| Headnote |
U.P. Encumbered Estates Act, 1934-Sections 7, 14(7), 18, 20, 24, 43 and 44-Restrictions imposed by the Act-Agreement of sale-Whether such restriction-Agreement to sell-Not a transfer of right in immovable property-Mortgage of the property-Rights of mortgage whether extinguished by its merger into a decree-Rights of mortgagee when revived. The respondent entered into an agreement to sell the house in dispute to the appellant on May 5, 1958. Earlier he had made an application to the Collector under Section 4 of the U .P. Encumbered Estates D Act (U .P. Act No. XXB of 1934), which had been transmitted to the Special Judge under Section 6 of the Act and pursuant to bis application under Section 24 of the Act, the house in dispute had been exempted from sale in the proceedings under the Act on March 26, 1943. Subsequent to the agreement, be made an application for including this house also in the property to be sold under the proceedings of the Act. The E appellant objected to it. By bis order dated 23rd June, 1961, the Collector rejected this request on the ground that since the house in dispute had already been exempted by the order dated March 26, 1943, that order could not be re-opened. There was a mortgage of this property by the predecessors of the respondent, which was also considered as a claim under Section 14 of the Act and a decree in favour of the mortgagee was passed by the Special Judge under clause (7) of Section 14 of the Act. In view of Section 18 the decree remained only as a money decree and the rights of the mortgagee came to an end. The appellant filed a suit against the respondent for specific performance of the contract of sale of the house in dispute. The trial court decreed the snit and on appeal, the first appellate court also maintained the decree but on second appeal, the High Court held that as permission to sell was refused under Section 7, the contract of sale would be hit by Section 23 of the Contract Act and set aside the decree passed in favour of the appellant. In the appeals, it was submitted by the appellant that although permission for sale of the house under Section 7 was rejected on June 14, 1945, the prohibition under Section 7 will not apply to an agreement for sale, that as the proceedings before Special Judge had come to an end, the objection pertaining to Section 7 for passing of a decree under Specific Relief Act for specific performance will not be available, that if the debts remained to be satisfied still the sale proceeds could be kept in deposit for being distributed to' the creditors, and, therefore, it could not be said that a decree for specific performance could not be passed, that the agreement to sell is not covered by anyone of the restrictions specified in sub-clauses (2) and (3) of Section 7 and, therefore, the agreement which was entered into in 1958 could not be said to be bad in law. On behalf of the respondent it was contended that as the order dated May 7, 1976 of the Collector was after the judgment of the High Court, it could not be said that no proceedings were pending under the Act, as the last order passed was on July, 7, 1975, that the language of Section 7 sub-clause (4) was wide enough and even an agreement to sell would be affected by the provisions of Section 7, and a transfer under decree could also be void if it was in contravention of this Section, that the rights of a mortgagee survived inspite of an order passed under Section 24 or inspite of an order under clause (7) of Section 14 having been passed, and that though the rights of the mortgagee may be extinguished but so long as the proceedings were pending they were not completely extinguished. |
