Whether insolvency petition can be filed if decree is not for payment of money?

 Civil - Validity of sale - Whether sale of property in execution of decree would fall within meaning of Section 6(e) of Provincial Insolvency Act (the Act) - Held, in present case, decree for sale was not decree for payment of money within meaning of Section 6(e) of the Act and that sale in execution would not be an act of insolvency on which an application for adjudication could be founded - Civil Revision Petition allowed.

Citation : AIR 1937 Mad 433

IN THE HIGH COURT OF MADRAS

Decided On: 14.12.1936

 Vakkalagadda Venkata Rama Lakshmayya
Vs.
 Parepalli Subba Rao and Ors.

Hon'ble Judges/Coram:
Venkataramana Rao, J.

1. This is a petition to revise an order of the learned District Judge of Masulipatam which confirmed an order of the learned Subordinate Judge of Bezwada adjudicating the petitioner an insolvent. The petition for adjudication was filed by the respondents-creditors on 4th July 1932. Two main acts of insolvency were relied on in support of the application, viz. (1) a compromise decree suffered by the petitioner in and by which a charge was created over certain properties belonging to the petitioner on 5th February 1932; (2) the petitioner allowed his Immovable property to be sold in execution of a decree dated 13th June 1932 on the footing of a charge created in favour of one Nagaratnammal. So far as the first alleged act of insolvency is concerned, it is admittedly more than three months prior to the date of the presentation of the petition to adjudge the petitioner an insolvent. The view that formerly prevailed that where the application was made on the re-opening day of the Court, though the alienation was more than three months prior to the date of presentation of the application it will still be available as an act of insolvency is no longer law. It has now been declared by the Full Bench in Chenchuramana v. Arunachalam AIR 1935 Mad 857 that the period of three months must be calculated from the date of commission of act of insolvency and it is an absolute rule. The first alleged act of insolvency is therefore of no avail.

2. The next question is whether the sale of the property in execution of the decree dated 13th June 1932 will fall within the meaning of Section 6(e), Provincial Insolvency Act. Both the lower Courts have sought to make a distinction between cases where a decree directs a sale on the footing of a mortgage and where a decree directs a sale on the footing of a charge. In my opinion this distinction does not seem to be sound especially in cases where the charge is not created for the first time by the decree. In this case under a will the said Nagaratnammal was given a charge for the annuity in her favour. The suit (O.S. 281 of 1931) itself was to enforce the charge created by the said will; the decree itself was passed Under Order 34, Rule 15, Civil P.C., which makes the procedure followed in the case of mortgage decree applicable to decrees passed on the footing of a charge. So far as the Provincial Insolvency Act is concerned, a mortgage and a charge are put on the same footing, but the question still remains whether the decree in question can be held to be a decree for payment of money within the meaning of Section 6(e), Provincial Insolvency Act. It will be noticed that the expression "in execution of the decree for the payment of money" occurs both in Clauses. (e) and (h) of Section 6. This seems to connote that a decree on the footing of a mortgage or charge would not be a decree for the payment of money within the meaning of the said two Clauses. There is a distinction between a decree based upon a purely personal claim and a decree based upon a mortgage or charge antecedent to the suit. In the one case the essential relief claimed in the suit would be for a personal relief and in the other essential relief would be for a sale of the property. So that, what is contemplated by the expression "in execution of the decree for the payment of money" is a decree capable of execution by the arrest of the person or against the general estate of the person against whom the decree is passed. Where a particular property is hypothecated for a debt either by way of mortgage or charge the relief can only be against that particular property and not against the general estate. In such cases the decree that is passed though in one sense is for the realization of the money secured by the mortgage or charge will not be a decree for the payment of money because it is not capable of enforcement in the first instance against the person or the general estate until the property which has been secured by the mortgage or charge is exhausted. Mookerjee, J. in Laldhari Singh v. Manager, Court of Wards Bhapatpura Estate (1911) 14 CLJ 639 in discussing whether a mortgage decree for sale is a decree for payment of money within the meaning of Section 232 of the old Code corresponding to Order 21, Rule 16 of the present Code points out the distinction between a decree for payment of money and a decree for sale on the footing of a mortgage. He says "where there is a decree for payment of money it must be taken to be a decree for payment of money personally," the word personally being used in the sense which I have explained above, i.e., enforcible by the arrest of the person or against the general estate. The learned Judge held in that case that a mortgage decree for sale is in substance a decree for sale of the mortgaged property and not for payment of money. This view was accepted as sound by the decisions of our High Court in Rajaratna Naidu v. Ramachandra Naidu MANU/TN/0050/1924 : AIR 1924 Mad 901 and Chidambara Thevar v. Subbarajar MANU/TN/0245/1925 : AIR 1926 Mad 623. I am therefore of opinion that the decree for sale passed on 13th June 1932 is not a decree for payment of money within the meaning of Section 6(e) and that the sale in execution thereof will not be an act of insolvency on which an application for adjudication can be founded. The Civil Revision Petition is accordingly allowed with costs here and in the Courts below.

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