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In Re: Balubhai Kallianchand - Court Judgment

LegalCrystal Citation
SubjectCivil;Property
CourtMumbai
Decided On
Case NumberInsolvency No. 79 of 1940
Judge
Reported in(1942)44BOMLR171
AppellantIn Re: Balubhai Kallianchand
Excerpt:
.....insolvency act, 1909, to embark on an enquiry involving; questions of title between the official assignee and a stranger to the insolvency. such an enquiry can best be undertaken in a regular suit between the parties.;the effect of the proviso to section 7 of the presidency-towns insolvency act, 1909, is that when a person who is examined under section 36 of the act denies the claim of the official assignee to any property in his possession, the official assignee can proceed against him only by way of suit unless he submits to the jurisdiction of the insolvency court. - - but in this case there has been no examination of the minor under section 36 and the proviso therefore clearly cannot apply. the notice of motion, to the extent that it is directed against the minor..........the contention of the official assignee that the firm of kallianchand sobhagchand was a joint family firm. if the official assignee's contentions were correct, balubhai as the karta would have the right to sell the right title and interest of the minor coparceners of the joint family for the debts of the joint family firm, and the official assignee by this notice of motion wishes me to give him the power to exercise the rights of balubhai to sell the right title and interest of the minors in the properties at surat, poona and borivli mortgaged to gordhandas ranchoddas bhagat in the manner and for the purpose i have already indicated.4. this notice of motion is opposed by gulabchand amarchand, the minor son of amarchand kallianchand. he alleges that the firm of kallianchand.....
Judgment:

Chagla, J.

1. On March 18, 1940, the insolvents were adjudicated insolvents by this Court on the petition of Messrs. Gobindmal Dhajanchand, creditors.

2. It seems that Kallianchand and Sobhagchand were two brothers, and in or about the year 1880 started business as commission agents and jewellery merchants in the name of Kallianchand Sobhagchand. In 1900 Sobhagchand died, and Kallianchand carried on the business. Kallianchand had two sons, Amarchand and Balubhai. Kallianchand died in 1915 and his sons carried on the business. Amarchand died in 1932 leaving behind him three sons, Uttamchand, Shantichand and Gulabchand. The firm of Kallianchand Sobhagchand had dealings with Gordhandas Ranchoddas Bhagat and deposited, to secure the indebtedness of the firm, the title-deeds of the properties situate at Surat, Poona and Bovril by way of equitable mortgage. The Official Assignee has admitted the claim of Gordhandas Ranchoddas Bhagat against the firm.

3. The insolvents are Balubhai, the son of Kallianchand, and Uttamchand Amarchand and Shantichand Amarchand, the two sons of Amarchand. This notice of motion is taken out by the Official Assignee against three minor sons of Balubhai, viz. Motichand, Kusumchand and Bapubhai, one minor son of Uttamchand, Chandrasen, two minor sons of Shantichand, Navinchand and Baba, and Gulabchand, a minor son of Amarchand Kallianchand, who died as I have stated in 1932. It is the contention of the Official Assignee that Balubhai Kallianchand, Uttamchand Amarchand, Shantichand Amarchand and their respective minor sons, and Gulabchand Amarchand constitute a joint and undivided Hindu family and Balubhai is the karta of this family. It is further the contention of the Official Assignee that the firm of Kallianchand Sobhagchand was a joint family firm. If the Official Assignee's contentions were correct, Balubhai as the karta would have the right to sell the right title and interest of the minor coparceners of the joint family for the debts of the joint family firm, and the Official Assignee by this notice of motion wishes me to give him the power to exercise the rights of Balubhai to sell the right title and interest of the minors in the properties at Surat, Poona and Borivli mortgaged to Gordhandas Ranchoddas Bhagat in the manner and for the purpose I have already indicated.

4. This notice of motion is opposed by Gulabchand Amarchand, the minor son of Amarchand Kallianchand. He alleges that the firm of Kallianchand Sobhagchand was not a joint family firm and that after the death of Kallianchand in 1915, his sons Amarchand and Balubhai carried on business in partnership in the name of Kallianchand Sobhagchand. After the death of Amarchand in 1932 Balubhai, Uttamchand and Shantichand continued to carry on business in partnership in the same name. After the Indian Partnership Act came into force, the firm of Kallianchand Sobhagchand was registered as a partnership firm under the provisions of that Act showing Balubhai, Uttamchand and Shantichand as partners. The minor Gulabchand therefore contends that his share in these properties is not liable for the debts incurred by his two brothers and his uncle for the purposes of the business of then partnership firm. The minor's guardian ad litem had made an affidavit in reply to this notice of motion on October 6, 1941. He made a further affidavit in sur-rejoinder on October 13, 1941. In this affidavit he contended that on the death of Kallianchand in 1915 there was a partition of the joint family, and Balubhai and Amarchand, the two sons, divided the property in equal shares. He, therefore, contends that Gulabchand is not a member of a joint family of which Balubhai is the karta.

5. The Advocate General on behalf of the Official Assignee has drawn my attention to various statements made by Balubhai where he has admitted that the firm of Kallianchand Sobhagchand was a joint family firm and that the joint family consisted both of his own branch and the branch of his deceased brother Amarchand. He has further drawn my attention to certain proceedings in which the firm of Kallianchand Sobhagchand was a party as a joint family firm. He also points out that the allegation with regard to partition as between Balubhai and Amarchand is an afterthought and has been made at a very late stage in these proceedings.

6. Whatever the truth of the matter may be, it is clear that on these affidavits various issues arise for determination : (1) whether there was a partition in 1915 between Balubhai and Amarchand, and whether the branches of Balubhai and Amarchand constitute today a joint and undivided Hindu family ; (2) even if the two branches constitute a joint and undivided Hindu family, whether the firm of Kallianchand Sobhagchand was a joint family firm or a contractual partnership firm consisting of the insolvents as partners. It is clear that I cannot decide these issues on affidavits, and the only question that arises on this notice of motion is whether I should try these issues in insolvency or whether I should refer the Official Assignee to take appropriate proceedings in the ordinary tribunal.

7. The Advocate General presses me to try these issues in insolvency and relies on the provisions of Section 7 of the Presidency-towns Insolvency Act, 1909. He contends that I have wide powers given to me under that section and that I should exercise my discretion in favour of the Official Assignee. On the other hand, Mr. Munshi contends that the questions for determination do not arise out of insolvency, and following the principles laid down by the English Court of Bankruptcy and the practice followed by our High Court and the High Court of Calcutta, I should not decide the question of title as between the Official Assignee and a stranger to the insolvency.

8. There is no doubt that the minor is a stranger to the insolvency. There is also no doubt that the Official Assignee is not claiming against him by a title which is paramount and superior to that of the insolvents. The right, if any, which Balubhai as the karta had was in him before his adjudication. The right has not resulted because of the supervention of the insolvency. The English Court of Bankruptcy has consistently refused to exercise jurisdiction as against a stranger to the insolvency, unless he submits to its jurisdiction, when the Official Assignee claims only the same right as the insolvent would have had, and has only exercised jurisdiction when the Official Assignee has claimed by a higher title. The same view of the jurisdiction of the insolvency Court has not been taken by all the High Courts in India. The High Court of Madras has tried questions of title as between the insolvent and a stranger even though he was not claiming by a paramount title if in its opinion it was for the benefit of the general body of creditors. Our High Court and the High Court of Calcutta have been more disposed to adopt the view of the English Courts. In 1927 the Presidency-towns Insolvency Act was amended by adding a proviso to Section 7 of the Act. The proviso is to this effect :-

Provided that, unless all the parties otherwise agree, the power hereby given shall, for the purpose! of deciding any matter arising under section 36, be exercised only in the manner and to the extent provided in that section.

9. The effect of the amendment is that when a person who is examined under Section 36 denies the claim of the Official Assignee with regard to any property in his possession, the Official Assignee can proceed against him only by way of suit unless he submits to the jurisdiction of the Insolvency Court. But, as will be seen, the new proviso only applies where there is an examination under Section 36. Mr. Munshi in the course of his arguments has relied on this proviso. But in this case there has been no examination of the minor under Section 36 and the proviso therefore clearly cannot apply. There being no such examination, my discretion is entirely unfettered by the provisions of the new amendment. But, as pointed out by Sir Dinshah Mulla in his learned treatise on the Law of Insolvency, it could not have been intended by the legislature that if there was an examination under Section 36 questions of title should not be. decidedly the Insolvency Court against strangers unless they submit to its jurisdiction but that such questions could be decided if the Official Assignee came to the Court under Section 7 without first going through the procedure laid down by Section 26. In the opinion of Sir Dinshah Mulla the amendment is not very happily drafted. But I must take the law as it stands and leave the legislature to bring it in conformity with its own intentions.

10. Having therefore the discretion to exercise the jurisdiction of this Court to try the issues raised on this notice of motion, the question is whether I should do so. The issues raised are very important involving, as they do, the question of the status of the minor, as to whether he is a member of a joint family consisting of the two branches of Balubhai and Amarchand. I do not think it is right for the Insolvency Court to drag strangers before it and compel them to submit to determination of questions of title as between themselves and the Official Assignee. They are entitled, if they so desire, to have these questions agitated in the ordinary tribunal. I think that the practice followed by our High Court and the High Court of Calcutta, as pointed out by Sir Dinshah Mulla, is sound, and I see no reason to depart from that practice. I will, therefore, not decide these questions arising between the Official Assignee and the minor; on this notice of motion.

11. There is no opposition to this notice of motion by the other minors, namely, the minor sons of Balubhai and Shantichand and the minor son of Uttam-chand. Their fathers being insolvents, apart from any other question, they would be liable to discharge their debts, unless they were of an immoral character, as a pious obligation, and the Official Assignee standing in the shoes of their fathers can sell the right title and interest of the sons in the properties mortgaged by the insolvents as stated before.

12. My order on the notice of motion, therefore, will be that the applicant as the assignee of the estate and effects of the insolvents be authorised to exercise all the powers of a Hindu father in respect of the properties described in exhibit A to the affidavit of Rasiklal Maganlal Sonawalla dated August 21, 1941, and that he be authorised to sell the properties so as to include therein the right, title and interest of the minor sons of the insolvents and that he be further authorised to execute a conveyance of the properties in favour of respective purchasers and convey and transfer the properties including the share, right, title and interest of the minor sons of the insolvents. The notice of motion, to the extent that it is directed against the minor Gulabchand Amarchand, must fail.

13. The Official Assignee must pay the costs of Gulabchand Amarchand of this notice of motion. Costs fixed at Rs. 225.

14. Costs of the Official Assignee to come out of the sale-proceeds of the mortgaged properties.


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