PETITIONER: COMMISSIONER OF INCOME-TAX, <NAME> Vs. RESPONDENT: KESHAVLAL LALLUBHAI PATEL DATE OF JUDGMENT: 09/11/1964 BENCH: <NAME>, M. BENCH: <NAME>, M. <NAME>, P.B. (CJ) <NAME>, K.N. CITATION: 1965 AIR 1392 1965 SCR (2) 139 CITATOR INFO : RF 1972 SC2178 (16) RF 1983 SC 109 (8,12) ACT: Income Tax Act , 1922 --self-acquired property thrown into H.U.F. Hotchpotch-Thereafter partition effected amongst members H.U.F.-Whether property transferred to wife and minor son amounted to indirect transfers under's. 16(3)(a) (iiiq and (iv). HEADNOTE: Until the assessment year 1952-53, the assessee was assessed as an individual. On April 18, 1951, he swore an affidavit to the effect that he was throwing all his self-acquired properties into the common hotchpotch of the Hindu undivided family consisting of himself and his two sons, one a major and the other a minor. On June 12, 1951, an oral partition was effected between the several members of this undivided family, and as a result some of the properties were transferred to the assessecc's wife and his minor son. For the assessment year 1952-53, the assessee claimed that assessment should be made taking into account the conversion of his self-acquired property into joint family property and the subsequent partition. <ORG> confirmed the orders of the Income-tax Officer and the Assistant Appellate Commissioner disallowing the claim of the assessee on the ground that throwing into the hotchpotch one's self-acquired property and a subsequent partition among the members of the Hindu undivided family was an indirect transfer of property within the meaning of s. 16(3) of the Income-tax Act, 1922. However, upon a reference made to it, <ORG> was of the view that the above transactions did not amount to a direct or indirect transfer within the meaning of s. 1  6(3) (a) (iii) and (iv) of the Act. HELD:The two conditions that must be satisfied before s. 16(3) (a) (iii)or (iv) can apply are- (i) Assets must be transferred by the husband to the wife or the minor child; and (ii) They must be transferred directly or indirectly. Only the word 'transfer' occurs in s. 16(3)(a)(iii) and (iv) and a comparison with the language of s. 16(3)(c) shows that here it has been used in the strict sense and not in the sense of 'including every mean-, by which property may be passed from one to another'. [103 <CITATION> ,  2 S.C.R. 480 referred to. Although the expression 'directly or indirectly' is intended to take in indirect transfers, there must still be a transfer and the word 'indirectly' does not destroy the significance of the word 'transfer'. Even if the act of throwing self-acquired property into the hotchpotch is regarded as a transfer, the partition of Joint Hindu family property is not a transfer in the strict sense and the provisions of s. 16(3) (a) (iii) and (iv) are there:fore not attracted. [104 A, G; 105 <CITATION> ,  2 S.C.R. 531. distinguished. 101 <CITATION> . (1951) Mad. 607, <CITATION> .1.T. Madras, 41 I.T.R. 297 and <CITATION> , (1962) 64 P.L.R. 22, approved. <ORG> v. <ORG>, 32 T.C. 211, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1022 of 1963.

Appeal from the judgment and order dated April 28, 1961 of <ORG> in Income-tax Reference No. 16 of <NAME> and <NAME>, for the appellant.

<NAME>, <NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the respondent.

The Judgment of the Court was delivered by <NAME>, J. This is an appeal on certificate granted by <ORG> under S. 66A(2) of the Indian Income Tax Act, 1922, hereinafter referred to a,,, the Act, and involves the interpretation of s. 16(3) (a) (iii) and S. 16(3) (a) (iv) of the Act. The facts are not in dispute and it is not necessary to record the findings of the Income Tax officer and the Assistant Appellate Commissioner. It is sufficient to extract the relevant facts from the order of <ORG>.

The respondent. <NAME>, hereinafter referred to as the assessee was assessed till the assessment year 1952-53 (Accounting vear ending March 31, 1952) as an individual, On April 18, 1951 he swore an affidavit before <ORG>, Ahmedabad, throwing all his self acquired properties mentioned in the affidavit, into the common hotchpotch of the Hindu undivided family, consisting of himself and his two sons. The assessee had a wife and two sons, one major and the other a minor. However, no entries in the books were passed. On June 12, 1951, an oral partition was affected between the several member of the Hindu undivided family, and consistent with this partition, entries in the books were made. A joint declaration was made by the assessee, his wife and the major son on June 26,1951 before <ORG>. Later, a joint statement was made on December 5, 1951. before <ORG>. Properties were transferred thereafter in accordance with this arrangement to the names of the several members of the family.

For the assessment year 1952-53, the assessee claimed that assessment should be made taking into consideration the conversion of the self-acquired into joint family property and the subsequent partition. <ORG> confirmed the orders of the Income Tax Officer and Assistant Appellate Commissioner disallowing the claim of the assessee on the ground that "throwing into the hotchpotch one's self- acquired property, and a subsequent partition amongst the members of the Hindu undivided family is an indirect transfer of the property within the meaning of S. 16(3) of the Act." <ORG>, at the instance of the assessee, referred the following question to <ORG> "Whether on the facts and circumstances of this case the throwing into the hotchpotch of the applicant's self acquired property and the subsequent partition among the members of the Hindu undivided family is an indirect transfer of property so far as the wife and minor son are concerned, within the meaning of Section 16(3) (a) (iii) and (iv) of the Income Tax Act ?"

<ORG> answered the above question in favour of the assesses. As stated above, it granted a certificate under S. 66A(2) of the Act.

Mr. <NAME>, the learned counsel for the <ORG>, urges before us that it is a clear case of indirect transfer by the assessee, within s. 16 (3) (a) (iii) and S. 16 (3)

(a) (iv) of the Act. He does not dispute the genuineness of the transactions. He says : Look at the position antecedent to the affidavit dated April 18, 1951. The property in dispute belonged to the assessee. Then look at the position after the partition. The properties come to 'be held by the wife and the minor son. These two facts, according to him, show that there was a transfer, and it was an indirect transfer because the joint Hindu family had been utilised only as a conduit pipe by the assessee to transfer properties to the wife and the minor son.

Section 16 (3) (a) (iii) and (iv) read as follows "16(3)-In computing the total income of any individual for the purpose of assessment, there shall be included- (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly-

(iii)from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart; or

(iv)from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration;."

Mr. <NAME>, the learned counsel for the assessee, contends that in this case there is no transfer in the strict sense, and as it is a taxing statute, the provisions should be construed strictly. He says that neither the act of throwing the self-acquired property into the hotchpotch, nor the partition of joint family property was a transfer within the meaning of s. 16(3) (a) (iii) or s. 16 (3) (a)

(iv). If the legislature wanted to rope in these acts, it could have used another word, such as 'arrangement. Apart from authority, looking at the language of s. 16(3)

(a) (iii), following two conditions must be satisfied before the said provision can be applied :

(1)Assets must be transferred by the husband to the wife; (2)The assets must be transferred directly or indirectly. Two questions arise : Is the word 'transfer' used in the technical sense or in the popular sense ? And, secondly, what is comprehended in the word 'indirectly'? Some assistance is derived in ascertaining the meaning of the word 'transfer' by looking at the language of s. 1  6 ( 1 ) (c). In that clause, the legislature uses the words 'settlement', 'disposition' and 'transfer', and in the expression 'settlement or disposition' is included 'any disposition, trust, covenant, agreement or arrangement'. In this clause, the word 'transfer' is clearly used in the strict sense. If the legislature were minded to include an arrangement or agreement, not amounting to transfer, in s. 16(3)(a) (iii), it could have used these words. It seems to us that the word 'transfer has been used in the strict sense and not in the sense of 'including every means by which the property may be passed from one to another'. This conclusion is reinforced by the consideration that, as observed by this Court in <CITATION> (1), s. 16(3) "creates an artificial income and must be construed strictly." (1) 2 S.C.R. 480.

Coming now to the expression 'directly or indirectly' there does not seem to be any doubt that the legislature meant to rope in indirect transfers. One example is furnished by <CITATION> (1). But there must still be a transfer of assets. The word 'indirectly' does not destroy the significance of the word transfer'. Mr. <NAME> relies strongly on the decision of this Court in <CITATION> (1). But in our opinion that case is clearly distinguishable and does not assist us in this case. In that case, <NAME> and his sons were both desirous of putting Rs. 30,000 in the hands of their wives to enable them to buy a share in a house. Instead of directly gifting the amount, they hit upon the following device : <NAME> would gift Rs. 30,000 to the daughter-in-law and the "on would gift Rs. 30,000 to the mother. This Court held that it was a palpable device and a trick and the two cross transactions amounted to an 'indirect transfer' within s. 16(3) (a) (iii). In effect, this Court held that the father used his son as a conduit pipe and the son used his father as a conduit pipe to gift Rs. 30,000 each. Mr. <NAME> relies on the words "chain of transfers" used by Hidayatullah, J., in the following sentence :

"A chain of transfers, if not comprehended by the word 'indirectly' would easily defeat the object of the law which is to tax the income of the wife in the hands of the husband, if the income of the wife arises to her from assets transferred by the husband."

But in the context they refer to the cross gifts, if we may so call the two gifts of Rs.30,000 each. These are transfers in the strict sense of the term. In the present case there are no cross-gifts. We have, on the otherhand, in this case, a throwing of property into the hotchpotch and a partition of the <ORG> property. As will be pointed out later, the latter at any rate is not a transfer at all. This takes us to the facts of this case, and the question arises whether there is any transfer of assets in the strict sense. There is some difference of opinion whether the act of throwing selfacquired property into the hotchpotch is a transfer or not. We need not settle this controversy in this case. Let us assume that It is. But, is a partition of joint Hindu family property a transfer in the strict sense ? We, arc of the opinion that it is not. This Was so held in <CITATION> .(2) <NAME>, J., then a Judge of <ORG>, after (1)  2 S.C.R. 531, (2)1,1,.R.  Maci. -67.

examining several authorities, came to the conclusion that "partition is really a process in and by which a joint enjoyment is transformed into an enjoyment in severalty. Each one of the sharers had an antecedent title and therefore no conveyance is involved in the process as a conferment of a new title is not necessary." <ORG> again examined the question in <CITATION> (1) with reference to s. 16 (3 ) (a) (iv). It observed that "obviously no question of transfer of assets can arise when all that happens is separation in status, though the result of such severance in status is that the property hitherto held by the coparcenary is held thereafter by the separated members as tenants-in- common. Subsequent partition between the divided members of the family does not amount either to a transfer of assets from that body of the tenants-in-common to each of such tenants-in-common".

<ORG> came to the same conclusion in <CITATION> (2) . Agreeing with these autho- rities, we hold that when the joint Hindu family property was partitioned, there was no transfer of assets within s. 16(3) (a) (iii) and (iv) to the wife or the minor son. Mr. <NAME> finally contended that we must look at the substance of the transaction. But as pointed out by Lord <NAME> in Potts' Executors v. Commissioners of Inland Revenue(") "the <ORG> is not entitled to say that for the purposes of taxation the actual transaction is to be disregarded as "machinery" and that the substance or equivalent financial results are the relevant consideration. It may indeed be said that if these loose principles of construction had been liberally applied, they would in many instances have been adequate to deal with tax evasion and there would have been less frequent cause for the intervention of <ORG>."

In the result the appeal fails and is dismissed with costs. Appeal dismissed.

(1) (1961) 41 I.T.R. 297.

(2) (1962) 64 P.L.R. 22.

(3) 32 T.C. 21 1.


PETITIONER: COMMISSIONER OF INCOME-TAX, <NAME> Vs. RESPONDENT: DEWAS CINE CORPORATION DATE OF JUDGMENT: 08/11/1967 BENCH: <NAME>, J.C. BENCH: <NAME>, J.C. RAMASWAMI, V. BHARGAVA, VISHISHTHA CITATION: 1968 AIR 676 1968 SCR (2) 173 CITATOR INFO : R 1971 SC2270 (5) E 1973 SC1357 (9) F 1980 SC 176 (3,9) RF 1986 SC 368 (12) ACT: Indian Income-tax Act , 1922, s. 10(2) (vii) 2nd proviso--Two persons entering into partnership, each contributing a cinema theatre dissolution of partnership theaters returned to respective owners at original price -Depreciation equally divided between partners--Return of theatres whether sale for purpose of s. 10(2)(vii), 2nd proviso. HEADNOTE: S and H formed a partnership to carry on business in partnership as exhibitors of cinematograph films with effect from March 1, 1947. Each partner who was an owner of a cinematograph theatre brought his theatre into the books of the partnership as an asset of the partnership. For the assessment years 1950-51 to 1952-53 the Income-tax Officer allowed depreciation aggregating to Rs. 44,380/- in respect of the two theaters. The partnership was dissolved on September 30, 1951, and on dissolution it was agreed between the partners that the theaters should be returned to their original owners. In the books of account maintained by the partnership, the assets were shown as taken over on October 1, 1951, at the original price less the depreciation allowed-the depreciation being equally divided between the two partners. In proceedings for assessment for the year 1952-53 the respondent was treated as a registered firm. <ORG> held that by restoring the two theaters to the two original owners "there was a transfer by the firm and the entries adjusting the depreciation and writing off the assets at the original value amounted to total recoupment of the entire depreciation by the partnership. and on that account" proviso 2 to s. lO(2)(vii) of the Income-tax Act , 1922, applied. <ORG>. in reference, held in favour of the assesses. The <ORG> appealed, contending, that on the transfer of the theaters from the partnership to the original owners there was a sale. HELD:The expressions "side" and "sold" are not. defined in the Income-tax Act : Those expressions are used in s. 10(2)(vii) in their ordinary meaning. "Sale" according to its ordinary meaning is a transfer of property for a price. and adjustment of the rights of the partners in a dissolved firm is not a transfer, nor is it for a price. [176A-B] A partner may, it is true, in an action for dissolution insist that the assets of the partnership be. realised by sale of its assets, but where in satisfaction of the claim of the partner to his share in the value of the residue determined on the footing of an actual or notional sale property is allotted, the property so allotted to him cannot be deemed in law to be sold to him. 1176E] <CITATION> .  3 S.C.R. 400, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2163 of 1966.

Appeal from the judgment and order dated April 15, 1964 of <ORG> in Misc. Civil Case No. 22 of 1963.

<NAME>, Solicitor-General, <NAME>, <NAME> and <NAME>, for the appellant.

<NAME> and <NAME>, for the respondent. The Judgment of the Court was delivered by <NAME>, <NAME> and <NAME> entered into an agreement to carry on business in partnership as exhibitors of cinematograph films in the name and style of "<ORG>" with effect from March 1, 1947. Each partner who was an owner of a cinematograph theatre brought his theatre into the books of the partnership as an asset of the partnership. For the assessment years 1950-51 to 1952-53 the Income-tax Officer allowed depreciation aggregating to Rs. 44,380/- in respect of the two theatres. The partnership was dissolved on September 30, 1951, and on dissolution it was agreed between the partners, that the theatres should be returned to their original owners. In the books of account maintained by the partnership, the assets were shown as taken over on October 1, 1951 at the original price less the depreciation allowed the depreciation being equally divided between the two partners.

In proceedings for assessment for the year 1952-53 the respondent was treated as a registered firm. <ORG> held that by restoring the two theatres to the two original owners "there was a transfer by the firm and the entries adjusting the depreciation and writing off the assets at the original value amounted to total recoupment of the entire depreciation by the partnership and on that account" proviso 2 to s. 10(2)(vii) of the Income-tax Act, 1922, applied. <ORG> of Madhya Pradesh answered the following question referred to it by the <ORG> the negative:

"Whether on the facts and in the circumstances of the case, the amount of Rs. 44,380/- was rightly included in the total income of the assessee in the year 1952-53 under the second proviso to s. 10(2) (vii) of the Income-tax Act ?"

The Commissioner of Income-tax has appealed to this Court with certificate granted by <ORG>.

Section 10(2) of the Income-tax Act permits certain allowances to be debited in the computation of profits or gains of the business, profession or vocation carried on by the assessee in the year of account; one such allowance is prescribed by cl. (vii), the material part of which is:

"in respect of any such building, machinery or plant which has been sold or discarded or demolished or des-

troyed, the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant, as the case may be, is actually sold or its scrap value: Provided that Provided further that where the amount for which any such building, machinery or plant is sold, whether during the continuance of the business or after the, cessation thereof, exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to. be profits of the previous year in which the sale took place :"

In respect of each of the theatres depreciation was allowed by the taxing authorities in proceedings for assessment. <ORG> was of the view that since the theatres were returned to the partners in settling the accounts of the partners on dissolution, the theatres were in law sold to the partners. <ORG> disagreed with that view.

Under the Partnership Act , 1932, property which is brought into the partnership by the partners when it is formed or which may be acquired in the course of the business becomes the property of the partnership and a partner is, subject to any special agreement between the partners, entitled upon dissolution to a share in the money representing the value of the property. When the two partners brought in the theatres of their respective ownership into the partnership, the theatres must be deemed to have become the property of the partnership. Under s. 46 of the Partnership Act, 1932, on the dissolution of-the firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives according to their rights. Section 48 of the Partnership Act provides for the mode of settlement of accounts between the partners. It prescribes the sequence in which the various outgoing are to be applied and. the residue remaining is to be divided between the partners. The distribution of surplus is for the purpose of adjustment of the rights of the partners in the assets of the partnership; it does not amount to transfer of assets.

On dissolution of the partnership, each theatre must be deemed to be returned to the original owner, in satisfaction partially or wholly of his claim to a share in the residue of the assets after discharging the debts and other obligations. But thereby the theaters were not in law sold by the partnership to the individual partners in consideration of their respective share in the residue. The expressions "sale" and "sold" are not defined in the Income-tax Act ;-those expressions are used in s. 10(2)(vii) in their ordinary meaning. "Sale", according to its ordinary meaning is a transfer of property for a price, and adjustment of the rights of the partners in a dissolved firm is not a transfer, nor it is for a price. The Solicitor-General appearing for the <ORG> submitted that each partner is entitled to have the assets of the partnership sold for discharging the debts and obligations of the partnership, and for the. purpose of dividing the residue among the partners if property is allotted to the partners in satisfaction of their claims, the transaction must be deemed in law to take the form of a notional sale of the property to the partner in consideration of the money value of his share. Counsel relied upon the statement of the law in <ORG>, 12th Edn., at p. 568:

"........in the absence of a special agreement to the contrary, the right of each partner on a dissolution is to have the partnership property converted into money by a sale, even although a sale may not be necessary for the payment of debts.", and also upon the decision of this Court in <CITATION> (1). A partner may, it is true, in an action for dissolution insist that the assets of the partnership be realised by sale of its assets, but where in satisfaction of the claim of the partner to his share in the value of the residue determined on the footing of an actual or notional sale property is allotted, the property so allotted to him cannot be deemed in law to be sold to him.

<ORG> was, therefore, in our judgment, right in deciding the question referred in favour of the assessee. The appeal fails and is dismissed with costs. <NAME>

Appeal dismissed.

(1) [1966] 3 S.C.R. 400.


<NAME>.

1. I submit that where in the course of a suit a charge is created, such charge negatives personal liability. Secondly, by expressly mentioning a particular remedy granted by a decree the other reliefs are denied: expressio unius exclush alterius. Thirdly, you cannot divorce a decree from the plaint, for Section 11, expln. V, of the Civil Procedure Code, provides: "Any relief claimed in the plaint, which is not expressly granted by the decree, shall, .... be deemed to have been refused." Fourthly, the principle of Order XXXIV of the Code applies to the present case where charge is created for the first time by the decree itself. On the last point there is a divergence of opinion among Judges of our Court. Further question is whether Order XXXIV applies to moveables in principle.

2. In his second edition of the Transfer of Property Act , 1882, Sir <NAME> says (p. 547): "When a charge is created by act of parties the specification of the particular fund or property negatives a personal liability. The remedy of the holder of the charge is against the property charged only." The decree in the present case, being one passed in terms of a compromise, is on the footing of a contract between two parties. The judgment-debtor has made a concession by admitting the whole amount claimed and has therefore consented to the creation of a charge. Hence probably the creditor agreed to be content with the creation of the charge only. Even if the decree is so construed, the darkhast must be dismissed. The parties should be held to the contract.

3. <ORG> in <CITATION> (1930) I.L.R. 52 All. 901. said (p.904): "It appears to us that the question whether a charge-holder has a personal remedy against the person over whose property he holds a charge is a matter of contract. In the case of a simple mortgage it has been recognized that in the absence of a contract to the contrary, a simple mortgage carries a personal liability. Where there is a simple mortgage, there is a presumption that there is a personal liability, and unless the personal liability is excluded by an express contract it will exist. No such rule applies to the case of a charge." See also <CITATION> (1932) I.L.R. 54 All. 763.

4. In the case of an ordinary money decree the principle of Order II, Rule 2, will apply. That principle does not apply to mortgage decrees, which are governed by Order XXXIV, Rule 14, in so far as a mortgagor may waive his right to the institution of the second suit. The latter provision should be confined to a charge created before the institution of a suit, and not to a charge which came into existence during the progress of a suit. In every case, however, it must be a question of construction of the decree. It is laid down by <NAME> and <NAME>. in the recent case of <CITATION> : ". . .the principles underlying Order XXXIV, although they may not strictly apply in the case of a charge, may be applied and ought to be applied by analogy to charges created by a decree, unless indeed the terms of the decree make it clear that the remedy of recovering the decretal amount from the property charged was not given in lieu of the personal remedy, but in addition to it." The learned Judges referred with approval to <CITATION> . which has been followed over and over again not only in <ORG> but in other <ORG> also. It is recently followed by <NAME> in <CITATION> . Ordinarily, when you create a charge, you prima facie exclude personal liability. The whole question is one of construction, and in the light of certain canons of interpretation the decree stands on the same footing as any other contract between parties thereof. It is open to parties to provide for various eventualities. If they do not, they take the consequences. The decree should be construed in the light of explanation V of Section 11 , Civil Procedure Code, inasmuch as in the present case the plaintiff had prayed in the plaint for a personal decree which has not been expressly granted in the decree. Furthermore a charge excludes personal liability.

5. <NAME> in <CITATION> . was of opinion (p. 705): Order XXXIV, Rule 14, meant "that the decree should relate to the payment of money in satisfaction of a claim arising under the mortgage, i.e., a mortgage independent of the decree. It can have no application where the charge or the mortgage is created by the decree and where the direction as to payment of money is in no sense in respect of a claim arising under the charge or the mortgage." This case can be distinguished on three grounds: (1) liberty to apply was reserved in that decree; (2) decree was merely declaratory; and (3) in the present case, the charge was created prior to the decree by a compromise.

6. I submit that either Order XXXIV applies or it does not apply. If it applies, then there must be a separate application for a personal decree. If it does not apply, then Section 11 , expln. V, comes in in any event. The Order does not apply where the mortgage does not exist prior to the decree. Here, prior to the passing of the decree, the charge was created by the compromise. If Order XXXIV applies, in the present case no application for personal decree under Rule 6 has been made and hence the darkhast must be dismissed.

7. The analogy from a decree for maintenance as in <CITATION> (1932) I.L.R. 56 Mad. 343. as was pointed out in the case before Lokur J. in <CITATION> (1938) 41 Bom. L.R. 420, is irrelevant; where you mention a particular relief in a decree you are confined to that relief only.

8. There also are cases which bear against my contention. The first one is <NAME> v. <NAME> , which emphasizes that Order XXXIV, Rule 14, has no application to the execution of a decree which creates a charge for the first time, there being no prior mortgage. The principle of Order XXXIV, however, applies only to immoveable property. It demands that if there is a deficit from sale of property mortgaged, the decree-holder should apply for a personal decree. If Order XXXIV does not apply, the decree-holder comes under Section 11 , expln. V, or else he should file another suit. Where there is a money decree plus something else, that something else changes the character of the decree: <NAME> v. <NAME> , per <NAME> Where there is a complicated decree, you should read it as a whole. So read, it is clear that the personal relief is not expressly granted.

9. Secondly, there is the unreported judgment of <NAME> in <ORG> v. <NAME> (1935) First Appeal No. 61 of 1934, decided by <NAME>, on August 22, 1935, which is directly against me <CITATION> (1906) I.L.R. 33 Cal. 849. a mortgagee first instituted a suit to enforce his security and took merely a money decree, but failed to obtain satisfaction of the decree. He then brought a second suit to realize the debt by the sale of the mortgaged property. In holding that the second suit was not competent <NAME> said (p. 851): "Apart from authority, I should have thought that, inasmuch as the plaintiff elected to take a decree in the form he did, in the former suit, and practically abandoned or waived his right, which he then undoubtedly had, to have the mortgaged property sold in the event of the money not being paid, he cannot now, having regard to the provisions of Section 13 of the Code of Civil Procedure, successfully ask that the property should be sold in the present suit." Much more so in the present case. The principle of res judicata is not confined to the terms of Section 11 , Civil Procedure Code, i.e., Section 11 is not exhaustive. It applies not only when the question arises in two suits but also in a darkhast, a suit or vice versa or in the continuation of the same suit: Mulla's Civil Procedure Code, 10th edn., p. 86.

10. The case of <CITATION> . is against me. But it is an authority for Rule 14 of Order XXXIV and not Rule 6. A decree passed by consent creates estoppel by judgment. Order XXXIV, Rule 14, does not apply to consent decrees. If the principle of Order XXXIV is followed here, the decree-holder should first apply to the <ORG> for a personal decree.

11. In <ORG> v. <ORG> (1931) I.L.R. 59 Cal. 667. <ORG> applied the rules of Order XXXIV to mortgages of moveables, and in <CITATION> (1914) I.L.R. 42 Cal. 455. it was held that foreclosure, as a remedy of the mortgagee, was not confined to mortgages of land; it was equally applicable to mortgages of chattels.

12. Explanation V to Section 11 applies as much to consent decrees as to contested decrees. The rule applies not only to mortgages but also to charges (see Mulla's Civil Procedure Code, 10th edn., p. 1022). At any rate the principle of Rule 6 of Order XXXIV should be applied to the present case of moveables because it is a rule of procedure based on equitable considerations.

<NAME>, was not called upon.

<NAME>, <NAME>

13. This is an appeal from a decision of the First Class Subordinate Judge of Dharwar, and it raises a question in execution, which has caused some difference of opinion in this <ORG>, and is of very common occurrence.

14. In 1928 the plaintiff made an advance of Rs. 8,000 to the defendant, and certain shares were charged to secure the amount. In 1931 the plaintiff sued to recover the amount due, and on November 28 there was a consent decree. The decree recites the plaint, and then (in Clause 1) directs the defendant to pay to the plaintiff a lump sum of Rs. 9,000 by yearly instalments of Rs. 2,000. Then there is a default clause malting the whole amount payable on default of payment of two instalments. Then it is provided that a charge in favour of the plaintiff for the decretal amount of Rs. 9,000 is kept upon the suit shares, and then the decree goes on: "If defendant fails to pay the monies in time, the same should be recovered by sale of the said shares." The defendant failed to pay the instalments on the due dates, and in 1934 the shares were sold and realised Rs. 4,350. In 1936 the plaintiff took out the present darkhast to recover the balance of the debt by attachment and sale of a house belonging to the defendant. It is contended by the defendant that the plaintiff, having taken a charge on, specific shares, has abandoned his right to recover the money by any other means. Alternatively, it is said that if he desires to recover the money by any other means, and has a right to do so, he must first of all proceed to get a personal decree for payment. The learned Subordinate Judge decided in favour of the plaintiff.

15. Now, taking the decree as it stands, and without reference to authorities in the first instance, I should have thought that its meaning was perfectly plain. It is very common to have a consent decree for payment of money making the amount payable by instalments; but if the creditor agrees to instalments, he is, of course, abandoning his present right to execute the decree for the full amount due, and to compensate him for that it is very common for the debtor to give him a charge on property. In the present case, property, namely the shares, had been charged beforehand, but I think the same principle would apply if the charge had been created in the first instance by the decree. But in taking a charge it seems to me that what the creditor is looking to is his protection against the rights of intervening creditors, who may attach property of the judgment-debtor whilst the plaintiff's hands are tied by the time given for payment of instalments. That seems to me to be the object of a charge; not to regulate the order in which the defendant's property is liable to be attached. Taking Clause (1) of this decree, it is perfectly plain that it amounts to an order for payment, and if such clause stood alone, it could be enforced by any of the methods authorized by the Civil Procedure Code, including attachment and sale of any of the defendant's property. There is nothing in the rest of the decree which expressly takes away or limits that right, and I can see no reason why it should be held that the plaintiff by implication has deprived himself of that right or delayed its enforcement, merely because he has protected himself against other creditors by taking a charge on part of the defendant's property. Therefore, if I had to construe the decree without reference to authorities, I should say that there was no doubt whatever that the plaintiff, having failed to realize the whole amount of his debt by sale of the charged shares, can proceed under the decree to attach any other property of the judgment-debtor which may be available.

16. However, there are undoubtedly two cases of this Court, which are against that view. There is, first of all, a decision of an appellate bench in <CITATION> . The learned trial Judge distinguished that case by pointing out that it was a mortgage suit, as no doubt it was, but in that mortgage suit there was a consent decree, very much in the same terms as the decree in the present suit. Mr. Justice <NAME>, in the Court of first instance, said this (p.956):--

I see no reason to limit the plain meaning of the decree as to the payment of the full amount in instalments by the provision as to the realisation of the full amount by the sale of the mortgaged property in default of the payment of any two instalments. The decree directs the defendants to pay the full amount, and the obligation is not in, my opinion limited by the provision relating to the sale of the mortgaged property.

17. I think that is right; but in appeal Sir <NAME>, the Chief Justice, said (p. 958):

It seems dear to me that there must be a decree personally made against the mortgagor before it can be executed against property other than the mortgaged property. The decree in this case cannot be said to be a personal decree merely because it directs that the defendants should pay the amount.

18. With all respect to the learned Chief Justice, I do not follow the last proposition. A decree which directs payment of the amount is prima facie a personal decree. The <ORG> in that case purported to act by analogy to Order XXXIV of the Civil Procedure Code. Now, Order XXXIV is a code, which regulates the enforcement by suit of mortgages, and the scheme of the Order is that in the preliminary decree there is a direction on the mortgagor to pay the amount found due into <ORG>; on payment there is to be redemption, and on failure to pay, the mortgaged property can be ordered to be sold; and then there is liberty reserved to the mortgagee to apply for a personal decree against the mortgagor for any balance not realized. That is the general scheme of the Code, and where one is. dealing with a decree in a mortgage suit relating to immoveable property, one must follow that scheme. I agree that one must read the decree as a whole, and if a preliminary mortgage decree provided, in the first instance, that the mortgagor should pay the amount, not into <ORG> but to the mortgagee, the <ORG> would not be justified in construing that as an executable decree for payment, because, taking the decree as a whole, it provides that there is not to be a personal decree for payment until the mortgaged property has been sold and a deficit has resulted. But I cannot see any reason why one should apply the analogy of a mortgage decree to a consent decree, which must be construed according to the terms of the language used. Mr. <NAME> contends that the principles of Order XXXIV should be applied. I do not quite know what is meant by the principles of Order XXXIV. It would have been quite easy to provide in the Code that in the preliminary decree there should be a personal judgment for the balance remaining due after sale of the mortgaged property. There is no principle of equity, which I know of, which would make such a provision improper; but it happens that that is not the scheme of the Code framed by the <ORG>. There is, however, to my mind nothing inequitable in construing an agreement between parties so as to provide that the mortgagor shall pay to the mortgagee anything remaining due after sale of the mortgaged property, or that there shall be a personal decree for payment, which may be enforced before recourse is had to the mortgaged property. There is nothing inequitable in requiring that a debtor shall pay his debt immediately after the liability has been ascertained. In my opinion, the decision of Mr. Justice <NAME> in <NAME> v. <NAME> was right, and the decision of the appellate <ORG> was wrong.

19. Then there is another case, to which we have been referred, a very recent decision of this <ORG> in a Letters Patent Appeal from a decision of Mr. Justice <NAME> ( <CITATION> , since reported.).In that case there was a consent decree under which the defendant was directed to pay a certain sum by instalments; there was no default clause, but certain immoveable property was charged for the amount. It may be that the absence of a default clause creates a distinction; the case has not yet been reported,1 and I do not know the exact facts. But Mr. Justice <NAME> in giving the judgment of the <ORG> refers to <CITATION> and to other cases, and he concludes in these words (p. 1122):--

In every case it must be essentially a question of construction of the decree, but unless the contrary appears, we think the ordinary rule should be that when a charge is created by act of parties the specification of the particular fund or property negatives a personal liability and the remedy of the holder of the charge is against the property charged only or at any rate against the property charged in the first instance. In my opinion that is the way in which the decree in this case should be construed.

20. I am unable to agree with that conclusion. To apply such a rule of construction to a consent decree for payment of money would seem to me to be wrong in principle, and inexpedient in practice. In arranging consent decrees of the nature in question, it is usually the creditor, and not the debtor, who is master of the situation, and I can see no justification for holding that, by taking a charge upon specific property, the primary object of which, as I have pointed out, is to secure him against other creditors, the creditor abandons his right to proceed against other property of the debtor. Such an abandonment should not be presumed in the absence of language making clear the intention to abandon. On the other hand, to hold that the creditor can only attach other property after obtaining a fresh order for payment is to ignore the fact that the decree already contains an order for payment. The only effect of the latter construction would be to impose further delay and additional expense upon the creditor. In this country experience shows that there are opportunities in plenty afforded to a judgment-debtor to delay his creditor, and I am not disposed to add to the number.

21. We were referred to other cases which can be distinguished. <CITATION> (1918) I.L.R. 43 Bom. 631, s.c. 21 Bom. L.R. 698. which was followed in Gurupadappa v. <NAME> (1934) 36 Born. L.R. 523. is rather in favour of the view which I. take, but is no doubt distinguishable. In both those cases-there had been a decree and a charge created by the decree on immoveable property, and it was held that the charge could be enforced by execution of the decree without the necessity of filing a separate suit. The cases were both based on the view that the decree, which for practical purposes was in the same terms as the present decree, created a personal liability for payment of the amount due, and to that extent the cases are in favour of the view which I take. The decision of Mr. Justice <NAME> in <CITATION> . is again distinguishable. The learned Judge there held that the particular decree, with which he had to deal, was in the nature of a preliminary mortgage decree, and that being so, the provisions of Order XXXIV applied to it. It is not necessary to consider whether I should have come to the same conclusion as to the construction of that particular decree, but I agree that if once you find that the decree is in its nature a preliminary mortgage decree, the provisions of Order XXXIV apply, and there must be a further application for a personal decree. But, in my opinion, the decree with which we have to deal is quite plain in its meaning. It does not in terms restrict the right of the creditor to proceed against other property, and it does contain a decree for personal payment. It can therefore be executed against. <NAME>.

22. In my opinion, therefore, the decree appealed from was right. The appeal will be dismissed with costs.

Macklin, J.

23. I agree and have nothing to add.

Wassoodew, J.

24. I agree.