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Raj Kumar Chhotey Narain Singh v. Kedar Nath Singh
Structured Summary of the Opinion (Das, J., with Adami, J. concurring)
Factual and Procedural Background
This appeal challenges a final decree for foreclosure passed by the Subordinate Judge of Gaya under Order XXXIV, rule 3, of the Code of Civil Procedure. The factual and procedural chronology appearing in the opinion is as follows:
- 3 July 1913: The Calcutta High Court modified an earlier decree for sale and passed a foreclosure preliminary decree nisi in favour of the plaintiffs, fixing 3 January 1914 as the date for payment of mortgage money.
- 22 December 1913: Defendants 1 and 2 applied and obtained a certificate for leave to appeal to His Majesty in Council.
- 9 January 1914: Defendants petitioned the Calcutta High Court stating they were negotiating to raise a loan to pay off the mortgage and that they had preferred an appeal to His Majesty in Council; they asked the High Court to stay the passing of the final decree for foreclosure, or alternatively stay delivery of possession upon furnishing security, or appoint a receiver.
- 20 January 1914: The High Court appointed a Receiver pending disposal of the appeal and directed the Receiver to pay rents as they fell due and to pay interest on the mortgage debt.
- 1 June 1914: The Receiver was discharged because he declined to act on the remuneration fixed for him.
- 1–3 September 1914: After mortgagees signalled desire to obtain a final decree, defendants renewed application for a Receiver; on 3 September 1914 the High Court ordered the Subordinate Judge to appoint a Receiver, and the Receiver was appointed and directed to pay interest on the mortgage debt.
- 9 October 1916: The Judicial Committee (Privy Council) dismissed the mortgagors' appeal for non-prosecution.
- 20 December 1917: Plaintiffs applied to the High Court for discharge of the Receiver and for an order to make over the mortgaged properties to them.
- 18 March 1918: The High Court ordered that the Receiver pass his accounts but not be discharged until further application, and directed that the mortgagees would be at liberty to proceed with a view to obtaining a final decree notwithstanding that the Receiver remained in possession.
- 3 April 1918: Mortgagees filed the present application under Order XXXIV, rule 3 for a final decree of foreclosure. The Subordinate Judge rejected the mortgagors' plea of limitation. The mortgagors appealed; this appeal is from that order.
Legal Issues Presented
- Whether the plaintiffs' application for a final decree of foreclosure under Order XXXIV, rule 3 of the Code of Civil Procedure was barred by limitation.
- If limitation arises, when did the right to apply for a final decree accrue?
- Whether the appointment of a Receiver and the direction upon the Receiver to pay interest on the mortgage money operated as an order staying further proceedings, thereby suspending the running of limitation under section 15 of the Limitation Act for the period during which the Receiver was in possession.
- Whether, while a Receiver remained in possession of the mortgaged properties, the plaintiffs were entitled to an order for delivery of possession as part of, or incidental to, the final decree of foreclosure.
Arguments of the Parties
Respondents / Mortgagees (Mr. Manuk)
- Argued that the right to apply for a final decree in a foreclosure action accrues from day to day and that the Limitation Act is inapplicable to such an application; relied on Madhab Mani Dasi v. Lambert (though the court noted that case did not directly decide the present question).
- Contended that the High Court's order appointing a Receiver and directing payment of interest effectively operated as an order staying further proceedings; therefore, under section 15 of the Limitation Act, the period during which the Receiver was in possession (identified as 3 September 1914 to 18 March 1918) should be excluded from computation of limitation.
Appellants / Mortgagors (Mr. Hasan Imam)
- Contended that dismissal of the appeal for non-prosecution by the Judicial Committee placed the parties in the same position as if there had been no appeal; therefore the right to apply for a final decree accrued on 3 July 1913 (the date of the preliminary decree), making the later application time-barred. He relied on Abdul Majid v. Jawahir Lal as authority for that proposition.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Madhab Mani Dasi v. Lambert | Relied upon for the proposition that the right to apply for a final decree accrues day by day and that the Limitation Act might be inapplicable. | The court observed this was not a decision on the precise question before it because the learned judges in that case held the Code of Civil Procedure, 1908, did not apply to the matter; thus the precedent was not controlling for the present case. |
| Bala Ram Naik v. Kanhai Bharan Mahapatra | As authority that Article 181 of the Limitation Act governs applications following preliminary decrees for sale or foreclosure under the Code and that the period of limitation is three years from accrual. | The court accepted this Court's view as governing the present situation: Article 181 applies and a three-year limitation period attaches to such applications. |
| Abdul Majid v. Jawahir Lal (Privy Council) | Held (under the Transfer of Property Act and the old Limitation Act) that limitation for an application for order absolute for sale began from the order confirming the decree, not from the dismissal of an appeal for non-prosecution. | The court treated this case as analogous: it recognized that under earlier law the Judicial Committee had held accrual could be the date of the confirming order; by analogy the court said it was entitled to hold the right to apply accrued on 3 July 1913 unless the preliminary decree was stayed by order or injunction. |
| Sutcliffe v. Wood | Illustrates historical doubt in English practice whether a Court of Equity could grant mortgagee leave to join an action for recovery of land with foreclosure. | Cited to explain why procedural provisions were placed to permit joining possession claims with foreclosure and to contextualize rules permitting possession orders as part of foreclosure proceedings. |
| Best v. Applegate | Authority that an order for foreclosure absolute may include an order for delivery of possession. | Used to support the proposition that a foreclosure decree can include possession; the court acknowledged that such an order may be included in the final decree. |
| Keith v. Day | Authority that an order for delivery of possession may be given after a final decree. | Cited to note that possession may be ordered after the final decree, though that does not preclude obtaining possession as part of the decree itself. |
| Wills v. Luff | Contrasting authority where the proposition in Keith v. Day was not accepted. | Cited to show there was some divergence in authorities on whether possession must be ordered as part of or after the final decree; the court acknowledged the divergence but proceeded on the view that possession could be part of the decree. |
Court's Reasoning and Analysis
The court's analysis proceeded in discrete steps, applying statutory provisions, precedent, and the facts as found:
- Determination of the applicable law: The court held that, unlike certain earlier decisions, the Code of Civil Procedure, 1908, does apply to applications following preliminary decrees for sale or foreclosure. Consequently Article 181 of the Limitation Act (as applied to the Code) governs such applications, and the period of limitation is three years from the time when the right to apply accrues. The court relied on Bala Ram Naik v. Kanhai Bharan Mahapatra for this proposition.
- When the right to apply accrues: The court observed the preliminary decree was passed on 3 July 1913. It considered the appellants' argument (backed by Abdul Majid v. Jawahir Lal) that dismissal of the appeal for non-prosecution does not judicially confirm or adopt the earlier order and therefore the parties are in the same position as if there had been no appeal. By analogy to Abdul Majid the court acknowledged it is entitled to hold the right to apply accrued on 3 July 1913, so the plaintiffs' application would be time-barred unless the preliminary decree was stayed by some court order or injunction.
-
Effect of Receiver appointment and payment direction: The court examined whether the High Court's orders appointing a Receiver and directing the Receiver to pay interest effectively operated as an order staying further proceedings. The court analysed the form and substance of a final foreclosure decree under Order XXXIV, rule 3 and Appendix D Form No.10 (which contemplates: (a) debarring the defendant and persons claiming through him from all right to redeem; and (b) where necessary, ordering the defendant to put the plaintiff in possession). The court concluded:
- The Receiver's appointment together with the direction that the Receiver pay interest (and the Receiver being in possession) operated in substance, though not in form, as an order staying further proceedings in the suit until disposal of the Privy Council appeal.
- So long as the Receiver was in possession, the plaintiffs could not obtain an order compelling the defendants to put the plaintiffs in possession of the property; possession could be obtained either as part of the decree or after the decree, but the Receiver's possession prevented the plaintiffs from obtaining possession while the Receiver remained in occupation.
- Application of section 15 Limitation Act: The respondents argued that because the Receiver appointment functioned as a stay, the period from 3 September 1914 to 18 March 1918 should be excluded under section 15 of the Limitation Act. The court accepted that the Receiver's appointment and directions effectively suspended the plaintiffs' entitlement to both branches of the final foreclosure decree (debarment from redemption and possession order), and that the removal of that bar by the High Court on 18 March 1918 made the plaintiffs entitled to apply from that date.
- Conclusion on limitation: Because the plaintiffs became entitled to apply for the final decree on 18 March 1918 (when the High Court removed the bar), the court concluded the Subordinate Judge was right to reject the mortgagors' plea of limitation as applied to the 3 April 1918 application. The court therefore dismissed the appeal.
Holding and Implications
Holding:
DISMISSED. The appeal is dismissed and the Subordinate Judge's conclusion rejecting the mortgagors' plea of limitation is upheld; the respondents' application for a final decree (presented 3 April 1918) was properly maintainable because the plaintiffs' right to apply is treated as having accrued when the bar created by the Receiver's possession was removed (18 March 1918).
Implications:
- Direct effect on the parties: The plaintiffs (mortgagees) were entitled to proceed with the application for a final decree as of 18 March 1918, and the mortgagors' limitation plea was rejected; the appeal from the Subordinate Judge's order is dismissed with costs.
- Precedential effect: The opinion applies Article 181 of the Limitation Act to applications for final foreclosure decrees under the Code of Civil Procedure and treats the appointment of a Receiver (with a direction to pay interest) as operating in substance as a stay of proceedings for the purposes of limitation computation. The court did not purport to lay down a new, broader rule beyond its reasoning in the case; it relied on statutory provision and existing authorities by analogy.
No information beyond the opinion has been added. All statements in this summary are limited to material expressly found in the provided opinion.
Das, J.:— This appeal is directed against the final decree for foreclosure passed by the learned Subordinate Judge of Gaya, under the provisions of Order XXXIV, rule 3, of the Code; and the only question which we have to determine in this appeal is whether the application of the plaintiffs was barred by limitation.
On the 3rd of July, 1913, the Calcutta High Court, modifying the decree of the learned Subordinate Judge which was a decree for sale, passed a foreclosure decree nisi in favour of the plaintiffs whereby it fixed the 3rd of January, 1914, as the date for payment of the mortgage money by the defendants to the plaintiffs. On the 22nd December, 1913, defendants 1 and 2 presented an application and in due course obtained a certificate for leave to appeal to His Majesty in Council. On the 9th January, 1914, defendants 1 and 2 presented another application to the Calcutta High Court. They stated in that petition that they were negotiating for a loan to pay off the mortgage, and had also preferred an appeal to His Majesty in Council from the decree passed by the High Court. They asserted that the opposite parties were,
“Contemplating to apply for the final decree of foreclosure and far the delivery of possession of the property to them”;
and they asked as follows:—
“It is therefore prayed that your Lordships will be pleased to stay the passing of the final decree for foreclosure for such period as to your Lordships appear proper, and, in the alternative, to stay the delivery of possession over the said mortgage property on your petitioners furnishing security, and, in case of their being unable to do so, to appoint a Receiver for the management of the property and to pass such order or orders as to your Lordships appear just and proper”.
On the 20th January, 1914, the High Court appointed Babu Siva Nandan Roy, pending the disposal of the appeal to His Majesty in Council, Receiver of the disputed mortgaged properties in suit, and directed the Receiver to pay all the rents as they fell due and also the interest on the mortgage debt. On the 1st of June, the Receiver was discharged as he declined to act on the remuneration fixed for him. On the 1st of September, 1914, some of the mortgagees applied for an order that, as there was no fresh order for the appointment of a Receiver, they were at liberty to apply for the final decree for foreclosure and delivery of possession of the mortgaged properties in accordance with the decree of the High Court, dated the 3rd July, 1913. This application had the effect of compelling the defendants to make another application for the appointment of a Receiver; and this they did on the 2nd September, 1914. On the 3rd September, 1914, the High Court made an order on the Subordinate Judge to appoint a fit and proper person as the Receiver of the mortgaged properties. It is not disputed that, in pursuance of this order, the Subordinate Judge appointed a person as the Receiver of the properties and directed the Receiver to pay the interest on the mortgage debt. The next date of importance is the 9th of October, 1916, when the Judicial Committee dismissed the appeal of the mortgagors for non-prosecution of the appeal. On the 20th December, 1917, the plaintiffs applied to the High Court for the discharge of the Receiver and for an order on the Receiver to make over the mortgaged properties to them. On this application the High Court passed the following order:—
“We direct that the Receiver do forthwith pass his accounts, but that he be not discharged until a further application. The mortgagees will be at liberty to proceed with a view to obtaining a final decree notwithstanding the fact that the Receiver is in possession”.
This order was passed on the 18th March, 1918; and on the 3rd April, 1918, the mortgagees presented their application out of which the present appeal arises for a final decree in the foreclosure action under the provisions of Order XXXIV, rule 3, of the Code. It is to be remembered that the preliminary decree for foreclosure was passed on the 3rd July, 1913; and the fact that the present application was presented on the 3rd of April, 1918, encouraged the mortgagors to raise a plea of limitation. The learned Subordinate Judge has rejected the plea; and the only question which we have to determine in this appeal is whether the plea put forward on behalf of the mortgagors was a good plea.
Mr. Manuk, on behalf of the respondents, argues that, his right to apply for a final decree in a foreclosure-action accrues from day to day and that the statute of limitation is inapplicable to such an application, and he relies on Madhab Mani Dasi v. Lambert. As has been pointed out more than once, that was not a decision on the question which we have now to determine, for the learned Judges in that case held that the, Code of Civil Procedure, 1908, did not apply to the case at all. It is conceded that the Code of Civil Procedure, 1908, does apply to the present case;, and I have no doubt whatever that the question, as it has now arisen, is somewhat different from the question which the learned Judges in Madhab Mani Dasi v. Lambert, had to try. Now there was considerable difference of opinion at one time on the question as to whether orders under sections 87 and 89 of the Transfer of Property Act were orders in the suit itself or in execution, and whether the Limitation Act, and, if so, whether Article 178 or 179 of the old Limitation Act governed an application for obtaining such orders. It was with a view to put an end to the conflict of decisions that provisions as to mortgage suits have been removed from the Transfer of Property Act to the Code of Civil Procedure and applications which follow preliminary decrees either for sale or for foreclosure are now described as applications for a decree for sale and a decree for foreclosure and not applications for an order for sale or for an order for foreclosure. It is impossible now to contend that these applications are not applications under the provisions of the Code of Civil Procedure. If that be so, Article 181 of the Limitation Act clearly governs such an application and the period of limitation is three years from the time when the right to apply accrues. This was the view which was taken by this Court in Bala Ram Naik v. Kanhai Bharan Mahapatra.
The next question is, when did the right to apply accrue? It will be remembered that the preliminary decree was passed on the 3rd July, 1913, and that through the mortgagors carried an appeal to His Majesty in Council that appeal was dismissed on the 9th October, 1916, not on the merits, but for nonprosecution of the appeal. Mr. Hasan Imam, on behalf of the appellants, contends that the result of the dismissal of the appeal for non-prosecution was to place the parties in the same position as if there was no appeal and that accordingly the right to apply accrued on the 3rd July, 1913. That was certainly the view which was taken by the Judicial Committee in Abdul Majid v. Jawahir Lal. That case was decided under the Transfer or Property Act and the old Limitation Act before the new Civil Procedure Code made a change in the procedure relating to mortgage actions in that case the Court of first instance passed a decree in favour of the mortgagee on the 12th May, 1890, for the sale of the mortgaged property unless payment was made on or before the 12th August, 1890. There was an appeal to the Allahabad High Court and that appeal was dismissed on the 8th April, 1893. The mortgagor obtained leave to appeal to the Privy Council, but did not prosecute his appeal, and on the 13th May, 1901, the appeal was dismissed for want of prosecution. The Judicial Committee held that Article 179 of the Limitation Act governed the application which was then presented by the decree-holder for an order absolute for sale and that limitation began to run, not from the dismissal of the appeal for want of prosecution, but from the order of the High Court confirming the decree. The Judicial Committee in the course of its judgment said as follows, “The order dismissing the appeal for want of prosecution did not deal judicially with the matter of the suit and could in no sense be regarded as an order adopting or confirming the decision appealed from. It merely recognised authoritatively that the appellant had not complied with the conditions under which the appeal was open to him, and that therefore he was in the same position as if he had not appealed at all. To put it shortly, the only decree for sale that exists is the decree, dated the 8th April, 1893, and that is a decree of the High Court of Allahabad”. That case was of course decided on the view that an application for an order absolute for sale under the Transfer of Property Act was an application in execution of the decree. The position now is different; but we are entitled to hold by analogy that the right to apply in the present case accrued on the 3rd July, 1913, and that the application is accordingly barred by limitation unless the operation of the preliminary decree was stayed by an order and injunction of the Court.
Mr. Manuk contends that the order for the appointment of a Receiver, coupled with the direction upon the Receiver to pay the interest on the mortgage money, operated in effect as an order staying further proceedings, and that he is, accordingly, under section 15 of the Limitation Act, entitled to exclude the period between the 3rd September, 1914, and the 18th March, 1918, on which date the High Court gave him liberty to apply for the final decree notwithstanding the fact that the Receiver was not discharged. The argument involves an examination of the nature of a final decree in a foreclosure action. Order XXXIV, rule 3, of the Code, after dealing with the case where the defendant pays into Court the amount declared due to the plaintiff, provides as follows.
“Where such payment is not so made, the Court shall, on application made in that behalf by the plaintiff, pass a decree that the defendant and all persons claiming through or under him be debarred from all right to redeem the mortgaged property and also, if necessary, ordering the defendant to put the plaintiff in possession of the property.”
The form of a final decree for foreclosure is to be found in Appendix D to the Code of Civil Procedure and is No. 10. Under that Form the decree to which the plaintiff is entitled, is as follows,
“That the defendant and all persons claiming through or under him be debarred from all right to redeem the mortgaged property set out and described in the schedule hero unto annexed. (Where the defendant is in possession add “and shall put the plaintiff in possession of the said property)”.
There is no doubt at all, on a perusal of the Form as provided by the legislature in No. 10 of Appendix D, that the words “if necessary” in Order XXXIV, rule 3(2), refer to a case where the defendant is in possession and that, where the defendant is in possession, the plaintiff is entitled to a decree firs debarring the defendant and all persons claiming through or under him from all right to redeem the mortgaged property; and, secondly, ordering the defendant to put the plaintiff in possession of the property. Mr. Manuk contends that, in the events which have happened, he was not entitled to either of these orders until the 18th March, 1918.
I will first consider the question whether the plaintiffs were, in the events which happened, entitled to an order debarring the defendants from the right to redeem the mortgaged property. Now it will be remembered that the Receiver was appointed on an application by the defendants in which they stated that they were negotiating for a loan in order to pay off the mortgage money and that they were confident that they would be able to raise such a loan within two months from the date of that application. The Court appointed a Receiver and directed the Receiver to pay the interest due on the mortgage money to the plaintiffs. In my opinion, so long as the order of the High Court stood, the defendants had the right not only to pay the interest on the mortgage money to the plaintiffs but also, to quote their own words, “to pay off the decree”. In other words, the appointment of a Receiver and a direction upon him to pay the interest due to the plaintiff operated in substance, though not in form, as an order staying further proceedings in the suit until the disposal of the appeal by the Privy Council.
In the next place so long as the Receiver was in possession of the mortgaged properties, it was clearly incompetent to the plaintiffs, to ask for an order that the defendants do put the plaintiffs in possession of the property. The Code of Civil Procedure recognizes the right of the plaintiff who is out of possession to be put in possession of the mortgaged properties; in other words, he is in the same action entitled not only to a decree for foreclosure, but also to a decree for possession. At one time it was doubted in England whether a Court of Equity could grant the mortgagee leave to join an action for the recovery of land with the action for foreclosure [See Sutcliffe v. Wood. It was in order to remove the difficulty raised by such cases as Sutcliffe v. Wood that a proviso was added to Order XVIII, rule 2, of the Rules of the Supreme Court in December, 1885. That proviso now permits a plaintiff to join a claim for possession in an action for foreclosure or redemption. There is no doubt at all that an order for foreclosure absolute in a foreclosure action may now include an order for delivery, of possession by the defendant to the plaintiff [See Best v. Applegate]. It is quite true that an order for delivery of possession may be given after the final decree. This was established in Keith v. Day, though the proposition was not accepted in Wills v. Luff It may be assumed, however, that the plaintiffs were entitled to have an order as to delivery of possession not as part of the foreclosure decree, but after the decree; but the fact that the plaintiffs may obtain such an order after the final decree does not take away their right to claim such an order as part of the foreclosure decree. That order they could not have obtained so long as the Receiver was in possession of the mortgaged properties. The Calcutta High Court removed the bar on the 18th March, 1918, and in my opinion the plaintiffs became entitled to apply for the final decree on the 18th March, 1918.
In my opinion the conclusion at which the learned Subordinate Judge has arrived is right and I would dismiss this appeal with costs.
Adami, J.:— I agree.
Appeal dismissed.
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