Gaya Prasad Vs. Surendra Bahadur Singh, (Dead) by L.Rs. & Ors.
EmailAppeal: Civil Appeal Nos. 1381 & 1382 of 1976.
Petitioner: Gaya Prasad
Respondent: Surendra Bahadur Singh, (Dead) by L.Rs. & Ors.
Apeal: Civil Appeal Nos. 1381 & 1382 of 1976.
Judges: V. KHALID & G.L. OZA, JJ.
Date of Judgment: Mar 05, 1987
Head Note:
U.P. ENCUMBERED ESTATES ACT (U.P. ACT NO. XXV OF 1934):
Sections 4, 6, 7, 14(7), 18, 20, 23, 24, 43 and 44 – Protection of landholders of their indebtedness and consequent insolvency – Agreement to sell – Prohibition under section 7 – An agreement to sell is not a transfer of any rights in immovable property and therefore agreement could not be bad in law – In the absence of any proceedings pending the effect of clause 4 of Section 7 will be of no avail.
Held:
(i) It is not disputed that at the time when this agreement was entered into the proceedings under this Act were pending and the provisions of Section 7 are attracted. A plain reading of the provisions contained in sub-clauses 2 and 3 clearly go to show that agreement to sell has not been included in the restrictions which have been imposed on the right of debtor. The terms used clearly go to show that the prohibition is pertaining to the transfer (where fights in immovable property are transferred). Admittedly an agreement to sell is not a transfer of any rights in immovable property and therefore the agreement could not be held to be bad in law. (Para 11)
(ii) The language of Section 7 as quoted above is clear enough that this is effective only during the pendency of the proceedings under this Act and the order dated 7.5.76 filed by the appellant in this Court clearly goes to show that no proceedings are pending and the case has been consigned to the record. There is nothing to indicate that any proceedings are pending nor anything to indicate that any claim of any creditor still remains to be satisfied. In the absence of any proceedings pending the effect of clause 4 of Section 7 will be of no avail. In our opinion therefore a decree for specific performance could be passed. The High Court therefore was in error in allowing the appeal and setting aside the judgment and decree passed by the learned courts below. It is no doubt open to the party the respondent to approach the executing court to retain the sale proceeds if they are in a position to satisfy the court that any part of the claim still remain to be satisfied. (Para 20)
Cases Reffered:
1. Behram Khurshed Pesikaka v. The State of Bombay,(1955) 1 SCR 613;
2. Bhasheshar Nath v. The Commissioner of Income Tax, Delhi & Rajasthan & Another, (1959) Supp. 1 SCR 528;
3. Mrs. Chandnee Widya Wati Madden v. Dr. C.L. Katial and Others (1964)
4. Lochoo Mal v. Radhey Shyam, (1971) 3 SCR 693
5. Murlidhar Aggarwal and Another v. State of Uttar Pradesh and Another, (1974) 2 SCC 472,
6. Raj Narian Jain v. Firm Sukha Nand Ram Norgin and others., (1980) AIR Allahabad 78.
2. Bhasheshar Nath v. The Commissioner of Income Tax, Delhi & Rajasthan & Another, (1959) Supp. 1 SCR 528;
3. Mrs. Chandnee Widya Wati Madden v. Dr. C.L. Katial and Others (1964)
4. Lochoo Mal v. Radhey Shyam, (1971) 3 SCR 693
5. Murlidhar Aggarwal and Another v. State of Uttar Pradesh and Another, (1974) 2 SCC 472,
6. Raj Narian Jain v. Firm Sukha Nand Ram Norgin and others., (1980) AIR Allahabad 78.
JUDGEMENT:
KHALID, J.
1. I agree with my learned brother that the appeal has to be allowed. The Act involved in this appeal is an anachronism today because it was enacted to benefit the land-holders and zamindars. On a consideration of the facts and circumstances, I feel that equity is in favour of the appellant more than the respondents. The respondents made an application to the Collector, under Section 4 of the Act which was transmitted to the Special Judge, under Section 6 of the Act. He exercised his option under Section 24 and prayed for exemption of the house which is the subject matter of this appeal. This application was allowed as early as 26.3.43. It was long thereafter, on 4.5.58, that he entered into an agreement to sell the house to the appellant herein. Subsequently he made an application to include this house also in the properties to be sold in the proceedings under the Act. The appellant on being informed of this, objected to the request. The Collector rejected this request by his order dated 23rd June, 1961. From this order it is seen that there was an earlier order dated 14.6.45, by which permission to sell the house was rejected by the Deputy Commissioner. There was a mortgage on the property, but before the agreement a decree on the strength of the mortgage had been
passed. Under these circumstances, it comes with little grace from the respondents to contend that the agreement to sell, even granting that it would come within the mischief of Section 7, cannot be accepted. Since the mortgage had been extinguished by its merger into a decree, the charge under it was disappeared and in the proceeding, under the Act only a simple decree can be passed. What is more, an order produced before us, dated 7.5.76 shows that no proceedings are pending under the Act at present. In view of the finality of the matter, we do not propose to go into the questions of law regarding public policy, Section 7 contemplates and the authorities bearing on it.
2. Under these circumstances, the Judgment of the High
Court, in my opinion, is more in accord with fair play and
justice. The appeal has to be allowed as indicated by my
learned brother.
3. However, I am of the view that the respondent has to be
compensated in some measure by way of equity. I direct the appellant to pay a sum of Rs.20,000 to the respondent, taking into account the fact that the property would have
escalated in price many times by now.
4. Since we are allowing the main appeal, no orders ate
necessary in the other appeal.
OZA, J.
1. These appeals have been filed after obtaining leave of this Court against the judgement passed by the High Court of Allahabad, Lucknow Bench in Civil Second Appeal No. 49 of 1971 decided on 13th April, 1976.
2. The facts necessary for the disposal of this appeal are that the appellant filed a suit for specific performance of the contract of sale of the house in dispute situated in Pratapgarh (Uttar Pradesh). The agreement was made by the respondent in favour of the appellant on 4th May, 1958 for sale of the house in dispute for the consideration of Rs.6,000 within 5 years. Rs. 1500 were paid as the earnest money by the appellant to the respondent on the date of agreement. Further a sum of Rs.2510 was paid on 7.7.58 and on 6.12.59 a further sum of Rs. 10 was paid. It appears that this house was earlier mortgaged in favour of Thakur Aditya Prasad Singh by the predecessors of the respondent. The respondent Surendra Bahadur Singh filed an application under Sec.4 of the U.P. Encumbered Estates Act (U.P. Act No. XXV of 1934) (‘Act’ for short) to the Collector and Collector had transmitted the same to the Special Judge under Sec.6 of the Act. Subsequently, the respondent-debtor had submitted an application to the Collector that the disputed house may not be sold in the proceedings under the Act and may be exempted as provided in Sec.24 of the Act. On 26.3.43 the Collector in exercise of powers under Sec.24 exempted this house from sale in the proceedings under the Act and it is thereafter that the agreement was entered into. It appears that subsequently the debtor-respondent again wanted this house to be included in the property for sale in the proceedings under the Act to which the present appellant objected and this objection was disposed of by the Collector by his order dated 23rd June 1961 reiterating the position that by order dated 26.3.43 this house has been exempted from the proceedings under this Act and therefore that order can not be re-opened. This
order dated June 23, 1961 also refers to an order dated 14.6.45 wherein permission to sell this house which was sought by the respondent under Sec.7 of the Act was rejected by the Deputy Commissioner. It appears that the mortgage which was executed by predecessors of the respondents in favour of Aditya Prasad Singh was also considered as a claim under Sec. 1 of the Act and ultimately a decree was passed in favour of Aditya Prasad Singh by the Special Judge under the Act. As this decree was passed under clause 7 of Sec. 14 in view of Sec. 18 of the Act it only remained a money decree and the rights of mortgagee came to an end. The present appellant therefore pressed the respondent for execution of the sale deed in pursuance of the contract and ultimately filed a suit for specific performance of the contract for sale dated 2nd May 1958. Trial Court decreed the suit and on appeal the first Appellate court also maintained the decree but on second appeal the High Court on the basis of the provisions contained in the Act came to the conclusion that as permission to sell was refused under Sec.7 and in view of the prohibition under Sec.7 of the Act the contract of sale would be hit by Sec.23 of the Contract Act and in this view of the matter the High Court interfered in second appeal and set aside the decree passed in favour of the appellant. Aggrieved by this the present appeal has been filed.
3. Learned counsel for the appellant contended that the
scheme of the Act indicates that in order to protect land
holders of their indebtedness and consequent insolvency this Act was enacted and it was provided that whenever the land holder made an application under Sec.4 the Collector will pass an order under Section 6 and send the matter to the Special Judge. Under the scheme of the Act the Special Judge will consider various claims and determine the liability of the debtor. But
if these liabilities are determined they all will be money
decree and the earlier fights of creditors will come to an
end. It appears thereafter the properties will be put to
sale and the debtors may be paid on the basis of priorities
i.e. public debts first, then those which were secured debts
and thereafter other debts. It was contended that in the
scheme of this Act Sec.24 provided that the landholder may
keep one residential house with furniture and belongings
free from all encumbrances which will not be sold in order
to discharge the debts and it was competent for the Collec-
tor when an application has been made under Sec.4, to exempt
such a house under Sec.24 of the Act.
4. It was contended that such an application was made by
the respondents under Sec.24 on the basis of which by orders
dated 26.3.43 the Collector exempted the house in dispute
from sale during the proceedings under this Act and this
order was reiterated on 23.6.61.
5. It was further contended that although permission was
rejected for sale of the house under Sec.7 on 14.6.45 but it
was contended that the prohibition under Sec.7 will not
apply to an agreement for sale. It was also contended that
as the proceedings before the Special Judge have come to an
end the objection pertaining to Sec.7 for passing of a
decree under Specific Relief Act for specific performance
will not be available. Learned counsel placed reliance on an
order dated 7.5.76 which was filed in this Court which
clearly stated that on this date i.e. 7.5.76 no proceedings
are pending and they are over under Sec.44 of the Act and on
this basis it was contended that to a decree for specific
performance objection under Sec.7 will not be available to
the respondents.
6. Learned counsel for the respondents on the other hand
contended that this document which is an order from the
court of Collector, Allahabad dated 7.5.76 on which reliance
has been placed by the learned counsel for the appellant has
been filed in this Court for the first time and this order
itself shows that this was after the judgment of the High
Court as the High Court judgment is dated 13.4.76 whereas
this order has been obtained which is dated 7.5.76 and on
this basis it was contended that it could not be said that
no proceedings are pending under the Act and the last order passed was dated 7.7.75.
7. It was also contended that although under Sec.24 it is
possible for a debtor to obtain an order from the Collector
exempting one house from the proceedings under the Act but
it was contended that this exemption was nothing but exemp-
tion from attachment and sale which otherwise would follow
under the scheme of the Act after the claims are determined
under Sec. 14. Learned counsel after examining the scheme of
the Act contended that in fact what is contemplated under
Sec.24 is to allow a debtor landholder to have a house and
furniture for his residence and use so that he may live in a
respectable manner. This, as is not disputed. was in fact
the purpose of the Act as indicated by the Objects and
Reasons and it is with that view that Sec.24 was enacted. It
was contended that if a house was exempted under Sec.24 it
would not be consistent with the scheme of the Act to permit
the debtor landholder to seek an exemption under Sec.24 and
then sell away the house and pocket the money to defeat the
creditors. It was therefore contended that is why Sec.7
provides that no property could be sold except with permis-
sion under Sec.7. It was contended that the language of
Sec.7 sub-clause (4) is wide enough and even an agreement to
sell which creates rights in immovable property will be
affected by the provisions of Sec.7.
8. Learned counsel by reference to the various provisions
and especially to the provisions contained in Sections 43
and 44 contended that even when the proceedings under this
Act are quashed or an application is dismissed, the rights of
the creditors are revived. According to the learned counsel,
it could not be said that the proceedings have come to an
end and in this view of the matter it was contended that the
High Court was right in allowing the appeal and setting
aside the decree passed.
9. Learned counsel appearing for the appellant further
contended that although the order from the Collector has
been filed in this Court but is was filed long ago and if
the respondents wanted to challenge they could have filed
any other order from the Collector. As regards the argument
that under Sec.24 a house can be exempted for use of the
debtor landholder and it could not be just a device to
obtain exemption, sell the property and pocket the amount to
the detriment of the creditors but it was contended that
under these circumstances if the debts remain to be satis-
fied still the sale proceeds can be kept in deposit for
being distributed to the creditors. On this basis, it could
not be said that a decree for specific performance can not
be passed. Learned counsel alternatively contended that even if it is in dispute as to whether the proceedings under the Act are still pending when the provisions contained in Sec.7 are
attracted the decree for specific performance could be
passed subject to a permission under Sec.7. Learned counsel
for the appellant placed reliance on the decision of this
Court in Mrs. Chandnee Widya Wati Madden v. Dr. C.L. Katial
and Others (1964) 2 SCR 495. Learned counsel for the
respondents, however, placed reliance on the decisions of this
Court in Behram Khurshed Pesikaka v. The State of Bombay,
(1955) 1 SCR 613; Bhasheshar Nath v. The Commissioner of
Income Tax, Delhi & Rajasthan & Another, (1959) Supp. 1 SCR
528; Murlidhar Aggarwal and Another v. State of Uttar Pra-
desh and Another, (1974) 2 SCC 472, Lochoo Mal v. Radhey
Shyam, (1971) 3 SCR 693 and also on Ral Nation Jain v. Firm
Sukha Nand Ram Norgin and others., (1980) AIR Allahabad 78.
Facts are not in dispute. It is also not disputed that U.P.
Encumbered Estates Act 1934 was brought in to give relief to
a class of debtors particularly landholders and the Act
provide for a scheme for settlement of debts without filing
of an insolvency petition. The authorities referred to by
learned counsel do not throw any light on the questions
involved.
10. Sec.4 of this Act provides for making of an application
to attract the provisions of this Act and once an applica-
tion under this Section is made, the proceedings are said to
have commenced under the provisions of this Act. Sec.6
provides for passing of an order and transmission of the
application to the Special Judge who has been conferred
jurisdiction under this Act to proceed with the proceedings.
Sec.7 of this Act provides:
“When the Collector has passed an order under Section 6 the following consequence shall ensue:
(a) all proceedings pending at the date of the said order in any civil or revenue court in Uttar Pradesh in respect of any public or private debt to which the landlord is subject,
or with which his immovable property is encumbered, except an appeal, review or revision against a decree or order, shall be stayed, all attachments and other execution processes issued by any such court and then in force in respect of any such debt shall become null and void, and no fresh process in execution shall, except as hereinafter provided, be issued;
(b) no fresh suit or other proceedings other than an appeal, review or revision against a decree of order, or a process for ejectment for arrears of rent shall, except as hereinaf-
ter provided, be instituted in any civil or revenue court in Uttar Pradesh in respect of any debts incurred before the passing of the said order but if for any reason whatsoever
such a suit or proceeding has been instituted, it shall be deemed to be a proceeding pending at the date of the said order within the meaning of clause (a).
Provided that when a landlord has executed a usufructuary mortgage in respect of any of his land and is in possession of that land as a thekadar of the mortgagee, no fresh process
shall issue for his ejectment from that land for arrears of the theka rent.
(2) After the passing of the said order and until the application is dismissed by the Special Judge under subsection (3) of Section 8 proceedings under this Act are quashed under Section 20 or until the Collector has liquidated the debt under Chapter V, no decree obtained on the basis of any private debt incurred by the landlord after the passing of
the order under Section 6 shall be executed against any of his property, other than proprietary rights in land, which has been mentioned in the notice under Section 11 and the
landlord shall not be competent without the sanction of the Collector to make an exchange, or gift or, or to sell, mortgage or lease, any of that property.
(3) After the passing of the order under Section 6 and until the Collector has declared in accordance with Section 44 that the landlord has ceased to be subject to the disabilities of this sub-section or until the passing of the order by the Special Judge, referred to in sub-section (2) of Section 44, no decree obtained on the basis of any private debt incurred after the passing of the order under Section 6 shall be executed against any of the landlord’s proprietary rights in the land mentioned in the notice published under Section 11 and the landlord shall not be competent, without the sanction of the Collector, to make any exchange or gift, or to sell, mortgage or lease those proprietary fights, or any portion of them.
(4) Any transfer made in contravention of the provisions of this section shall be void.”
Much of the controversy in the present matter pertains to
the effect of Sec.7. Sub-clause (1) of this Section indi-
cates the consequences that will follow when an order under
Section 6 has been passed by the Collector. sub-clause
(2) speaks of restrictions on the landlord about exchange, gift,
sale, mortgage or lease of any of the properties without the
sanction of the Collector. It is not in dispute that after
an application under Sec.4 was filed by the respondent-
debtor when an application under Sec.24 was filed for exemp-
tion in respect of the house in dispute and the order was
passed on 26.3.1943. It is therefore plain that on the day
i.e. 4.5.58 when the agreement was entered into an applica-
tion under Sec.4 had been made and the order had been made
under Sec.6 and it is not disputed that on the day on which
the agreement was made the provisions of Sec.7 were attract-
ed and the limitations put on the power of the landlord
under Sec.7 were applicable to the respondent-landlord in
this case. Sub-clauses 2 and 3 of the Sec.7 provided for
restrictions put on the power of the landlord and the re-
striction is in respect of exchange, gift, sale, mortgage or
lease. It is clear that the restrictions pertain to ex-
change, gift, sale, mortgage and lease and it was contended
by learned counsel for the appellant that agreement to sell
is not covered by any one of these restrictions and there-
fore the agreement which was entered into in 1958 could not
be said to be bad in law as the High Court appears to have
held whereas an attempt was made by learned counsel for the
respondents to contend that as the agreement to sell creates
some rights in immovable property it will be covered within
the language of sub-clauses (2) and (3).
11. It is not disputed that at the time when this agreement
was entered into the proceedings under this Act were pending
and the provisions of Sec.7 are attracted. A plain reading
of the provisions contained in sub-clauses 2 and 3 clearly
go to show that agreement to sell has not been included in
the restrictions which have been imposed on the right of
debtor. The terms used clearly go to show that the prohibi-
tion is pertaining to the transfer (where fights in immova-
ble property are transferred). Admittedly an agreement to
sell is not a transfer of any rights in immovable property
and therefore the agreement could not be held to be bad in
law.
Sec.24 of this Act provides:
“The Collector shall then realise the value of such of the
debtor’s property, other than proprietary fights in land, but including proprietary rights in land in the areas which on the 7th day of July, 1949, were included in a Municipality or a Notified Area under the provisions of the U.P. Municipalities Act, 1916, or a cantonment under the provisions of the Cantonment Act, 1924, or a Town Area under the provisions of the U.P. Town Area Act, 1914, as shall have been reported by the Special Judge under the provisions of sub-
section (2) of Section 19 to be liable to attachment or sale:
Provided that the Collector before passing orders under this section of the sale of any property shall hear any objection which the debtor may have to make to the sale of that property:
Provided also notwithstanding anything in any other section of this Act, the Collector may, if he considers fit, sell, along with any building disposed of under this Section, the proprietary rights of the applicant in any land
occupied by such building or appurtenant thereto:
Provided further that the Collector shall leave the debtor at least one residential house and necessary furniture thereof if-
(a) the debtor owns such house and furniture and desires to retain it, and
(b) such house and furniture is free from any mortgage or charge.
(2) The amount so realized shall be expended by the Collector in discharging the debts in order of priority.
(3) For the purpose of execution against property outside the (Uttar Pradesh) the decrees passed by the Special Judge shall be deemed to be decrees in favour of the Collector.
(4) For realising the value of the debtor’s property under
this section the Collector may excercise all the powers of a civil court for the execution of a decree.”
The proviso to this Section with sub-clauses (a) and (b)
clearly indicates that Collector has the authority to exempt
one residential house and necessary furniture and the exemp-
tion for such a house and furniture once granted will be
free from any mortgage or charge.
12. Much emphasis was laid on the terms of the order passed
by the Collector on June 23, 1961 wherein it was observed
that ‘house in question should remain exempted from attach-
ment and sale’ and it was contended by the learned counsel
for the respondents that this exemption only pertains to its
exemption from attachment and sale. The original order dated
26th March 1943 only talks of the house and personal effects
to be excluded. We have no hesitation in saying that it is
not the language of the order which is material but the
language of the provision under which the order was made as
it is not disputed that an order under Sec.24 exempting the
house in dispute was passed on 26th March 1943 which was
only reiterated in the order dated 23rd June 1961. It is
therefore clear that once this order is passed the house in
question was free from any mortgage or charge.
13. It was contended by the learned counsel for the respond-
ents that the scheme of the Act dearly show that what was
provided in sec.24 was only with a purpose to allow the
debtor to have a residential house with necessary furniture
to permit him to have a respectable living but it did not
mean that the debtor was at liberty to sell away this
property and pocket the money to defeat the creditors and on
this basis an attempt was made to contend that during the
pendency of the proceedings the fights of a mortgagee sur-
vived in spite of an order passed under Sec.24 or inspite of
an order under clause 7 of Sec. 14 having been passed.
14. So far as Sec.24 is concerned and the effect of the
order under this Section is concerned it is clear that once
an order exempting the property under this provision is
passed by Collector the house and furniture about which such
an order is made is free from any mortgage or charge and
therefore it leaves no doubt that after the order under
Sec.24 having been passed in the present case i.e. on
26.3.43 the mortgage which was in existence before the
proceedings under this Act commenced ceased to be effective
and this property was free from any . mortgage or charge.
15. Sec. 14 clause 7 provides for determination of debts: It
reads as under:
“(7) If the Special Judge finds that-
(a) no amount is due, he may pass a decree for cost in favour of the landlord;
(b) an amount is due to the claimant he shall-
(i) pass a simple money decree, having regard also to the provisions of Section 3 of the U.P. Zamindars’ Debt Reduction Act, 1952, for such amount together with any costs which he
may allow in respect of the proceedings in his court and of proceedings in any court stayed under the provisions of the Act together with pendente lite and further interest at a rate not higher than 4-1/4 per cent per annum; and
(ii) also certify the amount, if any, of such decree which, in accordance with the provisions of Section 8 of the U.P. Zamindars’ Debt Reduction Act, 1952, is not legally recovera-
ble otherwise than out of the compensation and rehabilitation grant payable to the landlord:
Provided that no pendente lite interest shall be allowed in the case of any debt where the creditor was in possession of any portion of the debtor’s property in lieu of interest payable on such debt for the period he was so in possession.”
Sub-clause (b) of this clause 7 clearly provides that the
amount which is found to be due to the claimant, a money
decree shall be passed and what will be the effect of this
money decree having been passed under sub-clause 7 of Sec.
14 has been provided in Sec. 18. Sec. 18 reads:
“Subject to the fight of appeal or revision conferred in Chapter VI, the effect of a decree of the Special Judge under sub-section (7) of Section 14 shall be to extinguish the previously existing fights, if any, of the claimant, together with all rights, if any, of mortgage or lien by which the same are secured and, where any decree is given by the Special Judge to substitute for those fights a fight to recover the amount of the decree in the manner and to the extent hereinafter prescribed:
Provided that secured debts, which, in accordance with the provisions of Section 8 of the U.P. Zamindars’ Debts Reduction Act, 1952, are not legally recoverable otherwise than out of the compensation and rehabilitation grant payable to the landlord shall be recoverable from the compensation and rehabilitation grant aforesaid as though the security had not been extinguished.”
16. Sub-clause 7 of Sec. 14 uses the phrase “pass a simple
money decree and in our opinion this terminology ‘simple
money decree has been used with some significance and if
any doubt is left it has further been cleared by providing
Sec. 18. This provision clearly indicates that once a decree
has been passed by the Special Judge under sub-Sec. 7 of
Sec. 14 the effect of it will be to extinguish the previous-
ly existing fights in any of the claims or mortgage and the
decree passed by the Special Judge will substitute all those
fights. It is therefore clear that once the claim of a
creditor even if he is secured is determined by the Special
Judge under Sec. 14 sub-clause 7 and a money decree is
passed the ‘rights of the creditors even if it was under
mortgage come to an end although the scheme of the Act
indicates that such debts which are secured may get priority
over the debts which were not secured and on the basis of
these provisions and the provisions contained in Sec.44 an
attempt was made by learned counsel for the respondents to
contend that although the rights of the mortgagee may be
extinguished but so long as the proceedings are pendings
they are not completely extinguished as in the event of
quashing of the proceedings the scheme of the Act indicates
a revival of such rights. But it could not be doubted that
so long as they are not revived they come to an end and we
have no hesitation in view of Sec.24, sub-clause 7 of Sec.
14 read with Sec. 18 that this house in dispute at the time
when the suit was filed for specific performance of the
contract was free from all encumbrances and there was no
mortgage or charge against this property.
17. It is therefore clear that what learned counsel for the
respondents contended on the basis of provisions contained
in Sections 43 and 44 only is that in cases where proceed-
ings are quashed under Sec.20 the rights of the creditors if
they were of a mortgage may revive and the time spent in
these proceedings may be exempted but it is nobody’s case
that the proceedings have been quashed under Sec.20 and
admittedly the respondent during these proceedings at no
time has not raised a plea that the proceedings have been
quashed under Sec.20. On the contrary the order that has
been put on record by the learned counsel for the appellant
clearly goes to show that the proceedings have been concluded and therefore question of revival does not arise.
18. Learned counsel for the respondents vehemently contended
that the scheme of the Act does not mean that when the house
which has been exempted only for the purposes of living of
the debtor, could not be sold away and money pocketed de-
feating the claims of the creditors. Even if this argument
is accepted it does not carry the matter further except that
if any claim is still remaining to be settled the sale
proceeds which the respondent-debtor will get out of the
decree for specific performance could be kept apart for
distribution to the creditors.
19. It was also contended that sub-clause 4 of Sec.7 quoted
above clearly provides that any transfer in contravention of
provisions of this section will be void and therefore even a
transfer under a decree would be void if it is in contraven-
tion of the provisions of Sec.7 whereas learned counsel for
the appellant frankly conceded that although as the order
dated 7.5.76 discloses that the proceedings are over, under
this Act and therefore effect of Sec.7 has come to an end
and a decree for specific performance for sale could be
passed without any objection under Sec.7 but even if the
proceedings are pending, the decree could be subject to a
permission from the Collector under Sec.7. Although it was
vehemently contend by the counsel for the appellant that if
the respondent wanted to challenge the order dated 7.5.76
which was filed by the appellant in this Court clearly
indicating that the proceedings are over, under Sec.44 of the
Act and it was open to them to file any further order indi-
cating that the proceedings are still pending and as no such
order has been filed it has to be accepted that the proceed-
ings are over and the limitation put on transfer by Sec.7
has ceased to be effective.
20. The language of Sec.7 as quoted above is clear enough
that this is effective only during the pendency of the
proceedings under this Act and the order dated 7.5.76 filed
by the appellant in this Court clearly goes to show that no
proceedings are pending and the case has been consigned to
the record. There is nothing to indicate that any proceed-
ings are pending nor anything to indicate that any claim of
any creditor still remains to be satisfied. In the absence
of any proceedings pending, the effect of clause 4 of Sec.7
will be of no avail. In our opinion, therefore a decree for
specific performance could be passed. The High Court there-
fore was in error in allowing the appeal and setting aside
the judgment and decree passed by the learned courts below.
It is no doubt open to the respondent to approach the executing court to retain the sale proceeds if they are in a position to satisfy the court that any part of the claim still remain to
be satisfied. The appeal is therefore allowed, the judgment
and decree. passed by the High Court is set aside. Instead
the decree passed by the trial court and maintained by the
Appellate court is restored. In the circumstances of the
case, parties are directed to bear their own costs.
Appeal allowed.
1. I agree with my learned brother that the appeal has to be allowed. The Act involved in this appeal is an anachronism today because it was enacted to benefit the land-holders and zamindars. On a consideration of the facts and circumstances, I feel that equity is in favour of the appellant more than the respondents. The respondents made an application to the Collector, under Section 4 of the Act which was transmitted to the Special Judge, under Section 6 of the Act. He exercised his option under Section 24 and prayed for exemption of the house which is the subject matter of this appeal. This application was allowed as early as 26.3.43. It was long thereafter, on 4.5.58, that he entered into an agreement to sell the house to the appellant herein. Subsequently he made an application to include this house also in the properties to be sold in the proceedings under the Act. The appellant on being informed of this, objected to the request. The Collector rejected this request by his order dated 23rd June, 1961. From this order it is seen that there was an earlier order dated 14.6.45, by which permission to sell the house was rejected by the Deputy Commissioner. There was a mortgage on the property, but before the agreement a decree on the strength of the mortgage had been
passed. Under these circumstances, it comes with little grace from the respondents to contend that the agreement to sell, even granting that it would come within the mischief of Section 7, cannot be accepted. Since the mortgage had been extinguished by its merger into a decree, the charge under it was disappeared and in the proceeding, under the Act only a simple decree can be passed. What is more, an order produced before us, dated 7.5.76 shows that no proceedings are pending under the Act at present. In view of the finality of the matter, we do not propose to go into the questions of law regarding public policy, Section 7 contemplates and the authorities bearing on it.
2. Under these circumstances, the Judgment of the High
Court, in my opinion, is more in accord with fair play and
justice. The appeal has to be allowed as indicated by my
learned brother.
3. However, I am of the view that the respondent has to be
compensated in some measure by way of equity. I direct the appellant to pay a sum of Rs.20,000 to the respondent, taking into account the fact that the property would have
escalated in price many times by now.
4. Since we are allowing the main appeal, no orders ate
necessary in the other appeal.
OZA, J.
1. These appeals have been filed after obtaining leave of this Court against the judgement passed by the High Court of Allahabad, Lucknow Bench in Civil Second Appeal No. 49 of 1971 decided on 13th April, 1976.
2. The facts necessary for the disposal of this appeal are that the appellant filed a suit for specific performance of the contract of sale of the house in dispute situated in Pratapgarh (Uttar Pradesh). The agreement was made by the respondent in favour of the appellant on 4th May, 1958 for sale of the house in dispute for the consideration of Rs.6,000 within 5 years. Rs. 1500 were paid as the earnest money by the appellant to the respondent on the date of agreement. Further a sum of Rs.2510 was paid on 7.7.58 and on 6.12.59 a further sum of Rs. 10 was paid. It appears that this house was earlier mortgaged in favour of Thakur Aditya Prasad Singh by the predecessors of the respondent. The respondent Surendra Bahadur Singh filed an application under Sec.4 of the U.P. Encumbered Estates Act (U.P. Act No. XXV of 1934) (‘Act’ for short) to the Collector and Collector had transmitted the same to the Special Judge under Sec.6 of the Act. Subsequently, the respondent-debtor had submitted an application to the Collector that the disputed house may not be sold in the proceedings under the Act and may be exempted as provided in Sec.24 of the Act. On 26.3.43 the Collector in exercise of powers under Sec.24 exempted this house from sale in the proceedings under the Act and it is thereafter that the agreement was entered into. It appears that subsequently the debtor-respondent again wanted this house to be included in the property for sale in the proceedings under the Act to which the present appellant objected and this objection was disposed of by the Collector by his order dated 23rd June 1961 reiterating the position that by order dated 26.3.43 this house has been exempted from the proceedings under this Act and therefore that order can not be re-opened. This
order dated June 23, 1961 also refers to an order dated 14.6.45 wherein permission to sell this house which was sought by the respondent under Sec.7 of the Act was rejected by the Deputy Commissioner. It appears that the mortgage which was executed by predecessors of the respondents in favour of Aditya Prasad Singh was also considered as a claim under Sec. 1 of the Act and ultimately a decree was passed in favour of Aditya Prasad Singh by the Special Judge under the Act. As this decree was passed under clause 7 of Sec. 14 in view of Sec. 18 of the Act it only remained a money decree and the rights of mortgagee came to an end. The present appellant therefore pressed the respondent for execution of the sale deed in pursuance of the contract and ultimately filed a suit for specific performance of the contract for sale dated 2nd May 1958. Trial Court decreed the suit and on appeal the first Appellate court also maintained the decree but on second appeal the High Court on the basis of the provisions contained in the Act came to the conclusion that as permission to sell was refused under Sec.7 and in view of the prohibition under Sec.7 of the Act the contract of sale would be hit by Sec.23 of the Contract Act and in this view of the matter the High Court interfered in second appeal and set aside the decree passed in favour of the appellant. Aggrieved by this the present appeal has been filed.
3. Learned counsel for the appellant contended that the
scheme of the Act indicates that in order to protect land
holders of their indebtedness and consequent insolvency this Act was enacted and it was provided that whenever the land holder made an application under Sec.4 the Collector will pass an order under Section 6 and send the matter to the Special Judge. Under the scheme of the Act the Special Judge will consider various claims and determine the liability of the debtor. But
if these liabilities are determined they all will be money
decree and the earlier fights of creditors will come to an
end. It appears thereafter the properties will be put to
sale and the debtors may be paid on the basis of priorities
i.e. public debts first, then those which were secured debts
and thereafter other debts. It was contended that in the
scheme of this Act Sec.24 provided that the landholder may
keep one residential house with furniture and belongings
free from all encumbrances which will not be sold in order
to discharge the debts and it was competent for the Collec-
tor when an application has been made under Sec.4, to exempt
such a house under Sec.24 of the Act.
4. It was contended that such an application was made by
the respondents under Sec.24 on the basis of which by orders
dated 26.3.43 the Collector exempted the house in dispute
from sale during the proceedings under this Act and this
order was reiterated on 23.6.61.
5. It was further contended that although permission was
rejected for sale of the house under Sec.7 on 14.6.45 but it
was contended that the prohibition under Sec.7 will not
apply to an agreement for sale. It was also contended that
as the proceedings before the Special Judge have come to an
end the objection pertaining to Sec.7 for passing of a
decree under Specific Relief Act for specific performance
will not be available. Learned counsel placed reliance on an
order dated 7.5.76 which was filed in this Court which
clearly stated that on this date i.e. 7.5.76 no proceedings
are pending and they are over under Sec.44 of the Act and on
this basis it was contended that to a decree for specific
performance objection under Sec.7 will not be available to
the respondents.
6. Learned counsel for the respondents on the other hand
contended that this document which is an order from the
court of Collector, Allahabad dated 7.5.76 on which reliance
has been placed by the learned counsel for the appellant has
been filed in this Court for the first time and this order
itself shows that this was after the judgment of the High
Court as the High Court judgment is dated 13.4.76 whereas
this order has been obtained which is dated 7.5.76 and on
this basis it was contended that it could not be said that
no proceedings are pending under the Act and the last order passed was dated 7.7.75.
7. It was also contended that although under Sec.24 it is
possible for a debtor to obtain an order from the Collector
exempting one house from the proceedings under the Act but
it was contended that this exemption was nothing but exemp-
tion from attachment and sale which otherwise would follow
under the scheme of the Act after the claims are determined
under Sec. 14. Learned counsel after examining the scheme of
the Act contended that in fact what is contemplated under
Sec.24 is to allow a debtor landholder to have a house and
furniture for his residence and use so that he may live in a
respectable manner. This, as is not disputed. was in fact
the purpose of the Act as indicated by the Objects and
Reasons and it is with that view that Sec.24 was enacted. It
was contended that if a house was exempted under Sec.24 it
would not be consistent with the scheme of the Act to permit
the debtor landholder to seek an exemption under Sec.24 and
then sell away the house and pocket the money to defeat the
creditors. It was therefore contended that is why Sec.7
provides that no property could be sold except with permis-
sion under Sec.7. It was contended that the language of
Sec.7 sub-clause (4) is wide enough and even an agreement to
sell which creates rights in immovable property will be
affected by the provisions of Sec.7.
8. Learned counsel by reference to the various provisions
and especially to the provisions contained in Sections 43
and 44 contended that even when the proceedings under this
Act are quashed or an application is dismissed, the rights of
the creditors are revived. According to the learned counsel,
it could not be said that the proceedings have come to an
end and in this view of the matter it was contended that the
High Court was right in allowing the appeal and setting
aside the decree passed.
9. Learned counsel appearing for the appellant further
contended that although the order from the Collector has
been filed in this Court but is was filed long ago and if
the respondents wanted to challenge they could have filed
any other order from the Collector. As regards the argument
that under Sec.24 a house can be exempted for use of the
debtor landholder and it could not be just a device to
obtain exemption, sell the property and pocket the amount to
the detriment of the creditors but it was contended that
under these circumstances if the debts remain to be satis-
fied still the sale proceeds can be kept in deposit for
being distributed to the creditors. On this basis, it could
not be said that a decree for specific performance can not
be passed. Learned counsel alternatively contended that even if it is in dispute as to whether the proceedings under the Act are still pending when the provisions contained in Sec.7 are
attracted the decree for specific performance could be
passed subject to a permission under Sec.7. Learned counsel
for the appellant placed reliance on the decision of this
Court in Mrs. Chandnee Widya Wati Madden v. Dr. C.L. Katial
and Others (1964) 2 SCR 495. Learned counsel for the
respondents, however, placed reliance on the decisions of this
Court in Behram Khurshed Pesikaka v. The State of Bombay,
(1955) 1 SCR 613; Bhasheshar Nath v. The Commissioner of
Income Tax, Delhi & Rajasthan & Another, (1959) Supp. 1 SCR
528; Murlidhar Aggarwal and Another v. State of Uttar Pra-
desh and Another, (1974) 2 SCC 472, Lochoo Mal v. Radhey
Shyam, (1971) 3 SCR 693 and also on Ral Nation Jain v. Firm
Sukha Nand Ram Norgin and others., (1980) AIR Allahabad 78.
Facts are not in dispute. It is also not disputed that U.P.
Encumbered Estates Act 1934 was brought in to give relief to
a class of debtors particularly landholders and the Act
provide for a scheme for settlement of debts without filing
of an insolvency petition. The authorities referred to by
learned counsel do not throw any light on the questions
involved.
10. Sec.4 of this Act provides for making of an application
to attract the provisions of this Act and once an applica-
tion under this Section is made, the proceedings are said to
have commenced under the provisions of this Act. Sec.6
provides for passing of an order and transmission of the
application to the Special Judge who has been conferred
jurisdiction under this Act to proceed with the proceedings.
Sec.7 of this Act provides:
“When the Collector has passed an order under Section 6 the following consequence shall ensue:
(a) all proceedings pending at the date of the said order in any civil or revenue court in Uttar Pradesh in respect of any public or private debt to which the landlord is subject,
or with which his immovable property is encumbered, except an appeal, review or revision against a decree or order, shall be stayed, all attachments and other execution processes issued by any such court and then in force in respect of any such debt shall become null and void, and no fresh process in execution shall, except as hereinafter provided, be issued;
(b) no fresh suit or other proceedings other than an appeal, review or revision against a decree of order, or a process for ejectment for arrears of rent shall, except as hereinaf-
ter provided, be instituted in any civil or revenue court in Uttar Pradesh in respect of any debts incurred before the passing of the said order but if for any reason whatsoever
such a suit or proceeding has been instituted, it shall be deemed to be a proceeding pending at the date of the said order within the meaning of clause (a).
Provided that when a landlord has executed a usufructuary mortgage in respect of any of his land and is in possession of that land as a thekadar of the mortgagee, no fresh process
shall issue for his ejectment from that land for arrears of the theka rent.
(2) After the passing of the said order and until the application is dismissed by the Special Judge under subsection (3) of Section 8 proceedings under this Act are quashed under Section 20 or until the Collector has liquidated the debt under Chapter V, no decree obtained on the basis of any private debt incurred by the landlord after the passing of
the order under Section 6 shall be executed against any of his property, other than proprietary rights in land, which has been mentioned in the notice under Section 11 and the
landlord shall not be competent without the sanction of the Collector to make an exchange, or gift or, or to sell, mortgage or lease, any of that property.
(3) After the passing of the order under Section 6 and until the Collector has declared in accordance with Section 44 that the landlord has ceased to be subject to the disabilities of this sub-section or until the passing of the order by the Special Judge, referred to in sub-section (2) of Section 44, no decree obtained on the basis of any private debt incurred after the passing of the order under Section 6 shall be executed against any of the landlord’s proprietary rights in the land mentioned in the notice published under Section 11 and the landlord shall not be competent, without the sanction of the Collector, to make any exchange or gift, or to sell, mortgage or lease those proprietary fights, or any portion of them.
(4) Any transfer made in contravention of the provisions of this section shall be void.”
Much of the controversy in the present matter pertains to
the effect of Sec.7. Sub-clause (1) of this Section indi-
cates the consequences that will follow when an order under
Section 6 has been passed by the Collector. sub-clause
(2) speaks of restrictions on the landlord about exchange, gift,
sale, mortgage or lease of any of the properties without the
sanction of the Collector. It is not in dispute that after
an application under Sec.4 was filed by the respondent-
debtor when an application under Sec.24 was filed for exemp-
tion in respect of the house in dispute and the order was
passed on 26.3.1943. It is therefore plain that on the day
i.e. 4.5.58 when the agreement was entered into an applica-
tion under Sec.4 had been made and the order had been made
under Sec.6 and it is not disputed that on the day on which
the agreement was made the provisions of Sec.7 were attract-
ed and the limitations put on the power of the landlord
under Sec.7 were applicable to the respondent-landlord in
this case. Sub-clauses 2 and 3 of the Sec.7 provided for
restrictions put on the power of the landlord and the re-
striction is in respect of exchange, gift, sale, mortgage or
lease. It is clear that the restrictions pertain to ex-
change, gift, sale, mortgage and lease and it was contended
by learned counsel for the appellant that agreement to sell
is not covered by any one of these restrictions and there-
fore the agreement which was entered into in 1958 could not
be said to be bad in law as the High Court appears to have
held whereas an attempt was made by learned counsel for the
respondents to contend that as the agreement to sell creates
some rights in immovable property it will be covered within
the language of sub-clauses (2) and (3).
11. It is not disputed that at the time when this agreement
was entered into the proceedings under this Act were pending
and the provisions of Sec.7 are attracted. A plain reading
of the provisions contained in sub-clauses 2 and 3 clearly
go to show that agreement to sell has not been included in
the restrictions which have been imposed on the right of
debtor. The terms used clearly go to show that the prohibi-
tion is pertaining to the transfer (where fights in immova-
ble property are transferred). Admittedly an agreement to
sell is not a transfer of any rights in immovable property
and therefore the agreement could not be held to be bad in
law.
Sec.24 of this Act provides:
“The Collector shall then realise the value of such of the
debtor’s property, other than proprietary fights in land, but including proprietary rights in land in the areas which on the 7th day of July, 1949, were included in a Municipality or a Notified Area under the provisions of the U.P. Municipalities Act, 1916, or a cantonment under the provisions of the Cantonment Act, 1924, or a Town Area under the provisions of the U.P. Town Area Act, 1914, as shall have been reported by the Special Judge under the provisions of sub-
section (2) of Section 19 to be liable to attachment or sale:
Provided that the Collector before passing orders under this section of the sale of any property shall hear any objection which the debtor may have to make to the sale of that property:
Provided also notwithstanding anything in any other section of this Act, the Collector may, if he considers fit, sell, along with any building disposed of under this Section, the proprietary rights of the applicant in any land
occupied by such building or appurtenant thereto:
Provided further that the Collector shall leave the debtor at least one residential house and necessary furniture thereof if-
(a) the debtor owns such house and furniture and desires to retain it, and
(b) such house and furniture is free from any mortgage or charge.
(2) The amount so realized shall be expended by the Collector in discharging the debts in order of priority.
(3) For the purpose of execution against property outside the (Uttar Pradesh) the decrees passed by the Special Judge shall be deemed to be decrees in favour of the Collector.
(4) For realising the value of the debtor’s property under
this section the Collector may excercise all the powers of a civil court for the execution of a decree.”
The proviso to this Section with sub-clauses (a) and (b)
clearly indicates that Collector has the authority to exempt
one residential house and necessary furniture and the exemp-
tion for such a house and furniture once granted will be
free from any mortgage or charge.
12. Much emphasis was laid on the terms of the order passed
by the Collector on June 23, 1961 wherein it was observed
that ‘house in question should remain exempted from attach-
ment and sale’ and it was contended by the learned counsel
for the respondents that this exemption only pertains to its
exemption from attachment and sale. The original order dated
26th March 1943 only talks of the house and personal effects
to be excluded. We have no hesitation in saying that it is
not the language of the order which is material but the
language of the provision under which the order was made as
it is not disputed that an order under Sec.24 exempting the
house in dispute was passed on 26th March 1943 which was
only reiterated in the order dated 23rd June 1961. It is
therefore clear that once this order is passed the house in
question was free from any mortgage or charge.
13. It was contended by the learned counsel for the respond-
ents that the scheme of the Act dearly show that what was
provided in sec.24 was only with a purpose to allow the
debtor to have a residential house with necessary furniture
to permit him to have a respectable living but it did not
mean that the debtor was at liberty to sell away this
property and pocket the money to defeat the creditors and on
this basis an attempt was made to contend that during the
pendency of the proceedings the fights of a mortgagee sur-
vived in spite of an order passed under Sec.24 or inspite of
an order under clause 7 of Sec. 14 having been passed.
14. So far as Sec.24 is concerned and the effect of the
order under this Section is concerned it is clear that once
an order exempting the property under this provision is
passed by Collector the house and furniture about which such
an order is made is free from any mortgage or charge and
therefore it leaves no doubt that after the order under
Sec.24 having been passed in the present case i.e. on
26.3.43 the mortgage which was in existence before the
proceedings under this Act commenced ceased to be effective
and this property was free from any . mortgage or charge.
15. Sec. 14 clause 7 provides for determination of debts: It
reads as under:
“(7) If the Special Judge finds that-
(a) no amount is due, he may pass a decree for cost in favour of the landlord;
(b) an amount is due to the claimant he shall-
(i) pass a simple money decree, having regard also to the provisions of Section 3 of the U.P. Zamindars’ Debt Reduction Act, 1952, for such amount together with any costs which he
may allow in respect of the proceedings in his court and of proceedings in any court stayed under the provisions of the Act together with pendente lite and further interest at a rate not higher than 4-1/4 per cent per annum; and
(ii) also certify the amount, if any, of such decree which, in accordance with the provisions of Section 8 of the U.P. Zamindars’ Debt Reduction Act, 1952, is not legally recovera-
ble otherwise than out of the compensation and rehabilitation grant payable to the landlord:
Provided that no pendente lite interest shall be allowed in the case of any debt where the creditor was in possession of any portion of the debtor’s property in lieu of interest payable on such debt for the period he was so in possession.”
Sub-clause (b) of this clause 7 clearly provides that the
amount which is found to be due to the claimant, a money
decree shall be passed and what will be the effect of this
money decree having been passed under sub-clause 7 of Sec.
14 has been provided in Sec. 18. Sec. 18 reads:
“Subject to the fight of appeal or revision conferred in Chapter VI, the effect of a decree of the Special Judge under sub-section (7) of Section 14 shall be to extinguish the previously existing fights, if any, of the claimant, together with all rights, if any, of mortgage or lien by which the same are secured and, where any decree is given by the Special Judge to substitute for those fights a fight to recover the amount of the decree in the manner and to the extent hereinafter prescribed:
Provided that secured debts, which, in accordance with the provisions of Section 8 of the U.P. Zamindars’ Debts Reduction Act, 1952, are not legally recoverable otherwise than out of the compensation and rehabilitation grant payable to the landlord shall be recoverable from the compensation and rehabilitation grant aforesaid as though the security had not been extinguished.”
16. Sub-clause 7 of Sec. 14 uses the phrase “pass a simple
money decree and in our opinion this terminology ‘simple
money decree has been used with some significance and if
any doubt is left it has further been cleared by providing
Sec. 18. This provision clearly indicates that once a decree
has been passed by the Special Judge under sub-Sec. 7 of
Sec. 14 the effect of it will be to extinguish the previous-
ly existing fights in any of the claims or mortgage and the
decree passed by the Special Judge will substitute all those
fights. It is therefore clear that once the claim of a
creditor even if he is secured is determined by the Special
Judge under Sec. 14 sub-clause 7 and a money decree is
passed the ‘rights of the creditors even if it was under
mortgage come to an end although the scheme of the Act
indicates that such debts which are secured may get priority
over the debts which were not secured and on the basis of
these provisions and the provisions contained in Sec.44 an
attempt was made by learned counsel for the respondents to
contend that although the rights of the mortgagee may be
extinguished but so long as the proceedings are pendings
they are not completely extinguished as in the event of
quashing of the proceedings the scheme of the Act indicates
a revival of such rights. But it could not be doubted that
so long as they are not revived they come to an end and we
have no hesitation in view of Sec.24, sub-clause 7 of Sec.
14 read with Sec. 18 that this house in dispute at the time
when the suit was filed for specific performance of the
contract was free from all encumbrances and there was no
mortgage or charge against this property.
17. It is therefore clear that what learned counsel for the
respondents contended on the basis of provisions contained
in Sections 43 and 44 only is that in cases where proceed-
ings are quashed under Sec.20 the rights of the creditors if
they were of a mortgage may revive and the time spent in
these proceedings may be exempted but it is nobody’s case
that the proceedings have been quashed under Sec.20 and
admittedly the respondent during these proceedings at no
time has not raised a plea that the proceedings have been
quashed under Sec.20. On the contrary the order that has
been put on record by the learned counsel for the appellant
clearly goes to show that the proceedings have been concluded and therefore question of revival does not arise.
18. Learned counsel for the respondents vehemently contended
that the scheme of the Act does not mean that when the house
which has been exempted only for the purposes of living of
the debtor, could not be sold away and money pocketed de-
feating the claims of the creditors. Even if this argument
is accepted it does not carry the matter further except that
if any claim is still remaining to be settled the sale
proceeds which the respondent-debtor will get out of the
decree for specific performance could be kept apart for
distribution to the creditors.
19. It was also contended that sub-clause 4 of Sec.7 quoted
above clearly provides that any transfer in contravention of
provisions of this section will be void and therefore even a
transfer under a decree would be void if it is in contraven-
tion of the provisions of Sec.7 whereas learned counsel for
the appellant frankly conceded that although as the order
dated 7.5.76 discloses that the proceedings are over, under
this Act and therefore effect of Sec.7 has come to an end
and a decree for specific performance for sale could be
passed without any objection under Sec.7 but even if the
proceedings are pending, the decree could be subject to a
permission from the Collector under Sec.7. Although it was
vehemently contend by the counsel for the appellant that if
the respondent wanted to challenge the order dated 7.5.76
which was filed by the appellant in this Court clearly
indicating that the proceedings are over, under Sec.44 of the
Act and it was open to them to file any further order indi-
cating that the proceedings are still pending and as no such
order has been filed it has to be accepted that the proceed-
ings are over and the limitation put on transfer by Sec.7
has ceased to be effective.
20. The language of Sec.7 as quoted above is clear enough
that this is effective only during the pendency of the
proceedings under this Act and the order dated 7.5.76 filed
by the appellant in this Court clearly goes to show that no
proceedings are pending and the case has been consigned to
the record. There is nothing to indicate that any proceed-
ings are pending nor anything to indicate that any claim of
any creditor still remains to be satisfied. In the absence
of any proceedings pending, the effect of clause 4 of Sec.7
will be of no avail. In our opinion, therefore a decree for
specific performance could be passed. The High Court there-
fore was in error in allowing the appeal and setting aside
the judgment and decree passed by the learned courts below.
It is no doubt open to the respondent to approach the executing court to retain the sale proceeds if they are in a position to satisfy the court that any part of the claim still remain to
be satisfied. The appeal is therefore allowed, the judgment
and decree. passed by the High Court is set aside. Instead
the decree passed by the trial court and maintained by the
Appellate court is restored. In the circumstances of the
case, parties are directed to bear their own costs.
Appeal allowed.
