Kumar Pashupatinath Malia and Another vs Deba Prosanna Mukherjee

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 90 of 1950

Decision Date: 4 May 1951

Coram: Hiralal J. Kania

In this case the Supreme Court of India delivered a judgment on 4 May 1951 authored by Chief Justice Hiralal J Kania, with a bench that also included Justices Das and Sudhi Ranjan. The petitioners were Kumar Pashupatinath Malia and another, and the respondent was Deba Prosanna Mukherjee. The decision is reported at 1951 AIR 447 and 1951 SCR 572. The dispute arose under the Bengal Money-Lenders Act of 1940, specifically sections 2(22) and 36(5). The central issue was whether a suit filed under section 36 could be entertained when an execution proceeding was pending on 1 January 1939, and whether the attachment that remained in force after a case was struck off terminated the execution proceeding. The Court also considered whether the sub-mortgagee was an assignee of the mortgage and therefore entitled to protection under section 36(5). The factual background shows that a mortgage decree was passed in 1929 in a suit brought by the representatives of a sub-mortgagee, and a personal decree for the balance due after the sale of the mortgaged properties was issued in 1935. In 1936 the holder of the decree commenced execution of the personal decree and attached certain properties of the judgment-debtor. On 30 January 1937 the decree-holder applied to have the execution case struck off for non-prosecution while the attachment remained, citing ongoing settlement negotiations. The court dismissed the execution petition for non-prosecution and ordered that the attachment already effected continue. On 2 June 1939 the decree-holder filed another petition stating that the decree had been satisfied and that the attachment could be withdrawn. The Bengal Money-Lenders Act became effective on 1 September 1940. On 2 January 1941 the legal representatives of the judgment-debtor instituted a suit under section 36 of the Act seeking to reopen the transactions. The pivotal question was whether any execution proceeding was pending on or after 1 January 1939, as required by the definition of “a suit to which this Act applies” in section 2(22) of the Act. The Court, delivering the opinion of the Chief Justice and Justice Das, held that the order dated 30 January 1937 constituted a final order dismissing the execution petition of 1936. The continuation of the attachment was not due to a pending execution proceeding but resulted from a specific order under Order 21, rule 57 of the Civil Procedure Code, as amended by the Calcutta High Court, which allowed the attachment to remain. Consequently, despite the attachment’s existence, there was no execution proceeding pending on 1 January 1939. Accordingly, the decree that the petitioners sought to reopen did not fall within “a suit to which the Act applies” under section 2(22), and the Court lacked jurisdiction to reopen the transactions under the Act.

The Court observed that under section 36 (2) the petition filed on 2 June 1939 did not constitute a proceeding for execution; it was merely a certification by the decree-holder that the decree had been satisfied. Judge Patanjali Sastri then explained that although the execution petition had been dismissed, the attachment on the property was continued. This continuation, he said, demonstrated that the original proceeding which gave rise to the attachment was being kept alive for a later sale of the attached property. Because attachment itself is a proceeding in execution, the existence of the attachment meant that a proceeding in execution remained pending. Consequently, a proceeding in execution was pending on 1 January 1939, and the decree in question had to be regarded as having been passed in “a suit to which this Act applies.” The Court further noted that the sub-mortgage created in favour of the respondent’s predecessor in title was made in good faith, and that the holder of that sub-mortgage, by virtue of it, obtained the right to sue the original mortgagor for the recovery of the mortgage debt. Accordingly, the decree-holder was a bona-fide assignee, and his claim to the entire decree debt was protected by section 36 (5) of the Act. The judgment cited the authorities Renula Bose v. Manmatha Nath Bose (L.R. 72 I.A. 156), Promode Kumar Roy v. Nikhil Bhusan Mukhopadhya (50 C.W.N. 407) and Promode Kumar Roy v. Nikhil Bhusan Mukhopadhya (L.R. 76 I.A. 74). The judgment proceeded to set out the appellate matter: it was a civil appeal numbered 90 of 1950, filed against the judgment and decree dated 22 July 1948 of the Calcutta High Court (Justices K. C. Mitter and K. C. Chunder), which itself was an appeal from Original Decree No. 49 of 1942 arising out of a decree dated 8 September 1941 of the Subordinate Judge at Asansol in Suit No. 1 of 1941. Counsel for the appellants appeared, as did counsel for the respondent, and the judgment was delivered on 4 May 1951. The substantive facts began with a suit filed by the appellants on 2 January 1941 in the court of the Subordinate Judge, Asansol. That suit arose from an earlier partition suit brought by Kumar Dakhineswar Malia against Rameswar Malia, Rani Bhaba Sundari and others concerning the Searsole Raj Estate, in which Bhagabati Charan Mitra was appointed receiver. On 10 August 1908 the receiver, with the court’s permission, granted two mining leases, each for a term of 999 years—one covering a 5/16 share of the Malias in Mouza Monohar Bahal and the other covering 230 bighas in the village of Marich Kota—to the firm Laik Banerjee & Company. On the same day the receiver mortgaged the same properties to that firm as security for a loan of Rs 100,000 advanced by the firm, and the Malias joined the receiver in executing both the leases and the mortgage. As a result, Laik Banerjee & Company became the lessee for 999 years of the two properties and the mortgagee of the lessors’ interest. Subsequent transactions, not detailed, led to the appellants becoming successors in interest of the original mortgagors, while the respondent, Deva Prasanna Mukherjee, became the successor in interest of the mortgagee under the 1908 mortgage. Deva Prasanna filed suit No. 78 of 1922 on 31 March 1922 to enforce the 1908 mortgage; a preliminary decree was issued on 31 July 1928 and a final decree for sale on 26 February 1929. In execution of that final decree the mortgaged properties were sold at a court sale and purchased by Deva Prasanna for Rs 59,000, a sale that was confirmed on 30 June 1931. A substantial sum remained due to Deva Prasanna, and he subsequently applied for further relief, with the application being made in October.

The parties that had originally executed the two leases dated 10 August 1908 and the accompanying mortgage subsequently became the lessees for a term of nine hundred ninety-nine years and also the mortgagee of the lessors’ interest in the two parcels of land. By various legal mechanisms, which need not be recounted in detail, the appellants acquired the position of successors in interest to the original mortgagors, while the respondent, Deva Prasanna Mukerjee, succeeded to the mortgagee’s interest under the same 1908 mortgage. On 31 March 1922, Deva Prasanna instituted suit number 78 of 1922 seeking to enforce the mortgage executed on 10 August 1908. The court passed a preliminary decree on 31 July 1928 and subsequently rendered a final decree of sale on 26 February 1929. In compliance with the final decree, the mortgaged properties were sold at a court-ordered sale and the purchaser was Deva Prasanna, who paid the sum of Rs 59,000. The court confirmed the validity of that sale on 30 June 1931. Because a substantial balance remained owing to Deva Prasanna, he obtained a personal decree on 30 October 1935 for the amount of Rs 1,27,179-0-6 against Raja Pramatha Nath Malia, who had inherited the lessors’ interest and thereby become the borrower under the mortgage. In 1936 Deva Prasanna commenced execution proceedings, identified as case number 118 of 1936, to enforce the personal decree and attached certain properties alleging that they belonged to the Raja. The precise date of attachment is not recorded in the printed proceedings. The Raja, acting as the Silaït of a particular deity, together with his two sons—the appellants—challenged the attachment and filed a claim case. Settlement negotiations were undertaken, and on 30 January 1937 a petition (Exhibit 2) was filed in the executing court stating that the judgment debtor had made special requests for an amicable settlement, that the decree-holder had consented, that the judgment debtor had paid execution costs of Rs 76-14-0, and that the decree-holder had agreed to strike off the execution case while retaining the attachment. Although the original order or a certified copy of the order dated that day is not presently available, the parties unanimously agree that the order is accurately reflected in column 20 of Exhibit F, a certified extract from the Register of applications for execution of decrees relating to execution case number 118 of 1936. Column 20 is headed “Date on which execution case was finally disposed of and purport of final order,” and it records the substantive terms of the order.

The record shows that in column 20 of the exhibit, under the heading “Date on which execution case was finally disposed of and purport of final order,” the entry reads: “D. H. admits receipt of Rs 76-14-0 as costs of this case from the J.D. The execution case is dismissed for non-prosecution—the attachment already effected in this case continuing. 30 January 1937.” In the same exhibit, column 11 contains a separate notation stating: “Claim case automatically drops as the execution case is dismissed. It is, therefore, rejected without any sort of adjudication. 30 January 1937.” Subsequently, in May 1937, the Searsole Raj Estate was placed under the jurisdiction of the Court of Wards. By a deed of conveyance—referred to as a Kobala—executed with the permission of the Board of Revenue, Raja Pramatha Nath Malia and his two sons, Kumars Pashupati Nath Malia and Kumars Kshitipati Nath Malia, the latter acting as Manager of the Searsole Raj Wards Estate, transferred a property known as Senapati Mahal to Deva Prasanna. This transfer was intended to settle fully the claim that Deva Prasanna had asserted under a personal decree against the Raja. By a contemporaneous agreement, Deva Prasanna further undertook to reconvey Senapati Mahal to the Kumars in the event that he received a payment of Rs 90,000 within two years from the date of that agreement. Although Senapati Mahal originally belonged to the Raja, it had been transferred by him to his two sons. A creditor subsequently instituted a suit under section 53 of the Transfer of Property Act challenging the validity of that transfer. The creditor obtained a decree holding the transfer to be fraudulent and void insofar as the creditors of the Raja were concerned. The Kumars appealed against that decree, and the appeal remained pending on the date of the Kobala dated 4 January 1939. Given the pending appeal, the parties considered it prudent to join the Raja in the aforementioned Kobala in favour of Deva Prasanna.

On 2 June 1939, counsel for Deva Prasanna, who was the decree holder, filed a petition in the Court of the Subordinate Judge at Asansole. The petition was titled “Money Execution Case No 118 of 1936.” The petition contended that the execution case had been disposed of on 30 January 1937, with the attachment on the properties continuing to subsist. It further asserted that, since that disposal, the decree that had been put to execution had been satisfied by a substantial remission of interest and by the outright sale of certain properties through a registered Kobala dated 4 January 1939. The petition argued that, consequently, there was no longer any justification for maintaining the attachment and therefore prayed that the attachment be withdrawn. On the same day, the court heard counsel for both parties. Both parties jointly requested the cancellation of the attachment that had been created by a special order in Money Execution Case 118 of 1936, despite the fact that the execution case itself had been dismissed. The court issued an order cancelling the said attachment and recording that the decree in question was adjusted, as described by the counsel for the decree holder and the counsel for the judgment debtor, according to the adjustment mentioned in the petition, although the precise details of that adjustment were not set out in the petition filed on that day.

In the record, a direction was given to “make necessary notes and send this petition to the District Record Room.” In the remarks column numbered 22 of Exhibit F, an entry recorded that the attachment had been cancelled and that the decree in question was recorded as adjusted as described by the learned pleader for the decree-holder and the pleader of the judgment debtor, although the adjustment was not detailed in the petition of that day; the entry was dated 2 June 1989. The Raja died in August 1940, leaving his two sons as his legal representatives. The Bengal Money Lenders Act 1940 (Bengal Act X of 1940), thereafter referred to as the Act, became effective on 1 September 1940. On 2 January 1941, the appellants, in their capacity as the legal representatives of the deceased Raja, became “borrowers” within the meaning of the Act and filed a suit that gave rise to the present appeal. The suit was instituted by the appellants against the respondent under section 36 of the Act, seeking the reopening of transactions, the taking of accounts, and a release from all liabilities that exceeded the limits prescribed by law. In essence, they asked the court to grant relief by exercising the powers conferred on it by section 36 of the Act. The pleadings also included a prayer for the reconveyance of the Senapati Mahal. The respondent responded with a written statement that set up a range of defenses, both on the merits and on legal pleas in bar. On 8 May 1941, the Subordinate Judge framed the issues and fixed 9 June 1941 for a preliminary hearing of the suit, particularly on those issues that were based on the pleas in bar. The matter was eventually taken up for preliminary hearing on 4 September 1941, and by a judgment delivered on 8 September 1941, the learned Subordinate Judge dismissed the suit on Issue 2, which asked whether the plaint disclosed a valid cause of action for the suit. The appellants then appealed to the High Court at Calcutta. Although the High Court (R.C. Mitter and K.C. Chunder JJ.) did not adopt every reasoning of the Subordinate Judge, it agreed that the appellants could obtain no relief because the decrees in Suit No. 78 of 1922 could not be reopened, as those decrees were not passed in “a suit to which this Act applies.” Consequently, the High Court dismissed the appeal. The appellants have now filed the present appeal before this Court after obtaining a certificate under section 110 of the Code of Civil Procedure. Counsel supporting the appeal has argued that the High Court erred in holding that the decrees in Suit No. 78 of 1922 were not subject to reopening under the second proviso of section 36(1). Counsel for the respondent, while joining that issue, also raised another point, which, however, was not pursued further in the High Court’s decision.

The respondent’s contention that, as a bona-fide assignee for value of the mortgage debt, he was protected by sub-section (5) of section 36 did not find favour with the High Court. It was clear from the record that if either of the two principal points raised by the appellants were decided against them, the present appeal could not succeed. The Court then set out the main provisions of section 36(1), which read as follows: “Notwithstanding anything contained in any law for the time being in force, if in any suit to which this Act applies, or in any suit brought by a borrower for relief under this section, whether heard ex parte or otherwise, the Court has reason to believe that the exercise of one or more of the powers under this section will give relief to the borrower, it shall exercise all or any of the following powers as it may consider appropriate namely, shall (a) reopen any transaction and take an account between the parties; (b) notwithstanding any agreement purporting to close previous dealings and to create new obligations, reopen any account already taken between the parties; (c) release the borrower of all liability in excess of the limits specified in clauses (t) and (2) of section 30; (d) if anything has been paid or allowed in account on or after the first day of January, 1939, in respect of the liability referred to in clause (c), order the lender to repay any sum which the Court considers to be repayable in respect of such payment or allowance in account as aforesaid; (e) set aside either wholly or in part or revise or alter any security given or agreement made in respect of any loan, and if the lender has parted with the security, order him to indemnify the borrower in such manner and to such extent as it may deem just.” The Court observed three important aspects of this provision: (a) the language “notwithstanding anything contained in any law for the time being in force” makes the section supreme over other statutes; (b) the powers listed may be exercised in any suit to which the Act applies or in any suit filed by a borrower seeking relief under the section; and (c) the Court is required to use any or all of those powers whenever it has reason to believe that such use will provide relief to the borrower. In the present matter, the borrowers had instituted a substantive suit seeking relief under section 36. Consequently, if nothing in the statute barred the Court’s belief that relief was attainable, the Court could, in accordance with the said powers, grant the relief pleaded in the plaint. The Court noted, however, that subsection (1) of section 36 is qualified by two provisos. The relevant portion of the second proviso was then quoted, beginning with the words: “Provided that in exercise of these powers the Court”.

The provision states that the Court shall not – (i) … – (ii) do anything which affects any decree of a Court, other than a decree in a suit to which the Act applies which was not fully satisfied by the first day of January 1939, or …. The proviso therefore makes it unequivocally clear that, while exercising the powers conferred on it, the Court is prohibited from reopening or otherwise altering a decree of any Court unless that decree originates from a suit to which this Act applies and that decree remained unsatisfied as of 1 January 1939. In light of the decision of the Full Bench of the Calcutta High Court in Mrityunjay Mitra v. Satis Chandra Banerji, which was subsequently affirmed by the Privy Council in Jadu Nath Roy v. Kshitish Chandra Acharyya, the parties have not contested that, because the personal decree for the balance remained unpaid on 1 January 1939, the decrees in Suit No. 78 of 1922 cannot be said to have been fully satisfied within the meaning of the aforesaid proviso. Consequently, the remaining issue for determination is whether those decrees were issued in “a suit to which this Act applies.” Section 2(22) of the Act defines the expression as follows: “Suit to which this Act applies” means any suit or proceeding instituted or filed on or after the first day of January 1939, or pending on that date, and includes a proceeding in execution—(a) for the recovery of a loan advanced before or after the commencement of this Act; (b) for the enforcement of any agreement entered into before or after the commencement of this Act, whether by way of settlement of account or otherwise, or of any security so taken, in respect of any loan advanced whether before or after the commencement of this Act; or (c) for the redemption of any security given before or after the commencement of this Act in respect of any loan advanced whether before or after the commencement of this Act.” The words “instituted or filed on or after the first day of January 1939, or pending on that date” have been interpreted as qualifying both the initial phrase “any suit or proceeding” and the later phrase “proceeding in execution,” as observed by Spens C.J. in Bank of Commerce Ltd. v. Amulya Krishna. Accordingly, the principle was applied in Ram Kumar De v. Abhoya Pada Bhattacharjee, where it was held that if a decree arises from a suit that terminated before 1 January 1939 and no execution proceeding was initiated or actually pending on or after that date, the decree does not fall within the category of a decree “in a suit to which this Act applies.”

In the earlier case of Aparna Kumari v. Girish Chandra the Special Bench of the Calcutta High Court affirmed the view that a decree passed in a suit that terminated before 1 January 1939 could not be reopened under the Act, and it overruled two earlier decisions that had taken a contrary position. The Special Bench also explained the construction of section 2(22) of the Act and gave reasons that the present Court found to be well-founded.

The matter before this Court concerned Suit No. 78 of 1922. All three decrees issued in that suit were passed long before the statutory cut-off date. Consequently, the only issue that required determination was whether any execution proceeding relating to those decrees was pending on or after 1 January 1939. The answer to that issue depended on the true meaning and legal effect of two orders issued by the executing Court: one dated 30 January 1937 and the other dated 2 June 1939.

Regarding the order of 30 January 1937, it was not contested that the order was issued under Order XXI, rule 57, as amended by the Calcutta High Court. That rule states: “Where any property has been attached in execution of a decree but by reason of the decree-holder’s default the Court is unable to proceed further with the application for execution, it shall either dismiss the application or for any sufficient reason adjourn the proceedings to a future date. Upon the dismissal of such application the attachment shall cease.” The marginal note to the rule records that its purpose is the determination of attachment.

In the judgment of C.J. Rank in Shibnath Singh Ray v. Sheikh Saberuddin Ahmad, the rationale for introducing rule 57 into the 1908 Code was explained. Rank observed that the rule was intended to provide a remedy for the inconvenience that arose when, after an attachment in execution, the application could not be pursued because the decree-holder defaulted. Such a situation was common: the decree-holder would make an informal arrangement giving the judgment-debtor additional time without obtaining full satisfaction of the decree; the execution application would then remain unprosecuted, not withdrawn, and neither party would attend further proceedings. The object of rule 57, according to Rank, was to require the Court either to adjourn the proceeding to a definite future date or to formally dismiss the application.

The need for a definitive dismissal was emphasized to prevent the Court’s files from becoming clogged with numerous pending applications. In the absence of a clear dismissal order, the practice had developed of “striking off” applications, a practice not authorized by the Code and which raised the problematic question of whether the attachment made under such an application also fell away. Rule 57 was therefore intended to stop this illogical practice by making clear that, when an application for execution is dismissed, any attachment made under that application must cease to exist.

In practice, many execution applications had become stagnant and neglected, leading courts to habitually order such applications to be “struck off.” This practice was not supported by the Code, and it raised the question of whether an order to strike off also terminated any attachment that had already been made under the execution application, or whether the attachment continued despite the order. Numerous other difficult and significant questions emerged from this practice, and rule 57 was intended to put an end to this illogical and inconvenient procedure. Accordingly, rule 57 required that an execution application be dismissed definitively if it was not adjourned to a later date. The final sentence of rule 57 was meant to resolve the uncertainty about the fate of an attachment when an execution application is dismissed; the legislature expressly provided that the attachment should be terminated. The amendment that introduced this new rule presented two alternative courses for the executing court when faced with the situation described in the rule. Each alternative had its own advantages and disadvantages. If the court chose to adjourn the execution proceedings, the attachment remained in force automatically, without any further order. This approach facilitated genuine arrangements between the decree-holder and the judgment-debtor concerning the timing and manner of satisfying the decree, but it also tended to encourage idle or protracted proceedings, thereby causing undesirable congestion in the files of the executing court because many execution matters remained alive. Conversely, if the court dismissed the application under the circumstances specified in the rule, the dismissal would prevent such congestion by providing a final order that closed the matter. However, this dismissal would also eliminate the attachment, potentially discouraging decree-holders from offering reasonable accommodations to judgment-debtors, since the loss of the attachment allowed the judgment-debtor to deal with the property to the detriment of the decree-holder. To preserve the benefit of dismissal while avoiding the disadvantage of automatically ending the attachment, the Calcutta High Court amended rule 57 by adding the words “unless the Court shall make an order to the contrary” to the last sentence. The amended rule now leaves three options for the executing court when it encounters difficulty proceeding with an execution case because of the decree-holder’s default: (1) the court may adjourn the proceedings for a proper reason, which keeps the attachment alive automatically; (2) the court may dismiss the application, which automatically terminates the attachment; or (3) the court may dismiss the application but expressly order that the attachment remain in force. Thus, the amended rule provides three distinct forms of order that the court may make in the circumstances described.

In this case the Court considered which of the three categories of orders, set out in the amended rule, applied to the order dated 30 January 1937 in Execution Case No. 118 of 1936. The order of that date was issued on a petition, identified as Exhibit 2, that had been filed on the same day in the same execution case. The counsel for the appellants emphasized the phrase “struck off for the present” that appeared in the body of the petition. Those words were part of the judgment-debtor’s own request as recited in the petition. However, when the decree-holder actually prayed before the Court, the wording “for the present” was omitted; the decree-holder merely asked the Court to “strike off the execution case keeping the attachment in force.” Apart from the parties’ positions, the Court’s own intention was evident from the order it entered, which is recorded in column 20 of Exhibit F. The Court observed that the decree-holder’s willingness to engage in prolonged negotiations with the judgment-debtor indicated an unwillingness to prosecute the execution proceedings diligently. Consequently, the Court dismissed the execution case for non-prosecution but expressly ordered that the attachment should remain in effect. This clearly shows that the Court made the third type of order described in the amended rule, namely a dismissal of the execution case together with an explicit direction to keep the attachment alive. The three forms of order permitted by rule 57, as amended by the High Court, are distinct and do not overlap. If merely allowing the attachment to continue automatically transformed an express dismissal— a final order—into an adjournment— a non-final order—there would have been no purpose in the High Court’s amendment of rule 57. The Court could simply have adjourned the proceedings, which would have kept the attachment alive without any specific direction. The fact that the Court gave a specific direction that the attachment should continue demonstrates that it intended to issue a final dismissal order. Moreover, the heading of column 20 in Exhibit F indicates that only a final order is to be entered in that column, and the entry of the order there supports the conclusion that the Court made a final order of dismissal. The automatic dropping of the claim case further signals that the execution case had concluded. Additionally, the judgment-debtor’s payment of the full costs of the execution case suggests, at least to some degree if not conclusively, that the execution proceedings were finally resolved by that order. The petition, Exhibit 2(a), also bears an endorsement dated 2 June 1939, which confirms the Court’s understanding that the 30 January 1937 order was a final dismissal of the execution case, with the attachment continued by a special order authorized under the amended rule 57.

On June 2 1939, the court recorded an endorsement stating that learned pleaders for both parties jointly requested the cancellation of the attachment that existed by a special order in Money Execution Case 118 of 1936, even though that case had been dismissed. This endorsement clearly indicated that the court itself recognized the order issued on January 30 1937 as a final order of dismissal and that the attachment had been continued by a special order. After reviewing all the surrounding circumstances, the court held that there was no doubt that the January 30 1937 order was, in both form and substance, a final dismissal of Execution Case No. 118 of 1936 and that the attachment persisted because of a special order authorized by the amendment to rule 57 made by the Calcutta High Court. The counsel for the appellants argued that once an execution case ended, the attachment could not remain in force, asserting that an attachment normally depends on an ongoing execution proceeding and would fail if the execution were dismissed. The court found this argument without merit, noting that rule 57, as amended, expressly permits a court to dismiss an execution application while simultaneously preserving the attachment by a special order. In the present case, the attachment was not left unsupported; rather, it rested on the solid legal basis provided by the special order authorized under the amended rule 57.

The court explained that the continuation of the attachment did not require an active execution proceeding. It cited the example of an attachment before judgment under Order XXXVIII, rule 11, where, after a decree is granted in favor of the plaintiff, the attachment automatically continues without the need for a fresh application for execution. Consequently, the judgment-debtor is prevented from dealing with the property to the detriment of the decree-holder, even though no separate execution proceeding is pending. Similarly, the attachment in the present matter existed solely based on the provisions of Order XXXVIII, rule 11, and not on any subsequent execution process. Such an attachment cannot be described as a proceeding in execution because no execution was ever initiated after the decree. Accordingly, the court concluded that the January 30 1937 order was a definitive order that terminated Execution Case No. 118 of 1936, and the attachment continued not because of a lingering execution proceeding but because a special order was issued under Order XXI, rule 57, as amended by the High Court.

The Court examined the contention raised by counsel for the appellants that the petition labeled Ex 2a, dated 2 June 1939, constituted a proceeding in execution and that, because it had been instituted and was pending after 1 January 1939, it fell within the definition of “a suit to which this Act applies” in section 2(22). The Court found this line of argument unsound. It held that the document presented as petition Ex 2a was not, in substance, an application. Relying on the precedent set in Raja Shri Prakash Singh v. The Allahabad Bank Ltd. (33 C.W.N. 267; A.I.R. 1929 P.C. 19), the Court observed that the petition was essentially a certification by the decree-holder that the decree had been satisfied. The mere formal character of the document as a petition did not transform the ordinary certification procedure into a proceeding in execution for the recovery of a loan or for the enforcement of any agreement. The Court described the petition as merely an intimation to the Court by the decree-holder that the decree had been satisfied outside the Court, and that the request for withdrawal of the attachment was a consequential step that would naturally follow once full satisfaction of the decree was recorded. The order issued on the basis of that petition confirmed that the decree was recorded as adjusted and that the attachment was cancelled. Consequently, the Court concluded that petition Ex 2a did not amount to an application that would initiate a proceeding in execution for any of the purposes enumerated in clauses (a), (b) or (c) of section 2(22) of the Act. Accordingly, the decrees sought to be reopened were not decrees rendered in “a suit to which this Act applies”. Suit No 78 of 1922 was neither instituted on or after 1 January 1939, nor was it pending on that date, and all three decrees had been passed long before that date. No proceeding in execution contemplated by section 2(22) was instituted or pending on or after that date. The Execution Case No 118 of 1936 had terminated on 30 January 1937, and the petition of 2 June 1939 was not an application and certainly not a proceeding in execution within the meaning of section 2(22). This finding alone warranted the dismissal of the appeal, and the Court saw no need to consider the respondent’s alternative question based on section 36(5) of the Act, expressing no opinion on that matter. The appeal was therefore dismissed with costs, and the order was entered accordingly. Chief Justice Kania concurred with this view. Justice Patanjali Sastri noted that the factual background of the dispute had been fully set out in the judgment of Ray Brother Das, which he had read, and therefore it was unnecessary to repeat those facts. He further observed that the appellant-mortgagor was seeking relief under the Bengal Money-lenders Act, 1940, in respect of the matters before the Court.

The appellant sought payment of a decree debt that was owed by him. The respondent, who acted as the representative of the sub-mortgagee who held the decree, relied on two exemptions contained in the Bengal Money-lenders Act, 1940. The first exemption was found in Section 86(1), proviso (ii), which provides that “any decree other than a decree in a suit to which this Act applies which was not fully satisfied by the first day of January, 1939” is exempt. This provision gave rise to a dispute about whether the decree in favour of the respondent had been passed in a suit that fell within the meaning of “a suit to which this Act applies”. The second exemption relied upon the respondent was Section 36(5), which exempts “the rights of any assignee or holder for value if the Court is satisfied that the assignment to him was bona fide and that he had not received the notice referred to in clause (a) of sub-section (1) of section 28”. The question therefore arose as to whether a sub-mortgagee could be characterised as an “assignee” under the Act. To answer the first question, the Court referred to the definition of “a suit to which this Act applies” contained in Section 2(22). That definition states that the expression means “any suit or proceeding instituted or filed on or after the 1st day of January, 1939, or pending on that date and includes a proceeding in execution for (among other things) the recovery of a loan advanced before or after the commencement of this Act.” The Court observed that this definition requires the “proceeding in execution” to have been pending on 1 January 1939. Accordingly, the Court examined whether the order of the executing court dated 30 January 1937, which purported to dismiss the respondent’s execution case for non-prosecution while simultaneously allowing the existing attachment to continue, had terminated the execution proceeding that had given rise to the attachment. It was contended that the order was made under Order XXI, Rule 57 of the Civil Procedure Code, as amended by the Calcutta High Court, and therefore was intended to bring the execution proceeding to an end. The Court was not persuaded that the dismissal had the effect of ending the entire proceeding. The amendment to the rule that added the words “unless the court shall make an order to the contrary” envisages a dismissal of an “application for execution” while at the same time preserving a subsisting attachment. Consequently, the Court held that the dismissal on 30 January 1937 should be understood as the dismissal of the specific execution application then before the court and should not be read as having any broader operation. Moreover, the explicit continuation of “the attachment notwithstanding the dismissal” indicated that the proceeding which had resulted in the attachment was kept alive for later enforcement, such as by sale of the attached property. The Court noted that an attachment itself constitutes a “proceeding in execution” and, so long as the attachment remains, the execution proceeding can fairly be regarded as pending. In support of this view, the Court cited In re Clagett’s Estate; Fordham v. Clagett, in which Jessel M.R. observed that “a pending matter in any court of justice means one in which some proceeding may still be taken”. The attachment therefore remained a pending matter for the purposes of the statutory definition.

The decree was cancelled by the court only on 2 June 1939, when the decree in question was recorded as adjusted, and therefore execution of the decree could be properly considered terminated only after that date. In this view, a “proceeding in execution” was still pending on 1 January 1939, and consequently the respondent’s decree must be regarded as having been passed in a suit to which the Act applies, leading to the conclusion that the respondent’s claim to exemption under proviso (ii) to sub-section (1) of section 36 of the Act must fail. Nevertheless, the Court expressed the opinion that the respondent’s claim to recover his decree debt is protected by section 36(5). There is no dispute that the sub-mortgage granted to the respondent’s predecessor in title was made in good faith, and the respondent could not have received the notice referred to in clause (a) of sub-section (1) of section 28 because the transaction occurred long before the Act was enacted. It is also undisputed that section 36(5) applies to debts that arose before the Act, as noted in Renula Bose v. Manmatha Nath Bose (L.R. 72 I.A. 156). The remaining issue, therefore, is whether the respondent, as sub-mortgagee, qualifies as an assignee within the meaning of sub-section (5) of section 36. The judges in the lower court held that he was not, following an earlier decision of the same court in Promode Kumar Roy v. Nikhil Bhusan Mukhopadhya (20 Ch. D. 687). That earlier decision, however, was reversed by the Privy Council in Promode Kumar Roy v. Nikhil Bhusan Mukhopadhya (L.R. 76 I.A. 74), where the Privy Council addressed the present question and observed that the suggestion—that treating a sub-mortgagee as an “assignee” under section 36(5) would create difficulties and anomalies—could not be accepted. The Lords further explained that they did not express a view on the position that would arise if the sub-mortgage merely constituted a charge on the original mortgage debt; instead, they noted that when the sub-mortgage contains an assignment of that debt together with all the rights of the mortgagee, the situation appears free from difficulty. Relief may be granted to the original mortgagor against the original mortgagee under section 36, but such relief must not prejudice the rights of the assignee by way of sub-mortgage. To illustrate, the Lords imagined a scenario where the original mortgage debt, including principal and interest at the original rate, amounted to Rs 1,000, while the sub-mortgage by assignment owed Rs 500. If relief were granted against both the mortgagee and sub-mortgagee, the amounts due might be reduced to Rs 800 and Rs 400 respectively; however, by virtue of sub-section (5), the sub-mortgagee’s rights would remain unaffected.

In this case, the Court observed that the rights of the original mortgagee could not be impaired by the sub-mortgage. Accordingly, the sub-mortgagee, as the assignee of the mortgage debt, was entitled to claim the full amount of Rs 500 against both the mortgagor and the original mortgagee. The Court further explained that if relief were granted to the mortgagor against the original mortgagee, the mortgagor would remain liable to pay the original mortgagee only Rs 300, which represented the balance of the reduced debt after the sub-mortgagee had been paid in full. Thus, the sub-mortgagee could enforce his entire claim, while the mortgagor’s obligation to the original mortgagee would be diminished by the amount already satisfied to the sub-mortgagee.

The Court rejected the argument that subsection (5) of section 36 could be read as applying only to an assignee of a mortgage decree, citing authorities (1) 50 C.W.N. 407 and (2) L.R. 76 I.A. 74. The language of the provision, together with the requirement that the assignee had not received the notice mentioned in clause (a) of subsection (1) of section 28, made it clear that an assignee of a mortgage debt falls within the scope of subsection (5). The Court noted that section 28, sub-section (1) deals exclusively with the assignment of debts, and therefore the assignee is expressly covered by the sub-section, as reflected in the reference on pages 83-84 of the cited text.

The Court pointed out that the sub-mortgage under consideration also contained an explicit assignment of the debt owed under the original mortgage and of “the entire interest” of the original mortgagee. The deed of sub-mortgage reproduced the original mortgage terms and then stated: “We mortgage all that is at present due and that will in future become due to us, the first, second, third and fourth parties, on account of the said one lakh of rupees together with interest and the entire interest under the mortgage taken by us on the basis of the said Indenture in respect of five annas share of the said Niskar Mouza Monoharbahal and in respect of sixteen annas of the surface and underground rights in the said Mouza Marichkota and we make over the said Deed of Indenture to you.” The Court held that this decision was directly on point and governed the present dispute. It was suggested that the decision conflicted with earlier rulings of the same tribunal in Ram Kinkar Banerjee v. Satya Charan Srimani (1) and Jagadamba Loan Co. v. Raja Shiba Prasad Singh (2). Those earlier judgments emphasized the phrase “all the rights of the mortgagee” and concluded that, under Indian law, a legal interest remained in the mortgagor even when the mortgage was an English mortgage, meaning the mortgagee’s interest was not absolute. The argument derived from those decisions was that a sub-mortgage does not transfer all the original mortgagee’s rights, leaving the mortgagee with a residual legal interest in the original mortgage. The Court rejected this view as superficial, observing that the earlier cases dealt with the quantum of interest transferred in a leasehold mortgage to determine the existence of privity of estate, not with the assignment of the entire mortgage debt and the mortgagee’s right to recover it.

In that earlier discussion, the Court examined whether a mortgage could function as a full assignment of the mortgagor’s entire interest in a lease or merely as a partial assignment. The Court explained that if the mortgage operated as a complete assignment, the mortgagee would be bound by privity of estate and therefore would bear the obligations attached to the lease. Conversely, if the mortgage only transferred a portion of the mortgagor’s interest, the mortgagee would not be subject to those lease burdens. To resolve this issue, the judges held that Indian law does not create privity of estate because the mortgagor retains a legal interest in the property and the mortgagee’s interest is not absolute. The judgments cited in that analysis were not relevant to the question that arose in the case of Promode Kumar Roy v. Nikhil Bhusan Mukhopadhya and that also arises in the present dispute, namely whether a sub-mortgagee steps into the position of an assignee of both the mortgage debt and the mortgagee’s right to recover that debt from the original mortgagor. The statutory provision under consideration provides relief to certain debtor categories by limiting, to some extent, the rights of creditors, while reserving an exception for “assignments of loans.” Within that framework, the only material inquiry is whether the assignment creates a debtor-creditor relationship between the assignee and the original debtor that brings the matter within the scope of the Act. The Court observed that if the sub-mortgagee, by virtue of the sub-mortgage, acquires the authority to sue the original mortgagor for repayment of the mortgage debt, that suffices to qualify the sub-mortgagee as an assignee under the Act. Consequently, the nature of the right conveyed to a sub-mortgagee by the sub-mortgage was examined in the earlier case of Promode Kumar Roy v. Nikhil Bhusan Mukhopadhya and was again scrutinised in the present case. The reference in that earlier decision to a sub-mortgage containing an “assignment of all the rights” of the mortgagee must be understood as referring to whether the transferred right is sufficient to enable the sub-mortgagee to institute his own suit against the original mortgagor, thereby activating the relevant provisions of the Act. The Court also noted a reservation made by the earlier judges that a sub-mortgage limited to a charge on the original mortgage does not create such an assignment, and this observation supports the present view. Accordingly, the Court found no inconsistency between the earlier decisions and the ruling in Promode Kumar Roy v. Nikhil Bhusan Mukhopadhya; even if a theoretical inconsistency existed, it would not affect the present matter. On this basis, the Court affirmed that the appeal fails, ordered its dismissal with costs, and recorded the agents for the parties.