Insolvency proceedings taken by mortgagor would not bind the secured creditor.

1.The plaintiff is the appellant.

2.The plaintiff's suit is one for permanent injunction.

3.The plaintiff's case is that the suit property originally belonged to one Rajamani Devadoss, who had mortgaged the same to the 1st defendant and he having defaulted to discharge the mortgage debt, the 1st defendant took steps for realisation of the amount, under the Tamil Nadu Cooperative Societies Act to pass an award in ARC.No.139/1970-71 and an award was passed on 23.8.1971. Pursuant to the same, EP.No.24/1972-73 was filed before the Regional Deputy Registrar of Cooperative Societies (Housing) Cuddalore and the property was brought to sale in public auction and the plaintiff purchased the property in the public auction held on 24.1.1974. The plaintiff filed EA.No.1317/1975 on the file of the District Munsif Court, Trichy and took possession of the property through court on 5.11.1975. After taking possession, he made improvements at heavy cost. As such, the plaintiff is the bonafide purchaser of the property for value. While so, the plaintiff received a phone message from the 1st defendant, stating that the 2nd defendant, viz. the Official Receiver, Trichy is bringing the property again for sale on 20.7.1983. On enquiry, the plaintiff came to know that the debtor in ARC.No.139/1970-71, Rajamani Devadoss filed a petition for adjudicating him as an insolvent before the Sub Court, Trichy, in IP.No.134/1972, in which the 2nd defendant filed a petition and obtained an order to bring the property for sale, for the benefit of General Body of Creditors. It is stated that the 2nd defendant was aware of the award proceedings taken by the 1st defendant and also the sale held in favour of the plaintiff and as such, he cannot bring the property for sale.

4.The 1st defendant, in his written statement, has stated that as per the directions in IA.No. 540/1975 in IP.NO.134/1972 and CMA therefrom, this defendant is bringing the suit property to sale again after a notice to the Official Receiver as per the award. The prior execution sale by this defendant was held bonafide as per the rules and regulations laid down by the Cooperative Societies Act.

5.The 2nd defendant, the Official Receiver, in his written statement, has stated that the proceedings taken by the 1st defendant to bring the property for sale and the sale held on 24.1.1974 are not valid. But, however, it is admitted that the plaintiff took possession of the property, but, the improvements made were not admitted. It is stated that the plaintiff was aware of the proceedings in IP.No.134/1972 and also in IA.No.540/1975, filed by the defendants to declare that the sale held by the 1st defendant is null and void and the insolvency court declared the sale held on 24.1.1974 as null and void and the said order is valid.

6.The trial court did not accept the case of the plaintiff and dismissed the suit and the same was confirmed in the appeal. Aggrieved by the same, the plaintiff has preferred this appeal.

7.Heard the learned advocates for the appellants and the respondents.

8.The learned advocate for the appellants has raised three folded contentions: (1) That he was not a party to the insolvency proceedings and therefore, the said proceedings taken in his absence are not valid and binding upon him, (2) That the 1st defendant is the secured creditor, who brought the property for sale and the same is not affected by the insolvency proceedings, and (3) That the appellant is a court auction purchaser and purchased the property in good faith and therefore, he is entitled to the benefit of Section 51(3) of the Provincial Insolvency Act, 1920.

9.Now, let us consider the case of the appellant, for which certain dates are important. Rajamani Devadoss by executing a mortgage in favour of the 1st defendant borrowed the amount and for the non-payment of the amount, the property was brought to sale by the 1st defendant. The award was passed on 23.8.1971 and the date for the sale of the property was fixed o