1993 Supreme(Bom) 351

IN THE HIGH COURT OF BOMBAY
Smt. Sujata Manohar and N.D. Vyas, JJ.
Bakul M. Kapadia.... Appellant.
Versus
Bank of India and others.... Respondents.
Appeal No. 153 of 1993 in Notice of Motion No. 2781 of 1992 in Suit No. 2218 of 1983, decided on 8-7-1993.
Advocates appeared :
M.S. Singhvi i/b. Miss Jyoti N. Shah, for the appellant.
Saleh Doctor with N.G. Thakkar i/b. Little Co., for respondent No. 1.
T.P. Shami representative of Official Liquidator, for respondent No. 2.
S.S. Phadnis, for workers.
A.R. Bapat, Court Receiver present.

Headnote:Order 34, Rule 40-See Transfer of Property Act, 1882, Section 60.

       Order 34, Rule 40-Court-Power of to pass first decree itself as executable decree by consent.

       Held, Order 34 of the Civil Procedure Code is not exhaustive and it is open to the parties even in suit for sale brought on account of a simple mortgage to settle by compromise the form of a decree, e.g., it is open to the Court consent of parties to pass the first decree as an executable decree and thus do away with the necessity of passing a preliminary decree and then a final decree as provided in Order 34. Rule 4. In the present case o the mortgagor has acquiesced in security being sold by the mortgagee at the interim stage. There are no directions given as yet by the Court in connection with the distribution of sale proceeds, nor has the Court determined the amount which the Court Receiver is entitled to appropriate towards the mortgagees claim. In the present case both the mortgagor and mortgagee have agreed that the securities should be sold so that the net sale proceeds can be realised appropriately distributed under the directions of the Court after ascertaining the claim of the mortgagee in view of the fact that the mortgagor-company has been wound up and the Official Liquidator who is incharge of the assets of the mortgagor-company is required to realise the assets and distribute them in accordance With law.

       Order 40, Rule 1-See Companies Act, 1950, Sections 3 and 457.

       COMPANIES ACT, 1956

       Sections 3 and 457-Civil Procedure Code, 1908, Order 40, Rule 1 - Transfer of Property Act, 1882, Section 58-Company under litigation - Mortgaged property of-Order for sale of property-Whether individual shareholder can be heard in?

       The mortgagor in the present case is a Private Limited Company registered under the Companies Act, 1956. Such a company has a separate legal existance. It is the Company which has created a mortgage in respect of its property in favour of the 1st respondent Bank. Therefore, it is the Company as such mortgagor which is entitled either to redeem the mortgage or to contest the mortgage suit of the 1st respondent Bank or to arrive at such arrangement as it may be considered appropriate in connection with this with the 1st respondent Bank. An individual shareholder cannot be considered as a mortgagor at nor is an individual shareholders entitled to redeem a mortgage created by the private limited Company in favour of a third party. He has no claim to the equity of redemption of such mortgage. As a shareholder, therefore, the appellant cannot be heard in a mortgage suit.

       It is next contended by the appellant that he is also a guarantor of the debt incurred by the 2nd respondent Company. As such guarantor, the appellant is undoubtedly entitled to be suborgated to the right of the mortgagee if he discharges the mortgage debt. In the present case, the question of subrogation does not arise because the guarantor has not discharged the mortgage debt of the principal debtor, nor has he even offered to do so. In fact it is stated very frankly by Counsel for the appellant that he is not in a position to do so. The question, therefore, of the appellant being entitled to the sernrity created in favour of the mortgagee by stepping into the shoes of the mortgagee does not arise.

       Section 58-See Companies Act, 1956, Sections 3 and 457.

       Section 60-Civil Procedure Code, 1908, Order 34, Rule 40-Courts order to sell mortgaged property of company-It was assumed to be wrong when it cannot be said to be nullity ?

       Even otherwise, on merits, there is no reason for setting aside the order of 10th August 1994 to sell mortgaged property. It has been strongly urged by the Counsel for the appellant that equity of redemption can be extinguished only by act of parties or a decree of the Court. He relied upon Section 60 of the Transfer of Property Act and Order 34 of the Civil Procedure Code. He has submitted that in the present case, there is no decree passed in the mortgage suit which would extinguish the equity of redemption and, therefore, no order could have been passed directing the Court Receiver to sell the property. He, therefore, submits that the order dated 10th August 1994 is a nullity and must be ignored.

       This argument is fallacious. The Court may assume for the sake of argument that the order directing the Court Receiver to sell the property was wrongly passed or that this order is contrary to law Even so, such an order cannot be considered as a nullity. It is only when the Court has no inherent jurisdiction to pass an order that the order become a nullity. In the present case, the mortgage suit is filed in the Court which had jurisdiction to decide the suit The order of sole was also passed by the Court which clearly had jurisdiction in the matter. At the highest, the order may be considered as wrong in law. But this does no tender such an order a nullity. It is binding on all parties un less it is set aside. The remedy in such a case for the aggrieved party is to file an appeal. But in this case, nothing has been done and the order has been allowed to stand for nine years and has been acted upon by all parties including the appellant. There is no reason why such an order should be treated as a nullity or should be ignored. This contention has, therefore, no merit.