JUDGMENT <NAME>, C.J.

1. This reference to a Full Bench has been made by a Division Bench of this court doubting the correctness of the judgment of another Division Bench in <ORG> v. <NAME> [1984] ACJ 791 (<NAME>). The learned judges felt that the above decision could not be treated as good law in view of the decisions of <ORG> in <CITATION>  63 Comp Cas 847 and <CITATION>  64 Comp Cas 7. The point in these cases related to the defences that are open to an insurance company under Section 96(6) of the Motor Vehicles Act, 1939. The appeal before us is by <ORG>. Of course, during the course of the hearing of this appeal, learned counsel for the respondents has sought to sustain the award passed by the <ORG> on certain other grounds.

2. The facts of the case are as follows : The deceased, who was aged 57 years at the time of the accident, was killed on November 25, 1981 while travelling as a passenger in a stage carriage bus. The accident occurred on account of the negligent driving of the driver of the said vehicle. The name of the owner of the vehicle is <NAME>. The claimants before the <ORG> were the legal representatives of the deceased. They filed O. P. (MV) No. 1101 of 1983 on April 12, 1982, claiming Rs. 42,600 as damages, making the assessment on the basis that the deceased was aged 57 years and was getting a monthly salary of Rs. 1,685 from his employer. After conducting an enquiry, the <ORG> found that the driver was negligent and that the owner of the stage carriage bus was, therefore, liable and also that consequently the appellant-insurance company was also liable for the aforesaid sum of Rs. 42,600. Before the <ORG>, the insurance company contended that its liability should have been restricted to the extent covered by Section 95(2) of the Motor Vehicles Act, 1939, which, at the relevant time on November 25, 1981, was only Rs. 5,000 as per the provisions of Section 95(2)(b)(ii) (the limit was later raised to Rs. 15,000 with effect from October 1, 1982, by Act 47 of 1982, and it has now become an unlimited liability under Section 147(2)(a) of the Motor Vehicles Act, 1988, which has come into force with effect from July 1, 1989). The contention of the insurance company was rejected by the <ORG> on the ground that the same was contrary to the decision of this court in <ORG> v. <NAME>  ACJ 791 (<NAME>) above referred to. It is against the said judgment that the present appeal has been preferred by the insurance company.

3. In this appeal, it is contended on behalf of the insurance company by Sri <NAME> that the view taken in Titanhamani's case [1984] ACJ 791 is no longer good law in view of the two decisions of <ORG> referred to above and that the defences enumerated in Section 96(6) are not relevant for the purpose of this case. According to him, the defences that may be taken by the insurance company are limited only if the company wants to avoid the policy totally, but if the insurance company wants to claim that its liability is restricted to the statutory limits mentioned in Section 95(2) , such a defence is not prohibited by the provisions of Section 96(6) of the Act.

4. On the other hand, it is contended by Sri <NAME> for the respondents-claimants that even if the judgment of this court in <NAME>'s case [1984] ACJ 791 is to be treated as no longer good law in view of the judgment of <ORG> in the two cases referred to above, he could still sustain the award against the insurance company on other grounds. He contended that the liability of the insurance company, even though it was Rs. 5,000 under Section 95(2)(b)(ii) of the Act, as it stood on November 25, 1981, when the accident occurred, the said liability has become an unlimited liability in view of the provisions of Section 147(2)(a) of the Motor Vehicles Act, 1988, which has come into force on July 1, 1989. According to learned counsel, the provisions of Section 147(2)(a) of the 1988 Act are retrospective in nature and apply to cases of accidents which occurred before July 1, 1989, and even relate back to November 25, 1981, the date of the accident in the present case. His submission also is that inasmuch as the provisions of the Motor Vehicles Act , 1988, have come into force during the pendency of this appeal which was filed in 1987, the provisions of the new Motor Vehicles Act have to be applied. It is also alternatively contended that once the liability on the part of the owner of the vehicle in a sum of Rs. 42,600 is found, the insurance company is bound to indemnify the vehicle owner for Rs. 42,600 in view of the provisions in Section 96(1) of the Motor Vehicles Act, 1939, and that under Section 96(4) it will be for the insurance company, in its turn, to recover the "excess" amount over and above its statutory limits prescribed by Section 95(2)(b)(ii) by way of a separate proceeding by the company against the insured.

5. On the basis of the above contentions, the following points arise for consideration :

(1) Whether under Section 96(6) of the Motor Vehicles Act, 1939, the insurance company is not entitled to take a defence that its liability is to be limited to the statutory liability mentioned in Section 95(2) and whether <NAME>'s case  ACJ 791 is not correctly decided ?

(2) Whether the provisions relating to the unlimited liability of the insurance company specified in Section 147(2)(a) of the Motor Vehicles Act, 1988 (which came into force with effect from July 1, 1989), are retrospective and apply to pending cases and even to an accident which has occurred on November 25, 1981, and to a claim which has been filed on April 12, 1982 ?

(3) Whether in view of Section 96(1) of the Motor Vehicles Act, 1939, the insurance company is bound to discharge any liability incurred by the vehicle owner and whether the insurance company is bound to recover the "excess" amount over and above the statutory liability under Section 95(2) from the insured by way of proceedings to be taken out by the insurance company against the insured in view of Section 96(4) ?

6. Point No. 1.--This point does not present much difficulty in view of the decisions of <ORG> already referred to. Before doing so, we shall refer to the facts in <NAME>'s case [1984] ACJ 791. In that case, two persons suffered injuries while travelling as passengers in a stage carriage vehicle on October 23, 1976, when the bus dashed against a tree. The two persons filed two separate suits. In one suit, the plaintiff claimed Rs. 30,000 while in the other suit, the plaintiff claimed Rs. 20,000. Negligence of the driver was established and the civil court passed a decree against the vehicle owner, the driver and the conductor as also the insurance company. However, the vehicle owner was held liable in a sum of Rs. 10,000 in each of the two suits. The vehicle owner and his servants did not prefer any appeal to <ORG>. The appeal was preferred only by the insurance company. In that appeal, it was argued for the insurance company that its liability to a passenger was only Rs. 5,000 under Section 95(2)(b)(ii) and that, therefore, the award of the <ORG> was liable to be modified to conform to the statutory limits prescribed in the Act. <ORG> of this court rejected the said contention of the insurance company by holding that under Section 96(2) of the Act, the statute specified the various defences which an insurance company could take. The said defences were exhaustive as stated by <ORG> in <CITATION>  29 Comp Cas (Ins) 60 ; AIR 1959 SC 1331. <ORG> took the view that in view of the said decision of <ORG> in Captain <NAME>'s case  29 Comp Cas (Ins) 60 no other defence could be taken by the insurance company. According to <ORG>, a defence based on the limits specified in Section 95(2) is not one of the defences enumerated in Section 96(2) of the Act. Accordingly, <ORG> dismissed the appeal and held that the insurance company was liable for the amount of Rs. 10,000 each for each of the passengers instead of Rs. 5,000 each as provided in Section 95(2)(b)(ii) . It is the correctness of this view that is in question before us.

7. <CITATION>  63 Comp Cas 847 ; AIR 1988 SC 719, the same question fell for consideration. In the above said case before <ORG>, Captain <NAME>'s case [ 1959] 29 Comp Cas (Ins) 60 ; AIR 1959 SC 1331 was also cited. <ORG> pointed out that the principle laid down by <ORG> in Captain <NAME>'s case  29 Comp Cas (Ins) 60 applies only to a case where the insurance company intends to avoid the policy in toto on the basis of the defence mentioned in Section 96(6) . The word "avoid" used in Section 96(6) is referrable to a case of total avoidance of the insurance policy (see Section 96 extracted under point No. 3). Captain <NAME>'s case  29 Comp Cas (Ins) 60, therefore, is not a bar to the insurance company raising a contention that it is not liable for more than the limits prescribed in Section 95(2) . This is what <ORG> observed in <NAME> case, AIR 1988 SC 719 (para 9, page 722) (at p. 852 of 63 Comp Cas) :

"Learned counsel for the appellant then urged relying on the decision of this court in <CITATION>  29 Comp Cas (Ins) 60 ; AIR 1959 SC 1331, that in view of Sub-section (6) of Section 96 of the Act no insurer to whom the notice referred to in Sub-section (2) thereof has been given, is entitled to avoid his liability' to any person entitled to the benefit of any such judgment as is referred to in Sub-section (1) thereof otherwise than in the manner provided for in Sub-section (2). On this basis it was urged that the appellant was not entitled to assert that its liability was confined to Rs. 20.000 only inasmuch as this is not one of the defences specified in Sub-section (2) of Section 96 of the Act. We find it difficult to agree with this submission either. Firstly, in paragraph 12 of the report of this very case it has been held that Sub-section (2) of Section 96 in fact deals with defences other than those based on the conditions of a policy. Secondly, from the words 'to avoid his liability' used in Sub-section (6) of Section 96 it is apparent that the restrictions placed with regard to defences available to the insurer specified in Sub-section (2) of Section 96 are applicable to a case where the insurer wants to avoid his liability. In the instant case the appellant is not seeking to avoid its liability but wants a determination of the extent of its liability which is to be determined, in the absence of any contract to the contrary, in accordance with the statutory provision contained in this behalf in Clause (b) of Sub-section (2) of Section 95 of the Act. In the instant case since as seen above the appellant did not undertake in the policy any liability in excess of the statutory liability the award against it could be only in accordance with the said statutory liability."

8. <CITATION>  64 Comp Cas 7 ; AIR 1987 SC 2158, the above-said principle was applied by <ORG> and the liability of the insurance company was limited to the statutory liability. Of course, there was no occasion to lay down the principle in the clear terms in which it was laid down in <NAME> case  63 Comp Cas 847, but the fact remains that the decision conforms to the principle laid down in that case. In view of the above said two decisions of <ORG>, there can be no doubt that <NAME>'s case  ACJ 791 (Ker) is wrongly decided. We agree with the learned judges who referred the matter to <ORG> that the said decision must be overruled, and it is accordingly overruled. Point No. 1 is answered in favour of the appellant-insurance company.

9. Point No. 2.--The contention raised is that the insurance company's liability is now unlimited in view of the provisions of Section 147(2)(a) of the Motor Vehicles Act, 1988, which has come into force on July 1, 1989. It is argued that Section 147(2)(a) applies as the said provision is retrospective and applies to pending cases even though the accident in this case occurred on November 25, 1981, and the claim was filed on April 12, 1982. Therefore, the insurer is liable for the whole amount, it is claimed.

10. As already stated, if we go by the provisions of the Motor Vehicles Act , 1939, as they stood on November 25, 1981, when the accident occurred, the statutory liability of the insurance company will be only Rs. 5,000 under Section 95(2)(b)(ii) . The said statutory liability was enhanced to Rs. 15,000 by the amendment to Section 95(2)(b)(ii) by Act 47 of 1982 which came into force on October 1, 1982. Subsequently, by the provisions of Section 147(2)(a) of the Motor Vehicles Act. 1988, which came into force on July 1, 1989, the said liability of the insurance company has been made unlimited. We shall extract the provisions of Section 147(2) of the Motor Vehicles Act, 1988. including its proviso :

"147. (2) Subject to the proviso to Sub-section (1), a policy of insurance referred to in Sub-section (1), shall cover any liability incurred in respect of any accident, up to the following limits, namely :

(a) save as provided in Clause (b), the amount of liability incurred ;

(b) in respect of damage to any property of a third party, a limit of rupees six thousand :

Provided that any policy of insurance issued with any limited liability and in force, immediately before the commencement of this Act, shall continue to be effective for a period of four months after such commencement or till the date of expiry of such policy, whichever is earlier."

11. The Motor Vehicles Act , 1988, contains provision for repeal and savings in Section 217 . Section 217(2)(a) to (f) contain various provisions as to savings and a reading of those saving provisions shows that they do not specifically deal with the question of the statutory liability or compulsory insurance.

12. Section 217(4) reads as follows :

"217. (4) The mention of particular matters in this Section shall not be held to prejudice or affect the general application of Section 6 of the General Clauses Act, 1897  with regard to the effect of repeals."

13. It is, therefore, clear that the provisions of Section 6 of the General Clauses Act are attracted and under that Act, the court must first find whether the new Act shows any intention to apply its provisions with retrospective effect. Otherwise, the new Act has to be treated only as prospective.

14. In this context, it is necessary to refer to the proviso to Section 147(2)(a) which we have already extracted. It will be noticed that policies of insurance issued with limited liability and which are in force immediately before the commencement of the new Act, i.e., in force on July 1, 1989, shall continue to be effective for a period of four months after such commencement or on the date of expiry of such policy, whichever is earlier. That would mean that even in cases where a policy issued under the 1939 Act was in force on July 1, 1989, it would continue to be in force only for a period of four months after July 1, 1989, and the policy holders are obliged to take a new policy under the Act of 1988. This, in our opinion, is a clear indication that the provisions of Section 147(2) are not intended to be retrospective. Under Section 217(2)(c) , it is, no doubt, stated that notwithstanding the repeal by Section 217(1) , any document referring to any of the repealed enactments or the provisions thereof shall be construed as referring to the new Act or to the corresponding provisions of the new Act. This provision, in our view, cannot help the claimants. It cannot be said that the policy issued under the old Act should be treated as a policy issued under the new Act. Any such argument is clearly negatived by the provisions of the proviso to Section 147(2) which we have already referred to. Further, in this case, the policy which was issued on August 29, 1981, was for a period of one year up to August 28, 1982, on which date it expired. In fact, the policy itself matured on the date of the accident on November 25, 1981. Therefore, the policy was not in force even on October 1, 1982, when by Act 47 of 1982, the liability of the insurance company was raised from Rs. 5,000 to Rs. 15,000 nor was it in force on July 1, 1989, when the 1988 Act came into force.

15. In this context, it is also necessary to refer to a decision of <ORG> in <CITATION> .  53 Comp Cas 333 ; AIR 1982 SC 836. In that case, the policy issued by the insurance company covered "liability under Chapter VIII of the Motor Vehicles Act, 1939". The facts were that the policy was issued on May 31, 1969, for the period from June 30, 1969, to June 29, 1970. Section 95(2)(a) was amended by the Motor Vehicles Amendment Act  by which the particular coverage under the statutory liability was increased from Rs. 20,000 to Rs. 50,000. The said amendment came into force on March 2, 1970. The contention for the claimants was that inasmuch as the amendment came into force during the currency of the policy, the said amendment applied. But <ORG> held that "liability as the one under Chapter VIII of the Motor Vehicles Act, 1939" mentioned in the policy must mean a liability as determinate under Chapter VIII at the relevant time. Relevant time is the time when the liability actually arises. Since the liability of the insurer to pay a claim under a motor accident policy arises on the occurrence of the accident and not until then, one must necessarily have regard to the state of the law obtaining at the time of the accident for determining the extent of the insurer's liability under a statutory policy. Therefore, in our opinion, the material date is the date of the accident and on that date the rights of the parties crystallise. The liability of the insurance company, on the date of the accident in the present case, i.e. on November 25, 1981, was only Rs. 5,000. The provisions of 1988 Act came into force on July 1, 1989, and there can be absolutely no doubt that the same cannot be applied to an accident which occured on November 25, 1981. In fact, the term of the policy expired on August 28, 1982, long before July 1, 1989. The policy itself matured before July 1, 1989, and ceased to be in force. Hence Section 147(2)(a) of the 1988 Act has no application.

16. It is then contended that inasmuch as this appeal is pending when the new Act came into force, the new Act should be applied. In this context, we have to refer to a recent judgment of <ORG> of this court, consisting of one of us (<NAME>) in <CITATION>  77 Comp Cas 62 (Ker) [FB] wh'erein in the context of the retrospectivity of Section 92A of the Motor Vehicles Act, 1939, which was introduced on October 1, 1982, in relation to its application to the case of an accident which occurred on April 9, 1977, this court rejected a similar contention. It was pointed out by this court that merely because a statute came into force during the pendency of a case, it did not automatically follow that the said statute had to be applied. There must be some provisions in the statute which expressly or by necessary implication lead to an inference that the rights of the parties as on the date of the commencement of the proceedings are intended to be altered. We do not find anything in the new Act of 1988 which seeks to alter the liability of the insurance company as it stood on the date of the accident, i.e., on November 25, 1981. It may be true that there are beneficial provisions in the new Act, but even where beneficial provisions are introduced, it does not automatically lead to the inference that such provisions are retrospective in nature. As we have considered the said question exhaustively in the above said <ORG> judgment, we do not propose to deal with the same once again. We are of the view that the reasoning given in that judgment squarely applies to the case before us. We hold that the provisions of Section 147(2)(a) are not retrospective. They cannot be applied to the case of an accident which took place on November 25, 1981, even though the claim raised in connection with such an accident is pending in appeal by the date of commencement of the new Act. Point No. 2 is held accordingly against the claimants.

17. Point No. 3.--The contention is that inasmuch as the owner of the passenger vehicle has been made liable for the total sum of Rs. 42,600, the insurance company is liable to discharge the entire liability of Rs. 42,600 under Section 96(1) and that it will be for the insurance company to resort to Section 96(4) to seek to recover any amount paid to the claimants in excess of the statutory liability upon the insurance company under Section 95(2) . Section 96 of the Motor Vehicles Act, 1939, is a very lengthy Section and we shall, therefore, try to refer only to that part of the Section which is relevant for our purpose.

"96. Duty of insurers to satisfy judgments against persons insured in respect of third party rishs.--(1) If, after a certificate of insurance has been issued under Sub-section (4) of Section 95 in favour of the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under Clause (b) of Sub-section (1) of Section 95 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment-debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

(2) No sum shall be payable by an insurer under Sub-section (1) in respect of any judgment unless before or after the commencement of the proceedings in which the judgment is given the insurer had notice through the court of the bringing of the proceedings, or in respect of any judgment so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceeding is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely :--

(a) that the policy was cancelled by mutual consent or by virtue of any provision contained therein before the accident giving rise to the liability, and that either the certificate of insurance was surrendered to the insurer or that the person to whom the certificate was issued has made an affidavit stating that the certificate has been lost or destroyed, or that either before or not later than fourteen days after the happening of the accident the insurer has commenced proceedings for cancellation of the certificate after compliance with the provisions of Section 105 ; or

(b) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely :--

(i) a condition excluding the use of the vehicle--(a) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward,

(b) for organised racing and speed testing, or

(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or

(d) without side-car being attached, where the vehicle is a motor cycle ; or

(ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification ; or -

(iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion ; or

(c) that the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular. . . .

(3) Where a certificate of insurance has been issued under subsection (4) of Section 95 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the person insured thereby by reference to any conditions other than those in Clause (b) of Sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under Clause (b) of Sub-section (1) of Section 95 , be of no effect :

Provided that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue only of this sub-section shall be recoverable by the insurer from that person.

(4) If the amount which an insurer becomes liable under this Section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this Section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person.

(5) In this Section the expressions 'material fact and material particulars' mean, respectively, a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions, and the expression 'liability covered by the terms of the policy' means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.

(6) No insurer to whom the notice referred to in Sub-section (2) or Sub-section (2A) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment as is referred to in Sub-section (1) or Sub-section (2A) otherwise than in the manner provided for in Sub-section (2) or in the corresponding law of the reciprocating country, as the case may be."

18. The contention here is that under Section 96(1) whenever a judgment is given in respect of a liability incurred by a policy holder under Section 95(1)(b) (being a liability covered by the terms of the policy) then the insurance company shall pay to the persons entitled to the benefit of the decree, any sum not exceeding the sum assured payable "thereunder", as if the insurer were the judgment-debtor in respect of the liability, together with any amount of costs and interest. It is the further contention of the claimants that the effect of the above said provision in Section 96(1) is that whatever decree or award is passed against the insured, here the vehicle owner, the insurance company is liable to discharge the liability "thereunder". It is argued that the words "thereunder" refer to the decree as passed against the insured. It is the further contention that under Section 96(4) inasmuch as the word "exceeds" is used, the insurance company shall first discharge the liability incurred by the insured in toto, whatever be such liability and then after deducting the amount covered by the statutory liability of the insurance company under Section 95(2) , the company has to recover the excess amount from the insured by way of a separate action. In the present case, the contention is that if the statutory liability of the insurance company under Section 95(2)(b)(ii) to a passenger carried in the stage carriage vehicle is restricted to Rs. 5.000 as on November 25, 1981, then the insurance company has to first pay the entire amount of Rs. 42,600 to the legal representatives of the deceased thereby discharging the entire liability under the award or decree and then the insurance company has to recover the excess amount (Rs. 42,600-5,000 = 37,600) from the vehicle owner. The question is whether such a contention can be accepted.

19. The provisions of Section 96 of the Motor Vehicles Act, 1939, are more or less based upon the corresponding provisions of the Road Traffic Act, 1934, in England which sought to protect the interests of third parties. In fact, we find that the provisions of the said Act sought to supplement the provisions of the Road Traffic Act of 1930. We also find that the provisions of the above said two Acts have more or less been adopted not only in India in the Motor Vehicles Act , 1939, but also in Sri Lanka and also in other <ORG> countries with minor local changes. It would be convenient to refer to the history of these provisions briefly.

20. In the 1920s, motor cars on the roads were rapidly becoming a menace to life in England. The persons injured had no recourse against anyone except the driver or his principal (the owner of the vehicle). Sometimes, the owner was insured in full or in part against third party risks. Sometimes, he was not insured at all. In any case, the injured person had no right whatsoever to call upon the insurance company or on the moneys which were payable under the policies. The injured person's only recourse was against the negligent driver and he was often worth nothing or did not have enough money to pay the damages. In order to mitigate these evils, <ORG> in 1930 passed two statutes within a few days of one another. The principal one was the Road Traffic Act, 1930. Section 35(1) of that Act corresponds to Section 94(1) of the Motor Vehicles Act, 1939, while Section 36 thereof corresponds to our Section 95 and Section 38 corresponds to Section 96(3) of our Act. Under the Road Traffic Act, 1930, it was compulsory for motorists to insure against third parties in respect of certain classes of liability. They were not bound to insure in respect of their employees or in respect of passengers in private cars. But, they were bound to insure for other classes of insurance. The other Act was the Third Party (Rights Against Insurers) Act, 1930. That applied to cases where the driver or the owner of the car became insolvent--even bankrupt or the company went into liquidation. The Act enables the insured person to go directly against the insurance company ; but only for the sum covered by the policy. The insurance company was not bound to pay any more than what the policy provided as stated in Section 1(4) of that Act. The result, therefore, was that under these two Acts, the insurance company could not be made liable beyond their contractual obligations. The insurance company could still say that they were bound under their own contract. So much so, the protection became illusory. In <ORG> v. <ORG> Lloyd's Rep 167 ;  2 KB 53, Lord Justice <NAME> pointed out that a position had arisen which to a great extent nullified the protection which compulsory insurance was intended to afford. So a year or two later an important Act was passed to remedy the position. It was the Road Traffic Act, 1934. It made the insurance company pay directly to the third parties even though such parties are not parties to the insurance contract. The provisions of Section 10 of the 1934 Act correspond to Section 96 of the Motor Vehicles Act, 1939. It will be advantageous to extract the provisions of Section 10 , so that the same could be compared with the provisions of Section 96 of the Act :

21. The Road Traffic Act, 1934 :

"10. (1) If, after a certificate of insurance has been delivered under Sub-section (5) of Section 36 of the principal Act (Road Traffic Act, 1930), to the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under para (b) of Sub-section (1) of Section 36 of the principal Act (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including the amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

(2) No sum shall be payable by an insurer under the foregoing provisions of this section-(a) in respect of any judgment, unless before or within seven days after the commencement of the proceedings in which the judgment was given, the insurer had notice of the bringing of the proceedings ; . . .

(3) No sum shall be payable by an insurer under the foregoing provisions of this section, if, in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy, he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it :

Provided that an insurer who has obtained such a declaration as aforesaid in an action shall not thereby become entitled to the benefit of this sub-section as respects any judgment obtained in proceedings commenced before the commencement of that action, unless before or within seven days after the commencement of that action he has given notice thereof to the person who is the plaintiff in the said proceedings specifying the non-disclosure or false representation on which he proposes to rely, and any person to whom notice of such an action is so given shall be entitled, if he thinks fit, to be made a party thereto.

22. It will be noticed that the provisions of Section 10 of the Road Traffic Act, 1934, and the provisions of Section 96 of the Motor Vehicles Act, 1939, are similar. ,

23. A question, similar to the one now raised before us under Section 96(2) and (4), arose before <ORG> in <NAME> v. <ORG>  2 <ORG>. <NAME> and <NAME> (Lord <NAME> dissenting) were dealing with a case under the British Honduras Motor Vehicles Insurance (Third Party Risks) Ordinance, 1958, provisions of which were similar to Section 10 of the British Road Traffic Act, 1930, and Section 96 of the Motor Vehicles Act, 1939. In that case, the plaintiff was the executor of the estate of <NAME>, a soldier in <ORG>, who suffered grave injuries in a motor accident in British Honduras. An action in <ORG> of Belize, British Honduras, ended with a consent judgment for 175,000 British Honduras dollars with interest and costs, but the car driver was unable to pay any part of that judgment. He was, however, insured by the defendants under a motor insurance policy which was issued in accordance with the abovesaid Ordinance. The material clauses of Sections 3 , 4 and 20 of the said Ordinance read thus :

"3(1) Subject to the provisions of this ordinance, no person shall use, or cause or permit any other person to use, a motor vehicle on a public road unless there is in force in relation to the user of the motor vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Ordinance.

4(1) In order to comply with the requirements of this Ordinance, a policy of insurance must be a policy which (a) is issued by a person who is an insurer, and (b) insures such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death or bodily injury to any person caused by or arising out of the use of the motor vehicle on a public road :

Provided that such a policy shall not be required to cover (i) liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment, or (ii) except in the case of a motor vehicle in which passengers are being carried for hire or reward or by reason of or in pursuance of a contract of employment, liability in respect of the death of or bodily injury to persons being carried in or upon or entering or getting on to or alighting from the motor vehicle at the time of the occurrence of the event out of which the claim arises, (iii) any contractual liability, (iv) liability in respect of the first twenty-four dollars of any claim by any one person, (v) liability in respect of any sum in excess of four thousand dollars arising out of any one claim by any one person, (vi) liability in respect of any sum in excess of eight thousand dollars arising out of the total claims for any one accident for each vehicle concerned.

20(1) If, after a certificate of insurance has been issued under Sub- Section (4) of Section 4 to the person by whom a policy has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of Sub-section (1) of Section 4 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

20(4) If the amount which an insurer becomes liable under this Section to pay in respect of a liability of a person insured by a policy exceeds the amount for which he would, apart from the provisions of this section, be liable under the policy in respect of that liability, he shall be entitled to recover the excess from that person."

24. The insurance company paid the plaintiff 4,000 dollars and the issue before the court was whether they were liable for the entire amount of 175,000 dollars with a right to recover 171,000 dollars from the driver. The question, therefore, was whether the plaintiff should recover 171,000 dollars from the driver or whether the insurance company should first pay the plaintiff even beyond their statutory liability of 4,000 dollars to cover the decree and then try to recover the balance of 171,000 dollars from the driver.

25. It will be noticed that Section 3(1) of the ordinance corresponds to Section 94 , Section 4(1) to Section 95(1)(b) and Section 95(2)(b) while Section 20(1) corresponds to Section 96(1) and Section 20(4) corresponds to Section 96(4) of the Motor Vehicles Act, 1939. It was initially held by <NAME> ]., on a construction of Section 20 , Sub-clause (1), that the insurers were liable only "in respect of any such liability as is required to be covered by a policy under Section 4(1)(b) ". He held that the insurance company was liable up to the statutory liability of 4,000 dollars and not for the entire judgment in the sum of Rs. 175.000 dollars.

26. The said view was affirmed by the majority of <ORG>, namely, <NAME> and <NAME>., while Lord <NAME> dissented. The majority held that the word "liability" which occurred in the last three provisos to Section 4(1) had the same meaning which it bore in the three provisos and there was no reason why the <ORG> should not have provided either for total exemption of liability or for partial limited exemption liability above a stated figure. Lord <NAME> pointed out that Section 4(1)(b) of the Honduras Ordinance, which was in line with Section 36 of the Road Traffic Act, 1930, required the policy of insurance to insure "such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death or bodily injury to any person caused by or arising out of the use of the motor vehicle on a public road" (This provision corresponds to Section 95(1)(b)(i) of the Motor Vehicles Act, 1939). The learned judge then pointed out that thereafter there are six provisos (1) to (6) in the Honduras Act while the corresponding English provisions contain three provisos. The learned judge then referred to the argument of the plaintiff as follows : The argument was that the judgment had been obtained in respect of such liability as is required to be covered by Section 4(1)(b) (being a liability covered by the policy), and, therefore, the insurance company must pay to the plaintiff as the person entitled to the benefit of the judgment, any sum payable thereunder in respect of that liability, namely, 175,000 dollars. The insurance company contended that the only relevant liability required to be covered by Section 4(1)(b) is the liability up to 4,000 dollars and that alone was the sum payable thereunder in respect of the liability. The plaintiff thereafter contended that the words "thereunder" in the context meant under the judgment. The learned judge observed that it would be open to the <ORG> to limit the liability of the insurance company to a particular amount. Such limitations in the quantum of liability of the insurance company were there--for example, in Sections 502 and 503 of the U. K. Merchant Shipping Act, 1894. If the <ORG> wanted the insurance company to be initially liable for the whole amount nothing precluded the <ORG> from saying so clearly. The learned judge further observed that the words "amount in excess" in Section 20(4) of the Honduras Act (corresponding to Section 96(4) of the Motor Vehicles Act, 1939), no doubt, suggested the quantum rather liability, but this was not the view taken by the editor (Prof. <NAME>) in the fourth edition of <ORG>, para 779 which reads as follows:

"Rights of insurers against their assured.--If insurers, by virtue of the provisions relating to payments on judgments, become liable to pay to a third party a sum in excess of what, under the policy, they would be liable to pay to their assured in respect of the relevant accident, they are entitled to recover the excess from the assured. It would seem, therefore, that where the insurers would not be liable to pay anything under their policy by reason of misrepresentation or non-disclosure giving them a right to repudiate, they are entitled to recover from the assured anything which they are compelled by the statutory provisions to pay, whether or not they seek to obtain the relief which the statutory provisions afford them."

27. The other learned judge, <NAME>, L.J., observed that the Honduras Ordinance was manifestly modelled upon the example and language of the U. K. legislation of 1934. So far as England was concerned, an insured, apart from his remedy against the insurance company, had a separate right against <ORG> to recover the balance amount of the award to the extent it was not covered by the statutory liability. Such a device was not there in other countries. Even so, the policy of the <ORG> in Central America appeared to be the same as in the Carribean <ORG>s where a similar view had been taken in <ORG> v. <NAME> [1968] 13 WIR 138, limiting the liability of the insurance company to the statutory liability only and rejecting the contention that the insurance company should pay the full amount covered by the judgment and recover the balance over the statutory liability from the insured. The word "liability" in Section 20(4) of the Honduras Ordinance had the same meaning as the liability mentioned in the prviso to Section 4(1)(b) (corresponding to Section 95(2) of the Motor Vehicles Act, 1939). The majority followed the earlier decision of <ORG> from Ceylon, namely, <ORG> v. <NAME>  AC 541 (PC).

28. The above said decision of <ORG> was taken to <ORG> and the majority view was upheld in <NAME> v. <ORG>, [1980] 1 Lloyd's Rep. 556. <ORG> stated that the wording of the Ordinance was clear and free from any ambiguity. In effect, they held that there was nothing unusual if there was some difference between the position in England as compared to other countries in the sense that in England the entire liability of the insured (or even in the case of non-insurance) would be cleared by <ORG>, apart from what was covered by the insurance company while in certain other countries the compulsory insurance provisions in the statute could limit the questions of liability of the insurance company. Their Lordships agreed with the majority of <ORG> that the words in Section 20(1) "liability" as is required to be covered by a policy under paragraph (b) of Sub-section (1) of Section 4 (being a liability covered by the terms of the policy) are referable not only to the basic liability but also to the statutory quantum mentioned therein. After referring to Section 4(1) and Section 20(1) of the British Honduras Ordinance, 1958 (already set out), Lord <NAME> posed the question :

"In a sentence, the question of construction is : Is liability in respect of any sum in excess of four thousand dollars arising out of any one claim by any one person which by proviso (v) to Sub-section (1)(b) of Section 4 , a policy is not required to cover, nevertheless included in "such liability as is required to be covered by a policy under paragraph (b) of Sub-section (1) of Section 4 ", where that expression is used in Section 20(1) ?"

29. and answered the question as follows :

"So stated, the only possible answer is, in my view, "no". Your Lordships were taken through various other provisions of the Ordinance which it was suggested throw some darkness upon the apparent clarity of the language of Sections 4(1) and 20(1) . In particular an argument was based on Sub-section (4) of Section 20 ... The reference to the liability of the insurer in a direct action 'exceeding' his liability to his assured under the policy was relied upon as indicating that monetary limits lawfully provided for by the policy would be ineffective as a defence, in part, to a direct action on the judgment obtained against the assured"

30. and explained by the following crucial words :

"This sub-section was, in my view, intended to cover inter alia, cases where the insurer was entitled to avoid or cancel the policy; but even if, in the absence of the words 'if any' after the word 'amount' where it appears for the second time in the sub-section, the verb 'exceeds' is not the most apt to express an 'excess over nil', there are instances, of which costs and interest on the judgment are examples, where the insurer would be liable in the direct action for sums in excess of the permissible monetary limits upon the cover afforded by the policy. So even on its narrowest construction, the sub-section is not inconsistent with the clear and unambiguous meaning of Section 20(1) ."

31. Therefore, in spite of a provision similar to Section 96(1) and Section 9G(4) , the liability of the insurance company was restricted to the statutory liability and not to the extent of the entire liability of the insured.

32. We have then to refer to two more decisions of <ORG> in regard to a similar provision in Ceylon and Bermuda.

33. We have stated that in <NAME>'s case [1980] 1 Lloyd's Rep 556, <ORG> followed its earlier decision in <CITATION>  AC 541 (PC). In that case too, the position was the same. The claimant, who was an injured person, was awarded damages for Rs. 30,000 against the owner of the lorry, who was insured against third party risks. The statutory liability of the insurance company was up to Rs. 20,000 only. The claimant started an action against the insurance company and obtained judgment for the entire Rs. 30,000 from <ORG> of Ceylon rather than Rs. 20,000. The said judgment was reversed by <ORG>. The provisions of Section 133(1) of the Motor Car Ordinance, 1938, of Ceylon corresponds to Section 96(1) while Section 128(1)(b) corresponds to Section 95(1)(b) and Section 128(4)(c) to Section 95(2) . Section 138 of the Ordinance corresponds to Section 96(4) . Lord <NAME>, speaking for the <ORG>, construed Section 138 to say that the liability of the insurance company was only Rs. 20,000. The words "required to be covered" in Section 133 meant that the Section did not render the insurer liable to a third party for a greater sum than that in which he was liable to the assured under Section 128 of the ordinance.

34. In the other decision of <ORG> in <NAME> v. <NAME> [1989] 2 Lloyd's Rep. 227 (PC), the same question arose under the Bermudan Motor Car Insurance (Third Party Risks) Act, 1943. The respondent was injured by the negligent driving of Mr. <NAME>. The car was owned by Mrs. <NAME> and was insured with the appellants under a policy. The respondent claimed damages for personal injuries against Mr. <NAME>, for $ 100,000 and costs by consent. The respondent-claimant wanted that the entire sum be paid by the insurer-appellant even though by virtue of the provision of the Act of 1943, the statutory liability was restricted to $ 24,000. <ORG> at Bermuda held the appellant liable for the whole amount. Allowing the appeal, their Lordships held the appellant liable only to an extent of $ 24.000. Section 3(1) of the Act there is similar to Section 94 while Section 4(1) is similar to Section 95(1)(b) . The proviso to Section 4(1) corresponds to Section 95(2) limiting the liability of the insurance cmpany to $ 24,000 and to other amounts in various situations. Again Section 6(1) of the Act corresponds to Section 96(1) while Section 6(4) corresponds to Section 96(4) . Their Lordships followed the decision in <NAME>'s case  1 Lloyd's Rep 556 and <NAME> case  AC 541 (PC). The contention that <NAME>'s case  1 Lloyd's Rep 556 was wrongly decided and that the view of Lord <NAME> in <ORG> in <NAME>'s case  2 Lloyd's Rep 193, was correct, was rejected.

35. A further point was also argued that the policy there covered $ 125,000 while the statutory liability of the insurance company was only $ 24,000, and the award was for $ 100,000 and that <NAME>'s case [1980J 1 Lloyd's Rep 556 was distinguishable. But Lord <NAME> of <ORG> observed :

"It is true that <NAME>'s case [1980] 1 Lloyd's Rep 556 was in certain respects different in its facts from the persent one. But the reasoning of Lord <NAME> may nevertheless be applicable. That reasoning indicates that so far as the 1943 Act is concerned, the words in Section 6(1) -

36. '. . . such liability as is required to be covered by a policy under paragraph (b) of Sub-section (1) of Section 4 ..."

37. do not include liability in respect of any sum in excess of $ 24,000 arising out of any one claim by any one person, since by virtue of proviso (iii) to Section 4(1)(b) , such a liability is not required to be covered. It is, in their Lordships' opinion, nothing to the point, so far as the construction of Section 6 is concerned, that the insurers might under the terms of the policy be bound to indemnify the insured in respect of any excess over the statutory minimum for which an injured third party might have obtained judgment against the insured. The effect of Section 6(1) is to limit the amount which the injured third party can recover directly from the insurers."

38. It is not necessary for us to go into this further question for it is not contended here that the policy covers any amount in excess of the compulsory liability under the Act. No doubt, the above observations would show that even if the policy was for a higher amount, than the statutory limit, the claimants would be entitled as against the insurance company, only to the amount compulsorily required to be covered under Section 95(2) and the balance had to be recovered from the insured. The insured might seek reimbursement from the insurance company to the extent the policy amount exceeded the statutory liability. We are, as stated above, not concerned with this latter aspect which additionally arose in <NAME> (P.W.G.) v. <NAME> [1989J 2 Lloyd's Rep 227 (PC).

39. The same view as in the <ORG> cases was taken by a Division Bench of this court consisting of <NAME> and <NAME> in <CITATION> . 308 of 1986, dated September 3, 1992) after distinguishing <CITATION>  34 Comp Cas 693 (SC); AIR 1964 SC 1736.

40. Applying the above case-law, the following principles can be summarised :

(1) The provisions of Section 96(1) are unambiguous and clear, that where a judgment in respect of the liability referred to in Section 95(1)(b) --(being a liability covered by the policy)--, then the insurance company shall pay to the claimants-decree holders any sum, not exceeding the sum assured, payable thereunder, as if the insurer was the judgment-debtor in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments. The words "liability referred to in Section 95(1)(b) " are confined to the statutory liability mentioned in Section 95(1)(b) to the extent covered by Section 95(2) for Section 95(1)(b) itself refers to Section 95(2) . In other words, the insurer is not under Section 96(1) liable to the claimants for the entire amount covered by the judgment but only up to the extent covered by Section 95(1)(b) read with Section 95(2) .

2. (2) No doubt, Section 96(4) enables the insurer to recover the "excess" from the insured. But this does not refer to a situation where the insurer pays the entire amount covered by the judgment to the claimants and to its recovering the excess over the statutory liability from the insured. This is because the basic liability of the insurer is only to the statutory liability covered by Section 95(1)(b) read with Section 95(2) . But, the provisions of Section 96(4) are not redundant or otiose. They have a meaning and are meant to cover at least one of two different situations. In a case where the entire policy is avoided under Section 96(6) by the insurer on grounds mentioned in Section 96(2) as against the insured, the insurer may, after paying to the claimants the amount covered up to its statutory liability under Section 95(1)(b) read with Section 95(2) , recover whatever it has so paid to the claimants, from the insured. In that case, it can get back the whole of the amount covered by the statutory liability from the insured and it would be a case of "excess over nil" as stated by Lord <NAME> in <NAME>'s case  1 Lloyd's Rep 556. There can also be a second situation where after paying to the claimants the amount covered by the statutory liability under Section 95(1)(b) read with Section 95(2) together with interest and costs, the insurer could recover the "excess" amount over and above the specific statutory figure, governing its liability under Section 95(1)(b) read with Section 95(2) and obviously the word "excess" would then mean that the insurer could recover the costs and interest from the insured. Of course, there is no practice in our country for the general insurance companies to proceed to recover the interest and costs from the insured nor are we to be understood as permitting such a course by laying down a new convention.

(3) That would, in effect, mean that in case the insurance policy is totally avoided by the insurance companies on the ground of misrepresentation or otherwise, then the entire amount paid or payable to the claimants becomes "excess" and can be recovered from the insured. In other cases, the statutory liability of the insurance company under Section 95(2) being the amounts stated therein, the "excess" that the company becomes liable to pay to the claimants is the costs and interest payable because of the provisions of Section 96(1) , which, apart from that provision, was not payable by the insurance company and the insurance company's recovery of "excess" under Section 96(4) could refer to these two amounts, namely, costs and interest. There is, however, no claim generally, by any insurance company against the insured for the interest and costs and we should not be understood as permitting such a course.

(4) Thus, the liability of the insurance company could only be to the statutory limits and there is no question of recovering the entire amount from the insurance company nor is it necessary to make the company recover the excess from the vehicle owner.

41. We make it clear that we are here dealing with an Act policy only. We hold point No. 3 accordingly.

42. For the aforesaid reasons, we allow the appeal of the insurance company, overrule <ORG> v. <NAME> [1984] ACJ 791 (Ker), hold that Section 147(2) of the Motor Vehicles At, 1988, is not retrospective, that the liability of the insurance company under Section 96(1) is restricted to the statutory liability provided under sectin 95(2) and that the claimants cannot rely on Section 96(4) to contend that the insurance company is liable for the entire liability of the insured and they cannot say that the insurance company should recover the excess over the statutory liability from the insured. The claimants can recover from the insurance company only up to the limits stated in Section 95(2) and the balance, if any, has to be recovered from the insured. On the facts, the insurance company is liable only up to Rs. 5,000 with interest thereon and costs to the claimants. The balance of Rs. 37,600 with interest thereon is not recoverable from the insurance company.

43. The appeal is allowed as stated above. No costs.


ORDER

1. This appeal is directed against an order of the Subordinate Judge of Birbhum holding the decree sought to be executed by the Appellant incapable of execution and dismissing his application for execution. In 1910 Appellant obtained the mortgage decree which he is now seeking to execute in the <ORG> of the Subordinate Judge of Birbhum in respect of properties, some of which were in the District of Birbhum and some in the Santhal Parganas. In this execution case the judgment-debtors have taken exception to the execution on the ground that when the decree was passed, some of the mortgaged properties situated in the Santhal Parganas were under settlement, and so under Section 2 of Act 37 of 1855 <ORG> had no jurisdiction to pass the decree; the decree having thus been passed without jurisdiction is void and incapable of execution. The <ORG> below has found that one of the Santhal Parganas properties Mouzah Mouloti was under settlement when the decree was passed and held, under the provisions of the Act above referred to and on the authority of the decision of <ORG> in <CITATION> A.I.R. 1914 P.C. 140, that <ORG> had no jurisdiction to try the suit and pass the decree which is accordingly void and incapable of execution. In this view the learned Subordinate Judge has dismissed the execution case. The finding of fact recorded by the <ORG> below has not been disputed before us by the Appellant but the order of the <ORG> below has been assailed on two grounds:-(1) that the <ORG> below as executing <ORG> could not go behind the decree and test its validity but was bound to execute it even though it was passed without jurisdiction; (2) that the <ORG> below is wrong in holding that the whole decree was bad and it should have executed so much of it as was valid in respect of the Birbhum properties.

2. The second contention may be shortly disposed of as untenable in view of the decision of <ORG> in <CITATION> A.I.R. 1914 P.C. 140.

3. On the first point there is no unanimity of opinion and we find it difficult to reconcile some of the decisions of this <ORG> In <NAME> v. <NAME> [1878] 3 C.L.R. 192 and <NAME> v. Gopal Shah [1912] 17 C.L.J. 634, the objection that the decree was void and incapable of execution was permitted to be raised and allowed in the execution of the decree. A contrary view was taken in <NAME> v. <NAME> [1911] 14 C.L.J. 648 and in Kali Pada Sarkar v. <NAME> [1916] 44 Cal. 627, where it has been laid down that an execution <ORG> cannot question the validity of the decree and refuse execution though the decree was a nullity and passed without jurisdiction. <CITATION> A.I.R. 1928 Cal. 619, <NAME>, J., who was a party to the decisions in <NAME> v. <NAME>  14 C.L.J. 648 and <CITATION>  44 Cal. 627, enunciates the proposition of law that when a decree is void and a nullity it is not only the duty of the <ORG> which passed it to ignore it but of every <ORG> to which it is presented. Though the case in which this observation was made did not arise in execution, it is wide enough to cover a case like the present and is in conflict with the view expressed by the same learned Judge in the two previous cases above cited. This question has been recently considered by a Full Bench of the Patna High <ORG> in <CITATION>  4 P.L.J. 240, where as a review of the conflicting authorities it has been held that an execution <ORG> can only execute a valid decree, and a void decree ought to be disregarded without any formal proceedings to set it aside. The same view has been taken in other High <ORG>s. <CITATION>  17 All. 478, <NAME> v. <NAME>  15 Bom. 216 and M. Subramania v. <NAME>  38 Mad. 682.

4. As it is a matter of general importance and the view taken by this Court in the cases of <NAME> v. <NAME> [1911] 14 C.L.J. 648 and <CITATION>  44 Cal. 627 is not only in conflict with that accepted by the other <ORG> but also with the decisions in other cases of this Court to which we have referred, we are of opinion that the present state of the authorities being embarrassing to the lower Courts the law on the point should be settled by a Full Bench.

5. We accordingly submits the following question for the decision of the Full Bench:

Where a decree having been passed by a <ORG> having no jurisdiction to pass it is void and a nullity, is the execution <ORG> competent to question its validity and refuse to execute it? As the point has arisen in a second appeal the whole case is submitted to <ORG> for decision.

Walmsley, J.

6. This Reference is made in a first appeal from an order. The necessary facts are given in the Order of Reference and need not be repeated.

7. The question propounded is in these words: "Where a decree, having been passed by a <ORG> having no jurisdiction to pass it, is void, and a nullity, is the execution <ORG> competent to question its validity and refuse to execute it?"

8. The learned Judges who made the Reference are satisfied that the decree under consideration was made by a <ORG> that had no jurisdiction to make it, and that in consequence it is void and a nullity. It is not open to us therefore to consider any of the questions involved in those findings. We have to start by accepting the proposition that the <ORG> that made the decree had no jurisdiction to make it, and by that expression is meant that the <ORG> had not such territorial jurisdiction as would authorize it to make the decree, and not that having jurisdiction it exercised it erroneously. This distinction is of great importance, for with all respect I venture to think that the apparent conflict in reported cases is largely due to failure to keep this distinction clearly in view. It would be tedious to examine the numerous decisions, in detail, and it would not lead to any useful result. I think, it may be said that the correct view, and the view for which there is a strong cur-rent of authority, is that where the decree presented for execution was made by a <ORG> which apparently had not jurisdiction, whether pecuniary or territorial or in respect of the judgment-debtor's person to make the decree, the executing <ORG> is entitled to refuse to execute it on the ground that it was made without jurisdiction; within these narrow limits, I think that the executing <ORG> is authorised to question the validity of a decree.

9. As the question arises in a first appeal, we must return the case for final adjudication by the <ORG> which referred it, with the statement that our answer to the question propounded is in the affirmative.

<NAME>, J.

10. I agree.

Suhrawardy, J.

11. I agree.

<NAME>, J.

12. I agree.

Duval, J.

13. I agree.


CASE NO.: Appeal (civil) 4055 of 1998 PETITIONER: RAJASTHAN FINANCIAL CORPN. & ANR. RESPONDENT: THE OFFICIAL LIQUIDATOR & ANR. DATE OF JUDGMENT: 05/10/2005 BENCH: S.N. VARIAVA,TARUN CHATTERJEE & P.K. BALASUBRAMANYAN JUDGMENT:

J U D G M E N T P.K. BALASUBRAMANYAN, J.

1. Appellant No. 1, <ORG>, is a corporation constituted under Section 3 of The State Financial Corporations Act, 1951 (hereinafter referred to as "the SFC Act "). Appellant No. 2, <ORG>, is a deemed financial institution by virtue of exercise of power by <ORG> under Section 46 of the SFC Act. The appellants are the secured creditors of <ORG> (hereinafter referred to as, "the company-in- liquidation"). By an order dated 14.6.1994, the company judge of <ORG> ordered the company-in-liquidation to be wound up. <ORG> was directed to take charge of the assets of the company-in-liquidation. On 18.4.1995, <ORG> applied for directions to the company court. He sought permission to get the property valued by a valuer from the panel of valuers of <ORG>, and to sell the properties by public auction. He sought the issue of a direction to the appellants, the secured creditors, to advance Rs. 25,000/- each to <ORG> to meet the expenses for selling the assets of the company-in-liquidation on condition that the amounts would be reimbursed to the appellants on priority basis from the sale proceeds. The information about the filing of this application was conveyed by <ORG> to the appellants by communication dated 21.4.1995. Apparently, the appellants had no notice of the proceedings in liquidation and they, as secured creditors, now say that they want to stand outside the winding up. In their reply to <ORG>, the appellants indicated that they proposed to pursue the remedies available to them under Section 29 of the SFC Act. The appellants had obtained a valuation of the properties of the company-in- liquidation and according to the valuers, the value of the assets came to Rs. 92,56,000/-. In addition to opposing the report of <ORG>, the appellants also filed an application praying that as secured creditors standing outside the winding up, they may be permitted to realize the securities and apportion the net sale proceeds between them and <ORG>, another secured creditor, who was also entitled to payment pari passu with them. They undertook to pay over the dues of the workmen on the same being adjudicated by <ORG> to the extent of the availability of the funds out of the net sale proceeds of the properties of the company, in accordance with Section 529-A of the Companies Act. The company court rejected the application of the appellants. The company court took the view that the right available under Section 29 of the SFC Act had to be exercised consistently with the right of the workmen represented by <ORG> who was a charge-holder and ranked pari passu with the secured creditors, even if they stood outside the winding up. The company court held that in view of a valuation report already available, it was not necessary to have a fresh valuation. The Court permitted <ORG>, Appellant No.1, to invite offers for sale of the properties and directed it to finalize the same in consultation with <ORG>. It was directed that the reserve price would be fixed by the Company Judge on the report of <ORG>. The sale proceeds were to be retained by <ORG> until further orders. <ORG>, in the meantime, was to invite the claims of the workmen and was to assess the extent of the claim of the workmen under Section 529 of the Companies Act. Challenging this order, the appellants filed an appeal before <ORG> of <ORG>. <ORG> dismissed the appeal preferring to follow the earlier decision of that Court in <ORG> Vs. Official Liquidator [AIR 1993 Bombay 392]. It is feeling aggrieved by the dismissal of their appeal by <ORG>, that the appellants have filed this appeal by special leave before this Court.

2. It has to be noticed that even though the appellants could have proceeded under Section 29 or under Section 31 of the SFC Act, neither of the appellants has chosen to actually invoke those provisions or to approach the concerned <ORG> under Section 31 of the SFC Act. In other words, no proceeding under the SFC Act has been set in motion by the appellants even now. In this situation, it is seen straightaway that Section 32 (10) of the SFC Act has application. The said sub-Section reads:-

"32(10). Where proceedings for liquidation in respect of an industrial concern have commenced before an application is made under sub-section (1) of section 32 , nothing in this section shall be construed as giving to <ORG> any preference over the other creditors of the industrial concern not conferred on it by any other law."

On the face of it, it is apparent that no right is acquired by the appellants or no right has accrued to them or can accrue to them under Section 32 of the Act, unless any such right is conferred on the appellants by any other law in force. There is no plea that other than the SFC Act , any other law confers any additional right on the appellants. A mere right to take advantage of an enactment without any act done towards availing of that right cannot be deemed a right accrued. [See <NAME> Vs. Minister of Land (1895) AC 425]

3. On the facts of this case, the position is that proceedings in liquidation of the debtor company are going on and two secured creditors who could have had recourse to the SFC Act to proceed against its assets, but who did not, are standing outside the winding up and are claiming rights under the SFC Act by approaching the company court. The rights so claimed have to be considered in the light of Section 529-A of the Companies Act read with Section 529 of that Act.

4. When this appeal came up for hearing before two learned Judges, it was submitted that there was a conflict between the decisions in <ORG> Versus <ORG> and <ORG>. [(2000) 4 SCC 406] and in <ORG> Vs. <ORG> [(2003) 10 SCC 482]. The two learned Judges taking note of this submission and taking note of the importance of the question of law involved, placed the matter before a larger bench. That is how the matter has come up before us.

5. Learned Senior Counsel appearing for the appellants submitted that the appellants had special rights under the SFC Act and since there was no notice to them of the proceedings in liquidation and they were not parties to the order of winding up, they were entitled to proceed with the enforcement of their rights under the SFC Act and the company court was not justified in not permitting the appellants to sell the securities on their own and in directing them to associate <ORG> in the matter of sale and in the matter of disbursement of the proceeds among the creditors. Learned counsel submitted that <ORG> and <ORG> (supra) was an authority in support of the proposition that the SFC Act would prevail over the Companies Act , it being general law as against the special law protecting corporations, like the appellants, namely, the SFC Act . Learned counsel submitted that the decision in <ORG> Vs. <ORG> (supra) has not adverted to the earlier decision and had not properly understood the effect of the provisions of the SFC Act . Section 46B of the SFC Act gave the provisions of that Act, overriding effect. The claim of the appellants that they are entitled to sell the properties independent of <ORG>, therefore, deserves to be accepted. Learned counsel for <ORG>, on the other hand, submitted that on the facts and in the circumstances of the case, <ORG> was justified in directing the sale to be held under the supervision of <ORG> and in directing <ORG> to hold the sale proceeds until further orders from the company court and that the proceeds have to be distributed only in terms of Section 529-A of the Companies Act. Learned counsel further submitted that no interference was called for with the decision of <ORG>.

6. There is no doubt that the appellants are financial corporations within the meaning of the SFC Act conferred with the right to proceed under that Act, to take over the management and possession of the assets of the debtor, here the company-in-liquidation, or to enforce their claims by resort to Section 31 of the SFC Act by approaching the concerned <ORG>. The appellants not having invoked the provisions of the SFC Act , stand only in the shoes of secured creditors entitled to enforce their security. A liquidation of the company, the debtor, has intervened and what are the consequences of the order for winding up is the question to be considered. Once winding up of a company is resorted to, Sections 529 and 529-A of the Companies Act get attracted. Section 528 provides for debts of all descriptions to be admitted to proof. Section 529 makes applicable the rules of insolvency in the winding up of insolvent companies. The rules with regard to debts provable, the valuation of annuities and future and contingent liabilities, and the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent apply. Section 529(1)(c) of the Act deals with the rights of creditors. The same reads :

"529(1)(c). the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent:

Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realize his security, -

(a) the liquidator shall be entitled to represent the workmen and enforce such charge;

(b) any amount realized by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of workmen's dues; and

(c) so much of the debt due to such secured creditor as could not be realized by him by virtue of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, whichever is less, shall rank pari passu with the workmen's dues for the purposes of Section 529A "

7. The proviso above quoted and Section 529-A of the Act were inserted by Amendment Act 35 of 1985 with effect from 24.5.1985. Section 529-A also can be set out conveniently at this stage. It reads :

"529A. Overriding preferential payment.  Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company

(a) workmen's dues; and

(b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of Section 529 pari passu with such dues, shall be paid in priority to all other debts.

(2) The debts payable under clause (a) and clause

(b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.

A combined reading of Section 529-A and 529 indicates that notwithstanding anything contained in any other law for the time being in force or in the Companies Act itself, there is a preferential payment provided for workmen's dues and debts due to the secured creditors to the extent such debts rank under clause (c) of the proviso to Section 529(1) pari passu with such dues. Therefore, when the assets of the company are sold and the proceeds realized, the debts by way of workmen's dues and that of the secured creditors have to be paid in full if the assets are sufficient to meet them and if they are not sufficient, in equal proportions.

8. In Karnataka State Financial Corporation Vs. <ORG> and ors. [(1991) 70 Comp. Cas. 38], <ORG> held that rights under Section 29(1) of the SFC Act were available to the corporation only when the company is in charge and control of its assets and not when the company has lost control over its assets by the intervention of the company court and the Official Liquidator. Section 29 of the SFC Act did not justify a contention that where the creditor is a financial corporation, the assets of the company-in-liquidation pursuant to the order of the company court are taken outside the purview of the jurisdiction of the company court. On a proper construction of Sections 529 and 529A of the Companies Act, the workmen's dues and the debts due to the secured creditors to the extent of clause (c) of sub-Section (1) of Section 529 , should be worked out in the light of the illustration given under Section 529 and that could be ordered only by the company court in exercise of his powers under Section 446(2)(b) and (d) of the Companies Act .

9. In Kerala Financial Corporation Vs. Official Liquidator and anr. [(1991) 71 Comp. Cas. 324], <ORG> held that Section 529A of the Act prevailed over Section 29 of the SFC Act in case of a conflict and since the workmen's dues which rank pari passu with the dues of the secured creditors will have to be paid from the proceeds of the assets of the company including the security given to the secured creditors, any dispute as to the apportionment of workmen's dues and the amount due to the financial corporation and other related questions could not be left to be decided by the financial corporation. Therefore, in the best interests of all concerned, the sale of the assets had to be conducted by the Official Liquidator under the supervision of the company court. It may be noted that in that case, the financial corporation had sought permission of the company court to initiate proceedings under Section 29 of the SFC Act.

10. In <ORG>, Bombay Vs. The Official Liquidator [AIR 1993 BOMBAY 392], <ORG> took the view that rights conferred on a financial corporation as a mortgagee under Section 29 of the SFC Act are not obliterated when the company is in winding up. The statutory right under Section 29 to sell the property, had to be exercised consistently with the rights of a pari passu chargeholder in whose favour a statutory charge is created by the proviso to Section 529 of the Companies Act when the company is in liquidation. Therefore, such a power can be exercised only with the concurrence of the Official Liquidator and the Official Liquidator is required to take the permission of the <ORG> before giving such concurrence since he is an officer of the <ORG> and is required to act under the directions of the <ORG> while exercising his powers on behalf of the workers. The <ORG> held that there was no inconsistency between the SFC Act and Section 529 read with Section 529A of the Companies Act and hence Section 46B of the SFC Act was not attracted.

11. In <ORG> (In Liquidation) Vs. <ORG> [(1994) 81 Comp.Cas.19], a Division Bench of <ORG> held that the right of a secured creditor of a company-in-liquidation, there the <ORG>, to realize its security by taking possession of properties of the company subjected to security and selling them by standing outside the winding up, cannot be said even remotely to be affected by the amendment of Section 529 and the insertion of Section 529-A of the Companies Act, 1956 by Act 35 of 1985. It was held that the permission granted to the <ORG>, a secured creditor of the company-in-liquidation, to sell the assets of the company which constituted security for repayment of loans advanced by the <ORG> to the <ORG> and which the <ORG> had already taken into possession before the winding up was ordered, and the permission to realize the dues of the <ORG> subject to payment of the workmen's dues as undertaken by it, by standing outside the winding up, was well in accordance with the provisions of Section 529 , as amended, and Section 529-A as inserted in the Companies Act , 1956, and Section 29 and Section 46B of the SFC Act.

12. In <ORG> Vs. Official Liquidator and ors. [(1996) 87 Comp. Cas. 658], <ORG> doubted the correctness of the decision of <ORG> in Kerala Financial Corporation Vs. Official Liquidator and anr. (supra) and followed the decision of <ORG> in <ORG> (In Liquidation) Vs. <ORG> (supra). The Court held that the right of the secured creditor to deal with his security and realize the same without intervention of the court, remains unaffected notwithstanding such vesting, or property coming in the custody of the company court. To the extent of the charge or mortgage, the property does not come to the court and is not available for distribution of dividends generally unless the mortgagee relinquishes it or the surplus, if any, comes to the court. Enforcement of such right remains outside the insolvency proceedings or winding up proceedings. It was held that the power of recovery of loans by State Financial Corporations under Section 29 of the SFC Act was not in conflict with Section 529A of the Companies Act, 1956.

13. In <ORG> Vs. <ORG>. [(1996) 4 SCC 165], while considering the question as to when should a company court grant leave to a secured creditor to proceed with his suit against the company after an order of winding up was made, and on what conditions the permission should be granted, this Court held that in the case of conflict in power between the Official Liquidator appointed by the company court and the Receiver appointed by <ORG> in a suit filed by the secured creditor, the interest of the Official Liquidator should have precedence. The Court observed that the liquidator looks after the interests of a large segment of creditors along with that of workmen, whereas the Receiver appointed in a creditor's suit confines his concern to the interest of the particular secured creditor at whose instance, the Receiver had been appointed.

14. In <ORG> Vs. <ORG>. (supra), the question of jurisdiction of <ORG> under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, vis-`-vis the company court arose for decision. This <ORG> held that even where a winding up petition is pending, or a winding up order has been passed against the debtor <ORG>, the adjudication of liability and execution of the certificate in respect of debts payable to banks and financial institutions, are respectively within the exclusive jurisdiction of <ORG> and <ORG> under that Act and in such a case, the company court's jurisdiction under Sections 442 , 537 and 446 of the Companies Act stood ousted. Hence, no leave of the company court was necessary for initiating proceedings under the Recovery of Debts Act . Even the priorities among various creditors, could be decided only by <ORG> in accordance with Section 19(19) of the Recovery of Debts Act read with Section 529- A of the Companies Act and in no other manner. The <ORG> took into account the fact that Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was a legislation subsequent in point of time to the introduction of Section 529A of the Companies Act by Act 35 of 1985 and it had overriding effect. But it noticed that by virtue of Section 19(19) of the Recovery of Debts Act, the priorities among various creditors had to be decided by <ORG> only in terms of Section 529A of the Companies Act and Section 19(19) did not give priority to all secured creditors. Hence, it was necessary to identify the limited class of secured creditors who have priority over all others in accordance with Section 529-A of the Companies Act. The <ORG> also held that the occasion for a claim by a secured creditor against the realization by other creditors of the debtor under Section 529A read with proviso (c) to Section 529(1) of the Companies Act could arise before <ORG> only if the concerned creditor had stood outside the winding up and realized amounts and if it is shown that out of the amounts privately realized by it, some portion had been rateably taken away by the liquidator under clauses (a) and (b) of the proviso to Section 529(1) . The <ORG> has not held that Section 529-A of the Companies Act will have no application in a case where a proceeding under the Recovery of Debts Act has been set in motion by a financial institution. The <ORG> here was essentially dealing with the jurisdiction of <ORG> in the face of Sections 442 , 537 and 466 of the Companies Act.

15. In <ORG> Vs. Official Liquidator [(2000) 7 SCC 291], this Court held that the Company Judge, while permitting the financial <ORG> to stay outside the liquidation proceedings, rightly imposed conditions to ensure that the <ORG> would : (i) discharge its liability due to workers under Section 529-A of the Companies Act, (ii) inform the Official Liquidator in advance about the proposed sale of properties of the indebted companies, and (iii) would obtain the Court's permission before finalizing the tenders. This Court specifically overruled the view taken by <ORG> that it was not necessary for the Financial <ORG>s to seek permission of the company court to stay outside the winding-up proceedings. It was held that Sections 529(1) and 529-A of the Companies Act had overriding effect and the 1985 amendment being later in point of time, the non-obstante clause therein would prevail over the non-obstante clause contained in Section 46B of the SFC Act.

16. In <ORG> Vs. <ORG> [(2003) 10 SCC 482], this Court considered the correctness of the views expressed by <ORG> and <ORG>. This Court held that a right is available to a financial corporation under Section 29 of the SFC Act against a debtor, if a company, only so long as there is no order of winding up. When the debtor is a company in winding up, the rights of financial corporations are affected by the provisions in Sections 529 and 529-A of the Companies Act. It was also held that the proviso to Section 529 of the Companies Act creates a "pari passu' charge in favour of the workmen to the extent of their dues and makes the liquidator the representative of the workmen to enforce such a charge. The decision of <ORG> in <ORG>. Vs. <ORG> [AIR 1993 Bom 392] was approved. The reference to a larger bench was occasioned by the fact that the decision in <ORG> Versus <ORG> and <ORG> (supra) was not adverted to in this decision. This decision recognizes that, whether a creditor is standing outside the winding up or not, the distribution of the proceeds has to be in terms of Section 529 of the Companies Act read with Section 529A of that Act in a case where the debtor is a company- in-liquidation. As far as we can see, there is no conflict on the question of the applicability of Section 529A read with Section 529 of the Companies Act to cases where the debtor is a company and is in liquidation. The conflict, if any, is in the view that <ORG> could sell the properties of the Company in terms of the Recovery of Debts Act . This view was taken in <ORG> Versus <ORG> and <ORG> (supra) in view of Recovery of Debts Act being a subsequent legislation and being a special law would prevail over the general law, the Companies Act . This argument is not available as far as the SFC Act is concerned, since Section 529A was introduced by Act 35 of 1985 and the overriding provision therein would prevail over the SFC Act of 1951 as amended in 1956 and notwithstanding Section 46B of the SFC Act. As regards distribution of assets, there is no conflict. It seems to us that whether the assets are realized by a secured creditor even if it be by proceeding under the SFC Act or under the Recovery of Debts Act , the distribution of the assets could only be in terms of Section 529A of the Act and by recognizing the right of the liquidator to calculate the workmen's dues and collect it for distribution among them pari passu with the secured creditors. The Official Liquidator representing a ranked secured creditor working under the control of the company court cannot, therefore, be kept out of the process.

17. Thus, on the authorities what emerges is that once a winding up proceeding has commenced and the liquidator is put in charge of the assets of the company being wound up, the distribution of the proceeds of the sale of the assets held at the instance of the financial institutions coming under the Recovery of Debts Act or of financial corporations coming under the SFC Act , can only be with the association of the Official Liquidator and under the supervision of the company court. The right of a financial institution or of <ORG> or that of a financial corporation or the <ORG> which has been approached under Section 31 of the SFC Act to sell the assets may not be taken away, but the same stands restricted by the requirement of the Official Liquidator being associated with it, giving the company court the right to ensure that the distribution of the assets in terms of Section 529A of the Companies Act takes place. In the case on hand, admittedly, the appellants have not set in motion, any proceeding under the SFC Act . What we have is only a liquidation proceeding pending and the secured creditors, the financial corporations approaching the company court for permission to stand outside the winding up and to sell the properties of the company-in-liquidation. The company court has rightly directed that the sale be held in association with the Official Liquidator representing the workmen and that the proceeds will be held by the Official Liquidator until they are distributed in terms of Section 529A of the Companies Act under its supervision. The directions thus, made, clearly are consistent with the provisions of the relevant Acts and the views expressed by this <ORG> in the decisions referred to above. In this situation, we find no reason to interfere with the decision of the High <ORG>. We clarify that there is no inconsistency between the decisions in <ORG> Versus <ORG> and <ORG> (supra) and in <ORG> Vs. <ORG> (supra) in respect of the applicability of Sections 529 and 529A of the Companies Act in the matter of distribution among the creditors. The right to sell under the SFC Act or under the Recovery of Debts Act by a creditor coming within those Acts and standing outside the winding up, is different from the distribution of the proceeds of the sale of the security and the distribution in a case where the debtor is a company in the process of being wound up, can only be in terms of Section 529-A read with Section 529 of the Companies Act. After all, the liquidator represents the entire body of creditors and also holds a right on behalf of the workers to have a distribution pari passu with the secured creditors and the duty for further distribution of the proceeds on the basis of the preferences contained in Section 530 of the Companies Act under the directions of the company court. In other words, the distribution of the sale proceeds under the direction of the company court is his responsibility. To ensure the proper working out of the scheme of distribution, it is necessary to associate the Official Liquidator with the process of sale so that he can ensure, in the light of the directions of the company court, that a proper price is fetched for the assets of the company in liquidation. It was in that context that the rights of the Official Liquidator were discussed in <ORG> (supra). <ORG> and the District court entertaining an application under Section 31 of the SFC Act should issue notice to the liquidator and hear him before ordering a sale, as the representative of the creditors in general.

18. In the light of the discussion as above, we think it proper to sum up the legal position thus:-

i) <ORG> acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in- liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the liquidator appointed by <ORG> and after hearing him.

ii) <ORG> entertaining an application under Section 31 of the SFC Act will have the power to order sale of the assets of a borrower company-in- liquidation, but only after notice to the Official Liquidator or the liquidator appointed by <ORG> and after hearing him.

iii) If a financial corporation acting under Section 29 of the SFC Act seeks to sell or otherwise transfer the assets of a debtor company-in-liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the company court and acting in terms of the directions issued by that court as regards associating the Official Liquidator with the sale, the fixing of the upset price or the reserve price, confirmation of the sale, holding of the sale proceeds and the distribution thereof among the creditors in terms of Section 529A and Section 529 of the Companies Act.

iv) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the concerned creditor is to approach the company court for appropriate directions regarding the realization of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-in-liquidation.

19. Now reverting back to the case on hand, we find that the directions issued by the company court are in the interest of all the creditors and are well within its jurisdiction. But we find merit in the submission that the company court was not justified in not ordering a fresh valuation of the properties. Having regard to the lapse of time, we are satisfied that a fresh valuation is necessary. We direct the company court to get a fresh valuation done by a valuer from the panel of valuers of <ORG>. The other directions issued by the company court are affirmed.

21. The appeal is thus disposed of affirming the directions issued by the company court, but with a modified direction for getting a fresh valuation of the properties as indicated in the earlier paragraph.

22. We make no order as to costs.


<ORG>, J.

1. It does not seem have been intended by the <ORG> that any appeal should be entertained against an order made under Section 526 of the Code of Civil Procedure. The interference of <ORG> by an exercise of its extraordinary jurisdiction must now be limited according to the decision in <CITATION> . 7 Bom. 341, and this will, in general, prevent an examination of the view taken by the Subordinate Judge of the cause or ground shown under Section 526 on which he has based his assent or refusal to file an award. As his decision is thus clothed with finality, there is the strongest reason, on the principle laid down in the beginning of the judgment just referred to, why <ORG> should scrutinize with care, from the point of view of its legality, the exercise, by a Subordinate Judge, of a power of so great consequence. If, therefore, there has in any case been a disregard of the law amounting to an excess of jurisdiction, or a perversion of the purpose of the <ORG>, this Court must hold itself ready to interfere where no other remedy is available.

2. In the present case it is urged that as the award gave to one of the parties costs, and the submission did not leave this question to the arbitrators, the Subordinate Judge was bound to refuse to file the award as open to an objection of a kind specified in Section 520 of the Code of Civil Procedure. We think, notwithstanding the arguments of Mr. <NAME>, that the submission did not extend to the matter of costs. The Subordinate Judge, indeed, did not think it did; he relied on the arbitrators having as such, an implied power to deal with the costs. It is certain, however, that they could not in a private arbitration have such a power, unless it was given to them, and it must be taken that their award was open to the objection raised by the applicant <NAME>. The Subordinate Judge was bound to yield to that objection. It appears from <NAME> v. <NAME> I.L.R. 3 I.A. 209, 213, that <ORG> held that Section 327 of the Act, VIII of 1859, did not embody the earlier sections of the chapter in which it was placed. Section 526 of the present Code specifies the causes enumerated in Sections 520, 521 as those which may be urged against filing an award, but it does not say that the award may be remitted, nor without express authority can a <ORG> send back an award to private arbitrators over whose proceedings it has no control. Its only course, then, if a reasonable ground is shown (or a conclusive cause according to <NAME> v. <NAME>s I.L.R. 6 Bom. 663 is to refuse to file the award. This does no irreparable harm, since the party to be benefited can bring a suit on the award thus rejected." In. the present case, however, there has been a simple excess in the award. The party who would benefit by this (<NAME>) expresses his readiness to renounce the benefit rather than, be put to the expense of a suit, and it seems that complete justice will thus be done. When we are called on, then, by an exercise of our extraordinary jurisdiction, to set aside the Subordinate Judge's order for filing the award, we think it preferable to direct that the award stand good only for the remainder after its direction as to costs has been rejected, and that the decree be drawn in accordance with it, as it would be if it contained no direction as to costs.

3. The parties severally are to bear their own costs of this application. The costs, in <ORG> of Dagdusa, are to be paid by <ORG>.