Judgement

Appeal (No. 6 of 1944) from a judgment and decree of the Chief Court (March 17, 1942) which affirmed a judgment and decree of the Court of the Civil Judge at Lucknow (May 23, 1940).

The following facts are taken from the judgment of the Judicial Committee. On July 2, 1931, the appellant executed a simple mortgage deed for Rs. 1,50,000 in favour of the respondent bank. Some portion of that sum was paid off, but on August 25, 1934, the bank instituted a mortgage suit against the appellant in the Court of the Subordinate Judge of Lucknow to recover Rs.78,542-1-3 by sale of the mortgaged property. The bank also filed an application with the plaint praying for an attachment before judgment and the appointment of a receiver in respect of a portion of the hypothecated property, and on September 11, 1934, the Court of the Civil Judge passed an order granting that application and appointing a receiver.

On September 18, an agreement was entered into between the parties whereby the exploitation rights in four films were to be sold at Rs. 12,500 each and the amounts to be credited to the appellant in part payment of the mortgage debt. By cl. 3 of that agreement the respondent was to credit to the mortgage account of the appellant the sum of Rs.12,500 for each film as soon as two prints of any of the four films should be delivered to the respondent, and the respondent was to enter satisfaction in the decree in the court to that extent immediately on getting delivery. Subsequently, at a date not stated in the record, the appellant sold to the respondent the exploitation rights in another film for Rs. 17,500 of which Rs. 10,000 was paid in cash and Rs.7,500 was to be credited to the mortgage debt, and later still it was agreed that the transfer of the rights in three out of the four original films should be cancelled and that the rights in a sixth film should be transferred in their place, but at a price of Rs.75,000. Those sums were to be in satisfaction of the mortgage debt, and if there should be any excess in the hands of the respondent it was to be handed over to the appellant in cash.

On November 30, 1934, whilst those arrangements were being made, a preliminary decree was passed in favour of the respondent against the appellant for a total sum of Rs.83,359-6-11, with future interest at six per cent, per annum from May 31, 1935. The exact date when the agreements varying that of September 18, 1934, were made did not appear, but from a statement made by the appellant in the Chief Court of Oudh, from the arguments and contentions presented before it and the way in which the matter was dealt with by the court, it would appear that they were entered into after the preliminary decree. In any case it was plain that the delivery of the first and second films took place after that date, and the third still awaited delivery and had not yet been taken over by the respondent.

On October 15, 1935, the respondent went into liquidation and an official liquidator was appointed by the court. On September 29, 1937, the official liquidator filed an application for the passing of the final decree. The appellant resisted that application on the ground that the entire claim of the respondent had been satisfied by the agreements above mentioned and their fulfilment by putting the films referred

Law. Rep. 72 Ind. App. 277 ( 1944- 1945) Madan Theatres, Limited V. Dinshaw and C ompany, Limited

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to at the disposal of the respondent. In reply the liquidator did not admit knowledge of the agreement of September 18, maintained it was a nullity and unenforceable, and was made during the pendency of the suit and before the final decree was passed, that no payment of the amount due had been made in the manner set out in the preliminary decree, that the alleged payments or adjustments had not been certified as required under Or. 21, r. 2, of the Code of Civil Procedure, that as payment was denied no inquiry as to payment could now be made, and, finally, t