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PETITIONER: MANGRU MAHTO & ORS.

       Vs.

RESPONDENT: SHRI THAKUR TARAKNATHJI TARAKESHWAR MATH & ORS.

DATE OF JUDGMENT: 08/03/1967

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. WANCHOO, K.N. RAMASWAMI, V.

CITATION:  1967 AIR 2390            1967 SCR  (3) 125

ACT: Code  of Civil Procedure (Act 5 of 1908), O.XXI, rr. 58  and 63--Order  on claim petition against decree-holder--No  suit filed for setting aside order--Res judicata, to what extent. Mortgage-Suit    by    mortgagee--Lessees    of    mortgaged property  not  parties--Property sold in    execution     of mortgage  decree--Effect on lessees’ right of redemption.

HEADNOTE: The owner of certain properties over which K had a  mortgage granted  leases to certain persons.  The lands were sold  in execution  of the mortgage decree of K, and were,  purchased by  K at the auction The lessees allowed the property to  be sold  and  did  not apply for being joined  as  parties.   K obtained  a money decree against one of the lessees  and  in execution attached the lands.  The lessees filed claim peti- tions  objecting to the attachment under 0.21 r.  28  C.P.C. The  claim  petitions were allowed and the  executing  court found that the leases were genuine.  K did not file any suit under  O.21 r. 63 C.P.C. But later, K filed a  suit  against the mortgagor and the lessees for recovery of possession  of the   lands   alleging  that  the  leases   were   collusive transactions  and  were otherwise not binding on  him.   The trial  court  dismissed the suit holding  that  leases  were genuine,,  but the High Court decreed the suit holding  that the leases were sham transactions and made in  contravention of  s.  65A of the Transfer of Property Act.  In  appeal  to this  Court, the appellants contended that (i) as K did  not file any suit under Order 21 r. 63 C.P.C. the adverse Orders passed  against  him  in the proceedings under  0.21  r.  58 C.P.C.  operated as res judicata and he was  precluded  from alleging  that the leases were not binding on him; and  (ii) the leases granted by the mortgagor were binding on K. HELD:     In  view  of the orders passed against  K  in  the claim  proceedings and his failure to institute suits  under 0.21,  r. 63 C.P.C., K was precluded from claiming  that  he had  the right to attach the suit lands in execution of  his money decree, but he was not precluded from claiming that he had the right to sell the lands in execution of his mortgage decree. [128 E] A claim proceeding tinder 0.21 r. 58 C.P.C. is not a suit or

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a  proceeding  analogous to a suit.  An order in  the  claim proceeding does not operate as res judicata.  It is  because of 0.21 r. 63 that the order becomes conclusive.  The effect of  r. 63 is that unless a suit is brought provided  by  the rule,  the  party  against  whom  the  order  in  the  claim proceeding is made or any person claiming through him cannot reagitate in any other suit or proceeding against the  other party  or  any  person claiming  through  him  the  question whether  the  property was or no, liable to  attachment  and sale  in  execution  of the decree out of  which  the  claim proceeding arose but the bar of rule 63 extends no  further. [129 A-C] Kandadai Narasimhachariar v. Raghava Pedayachi & Ors  I.L.R. 1946 Mad. 79; approved. 126 Subbier v. Moideen Pitchai, A.I.R. 1923 Mad. 562, and  Sarju Prasad Missir and Ors. v. Maksudan Choudhuri & Ors.   A.I.R. 1922 P.C. 341; referred to. (ii) ’The  validity of the leases granted by  the  mortgagor was  not affected by s. 65A of the Transfer of Property  Act as  the leases were granted before the enactment of s.  65A. [131 A-B] The leases were not in the ordinary course of management  of the  mortgagor as the agent or bailiff of the mortgagee  and were not binding of the mortgagee. [132 A-B] A  lease  granted  by the mortgagor,, out  of  the  ordinary course  of management, though not binding on the  mortgagee, is binding as between the mortgagor and the lessee.  Such  a lessee  acquires an interest in the right of redemption  and is  entitled to redeem.  If such a lease is  created  before the  institution  of a suit relating to  the  mortgage,  the lessee must be joined as a party to the suit under 0.34,  r. 1.  C.P.C.;  otherwise he will not be bound  by  the  decree passed in the suit and will continue to retain his right  of redemption.   But  in  view  of s. 52  of  the  Transfer  of Property  Act, if the mortgagor grants such a  lease  during the pendency of a suit for sale by the mortgagee, the lessee is  bound by the result of the litigation.  If the  property is  sold in execution of the decree passed in the suit,  the lessee cannot resist a claim for possession by the  auction- purchaser.   The  lessee could apply for being joined  as  a party  to the suit and ask for an opportunity to redeem  the property.  But  if  he allows the property  to  be  sold  in execution of the decree., he loses his right of  redemption. In  the present case, the lessees allowed the suit lands  to be  sold in execution of the mortgage decree and  they  have now  lost the right of redemption.  They can of  resist  the claim  of the auction-purchaser for ’recovery of  possession of the lands. [132 D-G] Raja Kamakshya Narayan Singh Bahadur v. Chohan Ram and  Anr. [1953] S.C.R. 108; followed. Madan Mohan Singh v. Raj Kishori Kumari , 21 C.W.N. 88,  92; Gobinda Chandra Saha & Ors. v. Sasadhar Mandal, A.I.R.  1947 Cal. 73, 75 and Rust v. Goodale, [1957] 1 Ch. 33, 42 and 43; referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 988 and 989 of 1964. Appeals from the judgment and decree dated February 16, 1961 of  the Patna High Court in Appeal from Original Decree  No. 390 of 1953. D.   Goburdhun,  for  the  appellants (in C.A.  No.  899  of

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1964). S.   C. Agarwal and R. K. Garg, for the appellants (in C.A. No. 989 of 1964). D.   N.  Mukherjee and S. Mustafi, for respondent No. 1  (in both the appeals). The Judgment of the Court was delivered by Bachawat, J. One Harbans Narain Singh was the proprietor  of villages  Seha and Dhobaha and other villages.   He  created several   encumbrances  over  these  villages  including   a mortgage 127 dated  February  10,  1886 in favour of  Basanti  Bibi,  two mortgages  dated September 9, 1907 and February 5, 1910,  in favour of Harprasad Das and a mortgage dated August 2,  1911 in  favour of defendant No. I Ramanandan Lal.  On  June  23, 1915,  Harbans  Narain sold the villages to  Mahabir  Missir subject to the above mortgages.  Mahabir Missir redeemed the mortgages  in favour of Basanti Bibi and Harprasad  Das  and became   subrogated   to  their  rights.    Ramanandan   Lal instituted a suit to enforce his mortgage, obtained a  final decree  for  sale,  put the decree into  execution,  at  the execution  sale  purchased  villages Seha  and  Dhobaha  and obtained  possession of the villages in 1919 and  1920.   In 1924, Mahabir instituted suit No. 17 of 1924 to enforce  his mortgage  lien praying for ratable contribution of his  dues in respect of villages Seha and Dhobaha from Ramanandan  Lal and  obtained  a final decree on August 22,  1931.   Mahabir died leaving his son Kashinath as his legal  representative. Kashinath  put  the  decree  in suit No.  17  of  1924  into execution.   On  July  13, 1934,  Ramanandan  Lal  paid  the decreetal  dues in respect of village Seha.  On November  4, 1935, village Dhobaha was sold in execution of the decree in suit  No.  17 of 1924 and was purchased  by  Kashinath.   In June, 1934, Ramanandan Lal through his constituted attorney, Munshi  Sheobaran Lal granted five leases in respect of  the suit lands in the village to defendants 2 to 7. At the  time when  the  leases  were  created,  Ramanandan  Lal  was  the mortgagor  in  possession  of  the  suit  lands  over  which Kashinath  had  a mortgage lien.  One of  the  questions  in issue in these appeals is whether the leases were binding on Kashinath. It  appears that Kashinath obtained a money  decree  against Ramatahal  Pandey,  husband  of  defendant  No.  3  and   in execution  of  the  money decree attached  the  suit  lands. Defendants  2  to 7 filed claim petitions objecting  to  the attachment under 0.21, r. 58, CPC.  The claim petitions were allowed  and  the  lands were released  from  attachment  by orders  of the executing court dated November 20,  1942  and February  26,  1944.   The executing court  found  that  the leases were genuine.  Kashinath did not file any suit  under 0.21, r. 63, CPC.  One of the questions in these appeals  is whether  the  orders passed in the claim  proceedings  under 0.21, r. 58 precluded Kashinath from setting up his claim in the present suit. On June 11, 1946, Kashinath instituted the suit out of which these  appeals arise against Ramanandan Lal and the  lessees for  recovery  of  possession of the suit  lands  and  mesne profits alleging that the leases were collusive transactions and  were  otherwise  not binding on  him.   The  defendants contested the suit.  In the meantime, in other  proceedings, it was declared that Mahabir was a benamidar for Shri Thakur Taraknathji  and  the  deity  was  the  real  owner  of  the villages.  In view of this adjudication, Kashinath lost 128 all interest in the present suit.  By order dated August 25,

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1952, the deity was added as a coplaintiff in the suit. The  subordinate  Judge, Arrah, held that  the  leases  were genuine,  were  granted by Ramanandan Lal in due  course  of management  and  were binding on the  plaintiffs.   On  this finding,  he  dismissed the suit.  The  deity  preferred  an appeal  to the High Court of Patna.  The High Court  allowed the  appeal and decreed the suit.  It held that  the  leases were sham transactions were made in contravention of s.  65A of  the Transfer of Property Act and were not  binding  upon ’the plaintiffs.  Before the High Court, it was contended on behalf of the defendants that the plaintiffs were  precluded from  challenging  the leases in view of the  orders  passed against  Kashinath  in the proceedings under 0. 21,  r.  58, CPC,   but   the  High  Court  rejected   this   contention. Defendants Nos. 2, 6 and 7 and the widow of defendant No.  5 have filed C. A. No. 988 of 1964 and defendants 1 and 4 have filed  C. A. No. 989 of 1964 under certificates  granted  by the High Court, The  appellants contend that as Kashinath did not  file  any suit  under  O. 21, r. 63, CPC, the  adverse  orders  passed against  him  in  the proceedings under O. 21,  r.  58,  CPC operated  as  res judicata, and lie and the  deity  who  now stands  in his shoes, were precluded from alleging that  the leases  were  not  binding  on them.   We  think  that  this contention should be rejected.  In view of the orders passed against  Kashinath in the claim proceedings and his  failure to  institute suits under O. 21, r. 63, CPC,  Kashinath  was precluded from claiming that he had the right to attach  the suit lands in execution of his money decree, but he was  not precluded  from claiming that he had the right to  sell  the lands  in execution of his mortgage decree.  Rules 58 to  62 of Order 21, CPC, provide for a summary investigation of the claims  and  objections to the attachment  of  any  property attached  in  execution  of  a decree.   The  issue  in  the proceeding  is  whether  "such property is  liable  to  such attachment".   If  the  claim is allowed,  the  property  is released   from  attachment  (r.  60).   If  the  claim   is disallowed,  the  attachment  continues  (r.  61).   If  the property is subject to mortgage or charge in favour of  some person  not in possession, the attachment may  be  continued subject  to  such  mortgage or charge (r.  62).   The  party against  whom an order is made in the claim  proceeding  may institute  a suit to establish the right which he claims  to the  property in dispute, but subject to the result of  such suit, if any the order is conclusive (r. 63).  If no suit is brought  under  r.  63  within  the  prescribed  period   of limitation, the order in the claim proceeding is  conclusive on  the question whether the property was or was not  liable to  attachment  and  sale in  execution  of  the  particular decree.   But the order is not conclusive for all  purposes, see Kandai Narasimhachariar v. Raghava Padayachi 129 and others().  A claim proceeding under r. 58 is not a  suit or a proceeding analogous to a suit.  An order in the  claim proceeding does not operate as res judicata.  It is  because of rule 63 that the order becomes conclusive.  The effect of r.  63 is that unless a suit is brought as provided  by  the rule,  the  party  against  whom  the  order  in  the  claim proceeding is made or any person claiming through him cannot re-agitate in any other suit or proceeding against the other party  or  any  person claiming  through  him  the  question whether  the property was or was no,- liable  to  attachment and  sale in execution of the decree out of which the  claim proceeding arose, but the bar of rule 63 extends no further. In  support of the contention that the orders in  the  claim

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proceedings  operated  as  res  indicate,  counsel  for  the appellant  relied  on  several  decisions.   In  Subbier  v. Moideen  Pitchai(2),  the decree-holder in  execution  of  a money  decree  attached  a debt alleged to  be  due  to  the judgment-debtor.   The garnishee objected to the  attachment on  the  ground that the debt was not due to  the  judgment- debtor,  it had been assigned and he had premised to pay  to the assignee and the amount of the debt was Rs. 300 and  not Rs.  350.  The objection was disallowed.  The attached  debt was sold in execution of the decree and was purchased by the decree-holder.   The  decree-holder purchaser then  sued  to recover  the  debt.  As the garnishee did not  file  a  suit under  0.  21, r. 63, the order passed against  him  in  the claim  proceeding  became conclusive, and he  was  precluded from re-agitating his objections in the suit.  In the course of  his  judgment, Schwabe, C .J. referred to s. 11  of  the Code  of  Civil  Procedure and his  observations  give  some support  to the contention of the appellants in the  present case  that the order in the proceeding under r. 58  operates as   Yes   judicata.   But  we  cannot  agree   with   those observations.  The order in the summary proceeding under  r. 58  does  not operate as res judicata.  The reason  why  the garnishee  could  not reagitate his objections was  that  in view  of  r.  63 he was precluded from  asserting  that  the decree-holder was entitled to attach and sell the particular debt on the footing that it was due to the  judgment-debtor. In Sarju Prasad Missir and others v. Maksudan Choudhuri  and others(3),  one Lalji Lal obtained a decree for sale of  the property mortgaged to him.  In execution of the decree Lalji Lal  attached  ’the property.  One Karoal  Narian  Choudhary filed a petition objecting to the attachment.  ’By an  order dated  September 14, 1886 passed under s. 278, CPC of  1992, corresponding to 0. 21   58  CPC  of  1908.  file  executing court directed that the property   should not be sold  under the decree obtained by Lalji Lal.  Sarju Prasad, an assignee of  the  decree executed the decree, at the  execution  sale purchased the property and subse- (1) I.L.R. 1946 Mad. 79. (2) A.I.R. 1923 Mad. 562. (3)  A.I.R. 1922 P.C. 341. 130 quently  instituted a suit against the heir of Kamal  Narain for  recovery  of  possession of the  property.   The  Privy Council held that the order dated September 14, 1886  became final  and binding upon Lalji Lal and all  persons  claiming title under him.  Sir John Edge observed :-               "The  petition  of objection  was  a  petition               which  the Subordinate Judge had  to  consider               and   dispose  of  and  any  party   to   that               proceeding who was dissatisfied with the order               which  the Subordinate Judge might make  could               have appealed from it.  Lalji Lal was a  party               to that proceeding and he did not appeal,  and               the order became final and binding upon  Lalji               Lal and upon those who claim title under him." The  observation that the party dissatisfied with the  order made  under  S. 278 of the Code of  Civil  Procedure,  1882, could have appealed from the order, seems to have been  made per  incuriam.   It seems that no appeal lay  from  such  an order.   The  reason  why  Lalji  Lal  was  precluded   from contending  that the property was liable to be attached  and sold in execution of the decree obtained by him was that  in the  absence of a suit under s. 283 of CPC of 1882,  he  and Sarju   Prasad   claiming  title  under   him,   could   not subsequently contend that the property was liable to be sold

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in  execution  of the decree.  In the  two  cases  discussed above,  the  adverse orders in the claim  proceeding  became conclusive  on the question whether the property was  liable to attachment and sale in execution of the particular decree then sought to be executed.  Equally, in the absence of  any suit  under  O. 21, r. 63, CPC, the  adverse  orders  passed against  Kashinath conclusively decided that the suit  lands were not liable to be sold in execution of the money  decree obtained  by him against Ramtahal Pandey.  But those  orders were  not conclusive on the question whether the lands  were liable  to  be  sold in execution  of  the  mortgage  decree obtained by Kashinath against Ramanandan Lal. On the merits, the question is whether the leases granted by Ramanandan La]. while he was the mortgagor, in possession of the suit lands were binding on the mortgagee Kashinath.  The High Court held that the leases were in contravention of  s. 65A of the Transfer of Property Act, 1882.  Section 65A  was inserted  in the Transfer of Property Act, 1882 by s. 30  of the  Transfer of Property (Amendment) Act, 1929, which  came into  force on April 1, 1930 Section 63 of the  Transfer  of Property  (Amendment) Act 1929 provided that nothing in  the provisions  of s. 30 of the amending Act would be deemed  if any  to  affect the "terms or incidents of any  of  property made  or effected before the 1st day of April,  1930".   Now Kashinath was entitled to the rights of the mortgagees under the mortgages dated February 10, 131 1886, September 9, 1907, February 5, 1910.  All these  mort- gages  were executed before April 1, 1930 and nothing in  s. 65A  affected their incidents.  The power of the  lessor  to make  leases binding on the mortgagee-, was an  incident  of the mortgages and was not affected by s. 65A.  The  validity of the leases granted by the mortgagor in June 1934 must  be determined with reference to the law as it stood before  the enactment of s. 65A. In Madan Mohan Singh v. Raj Kishori Kumari(1) Mookerjee,  J, held  that  a  mortgagor in possession  may  grant  a  lease conformable  to usage in the ordinary course of  management, for  instance lie may create a tenancy from year to year  in the case of agricultural lands or from month to month in the case of houses.  But he is not competent to grant a lease on unusual  terms or to alter the character of the land  or  to authorise  its  use in a manner or for a  purpose  different from the mode in which he himself had used before he granted the  mortgage.  This view of the law as it stood before  the enactment  of s. 65A was approved in Raja Kamakshya  Narayan Singh  Bahadur v. Chohan Ram and Another(2) and  this  court held  that the question whether the mortgagor in  possession has power to lease the mortgaged property must be determined with  reference  to the authority of the  mortgagor  as  the bailiff or agent for the mortgagee to deal with the property in the usual course of management.  In Gobinda Chandra  Saha and  others  v.  Sasadhar Mandal(3), B.  K.  Mukherjea,  J., pointed out that normally a permanent lease with rent  fixed in  perpetuity is not sanctioned by the ordinary  course  of management.  He observed --               "The  mortgagor might be within his rights  to               create a lease which is from month to month or               from year to year as the case might be, but he               cannot  grant  a permanent lease with  a  rent               fixed  in  perpetuity.   This  amounts  to  an               alienation  of his right to increase the  rent               in  future and is as good as the sale  of  the               property  itself.  This is not  sanctioned  by               the ordinary course of management as has  been

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             mentioned  above  nor is it warranted  by  the               previous user of this particular property." In the present case, defendants 2-7 were lessees under  five leases  granted by the mortgagor in June 1934.   All  ’these defendants  claimed to be Permanent lessees with rent  fixed in   perpetuity.   Four  of  the  leases  were  granted   by registered  pattas.In respect of four leases  the  mortgagor received  nazrana  or premium.All the  leases  were  created after  the property was advertised for sale in execution  of the mortgage decree.  The High Court has found (1) 21 C.W.N. 88, 92.   (2) [1953] S.C.R. 118,118. (3)  A.I.R.1947Cal.73,75. 132 that  the leases were created by the mortgagor in bad  faith with  a view to cause loss to  the  mortgagee-decree-holder. The leases were not in the ordinary course of management  of the mortgagor as the agent or bailiff of the mortgagee,  and were not binding on the mortgagee. On  behalf of the appellants it was argued that  the  leases might  not  be  binding  on  Kashinath  while  he  was   the mortgagee, but after- he purchased the property he ceased to be a mortgagee, and he could not thereafter assert that  the leases  were  not binding on him.  This  novel  argument  is ingenious but unsound.  An auction-purchaser at a sale  held in execution of a mortgage decree buys not only the interest of the mortgagor but also the interest of the mortgagee.  If the lease does not ’bind the mortgagee, it does not  equally bind  the  auction-purchaser.  It is interesting  to  notice that  in Rust v. Goodale(1), Harman, J. held that the  right of  the  mortgagee to treat a tenant of the mortgagor  as  a trespasser  was a right which passed on sale or  foreclosure to his assignee.A lease granted by the mortgagor, out of the ordinary  course  of management, though not binding  on  the mortgagee,  is  binding  as between the  mortgagor  and  the lessee.  Such a lessee acquires an interest in the right  of redemption  and is entitled to redeem.  If such a  lease  is created  before  the institution of a suit relating  to  the mortgage,  the lessee must be joined as a party lo the  suit under 0 34, r. 1, CPC; otherwise he will not be bound by the decree  passed in the suit and will continue to  retain  his right  of redemption.  But in view of s. 52 of the  Transfer of Property Act, if the mortgagor grants such a lease during the pendency of a suit for sale by the mortgagee, the lessee is  bound by the result of the litigation.  If the  property is  sold in execution of the decree passed in the suit,  the lessee cannot resist a claim for possession by the  auction- purchaser.   The  lessee could apply for being joined  as  a party  to the suit and ask for an opportunity to redeem  the property.   But  if  he allows the property to  be  sold  in execution of the mortgage decree and they have now lost  the present case, the lessees allowed the suit lands to be  sold in  execution of the mortgage decree and they have now  lost the  right of redemption.  They cannot resist the  claim  of the  auction  purchaser  of recovery of  possession  of  the lands. If a mortgagor in possession of the mortgaged property  exe- cutes  a  lease of the property in the  ordinary  course  of management  as the agent or bailiff of the mortgagee  during the  pendency  of  a suit by the mortgagee  to  enforce  the mortgage,  a question may arise whether such a lease  is  in the eye of the law a lease granted by the mortgagee  through his agent and therefore binding on him.  But in the  present case, that question does not arise (1)  [1957] 1 Ch 33,42,43. 133

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as  the  leases  were not granted by the  mortgagor  in  the ordinary course of management as the bailiff or agent of the mortgagee. The High Court held that the leases were sham  transactions. We do not think it necessary to decide this question.   Even assuming  that  the leases were not sham  transactions  they were not binding on Kashinath and the deity.  The High Court rightly decreed the suit. The  appeals  are dismissed with costs.  There will  be  one hearing fee. Y. P.                                Appeals dismissed. 134