Case: M. L. Abdul Jabhar Sahib Vs. H. V. Venkata Sastri &amp; Sons &amp; Ors

On February 23, 1953 the appellant instituted C. S. No. 56 of 1953 on the Original Side of the Madras High Court under the summary procedure of Order 7 of the Original Side Rules against Hajee Ahmed Batcha claiming a decree for Rs. 40,556-1-2 and Rs. 832712-9 said to be due under two promissory notes executed by Hajee Ahmed Batcha.On March 9, 1953, Hajee Ahmed Batcha obtained leave to defend the suit on condition of his furnishing the security for a sum of Rs. 50,000 to the satisfaction of the Registrar of the High Court. On March 26, 1953 Hajee Ahmed Batcha executed a security bond in favour of the Registrar of the Madras High Court charging several immovable properties for payment of Rs. 50,000. The condition of the bond was that if he paid to the appellant the amount of any decree that might be passed in the aforesaid suit the bond would be void and of no effect and that otherwise it would remain in full force. The bond was attested by B. Somnath Rao. It was also signed by K. S. Narayana Iyer, Advocate, who explained the document to Hajee Ahmed Batcha and identified him. All the properties charged by the bond are outside the local limits of the ordinary original jurisdiction of the Madras High Court. The document was presented for registration on March 29, 1953 and was registered by D. W. Kittoo, the Sub-Registrar of Madras-Chingleput District. Before the Sub-Registrar, Haji Ahmed Batcha admitted execution of the document and was identified by Senkaranarayan, and Kaki Abdul Azib. The identifying witnesses as also the Sub-Registrar signed the document. Hajee Ahmed Batcha died on February 14, 1954 and his legal representatives were substituted in his place in C. S. No. 56 of 1953. On March 19, 1954 Ramaswami, J. passed a decree for Rs. 49,891-13-0 with interest and costs and directed payment of the decretal amount on or before April 20, 1954. While passing the decree, he observed:-"It its stated that the defendant has executed a security bond in respect of their immovable properties when they obtained leave to defend and this will stand enured to the benefit of the decree-holder as a charge for the decree amount.Clauses 3 and 4 of the formal decreethat the security bond executed in respect of their immoveable properties by defendants 2 to 4 in pursuance of the order dated 9th March 1953 in application No. 797 of 1953 shall stand enured to the benefit of the plaintiff as a charge for the amounts mentioned in clause 1 supra;(4) that in default of defendants 2 to 4 paying the amount mentioned in Cl. 1 supra on or before the date mentioned in Clause 2 supra the plaintiff shall be at liberty- to apply for the appointment of Commissioners for sale of the aforesaid properties.The appellant filed an application for (a) making absolute the charge decree dated March 31, 1954 and directing sale of the properties; and (b) appointment of Commissioners for selling them. On April 23, 1954 the Court allowed the application, appointed Commissioners for selling of the properties and directed that the relevant title deeds and security bond be handed over to the Commissioners. The Commissioners sold the properties on May 29 and 30, 1954. The sales were confirmed and the sale proceeds were deposited in Court on July 2, 1954.4. All the three respondents are simple money creditors of Hajee Ahmed Batcha. The respondents Venkata Sastri and Sons filed O. S. No. 13 of 1953 in the Sub-Court, Vellore, and obtained a decree for Rs. 5,500 on March 27, 1953. Respondent H. R. Gowramma instituted O. S. No. 14 of 1953 in the same Court and obtained a money decree on April 14, 1953. The two decree-holders filed applications for execution of their respective decrees. One Rama Sastri predecessor of respondents H. R. Chidambara Sastri and H. R. Gopal Krishna Sastri obtained a money decree against Hajee Ahmed Batcha in O. S. No. 364 of 1951/ 52 in the Court of the District Munsiff, Shimoga, got the decree transferred for execution through the Court of the District Munsiff, Vellore, and filed an application for execution in that Court. On June 7, 1954 the aforesaid respondents filed applications in the Madras High Court for (i) transfer of their execution petitions pending in the Vellore Courts to the file of the High Court and (ii) an order for rateable distribution of the assets realized in execution of the decree passed in favour of the appellant in C. S. No. 56 of 1953. The appellant opposed the applications and contended that as the properties were charged for the payment of his decretal amount, the sale proceeds were not available for rateable distribution amongst simple money creditors. The respondents contended that the security bond was invalid as it was not attested by two witnesses and that decree passed in C. S. No. 56 of 1953 did not create any charge. Balakrishna Ayyar, J. dismissed all the applications as also exemption petitions filed by the respondents. He held that the decree in C. S. No. 56 of 1953 did not create a charge on the properties. But following the decision in Veerappa Chettiar v. Subramanya Ayyar, ILR 52 Mad 123   = (AIR 1929 Mad 1  ) (FB) he held that the security bond was sufficiently attested by the Sub-Registrar and the identifying witnesses. The respondents filed appeals against the orders. On March 28, 1958 the Divisional Bench hearing the appeals referred to a Full Bench the followingthe decision in ILR 52 Mad 123   = (AIR 1929 Mad 1  ) (FB) requires reconsideration.The Full Benchour opinion, such signatures of the registering officer and the identifying witnesses endorsed on a mortgage document can be treated as those of attesting witnesses if (1) the signatories are those who have seen the execution or received a personal acknowledgment from the executant of his hiving executed the document, (2) they sign their names in the presence of the executant and (3) while so doing they had the animus to attest. The mere presence of the signatures of the registering officer or the identifying witnesses on the registration endorsements would not by themselves be sufficient to satisfy the requirements of a valid attestation; but it would be competent for the parties to show by evidence that any or all of these persons did in fact intend to and did sign as attesting witness as well.e Full Benchheld that the decision in Veerappa Chettiars Case, ILR 52 Mad 123  =(AIR 1929 Mad 1  ) (FB) (supra) can be held to be correct to this limited extent only and not otherwise. At the final hearing of the appeals, the Divisional Bench held that (1) a charge by act of parties could be created only by a document registered and attested by two witnesses; (2) the security bond was not attested by two witnesses and was therefore invalid; (3) the decree in C. S. No. 56 of 1953 should be construed as containing nothing more than a recital of the fact of there having been a security bond in favour of the plaintiff, and the sale in execution of the decree must be regarded as a sale in execution of a money decree; and (4) the respondents were entitled to an order for rateable distribution. Accordingly, the Divisional Bench allowed the appeals, directed attachment of the sale proceeds and declared that the respondents were entitled to rateable distribution along with the appellant. The present appeals have been filed after obtaining special leave from this Court.

Court's reasoning:
11. The evidence does not show that the registering officer D. W. Kittoo put his signature on the document with the intention of attesting it. Nor is it proved that he signed the document in the presence of the executant. In these circumstances he cannot be regarded as an attesting witness, see Surendra Bahadur v. Behari Singh 1939-2 Mad LJ 762 = (AIR 1939 PC 117 ). Likewise the identifying witnesses Senkaranarayana and Kaki Abdul Aziz put their signatures, on the document to authenticate the fact that they had identified the executant. It isHigh Court accepted this contention following its earlier decisions in Viswanadhan v. M.S. Menon, ILR (1939) Mad 199 = (AIR 1939 Mad 202  ) and Shiva Rao v. Shanmughasundaraswami, ILR (1940) Mad 306 = (AIR 1940 Mad 140  ) and held that the security bond was invalid , as it was attested by one witness only. We are unable to agree with this opinion. Section 100 is in theseimmovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.Nothing in this Section applies to the charge of a trustee on the trust property for expenses property incurred in the execution of his trust, and save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.The first paragraph consists of two parts. The first part concerns the creation of a charge over immovable property. A charge may be made by act of parties or by operation of law. No restriction is put on the manner in which a charge can be made. Where such a charge has been created the second part comes into play. It provides that all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as, may be, apply to such charge. The second part does not address itself to the question of creation of a charge. It does not attract the provisions of Section 59 relating to the creation of a mortgage.16. If a charge can be made by a registered instrument only in accordance with Section 59, the subsequent transferee will always have notice of the charge in view of Section 3 under which registration of the instrument operates as such a notice. But the basic assumption of the doctrine of notice enunciated in the second paragraph is that there may be cases where the subsequent transferee may not have notice of the charge. The plain implication of this paragraph is that a charge can be made without any writing.17. If a non-testamentary instrument creates a charge of the value of Rs. 100 or upwards, the document must be registered under Section 17 (1) (b) of the Indian Registration Act. But there is no provision of law which requires that an instrument creating the charge must be attested by witnesses.18. Before Section 100 was amended by Act 20 of 1929 it was well settled that the Section did not prescribe any particular mode of creating a charge. The amendment substituted the words "all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge," for the words "all the provisions hereinbefore contained as to a mortgagor shall, so far as may be, apply to the owner of such property and the provisions of Sections 81 and 82 shall, so far as may be, apply to the person having such charge." The object of the amendment was to make it clear that the rights and liabilities of the parties in case of a charge shall, so far as may be, the same as the rights and liabilities of the parties to a simple mortgage. The amendment was not intended to prescribe any particular mode for the creation of a charge. We find that the Nagpur High Court came to a similar conclusion in Bapurao v. Narayan, ILR (1949) Nag 802 at pp. 819-822 = (AIR 1950 Nag l17 at pp. 124-125).It follows that the security bond was not required to be attested by witnesses. It was duly registered and was valid and operative.If a charge can be made by a registered instrument only in accordance with Section 59, the subsequent transferee will always have notice of the charge in view of Section 3 under which registration of the instrument operates as such a notice. But the basic assumption of the doctrine of notice enunciated in the second paragraph is that there may be cases where the subsequent transferee may not have notice of the charge. The plain implication of this paragraph is that a charge can be made without any writing.17. If a non-testamentary instrument creates a charge of the value of Rs. 100 or upwards, the document must be registered under Section 17 (1) (b) of the Indian Registration Act. But there is no provision of law which requires that an instrument creating the charge must be attested by witnesses.18. Before Section 100 was amended by Act 20 of 1929 it was well settled that the Section did not prescribe any particular mode of creating a charge. The amendment substituted the words "all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge," for the words "all the provisions hereinbefore contained as to a mortgagor shall, so far as may be, apply to the owner of such property and the provisions of Sections 81 and 82 shall, so far as may be, apply to the person having such charge." The object of the amendment was to make it clear that the rights and liabilities of the parties in case of a charge shall, so far as may be, the same as the rights and liabilities of the parties to a simple mortgage. The amendment was not intended to prescribe any particular mode for the creation of a charge. We find that the Nagpur High Court came to a similar conclusion in Bapurao v. Narayan, ILR (1949) Nag 802 at pp. 819-822 = (AIR 1950 Nag l17 at pp. 124-125).It follows that the security bond was not required to be attested by witnesses. It was duly registered and was valid and operative.As to the 4th question we find that the immovable properties have been sold in execution of a decree ordering sale for the discharge of the encumbrance thereon in favour of the appellant.Section 73 (1), proviso (c) therefore applies and the proceeds of sale after defraying the expenses of the sale must be applied in the first instance in discharging the amount due to the appellant. Only the balance left after discharging this amount can be distributed amongst the respondents.It follows that the High Court was in error in holding that the respondents were entitled to rateable distribution of the assets along with the appellant.As to the third question, we find that the decree dated March 19, 1954 declared that the security bond in respect of the immovable properties would enure for the benefit of the appellant as a charge for the decretal amount. This relief was granted on the oral prayer of the plaintiffs. We are unable to agree with the High Court that in view of the omission to amend the plaint by adding a prayer for enforcement of the charge,the decree should be construed as containing merely a recital of the fact that a security bond had been executed. In our opinion, the decree on its true construction declared that the security bond created a charge over the properties in favour of the plaintiffs for payment of the decretal amount and gave them the liberty to apply for sale of the properties for the discharge of the incumbrance. Pursuant to the decree the properties were sold and the assets are now held by the Court. The omission to ask for an amendment of the plaint was an irregularity, but that does not affect the construction of the decree.20. It was suggested that the decree was invalid as the High Court had no territorial jurisdiction under clause 12 of its Letters Patent to pass a decree for sale of properties outside the local limits of its ordinary original jurisdiction. For the purpose of these appeals, it is sufficient to say that the respondents cannot raise this question in the present proceedings. If the decree is invalid and the sale is illegal on this ground, the respondents cannot maintain their applications for rateable distribution of the assets. They can ask for division of the sale proceeds only on the assumption that the properties were lawfully sold.It is therefore unnecessary to decide whether the objection as to the territorial jurisdiction of the High Court has been waived by the judgmentdebtor and cannot now be agitated by him and persons claiming through him, having regard to the decisions in Hiralal Patni v. Kali Nath,SCR 747 at pp.= (AIR 1962 SC 199   at pp.Bahrein Petroleum Co., Ltd. v. P. J. Pappu, (1966) 1 SCR 461     at pp.= (AIR 1966 SC 634   at pp.Zamindar of Ettiyapuram v. Chidambaram Chetty, ILR 43 Mad 675   = (AIR 1920 Mad 1019) (FB).21.As to the 4th question we find that the immovable properties have been sold in execution of a decree ordering sale for the discharge of the encumbrance thereon in favour of the appellant.Section 73 (1), proviso (c) therefore applies and the proceeds of sale after defraying the expenses of the sale must be applied in the first instance in discharging the amount due to the appellant. Only the balance left after discharging this amount can be distributed amongst the respondents.It follows that the High Court was in error in holding that the respondents were entitled to rateable distribution of the assets along with the appellant.