060-NLR-NLR-V-57-THAMBIPILLAI-et-al-Appellants-and-CANAGARATNE-et-al-Respondents.pdf
1954Present-: K. D. de Silva, J., and Sahsonj, J.
rpj-f AMBIPIL.L.AI cl a^-> Appellant?, and CANAGADATNJS el ah,
.-Respondents■
.s'. C. 53-5-1—D. C. {Inly.) Jaffna, 4,303
Execution—Concurrence of decree holders—Civil Procedure Code, ss. 232, 350, 352—Mortgage—Scope of rule that mortgagee should first- discuss the propertymortgaged.
After the claim of two primary mortgagees was sat is tied from tho proceeds of ahypothecary sale, tlio balance of tho proceeds lying in Court- to the credit of thomortgagor was seized under* section 232 of tho Civil Procedure Code by threeclasses of judgment creditors, viz., unsecured creditors holding money decreesof the sumo Court, unsecured creditors holding money decrees of another Court,-and secondary and tertiary mortgagees of the land sold under the hypotliccarydecrec. who had obtained hypothecary decrees prior to the sale but subsequentto the entering of the decree upon the primary mortgage.
Held, that there was nothing in either section 350 or section 352 of tho Civil1‘rocoduro Code to prevent all the seizing creditors, including tho secondary andtertiary mortgagees, from being equally entitled to claim concurrence and sharerateably, so long as the money lying in the custody Court had not been appro-priated to a particular dccreo holder or holders by an order of that Court.
Held further, that tho claim for concurrence by the secondary and tertiarymortgagees was not prejudiced by tl.o fart that-, apart from the land sold at theinstance of the primary mortgagees, other lands had also been hypothecated.under tlioir bonds.
A PPEAL. from an order of the District Court, Jaffna.
S. J. V. Chclvanayaham, Q.C., with 1M. Ttafich, for Appellants in S. C. 53.
S../- F. Ghelvmiayakam, Q.C.. s itli A. Narjnndm, for Appellants inS. C. 54.
A. C. KadarajaJt, for 1st- Despondent in £>. C. 53 and for 2nd Despon-dent in iS. C. 54.
T.ll llajaralnam, for 2nd Despondent in .S. 0. 53 and for 3rd Despon-dent in S. C. 54.
C. Manohara, for 3rd and 6th Despondents in S. C. 53 and for 4th to7th Despondents iu S. C. 54.
Cur. adv. mill.
November 24, 1954. Saxsoxi, J.—
A hypothecary decree was entered in this action on IGtli June 194S infavour of two primary mortgagees, and by order of Court the landmortgaged, was sold by a Commissioner. The primary mortgagees’ claim has
been satisfied and the money in Court is the balance left over out of theproceeils of the- salfe. After this money was deposited in Court seizurenotices under section 232 of the Civil Procedure Code were forwarded to theCourt by the Fiscal on behalf of three classes of judgment creditors, viz.,unsecured creditors holding money' decrees of the same Court-, unsecuredcreditors holding money decrees of another Court, and secondary andtertiary mortgagees of the land sold, who had obtained hypothecarydecrees prior to the sale but subsequent to the entering of the decree uponthe primary mortgage. Sonic of the seizing creditors went a step furtherand applied in this action that sums Jof money be transferred to theiractions to satisfy their claims. The District Judge very- properly directedthat the parties and all the seizing creditors be given notice of such appli-cations. Ultimately an inquiry was held into the claims of all the seizingcreditors and the learned Judge held that only those seizing creditorswho had applied for a transfer of money from this action to their respectiveactions could claim concurrence. He appears to have thought that thisresult followed from the decisions in Jlfeud is v. Peris and Shaw andSons v. SulaitnanThe secondary and tertiary mortgagees have appealed
and Mr. Chelvanayagam has pressed only their claim to concurrence.He said he was not claiming preferential payment out of the money inCourt-. Mr. Xada rajah, however, lias contested the appellants’ claimseven to concurrence.
I do not think the decisions cited have established the proposition onwhich the learned Judge based his order. On the contrary, the basisof the decision in Shaw and Sons i Sulaiman (supra) is that a judgmentcreditor who applies for execution is not shut out from claiming con-currence so long as the money lying in the custody Court has not beenappropriated to a particular decree holder or holders by an order of thatCourt. Xo such order had been made in this case prior to the inquiry.There is nothing in cither section 350 or section 352 of the Code to indicatethat an application for transfer of the money, such as had been made bythe respondents to these appeals, confers any particular privilege on a judg-ment creditor. The essential order of appropriation ]!ad not been made.The position, then, is that all the judgment creditors had effected seizures,and since no order in favour of any particular seizing creditor had beenmade they were all entitled to share in the money and they all had thesame rights. The latter part of section 350 seems to govern the matter.The seizing creditors had notified the Court of their claims to the moneyand the Court rightly caused notices to issue to all of them before makingany order as to payment. The justice of the case requires—and that isthe test laid down in the section—that all the seizing creditors, includingthe appellants, should share ratcably.- . –
But Mr. Xada rajah also relied on the rule enunciated b}' de Sampayo, J.,in Wije-sekera v. Pa teal3, that a mortgagee who has obtained a hypothe-cary decree should first realize the property mortgaged and can resort to.
other property of the debtor only for any deficiency, unless the debtorconsents otherw ise. He subnu'tted that although the land sold under thedecree in favour of the primary mortgagee had been mortgaged on thesecondary and tertiary bonds, other lands had also been mortgaged andrhe appellants should first sell those other lands before they claimedconcurrence inthe proceeds of sale of the land sold. J thinlc there are twoanswers to this submission. Firstly, it cannot be said that the appellantsare seeking to resort to property which has not been mortgaged tothem. The land sold was subject to secondary and tertiary mortgages infavour of the appellants, and by claiming to share in the money in Court,which was brought there by the sale of the land, they do not seem to meto be offending against the rule in question. It is not, in my opinion,“ other property of the debtor ” within the meaning of the rule. .Secondly,that rule was obviously introduced for the benefit of the mortgagor whoseunsecured property it- was probably7 intended to protect. This aspect of itis emphasised by the words “ unless the debtor consents otherwiseIf the rule was introduced to protect other creditors of the mortgagor,obviously it could not have been open to the mortgagor to waio it. Itherefore do not think this objection can be taken by the respondentswho are creditors of the mortgagor. T would also draw attention to thereservation made by de Sampayo, J., to which Schneider, J., referred inPciihinayakc v. W ickre-mcsinghc 1, viz., that there might be good reasonsfor a Court not enforcing the general principle that the mortgaged propertyshould be first discussed. It is clear that if the money7 lydng in Court isdrawn by7 the other creditors, the appellants will lose a great part oftheir security7, and if they7 have to proceed against the other mortgagedlands first it will he too late for them to claim concurrence. The decreesentered in favour cf the appellants first direct the debtors to paythe amounts due under the bonds, and are, in that- respect, like any7 moneydecrees ; they7 then direct that in default of such payment the mortgagedlands (including of course the land sold under the primary7 mortgage)should bo sold. The appellants are doing no more than levying executionunder the first part of their decrees.
For these reasons I would set aside the order of the learned Judge sofar as it rejects the claims of the appellants. They will be entitled toshare the money in deposit along with the seizilig creditors in whose favourthe learned Judge has already7 held. The appellants are entitled torecover their costs of these ‘appeals from the 1st, 2nd, 3rd and Gthrespondents in appeal Xo. 53, and the 2nd to 7th respondents in appealXo. 51. The order of the learned Judge as to costs in the District- Courtwill stand.
de Silva, J.—I agree.
– Order sel aside.
(J023) 2-5 X. L. li J02.