Chartered Bank, Ltd., and de Fonseka.
1943Present: Soertsz and Heame JJ.
RTER.ED BANK, LTD., Appellants, and DE ^FONSEKA, et al.r
25—26—D. G. (Inty.) Colombo 54,335 with 64—65 D. C. (Inty.)
Adjustmentof decree—Moneydueunder hypothecarydecree—Sale oflander
underdecree—Negotiationsforpayment of balance due—Failure to pay;
balance on due date—No certifiable adjustment—Notice of order for sals
to judgment-debtor unnecessary—Civil Procedure Code, ss. 347 and 349.
The plaintiff-Bank obtained a hypothecary decree against the 1stdefendant for a sum of two million odd rupees due on a primary mortgage.The decree directed that,in default ofthepayment of thissum,the
mortgaged landsshould besoldbyan auctioneer.
By October13,1938,the plaintiff had recovered in threeinstalments-
a sumof Us.793,910.85andhadcertified thesepaymentsofrecord.
Thereafter, on February 17,1941,after certainnegotiations had
taken place between thedefendant andtheBank, the latteragreedto
accept a sum of Rs. 8J lakhs in satisfaction of the balance claimprovided among- other conditions,thatthe amount should bepaid in-
certain instalments beforecertain dates,thearrangement beingthatthe-
amount should be paid on or before June 15,1941.
Twomonthsafter the finaldatefixed for thepaymentofthemoney,
the Proctorsof theplaintiff submittedamotion,acknowledgingpayment
of a furthersumof Rs.120,000and asking for executionofthe decree
to recover the balance still due.
Thereupon,thedefendant movedthat , the decree hadbeen adjusted,
so as to limit his liability underit to8flakhs and.thattheadjustment
be certified under section 349 oftheCivilProcedureCodeandthat the
order for sale be stayed.
Held, that there was no certifiableadjustment ofthedecree withitt
the meaning of the section.
All that had taken place between the 1st defendant and the plaintiff'at theend ofthe courseof negotiations was thatthe plaintiffhadoffered,
to take 8Jlakhs infull satisfaction ofhis decreeand that thedefendant
on hispart acceptedthat offerby agreeing toperform theconditions,
upon whichit wasmade to defendant. But when the defendant failed
to perform . themostimportantone—the payment of8Jlakhs—the-
offer lapsed and there was no adjustment.
Held,further, thatwhere ahypothecary decree is entereddirectings
that the mortgaged property be sold byanamedauctioneer, noorder for
sale with notice to the judgment-debtor under section 347 of the CivilProcedure Code is necessary.
Perera v. Joneset ah(41 N.L. R. 193) followed.
Held, also, that there is no requirement of law or of procedure that tjieorder sent to the auctioneer authorising him to sell should be signed,by the District Judge or by a particular officer of his Court.
PPEAXi from an order of the District Judge of Colombo.
SOEBT6Z J.—Chartered Bank, Ltd., and de Fonseka.
R.L. Pereira, K.C. (with him C. E. S. Perera, G. P. J. Kurukulasuriyaand Dodwell Gunaruardana), for the first defendant, appellant, in No. 25and the petitioner, appellant, in No. 64 and the petitioner, respondent,in No. 65.
V. Perera. K.C. (with him N. K. Choksy), for the plaintiff, respondent,in No. 25, and the plaintiff, appellant, in No. 26 and the plaintiff,respondent, in Nos. 64 and 65.
E. F. N. Gratiaen (with him S. Nadesan and T. K. Curtis), for the secondpetitioner, respondent, in No. 26 and the third defendant, respondent, inNo. 64 and the petitioner, appellant, in No. 65.
S.Nadesan for the fourth respondent in Nos. 26, .64, and 65.
J. Ranatunga for the fourteenth and fifteenth defendants, respond-ents, in Nos. 26, 64. and 65.
C. Nadarajah for the nineteenth, twentieth, twenty-first and twenty-second defendants, respondents, in Nos. 24, 64, and 65.
Lt. A. Rajapakse (with him Kingsley Herat), for the eighth defendant,respondent, in Nos. 26, 64 and 65.
N. M. de Silva (with him E. A. G. de Silva), for the ninth, tenth,eleventh, and seventeenth defendants, respondents, in Nos. 25, 64and 65
A. Rajapakse (with him F. W. Obeyesekere), for the sixth and fifteenth-defendants, respondents, in Nos. 26, 64 and 65.
Cur. adv. vult.
November 26, 1943. Soertsz J.-—
There are four appeals before us. In order of date, the earliest is theappeal by the first defendant from an order made against him refusinghis application for the stay of the sale of certain lands of his then dueto be held in pursuance of an order issued by the Court to the auctioneernamed in the decree. The respondent to that appeal is the plaintiff-Bank, the decree holders. The second appeal is also by the first defendantjand it is preferred against an order refusing to set aside the sales thattook place after the application to stay the sales had been rejected. Therespondents to it are the plaintiff-Bank and certain parties interestedas puisne encumbrancers and purchasers in execution. The third appealIs taken by the plaintiff-Bank from an order certifying an adjustment-of the decree under section 349, on an application made by the firstdefendant to have it certified. The respondents are the first defendantand the other respondents named in the first defendant’s second appeal.The fourth appeal is by the Bank of Chettinad against the order madefcy the Judge on an application made by that Bank for certification ofthe alleged adjustment and against the order for costs made againstthem. The respondents are the other parties concerned in the secondand third appeals. In addition to these appeals, there are cross-objec-tions .taken by the first defendant under section 772 of the Civil ProcedureCode to the order against which the plaintiff has appealed, the firstdefendant being dissatisfied with the terms in which the adjustment is
recorded as certified.
SOEKTSZ J.—Chartered Bank, Ltd., and de Fonseka.
The facts from which these copious tears flow are these:-On March lr
1935, the plaintiff-Bank obtained a hypothecary decree against thefirst defendant for a sum of Es. 2,860,347.31 due to them on a primarymortgage. The decree directed that this sum be paid forthwith or, indefault, that the mortgaged lands be sold by an auctioneer, a Mr. Meaden.
By October 17, 1938, the Bank had recovered in three instalments asum of Rs. 793,910.85 and had certified these payments of record. There-after, in some connected ease pending between the Bank and the firstdefendant, the latter had preferred an appeal to His Majesty in Council,and, on a joint motion made by both parties to the District Judge ofColombo, execution of the decree in the present case had been stayedto await the decision of that appeal. There was a third case pendingbetween them also in the District Court of Colombo.
In this state of things, an Advocate of this Court, apparently a friendof the first defendant, attempted the role of the Deus ex Machina to-terminate this prolific litigation and bring about a happy ending. OnDecember 16, 1940, he wrote letter A 12 making “ a firm offer ” of 8lakhs in full satisfaction of what was then due to the Bank on the decree.
An interview followed and the offer was raised to 8f lakhs. By theirletter A 19 of February .17, 1941, the Bank’s Proctors stated that the1Bank would accept that amount in satisfaction, provided the firstdefendant withdrew the appeal before the Privy Council and the actionin the District Court, and also recanted all allegations that he had madeagainst, the Bank and their lawyers. They also stipulated that thesum of 8f lakhs should be paid in certain instalments before certain-named dates. But, in regard to this, the final arrangement was thatthat amount should be paid on or before June 15, 1941. The first defend-ant, accordingly, withdrew his appeal, his action and his words butunfortunately, he failed to pay the money. Then, exactly two monthsaff.pr the final date fixed for the payment of the money, the Bank’sProctors submitted a motion, acknowledging payment of a further sumof Rs. 120,000, and asking for execution of their decree to recover thebalance still due. ‘They obtained an order for the sale of the otherlands executable under the decree. Thereupon, the first defendantcame forward saying that the decree had heen adjusted so as to limit hisliability under it to 8f lakhs, and asking that this adjustment be certified^under section 349 of the Civil Procedure Code, and that the sale orderbe stayed. The application for the stay of the sale was peremptorily-refused. In regard to the certification of the alleged adjustment, the-trial Judge made a curious order -with which neither party appears to besatisfied. He said “ the adjustment would appear to have becomeineffectual because it has not been given effect to within the stipulatedtime. It is now, if I may say so, spent ammunition. But Mr. Amera- -sekera argues that time is net the essence of the adjustment and, aslong as there is an adjustment of which information is given to Courtby petition by the judgment-debtor, the Court shall record the samethat it would be time enough to consider the legal effect ofthe certified adjustment if and when effect is sought to be given to itby someone interested in the matter. I do not wish to be understoodas agreeing with Mr. Amerasekera in his submission that time is not the
SOERTSZ J.—Chartered Bank, Ltd., and de Fonseka.41
essence of the adjustment but with regard to the remainder of his sub-mission I am unable to say that I disagree with him.”
Consequent on the refusal to stay sale, the first defendant and theBank of Chettinad 'who occupy the position of secondary mortgagees,.asked that the sale that had taken place be set aside.
The questions that then arise for our decision are: (a) Was there suchan adjustment in this case as was certifiable under section 349 of theCode? (b) Were the sales illegal and liable to be set aside? The firstof these questions depends for its answer upon the correct interpretationof section 349. The relevant part of it provides that (1) “ If any moneypayable under a decree is paid out of Court, or the decree is otherwiseadjusted in whole or in part to the satisfaction, of the decree-holder,he shall certify such payment or adjustment to .the Court whose dutyit is to execute the decree. (2) The judgment-debtor may also bypetition inform the Court of such payment or adjustment, and applyto the Court to issue a notice to the decree-holder to show cause ….■why such payment or adjustment should not be recorded as certified.And if after due service of such notice the decree-holder fails to appearon the day fixed, or having appeared fails to show cause why the pay-ment or adjustment should not be recorded as certified, the Court shall■record the same accordingly ”.
In this instance, the question of certification arises under part 2 ofsection 349 on a motion presented by the judgment-debtor. I am ofopinion that on the facts before us. there was no certifiable adjustmentat all. All that had taken place between the first defendant and theplaintiff at the end of their course of negotiations was that the plaintiffhad offered to take 8£ lakhs in full satisfaction of his decree if the firstdefendant, on his part, accepted that offer by performing the conditionsupon which it was made to depend. But, when the first defendant satisfiedonly some of these conditions and failed to perform the most importantone—the payment of thelakhs—the offer lapsed and there was no
adjustment. This is not a case of completed contract by which thejudgment-debtor promises to do something on a future date, and thedecree-holder accepts it as an immediate adjustment in entire or partialsatisfaction of the decree, but rather, a case of negotiations which failedho achieve the end the parties had in view.
It is stated that, on this interpretation, the first defendant receives no■consideration in return for the surrender of his appeal and of his action.1 do not think that is quite true. He obtained an extension of time.The fact that, in the end, that extension yielded no material benefit ishis misfortune and not the plaintiff's fault.
All the talk there was in the course of the argument about time notbeing of the essence of the contract appears to me to be entirely besidethe point in a ease like this where there was no concluded contract, ithaving failed owing to the inability of the offeree to comply with a condi-tion precedent, within the time he and the offeror agreed upon.
Mr. Gratiaen and Mr. Nadesan, although appearing for third parties-wept, the latter with some appearance of sincerity over the inability ofa debtor, in this view of section 349, to certify an arrangement likethis for, they said, that that would mean that although, under the
42S0EBTS2 J.—Chartered Bon/i, Ltd., and tie Fonseka.
agreement, the debtor was given time to pay, nevertheless, the creditorwould be able to take out writ during that period, for a Court may notrecognize any uncertified arrangement. But, in reality, the debtor i¬ in as hard a case as that. There is section 344 to which he couldresort if the decree-holder were to attempt to break faith.
The next question is whether the sales that took place after August,.1941, all or any of them, are liable to be set aside on the ground that they■were illegally held in that they were held—so it was contended—withouta proper order sanctioning them. The absence of such an order wasurged on the grounds that (a) on a correct interpretation, the order madeby 'the judge on the motion of August 15, 1941, means that the Judge-directed notice to issue on the judgment-debtor to show cause againstsale being ordered, and not that he allowed the order for sale to be sentto the auctioneer. (6) If, however, the correct meaning of that orderis that he directed an order for sale, it was not competent for the Judgeto make such an order without notice to the judgment-debtor, (c) Theorder for sale was, in any event, not properly authenticated and com-municated to the auctioneer in that it was not signed by the Judge-but by someone purporting to act as the clerk of the Court by order ofthe Judge.
After careful consideration of the motion paper, the minute of it madeon the journal, and the evidence of Mr. Ludcvici, I am quite satisfiedthat the trial Judge has interpreted the order correctly as meaning thatby it the Court allowed, an order of sale to issue without notice. Thejournal shows that the order was made after Mr. Ludovici had seen tbefJudge in Chambers to support his submission that, in the circumstancesof this case, no notice was necessary as a preliminary step. If theJudge had not accepted that submission, it is not at all likely that hewould have made his order with the one word “ allowed ”. He would,in that event, surely have made it clear that notice should issue in the■ first instance. Be that as it may, I am of opinion that, in a case involvinga hypothecary decree, directing that the mortgaged property be sold bya named auctioneer, no order for sale with notice to the judgment-debtorunder- section 347 of the Civil Procedure Code is necessary. I hadoccasion to give my reasons for that view in Perera v. Jones' et al.1 andI adhere to that view. In the result, therefore, even if we assume thatthe order of the Judge was intended to direct notice to issue in the firstinstance, the failure to issue it was only a non compliance with a directionsof the Court and, as such, not an irregularity that had the effect of vitiatingthe sales.
In vregard to the appeal of the Bank of Chettinad, who stand in theplace of secondary mortgagees, and who also have taken the objectionthat the sales are bad for want of notice to them, all I need say is thatthey have no voice whatever in the matter. They are not judgment-debtors and were not entitled to be noticed.
As regards the objection that the order to the auctioneer was notauthenticated and communicated to him properly, assuming that to be so,it is again a mere irregularity and cannot be said to invalidate the sale&which ultimately rested on the direction given in the decree itself. But,.
1 41 N. L. R. 19S.
Somasunderam and Assistant Collector of Customs, Trinco.
there is evidence on the record to show, and we were also informed fromthe Bar that, for over two years, it has been the practice in the DistrictCourt of Colombo for communications of this kind to be made to theauctioneer through an officer of the Court. As far as I am aware, thereis no requirement of law or of procedure that the order sent to theauctioneer authorising him to sell should be signed by the District Judgeor by any particular officer of his Court. It is not disputed that, in fact,this order was signed by a clerk of the Court in obedience to the directionof the Court.
It would, indeed, be deplorable to all but judgment-debtors if judicialsales were liable to be set aside on grounds like these, and if the publicshould come to regard participation in these sales as “ periculosae plenum'opus aleae ”.
It is clear that the first defendant has subjected the record of thistease to a microscopic examination in search of flaws in a desperate attemptto have the sales set aside and so to retrieve his fortunes. One cannothelp sharing his regret that he just failed to have his lands sold in theabnormally inflated market for land that exists to-day, but there are therights and dues of others to be considered.
I allow the appeal of the plaintiff and set aside the order of certificationmade by the District Judge. I dismiss both the appeals and the cross-objections of the first defendant as well as the appeal of the Bank of•Chettinad. In regard to costs, I think a fair order would be to directthat costs as of one inquiry and of one appeal be paid to the plaintiffin the proportion of half by the first defendant and half by the secondand fourth defendants between them. The first and second defendantswill also pay, each Bs. 500 as the costs here and below of the purchaserswho were represented by Counsel at the hearing before us.
Heakne J.—I agree.
Plaintiff's appeal allowed.
First defendant’s appeal and cross-objections dismissed.
CHARTERED BANK, LTD., Appellants, and DE FONSEKA, et al, Respondents