TMI Blog1925 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceedings in O.S. No. 11 of 1921. The District Judge held that Section 10 did not apply to the application and dismissed it. The application was made in the insolvency petition and, therefore it was made to the District Court exercising insolvency jurisdiction. There is no provision in the Provincial Insolvency Act corresponding to s, 18 of the Presidency Towns Insolvency Act empowering the Insolvency Court to stay proceedings pending against the insolvency before that Court or any other Court subject to the superintendence of that Court. Section 29 of the Provincial Insolvency Act gives power to the Court before which a suit or other proceeding is pending against a debtor, to stay the proceeding or to continue it on such terms as the Court may impose on proof that an order 6f adjudication has been made against the debtor. It is open to the Sub-Court of Coimbatore to stay the proceedings in O.S. No. 11 of 1924 pending the disposal of the application to the District Court by the Official Receiver under Section 53 of the Act. The order of the District Judge, therefore, is right. 2. It is contended on behalf of the appellant that on the making of the application by the Official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of private sale can be given to mortgagee, where the mortgage is an English mortgage to which transaction neither a Hindu, Muhammadan, or Buddhist, or a member of any other race, sect, tribe or class from time to time specified in this behalf by the Local Government with the previous sanction of the Govern or-General in Council, in the Local Official Gazette is 2 party; where the mortgagee is the Secretary of State for India in Council' and where the mortgaged property or any portion thereof is situate within the towns of Calcutta, Madras, Bombay, Karachi and Rangoon, the power of private sale of the mortgage can be exercised by the mortgagee, and in no other case can the power of sale in a mortgage be exercised by the mortgagee; in other words, the provisions of Section 69, do not apply to mortgages in the mofussil except in the case of an English mortgage as above described and except in the case of a mortgage in favour of the Secretary of State for India in Council. It, therefore, follows that Section 28, Clause (6), which is applicable only to the mofussil, could not be said to refer to the right of a mortgagee to effect private sale of the property. The word realise m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace The ordinary civil Court is only concerned with the question whether the mortgage document was executed by the mortgagor and whether the whole or portion of the consideration passed; and if the Court finds that the mortgage-deed was executed by the mortgagor and the consideration passed, it will pass a decree in favour of the mortgagee for the amount of consideration which is proved to have passed; and the onus of proving want of consideration in such cases is upon the mortgagor. In the case of Section 53, it the mortgage is within two years of the adjudication of the mortgagor as an insolvent the onus of proving good faith and valuable consideration is on the mortgagee. The Insolvency Court, therefore, is the proper Court for considering whether the transaction is bad under Section 53 of the Act. Vide Mariappa Pillai v. Raman Chettiar 10 L.W. 59. 5. The question for determination is whether the jurisdiction of the Civil Court to try a mortgage suit is taken away on the presentation of an application to the Insolvency Court under Section 53 of the Act. There is nothing in the Insolvency Act itself to support the contention that the jurisdiction of the Civil Court to try the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age which is voidable under Section 53 is only voidable to the extent to which the property transferred is necessary to satisfy the creditors of the insolvent. That being so, it is difficult to understand how the Civil Court is deprived of its jurisdiction by reason of an application under Section 53 of the Provincial Insolvency Act. If a declaration is given by the Insolvency Court in favour of the Official Receiver, the property would vest in the Official Receiver and he could dispose of it for the general body of creditors, and the mortgagee could not bring the property to sale on the strength of his mortgage, for the moment the transaction is declared void under Section 53, the property vests in the Official Receiver and he is entitled to deal with it for the general body of creditors. No Court has power to sell the property of an insolvent if it is vested in the Official Receiver excepting the Official Receiver himself. Vide Kochu Mahomed Asan Tharagan v. Sankaralinga Mudaliar (1921) M.W.N. 236 : 14 L.W. 505. But till such a declaration is made by the Insolvency Court under Section 53, the transaction is good and the mortgagee could proceed with the suit or with the execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit. There is no warrant either in law or in practice for the contention that the presentation of an application to the Insolvency Court for an order under Section 53 takes away the jurisdiction of the Civil Court to proceed with the suit of a secured creditor. 7. Under Section 4 of the Provincial Insolvency Act, the Court is given wide powers to try all questions which the Court may deem expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property. Though the Insolvency Court has such wide powers, neither Section 4 nor any other section of the Insolvency Act takes away the jurisdiction of the ordinary Civil-Court to try a suit instituted by a mortgagee against the insolvent. The scheme of the Act is to exempt the secured creditors from the operation of the Act unless they choose to come in under Section 47. This does not mean that a mortgage cannot beset aside as being void under Section 53. Similarly the jurisdiction given to an Insolvency Court raider Sections 53 and 54 cannot take away the jurisdiction of the ordinary Civil Court to entertain a suit at the instance of a mortgagee, or proceed with such a suit alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jbhandas 31 Ind. Cas. 948 : 17 Bom. L.R. 925. If so, then leave cannot Lie given to continue a suit already filed. But assuming without deciding that the general policy of the Act will support such an interpretation, the creditor who is estoppted by the subsection is one whose debt is probable under the Act, and the sub-section is subject to Sub-section (6) Nothing in this section shall affect the power of any secured creditor to realise or otherwise deal with his security, in the same manner as he would have been entitled to realise or deal with, it if this section had not been passed. Do these two clauses prohibit or permit the secured creditor to continue or commence a suit on his security during the pendency of the insolvency proceedings? As I have said, the point should not be found against the bona fide litigant unless it was obviously the intention of the Statute to deprive him of his ordinary civil remedies. 11. It will be noted first that the prohibition announced is not absolute but discretionary with the Court. Therefore, the leave' of the Court may be given to a mortgagee to commence or continue his mortgage suit pari passu with the proceedings under Section 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceed with his suit to enforce his security. 13. Section 4 of the Provincial Insolvency Act does not help the appellant. It is a section chiefly to settle questions of title to property between the debtor and a third party. Nor does Section 41 of the Indian Evidence Act assist in view of the limited nature of the enquiry under Section 53. The decision in Mariappa Pillai v. Raman Chettiar 52 Ind. Cas. 519 : 10 L.W. 59 also does not really help the appellant. I do not think that that decision laid down anything more than that the Civil Court has no jurisdiction to decide a matter which falls to be decided under Section 53 of. the Provincial Insolvency Act, 4 that is, it cannot annul in favour of creditors a transfer of the nature set out in that section The case in Official Receiver Tinnevely v. Sankaralingam Mudaliar 62 Ind. Cas. 495: 40 M.L.J. 219 : (1921) M.W.N. 236 : 14 L.W. 505 was not a case of secured creditor, as specifically found at page 530 Page of 44 M.--[Ed.] It was decided on the footing that the vesting order of the Insolvency Court placed the property of the insolvent at once in the hands of the Official Receiver and prohibited any other Court than the Insolvenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in such a suit as representative of the creditors at all. Obviously, for example, he could not challenge the passing of the consideration as that is not a point relevant to that suit, and the frame and scope of the suit cannot have been altered merely because the Official Receiver has been brought on as representative of the judgment-debtor. The Official Receiver does not carry into that representation his character as representative of the creditors. The decree in the mortgage suit, if in favour of the mortgagee, will still be enforceable except so far as the proceedings under Section 53 have debarred him from recovering the whole of the proceeds for himself, and if, for example, in the proceedings under Section 53 the Court finds the alienation good to any extent, and upholds it to that extent, or rather does not challenge the mortgage right to that extent, then the mortgagee will become a creditor of the insolvent estate on the foot of his mortgagee to that extent. If the mortgagee's suit is dismissed, then the property vests in the Official Receiver who is on record in his suit as representative of the mortgagor. Similarly, if the proceedings under, Section 53 are dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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