R. T. SIRIMALA VEDA, Appellant, and P. T. SIRIPALA et al., Respondents

153-NLR-NLR-V-55-R.-T.-SIRIMALA-VEDA-Appellant-and-P.-T.-SIRIPALA-et-al.-Respondents.pdf

544
Strimald, Veda v. Siripala
1954Present: Rose C.J. and Fernando A.J.R.T. SIREMALA VEDA, Appellant, and P. T. SIRIPALA et at.,
Respondents
S.C. 393—D. G. Kegalle, 6,186
f& « o
Civil Procedure Code—Procedure when assignee of a decree seeks to obtain execution—Validity of an order for execution preceded by substitution—Assignee ininsolvency—“ Representative ” of insolvent—Sections 339, 347.
Where the assignees of a decree first applied for substitution as plain-tiffs and, after that application was granted, made a separate application forexecution, without a formal petition—
Held, that the applications, taken together, constituted substantial andsufficient compliance with the requirements of section 339 of the Civil ProcedureCode.
The assignee in insolvency of a judgment-debtor is a ‘^representative ”of the judgment-debtor within the meaning of section 339 of the Civil ProcedureCode. Therefore, where a mortgagor against whom a hypothecary decreehas been entered is subsequently adjudged insolvent and the hypothecarydecree is thereafter transferred by assignment from the mortgagee to anyother person, such assignee, when he applies for execution of the decree undersection 339 of the Civil Procedure Code, must name as respondent the assigneein insolvency of the judgment-debtor and/or a person who has purchased themortgaged property from the assignee in insolvency. Pailure to do so willrender null and void the sale in execution of the hypothecary decree.
o
ApP^AL from a judgment of the District Court, Kegalle.
H. V. Perera, Q.G., with H. W. Jayewardene and D. R. P. Goonetilleke,
for the plaintiff appellant.
(
N. E. Weerasooria, Q.G., with Sir Lalita Raja/pakse, Q.O., and G. D. C.
Weerasinghe, for the 1st defendant respondent.
t
R. Gunaratne, for the 2nd defendant respondent.
Cur. adv. wit.
FERNANDO A.J.—Sirimala Veda v. Siripala
645
June 7, 1954. Fernando A.J.—
The plaiiftiff appellant in this case instituted an action against threedefendants for declaration of title to a £rd share of a land called DivelgamWalauwa – watte; the claim against the 3rd defendant was adjusted atthe trial and the contest was between the plaintiff on the one hand andthe 1st and 2nd defendants on the other.
The share in dispute was originally owned by one Richard Nugawela,t who mortgaged the land in 1924 as security for a sum of Rs. 15,550.The mortgagees put their bond in suit in 1924 and hypothecary decreewas entered in that action on December 12th, 1929. Although noticewaa served on the mortgagor in 1931 to show cause why commissionfor sale of the mortgaged property should not issue, no steps were takenat that stage to have the property sold, in execution.
Richard Nugawela, the original owner and mortgagor, was adjudgedinsolvent in 1936, and on October 7th 1936 the Secretary of the DistrictCourt of Kegalle was appointed assignee of the insolvent estate ; theshare in dispute in the present case was sold by the assignee on April 11th1938 with leave of the yourt, the sale was confirmed by Court, and onOctober ^Oth* 1*938 a conveyance was executed in favour of thepurchaser who is the plaintiff in the present action. The plaintiff’sclaim to the share in dispute is based on this conveyance.
In March 1939 the mortgagees who had obtained the hypothecarydecree in the mortgage action assigned the decree to the 1st and 2nddefendants who on May 5th 1939 filed a petition in the mortgage actionfor the substitution of themselves in place of the original plaintiffs forthe purpose of proceeding with the action to recover the amount due underthe decree in this case. The mortgagor Richard Nugawela was the onlyrespondent nfimed in the petition and notice was issued on him, butalthough he was represented at the hearing of the petition of July 5th1939, no objections were filed on his behalf to the application of May5th 1939. The Court at first made order that writ (presumably forexecution) may^be issued but, upon a statement by the proctor for thepetitioner that his application was only for substitution, the Courtvacated the order for issue of writ and only allowed substitution. Sub-sequently on July 20th 1939 the substituted plaintiffs applied for noticeon the defendants (Richard Nugawela) to show cause against the issueof a commission for the sale of the mortgaged property, and cause nothaving been shown the commission for sale issued. That commissionwas returned unexecuted on September 1st 1940 on the ground that thesubstituted plaintiffs were not desirous that the sale be held for somereason of their own. On application made on October 14th 1940 andafter notice to the defendant Nugawela, the commission was reissuedon December 19th 1940. The property was sold under that commissionand purchased by the substituted plaintiffs in whose favour a conveyancewas executed on April 15th 1943. The title of the 1st and 2nd defendantsto the present action, who were the substituted plaintiffs and thepurchasers in the mortgage action, is based on that conveyance.
The learned District Judge has dismissed the plaintiff’s action holdingthat the title of the 1st and 2nd defendants on the conveyance of 1943
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FERNANDO A.J.—Sirimala Veda v. Strip ala
in the mortgage action confers a better title than that obtained by theplaintiff by virtue of the conveyance in his favour in the«-'xnsolvencyproceedings. This appeal against the judgment of the District Judge isbased purely on questions of law concerning regularity of the proceedingsin the mortgage action which preceded the sale in execution under thehypothecary decree. Counsel for the plaintiff appellant questioUed theregularity of those proceedings on three grounds.
Firstly it was argued that under section 339 of the Civil ProcedureCode the only application which may be made by the assignee of a decree *is one for execution of the decree, that it must be made by petition andthat on such a petition the order for substitution of the assignee asplaintiff could only be ancillary to the substantial order which the Courtmay make namely an order for execution of the decree. It was urgedthat the order of Court made on July 5th 1939 for the substitution ofassignees as plaintiffs was a nullity because the Court had no jurisdictionto allow the substitution except upon an application for execution ofthe decree. Counsel referred to the case of Rajapakse v. Bastian1 wherethis Court upheld the refusal of the District Court to allow the applicationby the assignee of a decree to have himself siibstitut^fl.as plaintiff inthe action. There too the applicant’s counsel had as in the presentcase stated that the application was one for substitution and that he wasnot ashing for execution. Howard C.J. held that an application mademerely for an assignee to be brought on the record without any otherprayer will not lie. Such application must ask for execution of thedecree. The first contention of the appellant in this case was thereforethat the petition for substitution was a nullity, that the only applicationproperly before the Court was that made on October 14th, 1940 forexecution, and that the latter not having been made in compliancewith section 339, i.e., by petition in which the mortgagor-defendant(inter alia) should have been made respondent, the Court had nojurisdiction under section 339 to allow execution.
There are seemingly conflicting decisions or dicta of this Court as towhat the correct procedure should be when the assignee of <a decree seeksto obtain execution, particularly with regard to the question whetherit is permissible for the Court to allow an application for executionwhich has been preceded by an application for substitution. In Abey-wardene v. Marihar 2, Withers J. held (Burnside J. dubitante)«that anapplication for the substitution of the legal representative of a deceasedplaintiff was an incidental step, and that it should be made by motionand not by petition by way of summary procedure. In Adawiappenv. Aboobucher Lebbe3, Schneider J.held that in a case where the plaintiffhad died after decree, “ before any step in execution can be taken it wasnecessary that some person should have been substituted in his place.The procedure for doing so is pointed out in Abeywardene v. Marihar*.This substitution having taken place, then a motion should have beensubmitted for execution of the decree ”. In Silva v. Kavanihamy5,although the question of the validity of an order for execution preceded
1 (1940) 42 N. L. R. 214.3 (19&4) 6 C. L. Rea. 17.
8 (1892) 1 S. O. R. 192.4 (1892) 1 S. C. R. 192.
5 (1948) 50 N. L. R. 52.
FERNANDO A.J.—Sirimala Veda v. Sirypala
547
by substitution did not directly arise, yet the practice of allowingexecution »rjn such circumstances was referred to without criticism.Canekeratne J. said at p. 53 “ the judgment-creditor having died anapplication for substitution was made thereafter, and after notice to thedebtor, certain persons, one of whom was P. H. W. Edwin Singho, weresubstituted on January 13th 1937. On November 8th 1937, an appli-cation for execution was made to the Court by the substituted plaintiffs.It is in the form specified in the Code, Form 42 in the schedule and ismarked 5 D5, the names of the plaintiff and of the defendant are given inthe application and the amounts paid are shown. The prayer is thatthe writ lying in the above case may be executed and be issued forexecution to recover Us. 691-83£ with further interest. It was allowedby the Judge.” In Latif v. Seneviratne1 Hearne J. said that s. 339 doesnot contemplate that there should be an application for substitution asdistinct from an application for execution. All that is necessary isthat the transferee should file his application for execution setting outthe grounds on which he claims to be the transferee and the Court ordersthe application for execution to proceed or rejects it. If the Courtallows the application ,jt also orders that the transferee’s name be sub-stituted ?or tSat of the original decree holder. He pointed out that inthat case the fact that the application for execution was not made bypetition did not vitiate the sale. The application set out all the relevantdetails, a formal declaration was made that the details were true andthe appellants given due notice, and he held that even if the applicationcannot be described as a petition he would follow the principle that theCourt would not be disposed to set aside an execution on merely technicalgrounds when the execution has been found to be substantially right.
In view of these cases it appears that our Courts have not laid it downas a sine qua *non for the validity of an order for execution under section339 that there must be strict compliance with the exact procedurespecified in the section. The argument for the appellant in this case isthat the provisions of the section are mandatory and that the Courtwould only have jurisdiction to allow an order for execution where therehas been strict compliance : in the absence therefore of the contemplatedapplication by petition the Court if it allows execution would not becommitting an error of jurisdiction, but would be acting without juris-diction, ^ a circumstance which would totally vitiate the order for exe-cution. Counsel for the respondent urged that there had been substantialcompliance with the provisions of s. 339 and relied on decisions relatingto s. 347 where substantial compliance was held to have been sufficient.A Full Bench of the Bombay Hugh Court in the case of LaTchamshi v.Dahyabhai 3 dealing with Order 21 Rule 16 of the Indian Civil ProcedureCode which provides for execution upon application of the assignee of adecree, held that the assignee cannot get a decree executed unless hehad established his title to be assignee after giving notice to the judgment-debtor and after his objections if any had been heard by the Court.It was pointed out that while the Privy Council regarded* the notice tothe judgment-debtor as mandatory and the very foundation of thejurisdiction to allow execution, the view of the Privy Council was that
1 (1938) 40 N. L. B. 141.a A. I. B. (1949) Bombay 63.
548
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what is prohibited is the execution of the decree without hearing theobjections of the judgment-debtor. The facts of the case were tftat thoughno notice was given to the judgment-debtor in terms of the section,nevertheless the debtor did appear and raised objections challengingthe title of the assignee to maintain the execution proceedings. TheCourt held that the irregularity of not issuing the necessary notice hadbeen cured by the judgment-debtor putting in a written statement andfiling his objections which were considered before execution was allowed.
Applying the ratio decidendi of that case to the one before us it will beseen that the object which the Legislature had in view in providing for aprocedure by way of petition for an application for execution has beensubstantially satisfied. Although in fact the application of October14th 1940 for execution was not made by petition and did not specify thetitle of the assignee to ask for execution, yet there had been previouslymade to the Court a petition for substitution upon which the judgment -debtor could if he so wished have challenged the title of the petitioner.He was aware, and the Court was aware, when the subsequent applicationfor execution was made, that substitution had previously been allowedby the Court on the application by the assigned. Ther^sancijr&l objectof the section being not so much to permit objections to the issue ofexecution but to permit challenge of the validity of the assignment,that object was in my opinion substantially satisfied by what took placein the proceedings in the mortgage action. Howard C.J., in Bajapakse v.Bastian1, said that the question for decision in that case is whether thepetition in that case could be regarded as an application for execution.Undoubtedly it could not. But if in fact it had been followed by anapplication for execution I do not think the Court would have had muchhesitation in deciding that the applications taken together constitutedsubstantial and sufficient compliance with the requirements of s. 339.
For the reasons set out above, I am of opinion that the conveyance infavour of the respondents cannot be impeached on the first groundcontended for by the appellant.
a
Secondly, Counsel for the appellant argued that the order for executionof the decree in favour of the substituted plaintiff s in the mortgage actionwas invalid on the ground that the original plaintiffs (who had assignedtheir rights under the decree to the defendants in the present c^se) hadnot been named respondents to the application for execution. Heretoo the principle sought to be relied on is that the provisions of s. 339are mandatory and that the naming of the assignors as respondents wasessential in order to confer jurisdiction on the Court. The object of thesection in requiring that they be so named was to give them an oppor-tunity of denying the validity of the assignment or of alleging that theassignment was subject to some reservation or qualification.
On the facts of the present case there appear to have been no cir-cumstances whatever which would permit one to take the view that thisobject had been even substantially secured. The effect of the order forexecution and the substitution allowed by the Couf-t would have been
1 (1940) 42 N. L. B. 214.
FERNANDO A.J.—Sirimala Veda v. Siripala '
549
to sweep away the right of the alleged assignors, and undoubtedly thelatter would* be entitled successfully to challenge the validity of such anorder on the ground that it was made without notice to themselves. Itis not equally clear that a third party like the present appellant wouldhave a similar right. There is much to be said for the view that thefailure 4o comply with a procedural provision framed to secure soimportant an object would vitiate the order for execution, but in viewof my decision on the third point raised by the appellant it is unnecessary•for the purposes of this case to decide the question involved on thissecond ground of appeal.
TJie third ground taken at the argument in appeal is that the order forexecution and the sale and conveyance in pursuance of it are void byreason of the failure to name, as respondents to the petition for execution,the assignee in insolvency of the original mortgagor and/or the presentplaintiff who had purchased the property in the insolvency proceedings.Counsel for the appellant conceded that the title of the plaintiff to theproperty which he purchased was subject to the hypothecary decreepreviously entered in the mortgage action, but argued that never-the-lessthe rights* undpr> the hypothecary decree could not be enforced in suchmanner as to affect the title of the appellant unless the assignee ininsolvency or the appellant or both had been named respondents in theexecution proceedings.
There is no express provision in the Code laying down the procedureto be followed by the holder of a decree in a case where the judgment-debtor is subsequently declared insolvent and an assignee in insolvencyappointed. In Carson v. William Cameron 1 a mortgagee had obtaineda hypothecary decree, but before the mortgaged property was seized inexecution the, mortgagor was adjudicated insolvent and an assignee ofhis estate appointed. Subsequently, the plaintiff applied ex parte tohave the assignee made a party defendant and for execution to be leviedon the mortgaged property. The District Judge refused the applicationon two grounds :—Firstly, that the assignee could not be made a defendantat a stage affces judgment, and secondly, that the plaintiff was not entitledto interfere with the assignee’s duties and rights of administration whichincluded the right to sell the insolvent’s interests in the mortgagedproperty. Immediately thereafter a proxy was filed on behalf of theassignee »authorising the proctor to consent to the issue of executionagainst the mortgaged property. Clarence J. held in appeal that themortgagee is entitled to proceed to execution under his decree and theinsolvency threw no obstacle in his way. The learned Judge was “ notat present prepared to say that the mortgagee was bound even to give theassignee notice before proceeding to execution ”, but he did not considerthe point because in fact the assignee had intimated to Court that hedid not oppose the plaintiff’s application for execution. Counsel forthe respondent in the present appeal relied on that judgment as authorityfor the argument that there was no necessity to name the assignee orhis successor in title as respondent in the proceedings under s. 339. Itmust be noted however that the remark of Clarence J. regarding theneed for notice to the assignee was clearly an obiter dictum. In Suppiah-1 (1883) 5 S. G. O. 149.
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FERNANDO A.J.—Sirimdla Veda v. Siripala
Pillai v. Ramanaihan1 it was held that where the property of a judgment-debtor had been seized in execution of a decree, the insolvency of thejudgment-debtor after seizure does not abate the seizure and that there-fore, the seized property being already in the hands of the law it was notnecessary to substitute the assignee in insolvency in place of the insolventdebtor. That decision is inapplicable to the case of a hypothecarydecree where the title to the mortgaged property still remains in thejudgment-debtor, being only liable to be sold under a subsequent orderif the principal debt is not paid. The property would not come “ into'the hands of the law ” until the order to sell is actually issued. InSantiago v. Segu Mohamado 8 the judgment in which was only a brief one,the District Judge had apparently refused to permit the judgment-creditor to enforce his hypothecary decree, presumably because theJudge thought that the subsequent insolvency of the debtor barred theright of execution. Apparently also in that case no assignee in insolvencyhad even been appointed, and that being so the title to the mortgagedproperty undoubtedly remained with the judgment-debtor. Obviouslytherefore the plaintiff was fully entitled to have the land sold in exe-cution of his decree, the right which this Court recognised ga appeal.Macdonell C.J. however said that after the sale or auction “ the moneyor the proceeds thereof would have to be lodged in Court and therewill then be ample opportunity for the assignee of the insolvent, if suchbe then appointed,,to show cause against the money being paid out tothe plaintiff and to impeach the plaintiff’s mortgage ”. It might bethat this was said obiter, but the learned C.J. must have intended iteither as guidance or as a directive to the lower Court in regard to thematter of the disposal of the proceeds of sale. If it is open to an assigneeto impeach a mortgage, a sale in execution of which had taken placeeven prior to his appointment as such, it would seem to f611ow a fortiorithat after he is appointed an order for sale cannot issue except afternotice to him.
We were not referred to any decision expressly declaring that a decreewhich has been entered against a defendant who subsequently becomesinsolvent cannot be executed without notice to the assignee. Butrecognition of the status of the assignee is implied in the judgment ofDrieberg J. in Hong Kong and Shanghai Hank v. Krishnapillai 3 wherein his judgment at p. 255 (citing from Mathiah v. Marlcar Tar.mby4) herefers to three courses open to a mortgage creditor when the mortgagoris adjudicated insolvent—“ he should make a formal demand of theassignee in order to allow him the opportunity of redeeming the mortgageunder s. 76 of the Ordinance and disposing of the property for the benefitof the creditors ; if the assignee does not elect to redeem the propertythe mortgage creditor can prove his claim under the mortgage bond andwhen the property is sold he can draw the whole proceeds or so muchas is sufficient to satisfy his claim, or he might bring an action on thebond against the mortgagor as debtor and against the assignee as theparty in whom the property has vested under s. 71 of the Ordinance,obtain a hypothecary decree and have the property s©ld ”.
1 (1920) 22 N. L. R. 225.* (1932) 33 N. L. R. 249.
a (19t31) 32 N. L. R. 222.* (1884) 6 S. C. O. 83.
FERNANDO A.J.—SirimeUa Veda v. Siripata
551
The dictum of Drieberg J. referred only to the position of a creditorupon a mortgage and not to one of a creditor who had obtained a mortgagedecree prior to the insolvency of the debtor; but I find it of assistancein construing the provisions of s. 339 of the Civil Procedure Code whichrequires the assignee of the decree to name as respondent to his petitionfor execution “ the parties to the action or their representatives Theperson who must first and obviously be named respondent is the judgment-debtor, but where an assignee of the judgment-debtor has been appointed‘already, his title to the mortgaged property as well as his interest in theproceedings in the mortgage action would have ceased and undoubtedlythe ^object of the section is not secured by serving a notice on him of thepetition for execution.
Counsel for the 1st respondent relied on decisions that in consideringthe validity of execution proceedings, the Court would not insist oncompliance with technical requirements as to procedure. That principleis well recognised, but when there is non-compliance with any particularprocedural requirement, it is the duty of the Court to consider the objectwhich the Legislature had in mind when imposing the requirement andthe impontaneB ®>f that*object: if in fact the consequence of the pro-cedural defect is that some important object has not been secured orthat a means of protection intended to be afforded to some party orother interested person has not in fact been afforded to him, then theexecution cannot be said to be substantially right and a Court whichdeclares it invalid will not be doing so on “merely technical grounds”.Counsel also cited the case of Mallcarjun v. Narhari and another1 whereupon the death of the judgment-debtor notice was served on a personstated by the plaintiff and found by the Court to be his legal representa-tive. The Ihivy Council held that once notice was served the Courthad jurisdiction to order the sale despite its erroneous finding that theparty served was the legal representative. This case was distinguishedby the Privy Council in Ragunath Das v. Sundar Das Khetri2 on theground that in the latter case where the debtor had been adjudicatedinsolvent no n/itice of the application for execution had been served onthe assignee of the insolvent estate. The two cases illustrate thedifference between an error of the Court in the exercise of jurisdiction,which would make the execution only voidable, and a failure to take astep necessary to found jurisdiction, which renders anything done inpurported exercise of the jurisdiction a nullity. The defect in the casenow before us is clearly one of the latter description. The ease ofRagunath Das v. Sundar Das Khetri is of importance because in fact theassignee had notice of an application for substitution but no notice ofthe application for execution.
Another argument which we were invited to consider in favour of therespondents to this appeal was that s. 339 of the Civil Procedure Codedoes not apply to a mortgage action. For the 1st respondent it wasurged that S. 12 of the Mortgage Ordinance (Cap. 74) includes the powerto give directions for the substitution of parties at the stage of execution :Counsel for the 2nd* respondent made the more extreme suggestion that
J (1900) 27 Ind. App. 216, 25 Bombay 337.
• I. L. B. (1914) 42 Cal. 72.
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FERNANDO A.J.—SiriinaLa Veda v. Siripala
the whole set of provisions in the Civil Procedure Code dealing withexecution is excluded from application to a mortgage action. Evenassuming for a moment the correctness of either or both of these con-tentions, the most favourable conclusion one could draw would be thatthe matter of the execution of a hypothecary decree in circumstancessuch as those obtaining in this case is left to the discretion of the; Judge.But that discretion, if such there be, must be exercised judicially andreasonably ; and requirements such as those set out in s. 339 are nomore than what a Court should insist upon as conditions precedent to the*exercise of its discretion. I would therefore hold that the assignee ininsolvency of the judgment-debtor and/or a person who has purchasedthe mortgaged property from the assignee in the insolvency proceedingsis a “ representative ” of the judgment-debtor within the meaning ofs. 339, that accordingly each or one of those persons should have beennamed as respondents to the proceedings under s. 339 and that the salein execution of the hypothecary decree obtained against Richard ISTuga-wela, the original defendant in the mortgage action, was void on theground that neither the assignee nor the present appellant was named arespondent to, or in any manner participated ir., the proceedings unders. 339.'
The appeal is therefore allowed and decree will be entered in favourof the plaintiff-appellant as against the 1st and 2nd defendants declaringTrim entitled to the property claimed. The 1st and 2nd defendantsmust pay the costs of this appeal and of the contest in the lower Courtto the plaintiff. That part of the decree of the District Court whichrequires the plaintiff to give up possession to the 3rd defendant of a shareof certain contiguous lands (a matter which was settled by agreementon 30th October 1950) and the payment of the costs of then3rd defendantwill not be affected by the judgment in this appeal.
Rose C. J.—I agree.
”Appeal allowed.