RAMNAD DISTRICT CENTRAL CO OPERATIVE BANK Vs. OFFICIAL RECEIVER OF RAMNAD DT RAMNAD AT MADURA
HIGH COURT OF MADRAS
RAMNAD DISTRICT CENTRAL CO-OPERATIVE BANK, THROUGH ITS
OFFICIAL RECEIVER OF RAMNAD DT. RAMNAD AT MADURA
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Govinda Menon, J. -
(1.) In this appeal a point of significance on which there is divergence in the views expressed in judicial pronouncements has to be considered, and as the matter relates to the jurisdiction of courts we shall discuss it with some fulness of detail.
(2.) The appellant before us is the Ramnad District Central Co-operative Bank and the respondent is the Official Receiver of Ramnad district. The contest is between an official on the one side and a quasi-Government department on the other. One Syed Mohamed Rowther was adjudged an insolvent in I. P. No. 1 of 1947 on the file of the District Court of Ramnad and all his estates became vested in the Official Receiver of Ramnad. The insolvent was the president of a certain Cooperative Society as well as a director of the Ramnad District Central Co-operative Bank. The Co-operative Society was a debtor to the Co-operative. Bank in a large sum of money and the insolvent executed a security bond to the bank for that sum. The bank later on applied to the Deputy Registrar of Co-operative Societies to an award, A. R. C. No. 87/1947-48 for a sum of Rs. 83000 and odd against the insolvent, to be recovered by the sale of the properties hypothecated by him under the security bond and after getting that award the bank filed E. P. No. 95 of 194748 before the same Deputy Registrar for execution of the award and realisation of the amounts due by sale of the mortgaged property and that application is now pending. The Official Receiver in whom the equity of redemption has vested filed I. A. No. 47 of 1949 to annul the security bond under Section 53 of the Provincial Insolvency Act on the ground that it is a voluntary transfer and as such not valid and binding so far as the Official Receiver was concerned. Pending that application, the Official Receiver has also filed I. A. No. 48 of 1949 for a temporary injunction restraining the bank from proceeding with the execution of the award before the Deputy Registrar. The learned District Judge of Ramnad issued the injunction prayed for and against that order the present appeal has been filed.
(3.) Mr. M. Chockalingam for the appellant contests the jurisdiction of the insolvency Court to issue an Injunction restraining the proceedings taken by a secured creditor in due furtherance of his rights and states that in view of Section 28, Subsection (6) of the Provincial Insolvency Act, the secured creditor has an unfettered right of exercising his rights for the realisation of the amount due to him. Section 28, Sub-section (6) reads as follows: "Nothing in this section shall affect the power of any secured creditor to realise or otherwise deal with his security, in the same manner as he would have been entitled to realise or deal with it if this section had not been passed". On the very wide terms of this section, the argument is put forward that if a secured creditor has taken steps to realise the money due under his security or otherwise dealt with it, then it is in no way affected by the insolvency of the debtor and that the secured creditor could proceed as if Section 28 had nut been in force. In other words an insolvency court can issue no process against a secured creditor curtailing his unrestricted right of enforcement of a security. In such circumstances where the bank has taken steps to realise the security, the order of injunction issued by the insolvency court is 'ultra vires' and without jurisdiction. We have therefore to see how far this argument is well founded.;
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