D.Y. Chandrachud, J.
1. The Central Bank of India, which is the appellant is these proceedings, instituted Special Civil Suit No. 52/1972 against Messrs R.S.G. Agrawal, a partnership firm and others including the partners of the firm for the recovery of the outstanding dues of the bank on account of a loan sanctioned and disbursed to the borrower. The suit was decreed on 30th July, 1977 by the learned Joint Civil Judge, Senior Division, Nagpur. By the judgment and order of the trial Court, the defendants were directed to pay an amount of Rs. 5,79,759.64 to the bank together with future interest at the rate of 10.5% per annum until realisation. The decree was passed against each one of the seven defendants jointly and severally. The trial Court directed that it would be open to the bank to sell by public auction the stock of Manganese Ore and Iron Ore if there was any in existence and available for sale as described in Schedule A of the plaint. The sale proceeds were directed to be credited towards the decretal amount. No appeal was preferred by the judgment debtors. The judgment and order of the trial Court attained finality.
2. Among the securities that had been held by the appellant-bank was a deed of hypothecation which was executed in its favour by the borrowers on 3rd March, 1969. The schedule to the deed of hypothecation contained a description of the goods which were hypothecated in favour of the bank and provided as follows:
'All tangible moveable property such as products, stock in trade and goods of the borrowers which now or hereafter from time to time during this security shall be brought in, stored or be in or about the premises warehouses or godowns of the borrowers in Vizag Port Sukil or anywhere else. Stock of Manganese Ore.'
3. After the suit instituted by the appellant-bank was decreed, the judgment debtors brought to the notice of the bank that the 7th respondent herein had, without the knowledge and consent of the bank, sold a part of the hypothecated goods consisting of Iron Ore to third parties and had realised the proceeds thereof. Thereupon the bank instituted execution proceedings in the form of special Darkhast No. 75/1978. The bank as decree holder moved an application under Order I, Rule 10 of the Code of Civil Procedure, 1908 for the impleadment of the 7th respondent as a party to the execution proceedings together with an application under Order XXIX, Rules 1 and 2, but it has been stated that those proceedings came to be rejected on 23rd February, 1979. Interim applications were also filed on behalf of the appellant in the course of the execution proceedings. Amongst them, was an application for the appointment of a Receiver to take charge and custody of the hypothecated property; an application for a direction to the Collector of Chandrapur, not to allow the removal of the hypothecated goods and an application for a direction to the Station Master of the Alewahi Railway Station directing him not to allow the removal of the goods. These applications were allowed on 5th May, 1979. The Executing Court appointed a Receiver to take possession of the stock of Iron Ore, which forms the subject matter of dispute in these proceedings. An order was also passed by the Executing Court restraining the Collector from allowing removal of the goods, and similarly a direction was issued to the Station Master of the Railway Station at Alewahi, not to allow the 7th respondent or anyone else to remove the goods.
4. The proceedings before this Court arise out of an application which was filed by the 7th respondent before the Executing Court, in which he prayed that the prohibitory order which had been passed should be vacated; that the Collector of Chandrapur and Station Master Alewahi, be directed to allow him to remove the stock of Iron Ore and that there be a direction to the Receiver to ascertain the exact quantity of Iron Ore alleged to have been raised by the judgment debtors and to desist from interfering with the right, title and interest of the 7th respondent over the stock of Iron Ore lying at the mines and at the railway siding.
5. The contention of the 7th respondent in the application which was filed before the Executing Court was that one D.T. Punjabi was the original lessee of the State Government in respect of the mines at Lohara and that under an agreement with the lessee the 7th respondent raised Iron Ore from the mines since 1959 and that 'huge stocks' or Iron Ore had been raised by the 7th respondent which were lying at various sites of the mines. According to the 7th respondent, there was a dispute between the original lessee and him, which led to the filing of a suit against him. In that suit, being Regular Civil Suit No. 473/1961, the learned Joint Civil Judge, Junior Division, was stated to have given a finding to the effect that the 7th respondent alone was the owner of the Iron Ore lying at the Lohara Mines and that the action of the Government in taking possession thereof was erroneous. In pursuance thereto, it was stated, the Government had instructed the Collector, Chandrapur to implement the order of the Civil Court and the Collector had on 14th March, 1977 allowed the 7th respondent to remove Iron Ore to the extent of 5000 tons lying at the Alewahi railway siding. Therefore, the case of the 7th respondent was that he had been declared by the competent Court to be the owner of the Iron Ore lying at the Lohara Mines and at the railway siding. The 7th respondent relied upon the report of the Receiver, Exhibit 22, as supporting his case on the ground that possession had been taken from him. The 7th respondent claimed that the judgment debtors had no interest in the Iron Ore and in these circumstances, it was contended that the stock of Iron Ore was not and would not have been hypothecated with the appellant-bank. The 7th respondent, therefore, contended that the right, title and interest in the Iron Ore vested in him. The 7th respondent thus raised his objection to the orders which had been passed by the Executing Court in the course of the execution proceedings.
6. The stock of Iron Ore, which forms the bone of contention, came to be sold in the course of the execution proceedings. The 7th respondent submitted a bid at the auction sale. Ultimately, the Iron Ore was sold to a third party and an amount of Rs. 8,36,405/- came to be deposited in the Court which has been invested, as will be noted a little later.
7. Evidence was adduced before the Executing Court, both on behalf of the appellant-bank as well as on behalf of the 7th respondent. No evidence was adduced on behalf of the judgment debtors. By the impugned judgment and order dated 27th April, 1995, the 4th Joint Civil Judge, Senior Division, Nagpur, allowed the objection preferred by the 7th respondent and held that the judgment debtors had no right to hypothecate the stock of Iron Ore with the decree holder-bank. The Executing Court held that the objector, the 7th respondent herein, had right, title and interest in respect of the Iron Ore and was entitled to the sale proceeds of the iron Ore in question which had been deposited in the Court by the auction purchaser. According to the Executing Court, the judgment debtors were not the absolute owners of the stock of Iron Ore which could not have been hypothecated to the decree holder. The Executing Court was of the view that so long as the dispute between the 7th respondent and the judgment debtors was not resolved in terms of the arbitration clause of the agreement entered into between them, the appellant was not entitled to appropriate the sale proceeds of the Iron Ore in the amount of Rs. 8,36,405/- towards the satisfaction of the decretal claim. The appellant bank was, in the circumstances, directed to renew the fixed deposit receipts representing the auction proceeds of the Iron Ore and was granted liberty to proceed against the judgment debtors by any other mode for recovering the decretal amount.
8. In order to appreciate the nature of the claim, which has been made on behalf of the 7th respondent, it would be necessary to advert to the relevant factual background of the case. The mines at Lohara from which the Iron Ore, which forms the bone of contention in the present case, has been raised, had originally been granted on lease by the Government to one D.T. Punjabi. Two agreements were initially entered into by the lessee. The first was a raising contract of 1st January, 1959 which was entered into between the lessee and a partnership firm by the name of Oriental Mining Corporation, under which an amount of Rs. 8/- per metric ton was to be paid to the aforesaid firm as charges for raising the Iron Ore. The second agreement dated 15th January, 1959, was a selling contract, under which the 7th respondent was permitted to sell the Iron Ore which had been raised by Oriental Mining Corporation and was to pay an amount of Rs. 11/- per metric ton in respect thereof. The 7th respondent had an interest in the partnership firm, Oriental Mining Corporation, and the arrangement between the parties was that of the consideration of Rs. 11/per metric ton which was to be paid by the 7th respondent in respect of the sale of Iron Ore, an amount of Rs. 3/- per metric ton would be paid to the original lessee. The balance of Rs. 8/being the raising charges was due and receivable by the raising contractor, Oriental Mining Corporation.
9. Disputes arose between the original lessee of the mines, the said D.T. Punjabi on the one hand, and Oriental Mining Corporation and the 7th respondent on the other. In the meantime, it is common ground, that the mining lease had been terminated by the State Government in May 1962. Sometime prior to the termination of the mining lease, two agreements were entered into with the judgment debtors, both of 19th February, 1962. The first agreement was entered into by Oriental Mining Corporation through its partner Shri R.S. Joshi (the younger brother of the 7th respondent), with a firm by the name of Rajaramka Brothers. The second agreement was entered into between the 7th respondent and a firm of the judgment debtors by the name of R.S. Seth Gopikishan Agrawal and Sons. One of the two agreements was a raising contract, while the second was a sale contract.
10. The recitals of the raising contract adverted to the fact that Oriental Mining Corporation under an agreement of 1st January, 1959 with the lessee, was entitled to raise Iron Ore from the Lohara Iron Ore Mines for a period of ten years, in respect of which it was entitled to raising charges at the rate of Rs. 8/per ton. The 7th respondent was entitled to purchase the entire output raised from the Lohara Mines at the rate of Rs. 11/per ton in pursuance of another agreement dated 15th January, 1959. However, disputes had arisen with the original lessee and the said lessee had filed Civil Suit No. 474/1969 before the 2nd Joint Civil Judge, Junior Division, Nagpur, against Oriental Mining Corporation and the 7th respondent, claiming a declaration that the raising and selling agreements dated 1-1-1959 and 15-1-1959 had ceased to be binding and for an order of injunction restraining the defendants from exercising rights under the said agreements. The trial Court, by an order dated 6th September, 1961, modified by an order of 9th February, 1962 directed Oriental Mining Corporation to furnish security to the extent of Rs. 3,00,000/- for fulfilling its part of the contract dated 1st January, 1959. The recitals of the agreement are that the judgment debtor, had furnished the said security on 13th February, 1962. In order to fulfill the undertaking which was given by Oriental Mining Corporation to the Court and to safeguard the interest of the surety, it was considered necessary that Oriental Mining Corporation should employ a raising contractor for investing funds and for employing machinery to undertake the job of raising Iron Ore. In the circumstances, under the raising contract dated 19th February, 1962, Messrs Rajaramka Brothers, a firm of the judgment debtor, was appointed as the agency for carrying on raising operations at the Lohara Mines in accordance with the raising agreement dated 1st January, 1959. The aforesaid firm was to invest its own funds in the raising operations upto Rs. 1,00,000/-. Clause 3 of the raising contract provided that the firm shall receive raising charges at Rs. 8/per ton. Under Clause 6 of the agreement, it was provided that on account of the profit and loss, earned or suffered as the case may be, in carrying on the raising operations, an account shall be taken at the end of every three months and the profits will be distributed in the ratio of 60% of the net profits to the firm of the judgment debtors and 40% to the account of Oriental Mining Corporation which would be retained by the judgment debtors as security for reimbursement of the risk undertaken in furnishing the security to the Civil Court. Clause 12 of the agreement is material for the purposes of these proceedings and provides as follows:
'12. That there is certain quantity of raised ore already lying at the mines at present. Party No. 1 shall remove that ore at its own costs and party No. 2 will have no claim or interest on that ore.'
Clause 12, therefore, postulated that while the firm of the judgment debtors would henceforth carry on the raising operations, there was an existing stock of raised ore already lying at the mines which would be removed by Oriental Mining Corporation (the firm of the seventh respondent). Under Clause 13, the judgment debtors were to have no claim or interest in respect of that consignment of Iron Ore. The agreement was to subsist so long as the original agreement dated 1st January, 1959 made between the lessee and Oriental Mining Corporation subsisted. The raising contract has been exhibited in evidence in the proceedings in the execution and marked as Exhibit 154.
11. The second agreement which was entered into on 19th February, 1962 was a sale contract between the 7th respondent and another firm belonging to the judgment debtors, Messrs R.S. Seth Gopikishan Agrawal and Sons. That agreement was also exhibited and marked in evidence as Exhibit 131. Under the said agreement, it was provided that the judgment debtors shall be fully authorised to sell all the quantities of Iron Ore which have been raised by the raising contractor from the Lohara Mines to the State Trading Corporation either in their own name or in the name of the 7th respondent. An amount of Rs. 8/- per ton was to be paid to the raising contractor while an amount of Rs. 3/- per ton would be deposited in the Civil Court for and on behalf of the 7th respondent. The selling contract provides in Clauses 2 and 5 that accounts of the profit and loss would be prepared quarterly and the profits or as the case may be, the losses would be shared in the ratio of 40:60, 40% to the 7th respondent and 60% to the judgment debtors.
12. Both the raising agreement as well as selling agreement contained arbitration clauses. These two clauses are being referred to since the learned Joint Civil Judge, Senior Division, Nagpur, while allowing the objection which has been raised on behalf of 7th respondent, has come to the conclusion that the appellant was not entitled to appropriate the sale proceeds of the hypothecated stocks so long as the dispute between the judgment debtors and the 7th respondent was not decided in arbitration. It is in these circumstances that the Executing Court has ordered, in Clause 4 of the operative directions contained in the impugned order dated 27th April, 1995 that the decree holder-bank is not entitled to appropriate the sale proceeds of Rs. 8,36,405/- towards satisfaction of the decretal amount unless the dispute is resolved under the arbitration clause.
13. This part of the reasoning of the Executing Court, is ex facie erroneous. The appellant, as a decree holder, is in no manner concerned with the arbitration clause in the contract which was entered into between the firms representing the judgment debtors on the one hand, and the objector, the 7th respondent, on the other. All that the appellant as the decree holder has attempted to do is to realise the hypothecated security towards satisfaction of the decretal claim. The reasoning of the Executing Court to the effect that the appellant cannot do so until the dispute between the judgment debtors and the 7th respondent is resolved in arbitration is, therefore, clearly unsustainable. In fairness, it must be stated that neither the learned Counsel appearing on behalf of the appellant-bank, nor the learned Counsel appearing on behalf of the 7th respondent, have attempted to sustain this part of the reasoning. In fact, in the written submissions which have been filed by the 7th respondent it has been stated that the aforesaid part of the reasoning of the learned trial Judge is ex facie erroneous.
14. In that view of the matter, when this first appeal was heard, I had initially suggested to the learned Counsel that if the parties are so agreeable, the matter can be remitted back to the Executing Court for fresh determination of the objections which have been filed on behalf of the 7th respondent. The learned Counsel appearing on behalf of the 7th respondent has, however, stated that the 7th respondent is now over 84 years of age and it is desirable that the controversy is settled once and for all by this Court. The learned Counsel urged that the decree is of the year 1977, objections came to be disposed of in the year 1995 and this first appeal against the order of the Executing Court has been pending for nearly seven years. In that view of the matter and having regard to the specific request of both the learned Counsel, I have proceeded to consider the first appeal on merits. The record and proceedings of the case has been called for and with the assistance of the learned Counsel, I perused the documentary and oral evidence which had been adduced before the Executing Court.
15. On behalf of the appellant it has been urged that the order of the Executing Court is unsustainable and that the objection petition which had been filed, ought to have been dismissed by the Executing Court. The submissions which were urged on behalf of the appellant are as follows:-
(1) It is a well settled principle of law that the Executing Court cannot go behind the decree which is under execution. The effect of the order of the Executing Court in the present case would be to convert a decree for the realisation of security into a simple money decree, in so far as the Executing Court held that the appellant was not entitled to sell the hypothecated stocks;
(2) The stock of Iron Ore which was sought to be hypothecated by the appellant in the course of the execution proceedings, had been validly hypothecated to the appellant under the hypothecation agreement dated 3rd March, 1969. In entering into the deed of hypothecation, the appellant had relied upon the raising contract and the selling contract dated 19th February, 1962 and the judgment debtors had produced a statement of account before the bank at Exhibit 159 to establish that they had actually worked in the mines and that the Iron Ore which was hypothecated belonged to them;
(3) The objection petition which had been filed on behalf of the 7th respondent did not state the provision of law under which it had been filed and the provisions of Order XXI, Rule 58 of the Civil Procedure Code, 1908 had no application to a decree for the sale of hypothecated securities;
(4) The objection which was filed on behalf of the 7th respondent was misconceived. There was no averment in the objection petition that the objector was the owner of 25000 to 30000 metric tons of Iron Ore and the 7th respondent, in the course of his cross-examination, had admitted that he had no documentary evidence to prove his title to the hypothecated stock. Though Clause 12 of the raising contract dated 19th February, 1962 provided that the objector would be entitled to the quantity of Iron Ore lying at the mines on the date of the agreement, the objector had failed to establish as to what was the exact quantity lying in the mines on that date. The claim of the objector under the raising and selling agreements was only to a share in the profits that accrued upon the working of the mines.
16. On behalf of the 7th respondent, who is the objector in the execution proceedings, learned Counsel urged that the objector had filed his objections under Order XXI, Rule 58(2) of the Code of Civil Procedure, 1908 and that was the only appropriate remedy available to the objector. Clause 12 of the raising contract provided that the quantity of ore which had been already raised and was lying at the mines, could be removed by the objector. Learned Counsel urged that sufficient evidence had been adduced on behalf of the objector to establish his ownership of the iron ore to the extent of 25000 to 30000 metric tons since this quantity had been raised by the objector between the years 1959 and 1962. Reliance was sought to be placed on the interim orders passed by the Civil Court in the suit which was instituted by the original lessee and on the report of the Court Receiver appointed by the Executing Court. Finally, the learned Counsel made a grievance of the fact that though the monies which had been realised out of the auction sale of the stock of Iron Ore, had originally been invested in a fixed deposit, the monies lying in fixed deposit were subsequently withdrawn with the consent of the judgment debtors and kept in a home saving account which yielded a lower rate of interest.
17. The material question which has to be considered in these proceedings is whether the objection which has been raised on behalf of the 7th respondent was tenable in law and whether, as a matter of fact, the 7th respondent has established his interest in the quantity of Iron Ore to the extent of 19000 tons which was attached and sold in the course of the execution proceedings.
18. The application which was filed on behalf of the objector was relatable to the provisions of Order XXI, Rule 58 of the Code of Civil Procedure, 1908. Order XXI, Rule 58 provides that where any claim is preferred to, or any objection is made to the attachment of, any property attached in execution of a decree on the ground that such property is not liable to such attachment, the Court shall proceed to adjudicate upon the claim or objection in accordance with the provisions of the said Rule. Under the proviso to sub-rule (1), it has been laid down that no such claim or objection shall be entertained where, before the claim is preferred or objection is made, the property attached has already been sold. Proviso (a) is not attracted in the present case because it is common ground between the Counsel that the objection which has been filed on behalf of the appellant was before the property had been sold. Similarly, proviso (b) which deals with a situation where the claim or objection was designedly or unnecessarily delayed, has also no application here. Sub-rule (2) of Rule 58 stipulates that all questions including questions relating to the right, title or interest in the property attached arising between the parties to a proceeding or their representatives under the Rule and relevant to the adjudication of the claim or objection, shall be determined by the Court dealing with the claim or objection and not by a separate suit. Under sub-rule (3), upon the determination of the questions referred to in sub-rule (2), the Court is empowered to allow the claim or objection and release the property from attachment either wholly or to such extent as it thinks fit; to disallow the claim or objection; to continue the attachment subject to any mortgage, charge or other interest; or pass such order as the circumstances of the case require. The order passed by the Executing Court in adjudicating upon the claim or objection has the same force and is subject to the same conditions as to appeal or otherwise as if it were a decree. Where the Court refuses to entertain a claim or an objection, the party against whom such an order is made is at liberty to institute a suit to establish the right which he claims to the property in dispute; but subject to the result of such suit, if any, an order so refusing to entertain the claim or objection is to be conclusive.
19. There is no merit in the preliminary point which has been urged on behalf of the appellant to the effect that the objection which was preferred by the 7th respondent could not have been entertained under Order XXI, Rule 58. The simple answer to the submission is contained in sub-rule (2) of Rule 58 of Order XXI. Under the said provision, all questions including questions relating to the right, title or interest in the property attached have to be determined by the Court dealing with the claim or objection and not by a separate suit. The provisions of Order XXI, Rule 58 are consistent with the broad scheme of the Code of Civil Procedure, 1908 in matters relating to execution. Section 47 of the Code provides that all questions arising between the parties to the suit in which a decree was passed or their representatives and relating to the execution, discharge or satisfaction of the decree shall be determined by the Court executing the decree and not by a separate suit. The contention of the appellant that Order XXI, Rule 58 will have application only to a simple money decree and not to a decree where the decretal claim is secured by a hypothecation, has no basis. No such restriction is carved out by the plain terms of Rule 58 of Order XXI of the Code of Civil Procedure, 1908.
20. That leads the Court to the main issue which arises in this proceeding and which relates to the merits of the objections that were urged on behalf of the 7th respondent.
21. In considering the merits of the issue, it would be necessary at the outset to refer to the fact that the original lessee of the Lohara Mines was one D.T. Punjabi. The lessee had in turn entered into two contracts, the first being a raising contract dated 1st January, 1959. The raising contract was with a partnership firm by the name of Oriental Mining Corporation. The aforesaid partnership has been stated to be a family partnership in which the 7th respondent had an interest. The selling contract was with the 7th respondent. Under the raising contract, Oriental Mining Corporation was to receive Rs. 8/- per ton of Iron Ore raised. Under the selling contract, the 7th respondent was to pay to the original lessee an amount of Rs. 11/- per ton of Iron Ore made available for sale. Basically since under the raising contract an amount of Rs. 8/- per ton was to be paid to the partnership in which the 7th respondent had interest and under the selling contract an amount of Rs. 11/- per ton was to be paid by the 7th respondent, that meant that the difference of Rs. 3/- per ton would be paid by the 7th respondent to the original lessee. Disputes arose between the original lessee on one hand and the 7th respondent and the partnership on the other, which led to the institution of a suit. In the said suit, there was an interim order as a result of which, security had to be furnished to the extent of Rs. 1,00,000/-, and there is a reference to the interim orders that were passed by the Civil Court in the recitals of the agreements which were entered into by the 7th respondent and the aforesaid partnership with the firm of the judgment debtors. On 19th February, 1962, two agreements were entered into by and between the 7th respondent and the partnership firms represented by him on the one hand and the firms of the judgment debtors. Under the first agreement, the raising contract, the judgment debtors were given the right to raise Iron Ore from the Lohara Mines subject to the terms and conditions of the agreement dated 1st January, 1959. Clause 12 of the raising contract on which a considerable degree of reliance has been placed, provided that there was a certain quantity of Iron Ore which was lying on the date of the execution of the agreement at the Lohara Mines, and the objector would be entitled to remove it. The exact quantity of Iron Ore which was lying at the Lohara Mines was for some reason best known to the parties not specified. Therefore, it was for the 7th respondent to demonstrate as to what was the exact quantity of the Iron Ore which was lying at the Lohara Mines on the date of the execution of the agreement which the 7th respondent claimed to belong to him and which he could remove under Clause 12 of the agreement. The raising contract provided that in respect of the iron ore which was raised after 19th February, 1962 by the judgment debtors, accounts would be drawn up and the net profits would be shared in the ratio of 40:60 between the parties.
22. The net result, therefore, is that a raising contract was entered into on 19th February, 1962 between the firm representing the objector and the judgment debtors in view of the fact that there was dispute between the lessee of the mine and the objector arising out of the original agreement of 1959. That dispute had gone to the Court and in pursuance of the interim directions of the Civil Court certain obligations had to be complied with. The judgment debtors had furnished surety which had been directed by the Civil Court to be furnished by the objector; and by the raising contract between the objector of the judgment debtors, the right to raise Iron Ore was given exclusively to the judgment debtors' firm. What the objector was allowed to remove was the existing quantity of Iron Ore, which was lying at the site on the date of agreement, and a right to share in the net profits which would accrue out of the Iron Ore which would be raised after the date of the agreement.
23. The second agreement which was entered into between the objector and the judgment debtors was a selling contract by virtue of which it was agreed on 19th February, 1962 that the quantity of Iron Ore, which had been raised by the judgment debtors' firm, would also be sold subject to the condition that out of sale proceeds, an amount of Rs. 3/- per ton would have to be credited to the account of the civil suit, which was pending between the original lessee and the 7th respondent-objector.
24. What the Court will have to assess, in the facts and circumstances of the present case, is as to whether the 7th respondent has been able to demonstrate that the deed of hypothecation is a nullity on the ground that the entire stock of Iron Ore that had been raised belonged to the respondent and that there was no interest of the judgment debtors in the ore, which would have been hypothecated to the bank. Alternatively, the Court will have to consider whether the quantity of 19000 tons of iron which was sold in the auction sale belonged to the 7th respondent and if consequently, the 7th respondent would be entitled to the proceeds of the auction sale.
25. The 7th respondent stepped into the witness box in support of the objection which was raised. In the course of his evidence, the 7th respondent stated that between January 1959 and 1962, he had raised Iron Ore from the Lohara Mines which he sold to customers. The Government of Maharashtra cancelled the lease of D.T. Punjabi in the month of May 1962 and the entire stock of ore at the mines at Lohara and at the railway siding was seized by the Government immediately thereafter. The 7th respondent deposed that the State Government had seized 20000 tons of Iron Ore which was extracted by him. According to the 7th respondent, in pursuance of the order dated 6th September, 1965 passed by the Civil Court, the Government of Maharashtra had released 5000 tons of Iron Ore in his favour on his depositing Rs. 15,000/- as and by way of royalty. Thereafter, there was a prohibitory order of the Executing Court, as a result of which, the 7th respondent had been unable to lift the remaining stock. The 7th respondent then adverted to the fact that a Receiver was appointed by the Executing Court and he had taken custody of 15000 tons of Iron Ore belonging to him from the Lohara Mines and 4000 tons of Iron Ore from railway plot Nos. 7 to 10 of which he was the allottee.
26. In the course of the cross-examination, the 7th respondent was asked as to whether he was in possession of any material to show that he had extracted Iron Ore to the extent of 25000 tons from 1959 until 19th February, 1962. The 7th respondent admitted that he had no record to show that he had extracted 25000 tons of Iron Ore during 1959 and 1962. The 7th respondent filed some accounts about the extraction of Iron Ore with an application at Exhibit 75. That statement has not been exhibited by the learned trial Judge, since it was not referred to by the witness in the course of his examination-in-chief. Be that as it may, the witness admitted that the balance quantity of Iron Ore as shown therein was 6684 metric tons as on 3-1-1962. The witness admitted that the statement of accounts which he had filed, did not indicate that he had extracted Iron Ore to the extent of 25000 tons between 1959 and 1962. The 7th respondent also admitted that there was no other document on record except the statement of account to give the particulars of extraction of Iron Ore. The attention of the witness was drawn to the fact that in the main objection which had been lodged by him, he had not stated that he had extracted Iron Ore to the extent of 25000 tons between 1959 and 1962. The witness stated that he had no reason to assign why there was such an omission in his main application, Exhibit 29. Finally it would be necessary to note that the witness admitted that he had maintained a stock register from 1959 to 1962. But, he did not produce the copy of the stock extracts pointing out the total stock in respect of the mine area and of the plots at Alewahi railway siding. The witness stated that he has not maintained the stock register after 15th February, 1962.
27. The aforesaid admissions, in the course of cross-examination are, in my view, of some significance in the facts of the present case. The case which has been sought to be asserted on behalf of the 7th respondent, both before the Executing Court as well as before this Court is that the 7th respondent had extracted Iron Ore to the extent of 25000 tons between the years 1959 and 1962 and that this quantity was lying at the Lohara Mines and at the railway siding. On behalf of the 7th respondent it was sought to be urged that under Clause 12 of the raising contract, the 7th respondent was entitled to the entire stock of Iron Ore lying at the Lohara Mines on the date of the execution of the raising contract (19-2-1962). The 7th respondent was in a position to lead the best possible evidence in that regard by producing his own records relating to the extraction of Iron Ore. The 7th respondent failed to do so though he has admitted that he had maintained stock registers from 1959 to 1962. He has not produced any documentary material to sustain his contention that he had raised 25000 tons of ore, in the course of his evidence. An adverse inference would, therefore, have to be drawn against the 7th respondent for his failure to produce the best possible evidence which was in his custody, which would establish the quantity of Iron Ore which was raised by him prior to 19-2-1962 and as regards the Iron Ore which was lying at the Lohara Mines or railway siding as on that date.
28. As noted earlier, the 7th respondent in the course of his examination-in-chief, stated in paragraph 4 that the Court Receiver had seized 15000 tons of Iron Ore belonging to him from the Lohara Mines and 4000 tons of Iron Ore from Alewahi plot Nos. 7 to 10. This does not find corroboration in the report of the Court Receiver which is marked as Exhibit 22. For one thing, the report of the Court Receiver clearly contradicts the claim of the 7th respondent that an amount of 4000 tons Iron Ore was seized from the railway plots. The report of the Receiver, in fact, shows that Iron Ore had already been removed by the 7th respondent from plot Nos. 7 to 10 and only a small quantity measuring of about 125 to 150 tons, which was of an inferior quality, was lying there. Similarly, the report of the Receiver is completely silent on the extent or quantity of Iron Ore which was lying at the mines on the date on which the Receiver took possession. The Receiver has referred to the fact that a huge quantity of Iron Ore was lying at the mines. But again, the Receiver does not advert to the exact quantity lying there. Though reliance was placed on the statement contained in the report of the Receiver that the Iron Ore which was found at the mines was Iron Ore 'dug' by the 7th respondent, I am of the view, that the aforesaid statement would be of no help to the 7th respondent. The Receiver was appointed to take charge and custody of the Iron Ore which was found at the mines and at the railway plots and it was no part of his function to either determine or adjudicate upon the question as to who had extracted the Iron Ore.
29. Evidence of other witnesses in support of the case of the 7th respondent was adduced. D.W. 2 Patil deposed that about 6000 tons of ore was transported from the mine. D.W. 2 was the Manager from 1976 to 1982. The evidence of Ambade (D.W. 3) is to the effect that the 7th respondent had engaged about 200 to 300 labourers between the years 1959 and 1962 in order to extract Iron Ore. He states that 6000 tons of ore was transported from his mines to the railway station. According to him, the stock position at the mines in May 1962 may have been between 14 to 16 thousand tons.
30. There is no dispute about the fact that the 7th respondent did in fact work the mines between 1959 and 1962. However, the material question is whether the quantity which was attached by the Executing Court was the quantity which had been extracted by the 7th respondent prior to the date of the agreement dated 19th February, 1962. The case of the 7th respondent was that the quantity which was lying in the mines on 19th February 1962 belonged to him under Clause 12 of the agreement with the judgment debtors and could not have been attached. There is again no dispute about the plain interpretation of Clause 12. The question, however, is what was the quantity lying in stock and extracted as on 19th February, 1962. On that aspect, none of the witnesses who deposed in support of the 7th respondent shed any light. In fact, witness Ambade, who deposed in support of the 7th respondent stated that the stock position in respect of the Lohara Mines in May 1962 may have been between 14000 to 16000 tons. The evidence on the side of the 7th respondent is, therefore, far from consistent.
31. On behalf of the appellant-bank, the Branch Manager of the bank gave evidence. The Branch Manager deposed to the fact that the stock-in-trade which was described in the deed of hypothecation would include manages ore and iron ore. The judgment debtor had supplied documents to the bank to show that iron ore had been raised by him and belonged to him. The judgment debtor had produced the sale contract dated 19th February, 1962 and the raising contract dated 19th February, 1962. After the deed of hypothecation, it was stated, the judgment debtor had appointed his own staff to safeguard the property at the Lohara Railway Station and at the Lohara Mines. The Branch Manager also stated in his deposition that the judgment debtor had furnished statements of account to the bank, Exhibit 157, to show that he had incurred expenditure in raising iron ore.
32. The learned Counsel appearing on behalf of the 7th respondent has urged that the deed of hypothecation in the present case, specifically refers to the stock of manganese ore, but it does not contain any specific reference to iron ore. The specific reference to the stock of manganese ore would not, in my view, lead to the interference that the stock of iron ore had not been hypothecated to the bank. The schedule to the deed of hypothecation refers to 'all tangible moveable property such as products, stock-in-trade and goods of the borrowers, which now or hereafter from time to time, during this security shall be brought in, stored or be in or about the premises, warehouses or godowns of the borrowers in Vizag, Port Sukil or anywhere else'. Following these words, there is a reference to the stock of manganese ore. The language of this deed of hypothecation is wide enough to include the stock of Iron Ore as 'products, stock-in-trade and goods of the borrowers'.
33. The learned Counsel has sought to urge that the judgment debtors had worked the mines from February, 1962 until May 1962 when the lease came to be terminated and consequently, the agreement of 19th February, 1962 came to an end. It was urged that it is not conceivable that the judgment debtors would have raised ore to the extent of 19000 tons in the course of three months. The learned Counsel appearing on behalf of the 7th respondent has relied upon the orders which were passed in Regular Civil Suit No. 473/1961, instituted before the Joint Civil Judge, Junior Division, Nagpur by the original lessee-D.T. Punjabi, inter alia, against the 7th respondent. The raising and the selling contracts entered into on 19th February, 1962 contain in their recitals a reference to the interim orders of the trial Court dated 6th September, 1961 and 9th February, 1962 under which Oriental Mining Corporation was required to furnish security as a condition for working the mines. The interim order dated 21st April 1964 notes that the 7th respondent had remained in the mine and worked thereon under the express orders of the Court. The trial Court then held that the Government was not justified in seizing the ore from the mine after the termination of the lease and the ore must be returned to the 7th respondent herein, to whom it belonged. Notice was directed to issue to the Government. This was followed by a further interim order dated 6th September, 1965 after notice was served on the Government. The suit instituted by D.T. Punjabi came to be dismissed by the trial Court on 21st February, 1966 for non-prosecution. No final adjudication took place in the aforesaid suit and the appellant was not a party to the aforesaid proceeding. I am of the view that it would be impossible to decide the matter on the basis of an a priori assumption that the judgment debtors could not have raised 19000 tons of ore between February and May 1962 when they worked the mines. It was for the 7th respondent to demonstrate, by leading evidence specifically on the question as to: (i) what was the quantity of Ore which was raised by him between 1-1-1959 and 19-2-1962; (ii) what was the quantity which was removed between those dates from the mines; (iii) what was the exact quantity sold to third parties; (iv) what was the quantity which was stored on the railway plots; and (v) what was the quantity of the ore which was lying in the mines on 19-2-1962. As noted earlier, the 7th respondent has failed to produce documentary material which was in his custody. Though he stated that the stock register had been maintained, no stock register was produced before the Court.
34. Having regard to the record and the aforesaid facts and circumstances of the present case, I am of the view that the learned trial Judge was clearly not justified in passing the impugned order dated 27th April, 1995. The appellant-bank has a decree in its favour and under the terms of the decree, the bank is entitled to realise the hypothecated security towards satisfaction of the decretal amount. There was no valid justification for the learned trial Judge to come to the conclusion that there was any collusion between the decree holder and the judgment debtors or that the deed of hypothecation was not valid. Finally, as already noted earlier, the finding of the learned trial Judge, to the effect that the appellant-bank could not have appropriated the sale proceeds of the iron ore unless the disputes between the judgment debtors and the objector was settled in arbitration, is ex facie unsustainable. In fact, both the learned Counsel have fairly conceded that the aforesaid part of the reasoning of the Executing Court is without any basis or substance.
35. The appellant-bank must be permitted to realise the full extent of its decretal claim from the proceeds of the sale of the Iron Ore. An amount of Rs. 8,36,405/- was realised from the auction sale and has been invested in pursuance of the directions of the Court. The moneys were initially invested in a fixed deposit of a nationalised bank until September 1982 when in pursuance of an agreed statement of the judgment debtors and the appellant, they were invested in a Home Savings Account at the Nagpur Branch of the appellant. Thereafter, in pursuance of an order of this Court dated 1-10-1977, the moneys were invested in a fixed deposit. The appellant shall be entitled to and is permitted to realise its decretal claim from out of the proceeds of the amount which is lying in fixed deposit with the bank. The decree of the trial Court is as already noted in the amount of Rs. 5,79,759.64 together with interest thereon at the rate of 101/2% per annum from the date of the suit until realisation together with costs, against defendant Nos. 1 to 7 jointly and severally. The appellant would be entitled first and foremost to realise the entire decretal claim.
36. In the circumstances, therefore, I am of the view that the appellant-bank is entitled to succeed. The first appeal shall accordingly stand allowed and the impugned judgment and order of the learned 4th Joint Civil Judge, Senior Division, Nagpur, dated 27th April, 1995 shall stand quashed and set aside. In the result, the objection filed on behalf of the 7th respondent, at Exhibit 29, shall stand dismissed.