, and the purchasers having no notice of any irregularity, the sale held good unless or until it were set aside by appropriate proceedings for the purpose. The present case is of a wholly different character. No proper notice was served under the section and the respondents had full notice of and indeed were responsible for the irregularities of the procedure adopted.
The respondents suggested that with regard to certain machinery which was included in the sale of the colliery by the Official Assignee and which was also sought to be recovered in this action, the statute of limitations was a good defence. This point does not appear to have been taken at any time prior to the hearing before Their Lordships' Board. It was not one of the issues settled by the Court on the action, nor did the respondents mention it among their grounds of appeal from the decision of the Subordinate Judge. Their Lordships consider that it involves an inquiry as to the nature of the machinery to which it is said to be applicable and it is therefore too late to raise it.
Their Lordships will humbly advise His Majesty that the appeal ought to be allowed and the decree of the High Court of the 4th June, 1912, set aside with costs, here and below and that the judgment of the Subordinate Judge of Burdwan of the 8th September, 1909 ought to be restored.
Appeal allowed.
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