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. 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 123 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, that the alleged agreement with regard to the Rs.75,000 film was never entered into. 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, that the alleged agreement with regard to the Rs.75,000 film was never entered into. On those contentions the following issues were framed— "1.—(a) Whether the opposite party can set up the agreement alleged to have been entered into between the parties before the passing of the preliminary decree as an adjustment of the decree? (b) Whether the agreement was enforced after the passing of the preliminary decree? If so, its effect? 2. Whether an inquiry as to any payments made under the alleged agreement can be made in these proceedings? 3. Whether the alleged adjustment which has not been certified can be recognized by the court?" Certain other issues dealing with an alleged transfer of the decree were also framed, but were not material at this stage of the proceedings. The trial of the application was stayed for a time after the issues were framed, but came before the court at a later date and was decided on May 23, 1940, in favour of the respondent on the two grounds on which reliance was placed by the official liquidator, namely, firstly, that there had been no payment as ordered in the preliminary decree and, secondly, that the agreement of September 18, 1934, being anterior to the date of the preliminary decree could not be enforced and set up in defence thereafter. The preliminary decree declared the amount due up to May 30, 1935, to be Rs.83,359-6-11 in all, ordered that the appellants should pay that sum into court on or before May 30, 1935, or any later date to which the court might extend the time for payment, with future interest at six per cent, per annum, and further declared that in default of pay ment as aforesaid the respondent might apply for the sale of the mortgaged property. The learned judge held that inasmuch as that decree ordered payment into court, nothing short of such payment would comply with the decree or be a protection to the appellant against a final order for sale. He accordingly made on May 23, 1940, a final decree for sale of the mortgaged property. The learned judge held that inasmuch as that decree ordered payment into court, nothing short of such payment would comply with the decree or be a protection to the appellant against a final order for sale. He accordingly made on May 23, 1940, a final decree for sale of the mortgaged property. From that decree an appeal was taken to the Chief Court of Oudh (Bennett and Agarwal JJ.), but was dismissed on the ground that the agreement of September 18, 1934, was made before, and would not affect, the preliminary decree, and that once the preliminary decree was passed no future adjustments or payments by the mortgagor could be taken into account except possibly (1.) sums admittedly paid, (2.) sums paid in the presence of the court,, and (3.) sums certified. It was held that except in such circumstances the appellant was not even entitled to put forward proof of any payments or adjustments alleged to have been made. From that judgment the appellant obtained leave to appeal to His Majesty in Council, claiing the right to prove and, if proved, to take credit for the sums and adjustments on which they relied. 1945. June 13, 14. Sir Herbert Cunliffe K.C. and Khambatta for the appellant. Whatever technicalities there may be, no court will sit idly by in a mortgage suit and see a final decree made for the sale of the mortgaged property if the mortgagor alleges, and brings evidence to show, that he has in fact completely satisfied the whole of the claim, and all the money has been paid out. It will be sufficient for the appellants purposes if the Board directs that this matter should be sent back and the mortgagor allowed an opportunity of proving to the satisfaction of the court that he has in fact satisfied the whole Law. Rep. 72 Ind. App. 277 ( 1944- 1945) Madan Theatres, Limited V. Dinshaw and C ompany, Limited 124 of the claim. Order 23, r. 3, of the Code of Civil Procedure is the foundation of the appellants case, and leaves it open to him to satisfy the court that that is the state of affairs. Under Or. Rep. 72 Ind. App. 277 ( 1944- 1945) Madan Theatres, Limited V. Dinshaw and C ompany, Limited 124 of the claim. Order 23, r. 3, of the Code of Civil Procedure is the foundation of the appellants case, and leaves it open to him to satisfy the court that that is the state of affairs. Under Or. 23, r. 3, it would be the duty of the court to inquire whether the whole or part of the mortgage debt had been satisfied, and there is nothing to limit the application of that order at any time up to the making of the final decree, and a final decree cannot be made until this very material question has been inquired into. The question is stated in the order of the Chief Court giving leave to appeal as "whether the provisions of " Or. 23, r. 3, are subject to the provisions of Or. 34, r. 5, of " the Code, and whether uncertified payments made out of " court after a preliminary decree for sale can be recognized "at the time of the final decree." It is submitted that Or. 23, r. 3, applies to the case where an adjustment is pleaded by one party and is denied by the other party, and the court ought to have gone into the question of the adjustment of the preliminary decree. The provisions of Or. 34, r. 5, do not stand in the way of giving effect under Or.23, r. 3, to a payment out of court in a preliminary mortgage decree for sale. If the decision in Inayat Khan v. Harbans Lal (( 1936) A. I. R. (Al.) 9) was right it covers this case completely. The reasoning which was there used so forcibly with regard to the adjustment applies with equal force to an actual payment of the mortgage money, whether it be by cash or some other means Order 23, r. 3, gives effect to what is the real justice of the case. [Reference was also made, in support of the appellants contention, to Munni Singh v. Collector of Penares (( 1939) A. I. R. (All.) 28.) and Ram Niwas v. Ram Dayal (( 1939) A. I. R. (All) 174.).] In Raja Bahadur Harihar Prasad Narain Singh v. Maharaj Kumar Gopal Saran Narain Singh (( 1935) I. L. R. 14 Pat. [Reference was also made, in support of the appellants contention, to Munni Singh v. Collector of Penares (( 1939) A. I. R. (All.) 28.) and Ram Niwas v. Ram Dayal (( 1939) A. I. R. (All) 174.).] In Raja Bahadur Harihar Prasad Narain Singh v. Maharaj Kumar Gopal Saran Narain Singh (( 1935) I. L. R. 14 Pat. 488), which is similar in many respects to the present case, it was said that Or.23, r. 3, is imperative. If Palaniappa Chettiar v. Narayanan Chettiar (( 1935) 69 Mad. L. J. 765.) was rightly decided, and after the final decree the powers of Or. 23, r. 3, are still in force and enable the court to make the necessary adjustment, a fortiori there must be the power before the final decree; that case has taken a view of Or. 23, r. 3, which is sufficient for this appellants purposes, that so long as the court has seizin it can, and must, take into account any satisfaction, wholly or in part, that has been made by the mortgagor. Singa Raja v. Pethu Raja (( 1919) I. L R. 42 M. 61.), which is against the appellant, is referred to several times in Palianappa Chettiars case (( 1935) 69 Mad. L. J. 765.). It is conceded that in Tirloki Nath Dube v. Sadhu Ram Tewari(( 1927) A. I. R. (Oudh) 275.) the judge does say that he did not think he was bound to order the munsif to go into the question whether satisfaction had been made. Sewa Ram v. Parbhu Dayal (( 1935) A. I. R. (Oudh) 313.) appears to contemplate an opportunity to prove being given. Mazbut Singh v. Mst. Indrani (( 1936) A. I. R. (Oudh) 152.) really decides that the particular form of payment in that case was in satisfaction; there the payment was certified and was a payment out of court. Mst, Durga Devi v. Nand Lal (( 1932) A. I. R. (Lah.) 231.), Raja Ram v. Allahabad Bank, Ld. (11), and Plata Lal v. Bulaqi Mai & Sons (( 1935) A. I. R. (Lah.) 168.) are against the appellant. When Or. 23, r. 3, says "shall pass a decree in accordance therewith," it must run to everything—up to a complete setting aside of the preliminary decree. (11), and Plata Lal v. Bulaqi Mai & Sons (( 1935) A. I. R. (Lah.) 168.) are against the appellant. When Or. 23, r. 3, says "shall pass a decree in accordance therewith," it must run to everything—up to a complete setting aside of the preliminary decree. There must be a strict application of the particular rule taken by itself, and not read in conjunction with any other rule of court. Once it is proved that the debtor has satisfied the creditor, no court will give effect to the order for payment or realization of the security. The respondent did not appear. July 18. The judgment of their Lordships was delivered by LORD PORTER, who stated the facts set out above and continued The decision of the trial court would appear to be correct if the preliminary decree had been passed after an adjustment had been made and all the terms agreed upon by way of adjustment had been carried out before the making of the preliminary decree. In that case the mortgagors remedy would be to appeal against the preliminary decree. For the reasons hereafter stated, however, the decision is wrong where the adjustment is made or carried out after the preliminary decree has been passed. Unfortunately the respondent was not represented on the hearing, but their Lordships have heard a full Law. Rep. 72 Ind. App. 277 ( 1944- 1945) Madan Theatres, Limited V. Dinshaw and C ompany, Limited 125 and careful discussion of the points at issue which, apparently, have given rise to a conflict of view between various courts in India. Prima facie, a debtor should be entitled to take credit for any payments which he can prove to have made in respect of a mortgage debt. The only reason for prohibiting him from doing so would be that there was some valid law or regulation of the court to the contrary. Such regulations are, however, contended to exist, and reliance is placed on behalf of the respondent on rs.2, 4 and 5 of Or.34 of the Code of Civil Procedure. The only reason for prohibiting him from doing so would be that there was some valid law or regulation of the court to the contrary. Such regulations are, however, contended to exist, and reliance is placed on behalf of the respondent on rs.2, 4 and 5 of Or.34 of the Code of Civil Procedure. Rule 2 provides that in a suit for foreclosure, if the plaintiff succeeds the court shall pass a preliminary decree directing that if the defendant pays into court the sum due within the time fixed the plaintiff shall deliver up the documents of title and, if necessary, put the defendant in possession of the mortgaged property. Rule 4 adapts the same procedure to the case of an application for sale, and adds that in default of payment in accordance with the preliminary decree the plaintiff shall be entitled to apply for a final decree directing that the mortgaged property be sold. Rule 5, sub-r.1, provides that where on or before the day fixed, or at any time before the confirmation of a sale made in pursuance of a final decree passed under sub-r. 3 of this rule, the defendant makes payment into court of the amounts due, the court shall pass a final decree or order providing for the delivery up of documents and, if necessary, retransfer of the property, and that the defendant be put in possession. Sub-rule 3 provides that where payment in accordance with sub-r. 1 has not been made the court shall, on application made by the plaintiff on that behalf, pass a final decree directing that the mortgaged property be sold. Rules 2 and 4 of this order, it was said, visualized, and the preliminary decree made in this case directed, payment into court, and r. 5 was mandatory in declaring that if that direction was not complied with the court must pass a final decree for sale. Admittedly no payment into court had been made and therefore, it was contended, the court was obliged to pass a final decree for sale. It was at one time also contended that in any case any payment made in respect of the mortgage debt could not be relied on unless certified under Or.21, r. 2. But, apart from the question whether the parties could not compromise a decree (as to which see Oudh Commercial Bank, Ld. It was at one time also contended that in any case any payment made in respect of the mortgage debt could not be relied on unless certified under Or.21, r. 2. But, apart from the question whether the parties could not compromise a decree (as to which see Oudh Commercial Bank, Ld. v. Thakurain Bind Basni Kuer (( 1939) L. R. 66 I. A. 84.), it has again and again been held in India that this rule only applies in execution, that execution does not begin until after a final order for sale has been passed, and that therefore the rule has no application when the question is whether or no a final decree for sale should be passed. Their Lordships agree with the courts in India in this respect. As regards the main argument their Lordships do not stop to consider the question" whether the provisions of r. 34 are, if they stood alone, sufficiently precise to prohibit the compromise of the preliminary decree in a mortgage suit by payment or adjustment in some way other than that directed by the preliminary decree, since the question of adjustment is specifically dealt with in Or. 23, r. 3, which is as follows— " Where it is proved to the satisfaction of the court that a suit " has been adjusted wholly or in part by any lawful agreement " or compromise, or where the defendant satisfies the plaintiff " in respect of the whole or any part of the subject-matter of " the suit, the court shall order such agreement, compromise " or satisfaction to be recorded and shall pass a decree in " accordance therewith so far as it relates to the suit.” The appellant contends that this rule makes direct provision for the circumstances of the present case, and says that so far from affirming the final decree the Chief Court should have recorded the satisfaction of the mortgage debt and passed a decree in accordance therewith provided it was proved to its satisfaction that the debt had been satisfied, and that to deny the appellant the opportunity of furnishing proof is to act in disregard of the express terms of the rule. This question has given rise to a wide divergence of opinion in the courts of India. The stricter Law. Rep. 72 Ind. App. This question has given rise to a wide divergence of opinion in the courts of India. The stricter Law. Rep. 72 Ind. App. 277 ( 1944- 1945) Madan Theatres, Limited V. Dinshaw and C ompany, Limited 126 interpretation, which has been adopted by the Chief Court in this case, is that the terms of Or. 34, r. 5, which have express reference to the making of a final decree in the case of an application for sale in a mortgage suit, override the terms of Or. 23, r. 3, which is of general, but not of particular, application. This view has the support of the courts in Oudh and Lahore and, at any rate in the earlier cases, of the courts of Madras. Their Lordships have been referred to (1.) Tirloki Nath Dube v. Sadhu Ram Tewari (( 1927) A. I. R. (Oudh) 275.); (ii.) Sewa Ram v. Parbhu Dayal (( 1935) A. I. R. (Oudh) 313.); (iii.) Mazbut Singh v. Mst. Indrani (( 1936) A. I. R. (Oudh) 152.); (iv.) Mst. Durga Devi v. Nand Lal (( 1932) A. I. R. (Lah.) 231.); (v.) Piara Lal v. Bulaqi Mai & Sons (( 1935) A. I. R. (Lah.) 168.); (vi.) Raja Ram v. Allahabad Bank, Ld. (( 1939) A. I. R. (Lah.) 79.); and (vii.) Singa Raja v. Pethu Raja (( 1919) I. L. R. 42 M. 61.). One may summarize the decisions in these cases as determining that where the preliminary decree directs payment into court no other method of payment is permissible; but that the harshness of this doctrine may be diminished in some three or four ways, i.e. (1.) acceptance of money in satisfaction or part satisfaction, (2.) acknowledgment of payment, (3.) payment not into court but in the presence of the presiding judge, (4.) possibly the payment if certified. Except in these cases the court, it is said, cannot take notice of any payment out of court. The fourth exception, even if attention be paid only to the cases referred to above, is not easy to accept, since cases (i.) and (iv.) point out that Or. 21, r. 2, applies only to cases where execution has begun, and execution does not begin until the passing of the final decree. The fourth exception, even if attention be paid only to the cases referred to above, is not easy to accept, since cases (i.) and (iv.) point out that Or. 21, r. 2, applies only to cases where execution has begun, and execution does not begin until the passing of the final decree. The other two exceptions seem to have been arrived at on no logical basis, but rather on the injustice which would be perpetrated if they were not recognized. The courts of Allahabad and Patna appear to have taken a contrary view to those of Oudh and Lahore; the latest Madras case has cast some doubt on the earlier ones, and Calcutta seems to take a similar view to that of Allahabad and Patna. Reference may be made to (a) Inayat Khan v. Harbans Lal (( 1936) A I. R. (All.) 9.); (b) Munni Singh v. Collector of Benares (( 1939) A. I. R. (All.) 28.); (c) Ram Niwas v. Ram Dayal (( 1939) A. I. R. (All.) 174.); (d) Jogendra Prasad Narain Singh v. Gouri Shankar Prasad Sahu (2 Pat. L. J. 533.); (e) Raja Bahadur Harihar Prasad Narain Singh v. Maharaj Kumar Gopal Saran Narain Singh (( 1935) I. L. R. 14 Pat. 488.); (f) Palaniappa Chettiar v. Narayanan Chettiar (( 1935) 69 Mad. L. J. 765.); and (g) Piran Bibi v. Jitendra Mohun Mukerjee (( 1917) 21 Cal. W. N. 920.). It is true that the first of these cases leaves open the question whether a mere payment between preliminary and final decree without any adjustment would constitute a discharge of liability when it says, " Whatever be the correct view on the question " whether money paid out of court in satisfaction of the decree " in whole or part can be recognized by a court when it is " invoked to pass a final decree, it cannot refuse to act on " Or. 23, r. 3, if the conditions required are fulfilled." In that case the court pointed out that there had been not a mere payment but an adjustment. Even so limited an application of Or. 23, r. 3, would suffice to establish the Appellants contention in the present case, since adjustment followed by performance of the terms agreed is alleged. 23, r. 3, if the conditions required are fulfilled." In that case the court pointed out that there had been not a mere payment but an adjustment. Even so limited an application of Or. 23, r. 3, would suffice to establish the Appellants contention in the present case, since adjustment followed by performance of the terms agreed is alleged. The other cases, however, recognize that the suit continues up to final decree and consequently any adjustment or satisfaction up to that time must be taken into account. A decree holder need not, of course, agree to any adjustment or accept payment otherwise than into court, but in their Lordships opinion it is open to the debtor to allege and prove that an adjustment has taken place or payment in whole or in part has been made and received. Indeed, to hold otherwise is to disregard the opening words of the order, namely, Where it is " proved to the satisfaction of the court . . . . " Their Lordships see no qualification to the wide terms of the order nor any grounds for limiting its application. Admittedly the suit continues until the final decree is passed, and there is no time limit for Law. Rep. 72 Ind. App. 277 ( 1944- 1945) Madan Theatres, Limited V. Dinshaw and C ompany, Limited 127 recording the agreement arrived at as there is under Or.21, r. 2. In the present case, therefore, the judge of the Civil Court should have satisfied himself as to whether any adjustment had been arrived at or payment made, and followed this inquiry by an appropriate decree under which a finding of full satisfaction would lead to the dismissal of the suit and partial satisfaction to a diminution of the indebtedness, whereas a finding that there had been no adjustment or satisfaction would be followed by a final decree for sale. Their Lordships will accordingly humbly advise His Majesty that this appeal should be allowed, the final decree set aside, and that the Subordinate Court should be directed to hear evidence and decide whether or not satisfaction wholly or in part has been made in respect of the mortgage debt and to pass a decree accordingly. The respondent must pay the costs of the appellant before their Lordships and in the courts in India.