JUDGMENT
Punnayya, J.
1. This appeal came before Ramchandra Rao, J. for hearing. Before him, Shri C. Poorniah, the learned counsel for the appellant-Bank contended that it is not necessary for the plaintiff-Appellant to file a suit under Order 21, Rule 63, C. P. C. as by the date of the withdrawal of the claim petition filed under Order 21, Rule 58 the plaintiff had already filed a regular suit with regard to the declaration of its title. In support of his contention, the learned counsel for the appellant relied upon the decisions reported in K. Palaniappa Chettiar v. Ramswami Servai AIR 1937 Mad 582 and P. Umanath Bhandary v. Pedru Souza, . He also brought to the notice of the learned Judge a decision of the Division Bench of the Madras High Court in Sivaraman v. P. M. Shanmugasundara Mudaliar in which it was observed that the earlier decisions in Palaniappa Chettiar v. Ramswami Servai AIR 1937 Mad 582 and P. Umanath Bhandary v. Pedru Souza must be deemed to have been overruled in view of the Full Bench decision of the Madras High Court in Seethamma v. Kotareddi, AIR 1949 Mad 586 (FB).
Ramachandra Rao J. felt that a question of law of consideration importance was involved and that it should be decided by a Division Bench and accordingly he made a reference for the same. The appeal thus came before a Division Bench consisting of Chinnappa Reddy, J. (as he then was) and one of us (Punnayya J.). One of the contentions that was raised by Shri Poorniah in the Second Appeal is that it was not necessary for the plaintiff to file a suit under Order 21 Rule 63 as it had already, i.e. even before the dismissal of the claim petition “as not pressed” filed a suit to declare its title. Mr. Poorniah’s contention was supported by the decisions of the two single Judges of the Madras High Court in K. M. M. Pallaniappa Chettiar v. Ramswami Servai AIR 1937 Mad 582 and P. Umanath Bhandary v. Pedru Souza . However in Sivaram’s case it was pointed out that these two decisions must be deemed to be bad law in view of the Full Bench decision in Seethamma v. Kotareddi AIR 1949 Mad 586 (FB). The decisions of the two learned single Judges were not expressly overruled by the Full Bench . They were not even considered by the Full Bench.
Having regard to the importance of the question, the Division Bench considered it desirable that this case should be heard by a Full Bench and the Honourable Chief Justice was, therefore addressed for the same. The reference has thus come before us.
2. Before we answer the reference it is necessary for us to state the relevant facts leading to the Second Appeal. The appellant-Bank granted a loan upto a limit of Rs. 7,500/- to the defendant Y. Narasayya on the hypothecation of the goods in his shop bearing No. 7-2-871 Subhash Road, Secunderabad after obtaining an agreement Ex. A-1, dated 8-5-1959, from him. The plaintiff came to know by about 20-3-1961 that the defendant was not conducting his business satisfactorily and hence it called upon the defendant Narsayya by a letter the original of Ex. A-2 dated 21-2-1961 (sic) to pay the amount due on the cash credit or give pledge under Bank’s lock and key of the stock of cotton goods already hypothecated to the Bank. The defendant Narsayya gave a reply under Ex. A-3 agreeing to give pledge of the goods to the plaintiff and executed a pledge agreement, Ex. A-4. In pursuance of Exs. A-3 and A-4, the goods were shifted to the plaintiff’s godown bearing Municipal No. 1920 situated at Pawn Bazaar, Secunderabad.
Later, defendants 10 to 12 who were the creditors of Narasayya filed three Small Cause suits Nos. 217, 218 219 of 1961 in the Court of the First Judge., City Small Causes, Hyderabad and obtained attachment of goods before Judgment under the orders of the said Judge as if the goods stocked therein belonged to Narasayya free of encumbrances. The plaintiff filed three petitions I. A. Nos. 68, 69 and 70 of 1961 in Small Cause Suits Nos. 217, 218 and 219 of 1961 respectively requesting for raising attachment; 9th defendant filed a suit O. S. No. 52/1961 in the Court of the Assistant Judge, City Civil Court, Secunderabad, against late Narasayya. In the meanwhile some other creditors of Narsayya filed application I. P. No. 3/1961 before the Chief Judge, City Civil Court, Secunderabad seeking to adjudge Narsayya as insolvent.
The Court appointed interim receiver in the said proceedings. The interim receiver obtained possession of the goods that were pledged under Ex. A-4 to the plaintiff by late Narasayya. The interim receiver, in order to avoid the goods being eaten away by white ants, obtained permission from the Insolvency Court for the sale of goods. The Court granted permission and hence the interim. Receiver sold the goods for Rs. 4,000/- and deposited the sale proceeds in the insolvency court. As by the date of the hearing of the petitioners Exs. A-5 to A-7 the insolvency proceedings came into operation the petitions Exs. A-5 to A-7 were not heard but were closed. During the pendency of I. P. No. 3/1961 Narasayya died, and consequently the insolvency petition was dismissed since not pressed. Defendants 10 to 12 obtained decrees in Small Causes Suits 217, 218 and 219 of 1961 and filed E.Ps. 85 to 87 of 1963 and obtained attachment of amount representing the sale proceeds of the said cotton goods. 9th defendant also obtained a decree in his suit O.S. No. 52/1961 and filed E. P. No. 20/1963 and also obtained attachment of the same sale proceeds by an order of the Court.
The Plaintiff-Bank filed E. As. 84 to 86 of 1963 in E. Ps. 85 to 87 of 1963 in Small Cause Suits 217, 218 and 219 of 1961 before the Chief Judge, Small Cause, Hyderabad and also E. P. No. 105/1963 in E. P. No. 20/1963 in O. S. No. 52/1961 on the file of the Assistant Judge, City Civil Court, Secunderabad, praying for raising the attachment in each of these E. Ps. on the ground that the attachment order in each of these cases is not valid since the sale proceeds related to the goods pledged by late Narasayya in favour to the plaintiff for valuable consideration and the plaintiff is bona fide pawnee of the said goods and was in possession of the same even before the date of attachment.
While E. As. 84 to 86 of 1963 and E. A. No. 105/1963 were pending the plaintiff filed Tr. C. M. P. No. 10064/1963 in the High Court praying for transfer of E. As. 84 to 86 of 1963 in E. Ps. 85 to 87/1963 in Small Cause Suits 217, 218 and 219/1961 from the file of the Chief Judge, Small Causes, Hyderabad, to the file of the 1st Assistant Judge, City Civil Court, Secunderabad, to be heard and disposed of along with E. A. No. 105/1963 in E. P. No. 20/1963 in O S. No. 52/1961 on the file of the 1st Assistant Judge, City Civil Court, Secunderabad, for avoiding conflict of decisions. But the 9th defendant filed C. M. P. Nos. 10858, 10854 and 10865 of 1963 in Tr. C.M.P. 10064 of 1963 in the High Court requesting to vacate the interim stay granted previously in the stay petitions. The High Court vacated the stay and permitted the 9th defendant to withdraw the amount after furnishing security to the satisfaction of the 1st Assistant Judge, City Civil Court, Secunderabad.
Ultimately the High Court passed orders transferring the E. As. 84 to 86 of 1963 from the file of the Chief Judge, Small Causes Court to the file of the 1st Assistant Judge, City Civil Court, Secunderabad for disposal along with E. A. No. 105/1963. Since the 9th defendant withdrew an amount of Rupees 2565-95 which is the decretal amount from out of Rs. 4,000/- in pursuance of the orders of the
High Court, the plaintiff filed suit O. S. No. 290/1963 on 9-12-1963 for declaration that the plaintiff is entitled to sale proceeds of the pledged goods viz., Rs. 4,000/- deposited in the insolvency court to the credit of I. P. No. 3/1961 and for a decree against defendants 1 to 8, legal representatives of Narasayya for the said amount and for an order of injunction against defendants 10 to 12 restraining them from proceedings with the execution of the decrees in Small Causes Suits 217 to 219 of 1961 and from withdrawing the amount already deposited into the Court by the Official Receiver and for a direction that defendants 9 to 12 should redeposit the amount into the Court if they had already withdrawn the same from the Court.
3. E. A. No. 105/1963 was called along with the suit till 16-6-1964. Then the plaintiff made an endorsement that the E. A. may be closed as the suit had been filed. The Court passed an order that the E. A. was closed as per the endorsement. The trial Court in its judgment observed that the other claim petitions (E. As. 84 to 86 of 1963) and the orders thereon are not filed into the Court.
3-A. The record does not disclose whether the claim petitions E. As. 84 to 86/1963 were closed in view of the fact that the suit was filed as in the case of E. A. No. 105/1963. But the learned Assistant Judge made it clear in para 19 of his judgment that he proceeded on the footing that all the four petitions filed by the plaintiff were dismissed.
4. The learned Assistant Judge finally held that as the claim petitions were neither withdrawn with the permission of the Court without prejudice to the plaintiff’s right nor were they ‘not pressed’ with liberty to renew the applications or with any conditions attached to it the orders closing the petitions which virtually amount to a dismissal without any reservation should be held as adverse to the plaintiff, and as such the plaintiff ought to have filed a suit under Order 21, Rule 63, C. P. C. but not a suit of this nature. In support of this conclusion the learned Assistant Judge, relied upon the decisions in Cannonade Bank v. Madhavi, AIR 1942 Mad 41 (FB) and Thaher Unnissa v. Sherfunnisa, . He, therefore, held that the present suit is not maintainable.
On merits, the learned Assistant Judge held that when the Official Receiver sold with the permission of the Insolvency Court the properties which were pledged to the plaintiff Bank and when the plaintiff did not contend before the Insolvency Court that the sale should be subject to the plaintiff’s rights as a secured creditor, it should be deemed that the plaintiff acquiesced to the sale conducted by the Official Receiver and the plaintiff should, therefore, be deemed to have lost its right as a secured creditor and the plaintiff would be treated as an ordinary creditor along with the other creditors and the plaintiff, therefore, cannot challenge the validity of sale of the attached goods by the Receiver.
As the property was sold by virtue of the order of the Court and the sale proceeds were withdrawn by the 9th defendant by virtue of the orders of the High Court the plaintiff-Bank cannot be said to have been deprived of the possession of the pledged goods wrongfully and as such the plaintiff-Bank cannot have the remedy under S. 180 of the Contract Act which is available only if the Bank’s possession was deprived wrongfully and hence the attachment obtained by defendants 9 to 12 against the amount lying with the Receiver in I.P. 3/1961 is valid and the plaintiff has no remedy against defendants 9 to 12 even if they have withdrawn the amounts and they are not liable to refund the amount so withdrawn. The learned Assistant Judge also held that defendants 1 to 8 are not personally liable since Narsayya did not contract the debt for legal necessity of the family. He further held that they are also not liable as the assets left behind by late Narsayya were not in the hands of these defendants and they are, therefore, not liable either personally or otherwise and the plaintiff is not entitled to have any decree against them. So holding, the learned Assistant Judge dismissed the suit.
4-A. In the appeal, the Additional Chief Judge also confirmed these findings.
5. In this second appeal Shri Poorniah, the learned counsel for the appellant, contends that the finding given by the Courts below that the suit is not maintainable is not correct since the orders passed in E. As. 105/1963 and 84 to 86/1963 cannot be said to be adverse orders and the Courts below misconstrued the orders passed in the E. As. and have wrongly applied the principles laid down in Cannanore Bank v. Madhavi, AIR 1942 Mad 41 (FB), to this case. He also contends that the finding of the Courts below that the plaintiff has no remedy against defendants 9 to 12 and they are not liable to refund the amount withdrawn by them is not legally correct.
5-A. We would like to answer first the question of law which formed the basis for reference.
6. The order passed by the Court in E. A. No. 105/1963 is as follows: “Closed as per endorsement”. The endorsement is to the following effect. “As a suit has been filed, the E. A. may be closed” – The Courts below held that the order passed by the Court is an adverse order. In construing the orders as adverse order, they gain support from the ruling of the Full Bench of the Madras High court in Cannanore Bank v. Madhavi, AIR 1942 Mad 41 (FB) and the single Judge of the same Court in Taher Unnissa v. Sherfunnisa, . In our opinion the Courts below did not properly and correctly apply the principle enunciated by the Full Bench in Cannanore Bank v. Madhavi, AIR 1942 Mad 41 (FB) to this case.
7. The question when can an order passed by the Court in a claim petition filed under O.21 R. 58 he held to be an adverse order within the meaning of R. 63 of O. 21 so as to necessitate the claimant to file a suit for establishing his right which he claims in respect of the property in dispute became the subject-matter of several decisions. So much importance is attached to the ‘adverse order’ because the adverse order passed in the claim petition becomes conclusive if no suit is filed under O. 21 R. 63 within a period of 12 months from the date of such an order. Order 21, R. 58 contemplates adjudication when a claim is preferred or objection is raised against the attachment of any property attached in execution of the decree on the ground that such property is not liable to such attachment and the Court should investigate into the claim or objection and should pass an order. An order if passed rejecting the claim or objection of the complaint would be declared as an adverse order.
8. Even in a case where the Court passed an order dismissing the claim petition without investigation into claim or objection if in the considered opinion of the Court, the claim or objection was designedly or unnecessarily delayed, it is manifest that such an order also amounts to an adverse order. But the Courts experience some amount of difficulty in construing an order as adverse or not, when the petition was not adjudicated and the petition was dismissed without the claim being investigated into on the ground that the petition was not pressed or withdrawn or closed since the petition was not disposed of in any of the ways mentioned in O. 21, R. 58 which provides that the Court shall either proceed to investigate the claim or objection or dismiss it on the ground that it was unnecessarily filed too late. Rule 63 mandates that where a claim or objection is preferred, the party against whom an order is made may institute a suit to establish the right which he claims to the property in dispute, but subject to the result of such suit, the order shall be conclusive. The Full Bench in Venkatarathnam v. Ranganayakamma, AIR 1919 Mad 738 (FB) considered the question when an order would come within the meaning of O. 21, R. 63, C. P. C.
9. In that case a claim was put in before the District Munsif under R. 58 and the District Munsif first passed an order as follows:- “As this petition was filed late, this claim is ordered to be notified to the intending bidders”, a fresh petition was put in before him and he passed another order as follows:
“The allegations of the Zamindarini will be notified to the bidders with the remark that the Zamindarini did not take steps for her claim being inquired into during the last 10 months.”
10. Wallis, C. J. who spoke for the Bench observed that the general policy of these provisions of the Code, as explained by the Judicial Committee in Sardharilal v. Ambika Prasad, (1888) ILR 15 Cal 521, is to secure the speedy settlement of questions of title raised at execution sales. Section 283 of the Codes of 1877 and 1882 only gave a right of suit to the party against whom an order had been passed under Ss. 280, 281 or 282 and did not provide for the case where the Court under S.278 refused to investigate the claim on the ground that it had been designedly or unnecessarily delayed. In such cases, S. 283 failed to provide for the speedy settlement of the question of title raised by the claim. The legislature would appear to have intended to supply this omission when it conferred in R. 63, O. 21 of the present Code the right of the suit in general terms “where a claim or an objection is preferred” upon “the party against whom an order is made”, instead of limiting it, as in S. 283, to cases in which an order had been passed under Rr. 60, 61 and 62 (Ss. 280, 281 and 282 of the old Code).
Where a claim or an objection is preferred under R. 58 (formerly Section 278) and the Court rejects it under the proviso to that rule on the ground that it was designedly or unnecessarily delayed, the unsuccessful claimant or objector clearly comes within the words “the party against whom the order is made.” Rule 63 does not speak of any party, but of the party against whom an order has been made and assumes that, where a claim or objection is preferred under R. 58 (S. 278), there must always be a party against whom an order is made within the meaning of the rule. The learned Judge further observed, “……. Though the order was that the allegations of the Zamindarini would be notified to bidders, we think it amounted and was understood to amount to a rejection of the claim on the ground that it was filed too late.”
11. Sejagoro Aiyer, J. while agreeing with Wallis, C. J. observed in his separate judgment that the language of O. 21, R. 63, leaves little room for doubt that all orders which negative the right set up by the claimant or the decree-holder are within the rule. When a claim is preferred, the usual prayer is that the attachment should be raised as the property does not belong to the judgment-debtor, but belongs to the claimant. On the presentation of such a petition, if the order is not that the property be released from attachment, it must be taken to be an order against the claimant. The practice of notifying claims to intending bidders is not warranted by anything contained in the Code of Civil Procedure. The procedure adopted by some of the Subordinate Courts of notifying objections by claimants at the time of the sale without expressing any decision upon those objections should be construed to have the force of giving a decision against the claimant. His right to raise the attachment must be deemed to have been negatived when the property was ordered to be sold without releasing it from attachment.
12. This decision makes it abundantly clear that the old Code did not provide for a suit if the Court refuse to investigate into a claim on the ground that it has been designedly or unnecessarily delayed. But this lacuna was rectified in the new Code and the unsuccessful claimant or the objector is given the right to file a suit under R. 63 when his claim is rejected under the proviso to R. 58 on the ground that it was designedly or unnecessarily delayed. The decision also clarifies that if a claim petition is filed late, and the Court without investigating into the claim or objection merely notifies the claim to the intending bidders, the procedure adopted by the Court can be construed to have the force of giving a decision against the claimant as the property was ordered to be sold without releasing it from attachment.
Thus it is clear that even if any order negativing the claims of the claimant is expressly not passed, but has the force of giving a decision against the claimant, it should be deemed that the order is an adverse order against the claimant. On the other hand, if it has no force of giving a decision against the claimant, it cannot be treated as an adverse order. For instance a petitioner seeks permission of the Court to withdraw his claim petition and the Court to withdraw the petition and passes an order as “withdrawn and dismissed”. Such an order is not at all adverse, since the Court acquiesces in the course and permits the petitioner to withdraw.
13. But the position becomes different if the claimant does not press his claim petition and gets it dismissed. Where the petitioner or his counsel reports that the claim petition is not pressed and the Court passes an order as “not pressed; dismissed”, the order is an adverse order since the party intends not to prosecute the petition and desires the Court to dismiss it and the petitioner consents to the order of dismissal.
14. The Full Bench consisting of Leach, C. J., Krishnaswamy Ayyangar and Nappel, JJ. in Cannanore Bank v. Madhavi, AIR 1942 Mad 41 (FB) examined whether the orders “withdrawn and dismissed” and “not pressed and dismissed” amount to adverse orders. The learned Judges held that if the petitioner had asked to be allowed to withdraw the petition and the Court had acquiesced in the course, it might very well be that the order would not be an adverse order within the meaning of R. 63. But the learned Judges did not agree that because a claimant says to the Court that he does not press the petition and consents to an order of dismissal, it is not an adverse order. The learned Judges were of the view that in such circumstances it would clearly be an order against him within the meaning of R. 63.
15. The learned Judges also considered the observations of Coutts Trotter, C. J. in Lakshminarasamma v. Navugotal Pydamma, AIR 1925 Mad 265 in which Coutts Trotter, C. J. stated that he had always been of opinion that in the case of withdrawal of a petition, it was a mistake for the Judge to endorse on it “dismissed” and it was quite sufficient to record on it ‘withdrawn.’.
16. Leach, C. J. speaking for the Bench observed that “with great respect the Code of Civil Procedure does not contemplate such an order. It only contemplates the allowing or the refusal of a petition and strictly speaking the order should be one of dismissal. Where the petitioner informs the Court that he wishes to withdraw his petition, the Court may allow him to do so and by the use of the appropriate language in the dismissal order make it quite clear that it is not intended to be an adverse order.”
17. From the observations and the statement of law enunciated by the above cited Full Bench it is clear that whether a particular order passed in the claim petition is an adverse order or not depends upon the facts and circumstances of each case. It is therefore, incumbent on the part of the Court to examine the order and the relevant circumstances under which it was passed, for determining whether an order passed on the claim petition is an adverse order or not.
18. This view of ours is further supported by the rulings in Golam Mahomed v. Shibendra Pada Banerjee, (1908) ILR 35 Cal 990; Narayana Tantri v. Nagappa, AIR 1918 Mad 126 and Khudi Rai v. Lalo Rai, AIR 1926 Pat 259. In Gulam Mahomed v. Shibendra Pada Banerjee, (1908) ILR 35 Cal 990 an application was made by the plaintiff to withdraw the suit with liberty to institute a fresh suit, on which an order was passed on the same day giving permission to withdraw the suit. But nothing was stated in the order as to the plaintiff’s liberty to institute a fresh suit on the same cause of action. In that connection, the following observations were made by the learned Judges constituting the Division Bench : “we have already observed that on the 30th Jan., 1903 an application was made by the plaintiff to withdraw from his suit with liberty to institute a fresh suit, on which an order was passed on the same day giving permission to withdraw from the suit. Although nothing was said in that order as to the plaintiff’s liberty to institute a fresh suit on the same cause of action, that order ought to be read along with the application, on which it was passed. In that application we find a distinct prayer to be allowed to withdraw from the suit with liberty to institute a fresh suit on the same cause of action, and the Dy. Collector appears to have taken particular care in noting that the application for withdrawal was filed before delivery of judgment, that is to say before the order of dismissal was passed.” The learned Judges further held that the plaintiff was not debarred from instituting a fresh suit with regard to rents notwithstanding the fact that he has not obtained distinct permission to do so.
19. This decision clearly shows that though the order does not speak about the plaintiff’s liberty to institute a fresh suit the learned Judges opined that the order should be read so, since it was passed in view of the prayer made in the application. If the circumstances under which the order in that case is passed are taken into consideration, the order is undoubtedly not an adverse order.
20. This decision was quoted with approval and followed by a Full Bench of the Madras High Court in Narayana Tantri v. Nagappa, AIR 1918 Mad 126. In that case, a petition was presented under S. 373 of the Code of Civil Procedure, 1882 (which corresponds to O. 23 R. 1 of present Code) for liberty to withdraw from the suit with permission to bring a fresh suit, the Court merely passed the order “Plaintiff is permitted to withdraw from the suit.” It was held that the order must be read with the petition and construed as granting it, that is, as granting permission to file a fresh suit. In that case, the reservation made by the plaintiff was in the following words: “That the plaintiff reserving the right to file this suit again may withdraw the present suit without further proceedings.”
The referring Judge, Bakewell, J. concluded from this that the liberty to file a fresh suit having been expressly applied for and not having been expressly prevented must be taken to have been refused. It is this that the learned Judges constituting the Full Bench in that case considered was not correct and they observed : “In the original vernacular petition it is quite clear that what the petitioner asked for was liberty to withdraw with permission to bring a fresh suit.” In these circumstances, following the decision in Gulam Mahomed v. Shibendra Pada Banerjee, (1908) ILR 35 Cal 990 the learned Judges observed, we think that the order “plaintiff is permitted to withdraw from the suit” must be read with the petition and construed as granting it. On the other construction the order is most misleading to the petitioner and not an order contemplated by the Code.”
21. In Khudi Rai v. Lalo Rai, AIR 1926 Pat 259 the learned Judge of the Patna High Court followed the decision in Golam Mahomed v. Shibendra Banerjee, (1908) ILR 35 Cal 990. In that case, the plaintiff in a previous suit presented a petition for liberty to withdraw from the suit with permission to bring a fresh suit and the Court, however, gave the plaintiffs permission to withdraw from the suit, but did not in terms give them liberty to bring a fresh suit. Applying the rule in the above quoted decision and following the Full Bench decision of the Madras High Court, the learned Judges held:
“Where an application is made by a plaintiff to withdraw from a suit with liberty to bring a fresh suit on which an order is passed giving the permission to withdraw from the suit, although nothing is said in the order as to the plaintiff’s liberty to institute a fresh suit on the same cause of auction, that order ought to be read along with the petition and construed as granting permission to file a fresh suit.”
22. Thus it is necessary for the Court to look into the circumstances under which the order is passed for coming to the conclusion whether the order is adverse or not.
23. In the case on hand, the plaintiff-Bank made an endorsement that the E. A. may be closed, as the suit was filed. The Court passed order “closed as per the endorsement”. The endorsement made by the claimant and the order passed by the Court should therefore, be read together in order to decide whether the order is adverse order or not. The circumstances under which the order was passed are explicit. The claimant’s intention is clear enough to show that he seeks permission to withdraw the claim petition since he has already filed a suit to establish his rights which he claims in respect of the property in dispute and the Court granted permission for the same by passing the order that the E. A. is closed in view of the endorsement. When the petitioner informed the Court that he wanted to withdraw his petition in view of the fact that he had already filed a suit, the Court was justified in according to his request and allowing him to do so by the use of the appropriate language i.e. closed as per the endorsement.
Thus the Court made it clear that the order was not intended to be an adverse order and it would not attract the operation of Art. 11 of the Limitation Act. The order, therefore, falls within the purview of the decision of the Full Bench in Cannanore Bank v. Madhavi, AIR 1942 Mad 41 (FB), in which the learned Judges held that they can see no reason why the claim petition should not be withdrawn if the claimant wishes to withdraw it, but the orders passed in such circumstances should be worded so as not to attract the operation of Art. 11, Limitation Act. It is under these circumstances that we hold that the courts below have misconstrued the ruling of the Full Bench in Cannanore Bank v. Madhavi, AIR 1942 Mad 41 (FB) and committed error in holding that the order is an adverse order. As the order is not an adverse order, the plaintiff’s suit is undoubtedly maintainable.
24. Shri Poorniah also relied upon the decision of the two single Judges of the Madras High Court in Palaniappa Chettiar v. Ramaswamy Servai, AIR 1937 Mad 582 and P. Umanath Bhandary v. Pedru Souza, in support of his contention that a general suit for declaration of his title in respect of the property in dispute is permissible even if a suit is not filed under R. 63 of O. 21 as against an order passed in a claim petition. These two cases deal with the proceedings under R. 103 of O. 21. In Palaniappa Chettiar v. Ramaswamy, AIR 1937 Mad 582, Venkataramana Rao, J. laid down that if the unsuccessful party in the claim petition is able to get his right declared or established within a year even in a suit which was already filed prior to the claim petition, the adverse order must be held to have been superseded by the decree obtained in the suit. The claimant need not file another suit under Rule 103 to have his right to the property declared once again when a competent court has already declared. What is contemplated is the establishment of a right and the remedy by such suit is indicated in Rule 103. But what makes the order conclusive is not the failure to institute a suit, but the failure to have the right established.
25. In P. Umanath Bhandary v. Pedru Souza, , Govindarajachari J. held that where a suit or an appeal already filed by the claimant at the time when an order under Rule 98 of Order 21 dismissing his claim is made, it is not obligatory on his part to file another suit under O. 21, R. 103 within one year of the order under O. 21 R. 98. In such a case the order is subject to the decision of the suit or the appeal pending at the time.
26. But the Full Bench consisting of Harwill, Viswanatha Shastri and Balakrishna Ayyar, JJ. in Seethamma v. Kota Reddi, AIR 1949 Mad 586 (FB) took a different view. Their Lordships held that the provisions of O. 21, R. 63, C. P. C. were mandatory. The decision in claim application is final, unless the party aggrieved takes the course indicated in rule by instituting a suit to supersede it. The bar of res judicata would undoubtedly have applied, had it not been for the mandatory requirements of O. 21, R. 63. Upon the expiry of one year from the adverse claim order, the auction purchasers obtained an indefeasible right to the property. The Full Bench did not consider the effect of the decision of Venkataramana Rao, J. in Palaniappa Chettiar v. Ramaswami Servai, AIR 1937 Mad 582 and the decision of Govindaraja Chari, J. in P. Umanath Bhandary v. Pedru Souza, .
27. The Division Bench of the Madras High Court consisting of Srinivasan and Sadasivam, JJ. in Sivaraman v. P. M. Shanmuga Sundara Mudaliar, followed the decision of the Full Bench in Seethamma v. Koti Reddi, AIR 1949 Mad 586 (FB) and held that since no suit was filed within one year under O. 21, R. 103 from the date of the orders negativing the claims of the plaintiffs that they are entitled to possession and dismissing the petitions filed by them for the removal of the obstruction caused by defendants 2 and 3, the suit therein was not maintainable. The learned Judges considered the rulings of Venkataramana Rao, J. in Palaniappa’s case AIR 1937 Mad 582 and Govindaraja Chari, J. in Umanath’s case and did not agree with them and held that there is nothing in O. 21 R. 103 to show that it requires an unsuccessful party only to establish the right within a year, but that it only requires that the unsuccessful party should file a suit within a year to establish the right claimed and unless a suit is filed under R. 103 of O. 21 from the date of the order dismissing the claim petitions, any other suit filed for the declaration of the rights which he claims is not maintainable. The learned Judges also held that the two decisions of the two single Judges should be deemed to have been overruled by the Full Bench decision in Seethamma v. Kota Reddy, AIR 1949 Mad 586 (FB).
28. It is, therefore, clear that the two decisions of the two single Judges are in conflict with the Full Bench decision in Seethamma v. Kota Reddy, AIR 1949 Mad 586 (FB) and this Court is concerned with these three decisions, though the decision of the Division Bench in Sivaraman v. P. M. Shanmuga Sundara Mudaliar, has no binding effect on this Court. Whether the rulings of the two single Judges or the ruling of the Full Bench in Seethamma v. Kota Reddy, AIR 1949 Mad 586 (FB) are correct or not, we need not examine in this case though reference is made for the same purpose, as it is not necessary to give any decision on the reference made, since the finding, we have already given on the point of maintainability of the present suit, is sufficient for the disposal of this appeal.
29. The second point which requires consideration is whether the plaintiff-Bank is not entitled to a decree that defendants 9 to 12 are liable to refund the amount withdrawn by them.
30. It is not in dispute that late Narsayya took a loan up to a limit of Rs. 7,500/- from the plaintiff Bank on pledging the cotton goods with the plaintiff and the plaintiff took possession of the goods pledged with it. It is also not in dispute that the 9th defendant filed a suit O. S. No. 52/1961 in the Court of the Assistant Judge, City Civil Court, Secunderabad and defendants 10 to 12 also filed Small Cause Suits 217 to 219 of 1961 in the Court of the First Assistant Judge, City Small Causes Court. It is further not in dispute that some creditors of late Narsayya filed IP 3/1961 before the Chief Judge, City Civil Court, Secunderabad, for adjudging Narsayya as insolvent and the Court appointed interim receiver in the said proceedings and the interim receiver obtained possession of the goods pledged with the plaintiff Bank. The interim receiver in order to avoid the goods being eaten away by white ants, obtained permission from the Insolvency Court for the sale of the goods and the Court granted permission and hence the interim receiver sold the goods for Rs. 4,000/- and deposited the sale proceeds in the Insolvency Court and as Narsayya died, the insolvency petition was dismissed. Defendants 10 to 12 obtained decrees in Small Cause Suits and filed E. P. Nos. 85 to 87 of 1963 and obtained attachment of the amount representing the sale proceeds of the said cotton goods, 9th defendant also obtained a decree in his suit O. S. 52/1961 and filed E. P. No. 20/1963 and also obtained attachment of the same sale proceeds by an order of the Court.
It is also not in dispute that the 9th defendant was permitted to withdraw Rs. 2,562.95 Ps. which is the decretal amount from out of Rs. 4,000/- in pursuance of the orders of the High Court in Tr. C. M. P. Nos. 10858, 10854 and 10865 of 1963 in Tr. C. M. P. No. 10064/1963. The learned Assistant Judge took the view that when the Official Receiver sold with the permission of the Insolvency Court, the goods which were pledged to the plaintiff Bank and when the plaintiff did not contend before the Insolvency Court that the sale should be subject to the plaintiff’s rights as a secured creditor and the plaintiff would be treated as an ordinary creditor along with the other creditors and as the property sold by virtue of the order of the Court and the sale proceeds were withdrawn by the 9th defendant by virtue of the orders of the High Court, the plaintiff cannot be said to have been deprived of the possession of the pledged goods wrongfully and as such the plaintiff cannot have the remedy under S. 180 of the Contract Act which is available only if the Bank’s possession was deprived wrongly and the plaintiff has no remedy against defendants 9 to 12 even if they have withdrawn the amounts and they are not liable to refund the amount so withdrawn.
31. Sri Poorniah contends that the finding of the learned Assistant Judge and also confirmed by the learned Additional Chief Judge, City Civil Court is not correct in the light of the decision of the Supreme Court in Bank of Bihar v. State of Bihar, .
31-A. In that case, the plaintiff-Bank made certain advances to the 2nd defendant on the strength of the goods pledged by the 2nd defendant with the plaintiff-Bank. The goods which were pledged with the plaintiff were lawfully sold and deposited in the Treasury and the same was attached by the 1st defendant under the order of certificate officer and under the Public Demand Recovery Act. The trial court held that the order of seizure in respect of the stock of sugar was valid. It was further held that the plaintiff’s right as a pledgee could not be extinguished by seizure of the sugar in its possession and though the attachment order of the certificate officer was legally binding on the 2nd defendant it was not binding on the bank and it should be effective only in respect of that portion of the price which was not necessary for the liquidation of the dues of the plaintiff from the 2nd defendant. A decree was passed in favour of the plaintiff against the first defendant only for Rupees 93,910.10.9 with interest at 6% per annum from the date of the suit till realisation.
The 1st defendant (State of Bihar) filed appeal to the High Court. The High Court was of the view that in the presence of the finding that the plaintiff had not been wrongfully deprived of the sugar on account of the lawful seizure or its price owing to the certificate proceedings started by the Cane Commissioner, the plaintiff was not entitled to any decree against the State. But it was entitled to a decree against the 2nd defendant and the other defendants. Consequently a decree against the 1st defendant was set aside and instead a decree was granted against the other defendants. Then the matter went to the Supreme Court. Their Lordships observed that in that case the sugar had been seized and then sold. The sale proceeds would have been available to defendants 2 to 3 subject to the claim of the plaintiff against them, but it ceased to have any lien on the pledged property or the sale proceeds against any third party including the State as soon as it was legally deprived of the possession of the pledged goods.
Their Lordships referred to the statement in Halsbury’s Laws of England which states as follows : “Pawn has been described as a security where by contract a deposit of goods is made a security for a debt and the right to the property vests in the pledgee so far as is necessary to secure the debts, in this sense it is intermediate between a simple lien and a mortgage which wholly passed the property in the thing conveyed.” “The pawnee has a special property or special interest in the thing pledged, while the general property therein continues in the owner. That special property or interest exists so that the pawnee can compel payment of the debt or can sell the goods when the right to do so arises. This special property or interest is to be distinguished from the mere right of detention which the holder of a lien possesses, in that it is transferable in the sense that a pawnee may assign or pledge his special property or interest in the goods.” “Where judgment has been obtained against the pawnor of goods and execution has issued thereon, the Sheriff cannot seize the goods pawned unless he satisfied the claim of the pawnee.” “On the bankruptcy of the pawnor the pawnee is a secured creditor in the bankruptcy with respect to things pledged before the date of the receiving order and without notice of a prior available act of bankruptcy.”
Their Lordships also observed that it has not been shown how the law in India is in any way different from the English Law relating to the rights of the pawnee vis-a-vis other unsecured creditors of the pawnor. Their Lordships further observed, “In our judgment the High Court is in error in considering that the rights of the pawnee who had parted with money in favour of the pawnor on the security of the goods can be defeated by the goods being lawfully seized by the Government and the money being made available to other creditors of the pawnor without the claim of the pawnee being fully satisfied. The pawnee has special property and a lien which is not of ordinary nature on the goods and so long as his claim is not satisfied no other creditor of the pawnor has any right to take away the goods or its price. After the goods had been seized by the Government it was bound to pay the amount due to the plaintiff and the balance could have been made available to satisfy the claim of other creditors of the pawnor. But by a mere act of lawful seizure the Government could not deprive the plaintiff of the amount which was secured by the pledge of the goods to it.
As the act of the Government resulted in deprivation of the amount to which the plaintiff was entitled it was bound to reimburse the plaintiff for such amount which the plaintiff in ordinary course would have realised by sale of the goods pledged with it on the pawnor making a default in payment of debt.” Their Lordships also observed that “the approach of the trial Court was unexceptionable. The plaintiff’s right as a pawnee could not be extinguished by the seizure of the goods in its possession inasmuch as the pledge of the goods was not meant to replace the liability under the cash credit agreement. It was intended to give the plaintiff a primary right to sell the goods in satisfaction of the liability of the pawnor. The Cane Commissioner who was an unsecured creditor could not have any higher rights than the pawnor and was entitled only to the surplus money after satisfaction of the plaintiff’s dues.”
32. We feel that this ruling of the Supreme Court is applicable to the case on hand. From this ruling of the Supreme Court it is clear that the position or status of the secured creditor is not altered merely because the goods were sold by the Official Receiver with the permission of the Court or merely because the sale proceeds which were deposited by the Official Receiver in the Insolvency Court were attached by lawful orders of the Courts obtained by defendants 9 to 12 and hence the plaintiff-Bank which is a secured creditor is entitled to the satisfaction of its debt from the sale proceeds deposited and defendants 9 to 12 are only entitled to the surplus money after the satisfaction of the plaintiff’s dues.
33. It is in this view that we hold that the Courts below committed error in law in holding that the plaintiff-Bank is not having any rights superior to defendants 9 to 12. Thus we hold that the plaintiff is entitled to have a decree for the refund of the amounts withdrawn by defendants 9 to 12.
34. Having regard to our findings on both the points we find merits in the appeal. The judgment and decree passed by the Courts below are set aside and the suit is decreed against defendants 9 to 12. But Sri Poornaiah submitted that the claim against the 9th defendant is not pressed and the appeal against him may be dismissed. Since the 9th defendant died during the pendency of the first appeal and his legal representatives were not brought on record within the time prescribed, the appeal stood abated as against the 9th defendant. It is, therefore, dismissed. But the appeal against defendants 10 to 12 is allowed. We confirm the judgment and decree of the Courts below in refusing to grant a decree against defendants 1 to 8 as they are not liable personally or otherwise. The appeal as against them is, therefore, dismissed. Since defendants 10 to 12 did not contest the appeal, no costs. We fix up a fee of Rs. 150/- for the Court Guardian Sri. E. Bhagiradha Rao to be paid by the plaintiff-Bank.
35. Order accordingly.