- (1.) JANARDAN Sahai, J. The facts are simple. In reference proceedings under the Land Acquisition Act the petitioners were called upon by an order of the District Judge to deposit a sum of Rs. 1,86,76,652/- an amount, which they had withdrawn as compensation wrongly so according to the respondents who claim that the title of the land for which the compensation was awarded has been finally decided in their favour. The order of the District Judge was challenged in writ petition. This Court modified the order of the District Judge and instead of cash deposit permitted the petitioners to furnish security other than cash or bank guarantee to the satisfaction of the District Judge. In compliance with the order of this Court the petitioners furnished security bonds as security of property and also separate undertakings as personal security. By the impugned order dated 22-5-2007 the Additional District Judge found that the security bonds furnished were not valid being unregistered. The petitioners have filed the present writ petition against this order.
(2.) SRI R. N. Singh, learned Senior Counsel assisted by SRI A. K. Rai who appeared for the petitioners submitted that a security bond does not require registration. In support of his contention he relied upon a decision of the Orissa High Court in AIR 1980 Orissa 44, M/s. Indian Metals and Ferro Alloys Ltd. v. Orissa State Electricity Board. The Orissa High Court noticed that there was a sharp cleavage of opinion upon the question amongst the High Courts. The difference of opinion relates to the application and interpretation of Section 17 (2) (vi) of the Indian Registration Act, which exempts from registration any decree or order of a Court (except a decree or order expressed to be made on a compromise and comprising immovable other than that which is the subject matter of the suit or proceeding ). The High Courts of Bombay Nagpur, Madhya Pradesh, Punjab Mysore, Delhi and Himachal Pradesh have taken the view that a security bond is a step in the judicial proceedings as it does not become enforceable unless accepted by the Court. It is, therefore, a part of the judicial proceedings and is exempt. The Orissa High Court also took notice of the Rangoon decision of the Patna, Allahabad, Kerala and Calcutta High Courts, which have taken the opposite view holding that a security bond is not a step in the juridical procedure or part of judicial proceeding. The decisions of the different High Courts have been cited in the judgment of the Orissa High Court and it is not necessary to refer to any of them here except for the Allahabad decision in Bishnath Sahu v. Prayag Din, AIR 1958 Allahabad 820, which has binding effect upon this Court. The Orissa High Court has followed the view that a security bond is a step in the judicial proceeding and does not require registration. The decision of the Orissa High Court was considered by the Andhra Pradesh High Court in Purra Pentaiah v. Madam Pandya, AIR 1980 Andhra Pradesh 290 and was dissented from. The Andhra Pradesh High Court held that the mere fact that the Court accepts the security bend before it becomes enforceable is not sufficient basis for drawing the conclusion that the bond becomes a part of the order of the Court so as to be exempt from registration. No doubt the procedure of getting a security bond registered is a cumbersome and expensive one for the litigant and an interpretation which brings about such a situation should be avoided. But there is another aspect no less important which offsets the disadvantage in getting the bond registered. Registration operates as a public notice and guards third parties from being defrauded by unscrupulous transferors of property ready to conceal from the purchaser the existence of a charge or mortgage upon the property. An ordinary purchaser of property would in the usual course make inquiry from the registration office and discover the encumbrance. Registration thus operates as a public notice. In AIR 1958 Allahabad 820, Bishnath Sahu v. Prayag Din & Anr. , a Division Bench of our High Court held that a security bond offered under Order XLI, Rule 6 Civil Procedure Code mortgaging any property worth more than Rs. 100/- is registrable under Section 17 (1) (b) of the Registration Act and is not exempt from registration under Section 17 (2) (vi) of that Act. Ordinarily, it would have been sufficient to refer to this authority, which has binding effect without the necessity of noticing other decisions, but Sri R. N. Singh submitted that the decision pertains to a security bond creating a mortgage and is not applicable to a case such as the present one where the security bond furnished does not create a mortgage but a mere charge. It is true that the context in which the matter was considered by the Division Bench was that of a security bond offered under Order XLI, Rule 6 of the Civil Procedure Code. Such a bond is required to be in Form 2 of Appendix 'g' of the Schedule the terms of which provide for security by mortgage of the property. The security bond, which the petitioners were required to furnish under the order of the Division Bench in the writ petition was not necessarily the one in Form 2 because all that the petitioners were called upon to give was a security to the satisfaction of the District Judge, which could, therefore, be a bond creating a mortgage of the property or a mere charge or a security in any other form acceptable to the District Judge.
(3.) AN examination of the provisions of the Indian Registration Act and the Transfer of Property Act would reveal that the contention of Sri R. N. Singh that a security bond creating a charge does not require registration has little force. Sub-section (1) of Section 17 of the Registration Act provides that the documents referred to in that sub-section consisting of Clauses (a) to (e) are compulsorily registrable. Clause (b) of Sub-section (1) of Section 17 covers other non-testamentary instruments, which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards to or in immovable property. No doubt a charge does not create any title or interest in the immovable property upon which it is fastened but it does create an enforceable right to realize from the property charged the amount the charge secures. A charge is defined in Section 100 of the Transfer of Property Act as follows. "where immovable property of one person is by act of parties or operation of law made security for the payment of money to her, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property, and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge. " A security bond creating a charge in respect of property of more than Rs. 100 is, therefore, covered under Section 17 (1) (b ). But that apart Section 4 of the Transfer of Property Act provides that Section 59 along with certain other provisions of the Transfer of Property Act shall be read as supplemental to the Registration Act. Section 100 of the Transfer of Property Act lays down that the provisions "herein before contained which apply to a simple mortgage shall so far as may be applied to such charge". A simple mortgage as any other mortgage except a mortgage by deposit of title deeds is required by Section 59 of the Transfer of Property Act to be effected by a registered instrument if it secures an amount of more than Rs. 100. No doubt the application of the provisions relating to simple mortgage contemplated in Section 100 are qualified by the expression "so far as may be" but there being no incompatibility between Section 59 and Section 100 the provisions of Section 59 would be applicable to a charge. The same view has been taken by the Rajasthan High Court in AIR 1959 Raj. 143, Ilahi Bux v. Jamila Bai. A security bond whether it create a charge or a mortgage is, therefore, required to be registered.;