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Manne Venkata Narayudu and anr. Vs. Thammineedi Subba Rao and ors. - Court Judgment

LegalCrystal Citation
SubjectFamily;Property
CourtAndhra Pradesh High Court
Decided On
Case NumberA.A.O. No. 230 of 1967
Judge
Reported inAIR1973AP113
ActsProvincial Insolvency Act, 1920 - Sections 4 and 28-A
AppellantManne Venkata Narayudu and anr.
RespondentThammineedi Subba Rao and ors.
Appellant AdvocateN.C.V. Ramanujachari and ;C. Srinivasachari, Advs.
Respondent AdvocateJ.V. Surayanarayana Rao, Adv. for ;M. Bhujanga Rao, Adv.
Excerpt:
.....of venkatesam, j. 10. the sole question in this case, when the father's power of disposal of the sons' shares in the joint family properties is lost or extinguished by reason of a decree-holder attaching the shares of the sons prior to the adjudication of the father, whether the official receiver, in whom the property of the insolvent father, which comprises also the power of the father in or over the property of the undivided sons vests, would acquire any better rights in the matter of disposal of the properties under attachment prior to adjudication. the fact that the insolvency proceedings have intervened makes all the difference between a creditor who obtained a decree and got the property attached prior to the adjudication and a creditor who failed to obtain a decree in time and..........the sons also as parties, and the court in such a case has to go into the question whether the sons' shares will be liable, and if the court find that the sons' shares also would be liable, though the act of insolvency had been committed by the father the court can direct the official receiver to exercise the right of sale with regard to the sons' shares also for the discharge of the debts. these questions have not been considered by the division bench in the above case'.2. the decision in raju bahadur's case, : air1965ap451 , was relied upon before the learned judge by the respondents in answer to a decision of a single judge of this court in subba rao v. official receiver, west godavari, : air1965ap52 . the learned single judge venkatesam, j., was of the view that an attachment of.....
Judgment:

Obul Reddi, J.

1. Our learned brother, A. D. V. Reddy, J has referred this Civil Miscellaneous Appeal to a Division Bench on the ground that certain questions have not been considered by a Division Bench of this Court in Raja V. V. S. Raju Bhadur v. Official Receiver, : AIR1965AP451 . The relevant portion of the order of reference dealing with the questions said to have not been considered by the Division Bench reads:

'The question whether it is only the father's right to private alienation that is terminated on attachment or the right of the other creditors and the court to go into the question whether the sons are also liable for the joint family debts due to the other creditors is also terminated by reason of the attachment has not been considered.

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If there had been no insolvency, they ( creditors ) could have filed suits impleading the sons for adjudication of their claims. On adjudication of the father as an insolvent they are entitled to file petitions under Sections 4 and 5 of the Act, impleading the sons also as parties, and the Court in such a case has to go into the question whether the sons' shares will be liable, and if the Court find that the sons' shares also would be liable, though the act of insolvency had been committed by the father the court can direct the Official Receiver to exercise the right of sale with regard to the sons' shares also for the discharge of the debts. These questions have not been considered by the Division Bench in the above case'.

2. The decision in Raju Bahadur's case, : AIR1965AP451 , was relied upon before the learned Judge by the respondents in answer to a decision of a Single Judge of this Court in Subba Rao v. Official Receiver, West Godavari, : AIR1965AP52 . The learned Single Judge Venkatesam, J., was of the view that an attachment of the sons' shares by a decree-holder prior to the adjudication of the father as an insolvent only puts an end to the power of disposal of the father and of the Official Receiver under Section 28-A of the Act to dispose of the sons' shares, but will not preclude the Official Receiver from obtaining a declaration from the insolvency Court that the Sons' shares are liable for discharge of the debts due in the several creditors which are not illegal or immoral and have the property sold through Court.

3. While the learned Counsel for the appellants, ( Petitioners Creditors ), Mr. C. V. Ramanujachari and Mr. C. Srinivasachari, placed strong reliance upon the decision of Venkatesam, J., in Subba Rao v. Official Receiver, West Godavari, : AIR1965AP52 ; Mr. J. V. Suryanarayana Rao appearing for the respondents contended that the view taken by the learned Single Judge is opposed not only to the decision of the Division Bench of this Court in Raju Bahadur's case, : AIR1965AP451 , but to the view so far consistently taken by the Madras High Court which was followed by the Division Bench.

4. Therefore, in order to determine the correctness of the view expressed by Venkatesam, J., in : AIR1965AP52 and to determine the rights of an attaching creditor of the sons' shares prior to the adjudication of the father as an insolvent vis-a-vis the rights of the general body of the creditors, the relevent facts leading to the filing of the Civil Miscellaneous appeal may be stated. The appellants filed an application under Section 4 of the Provincial Insolvency Act in the District Court, West Godavari, asking for a declaration that the 2/3rds joint share of respondents 2 and 3 who are the sons of the insolvent in I. P. No. 11 of 1964 is also liable for the discharge of the debts on the doctrine of pious obligation and for a declaration that the 4th respondent alone is not entitled of the joint family properties belonging to the sons for attachment pursuant to the decree in O. S. No. 177 of 1962 on the file of the District Munsif's Court, Kovvur and that he is not entitled to claim any preference in respect of his debt over the general body of creditors.

5. The sons of the insolvent ( respondent 2 and 3 ) resisted the application on the ground that the application was not maintainable. The 4th respondent, the attaching creditor resisted the application on the ground that the petitioners and respondents 2 and 3 the sons of the insolvent are acting in collusion and the petition was filed for the benefit of the insolvent himself and as such it is liable to be dismissed in limine. The other ground on which the application was resisted was that he had obtained the decree in O. S. No. 177 of 1962 against respondents 1 and 2 and got the sons' shares attached prior to the adjudication of the 1st respondent as insolvent and as such the power of disposal of the joint family properties by the 1st respondent as the Kartha of the Joint family came to an end and therefore the Official Receiver in whom the rights of the father have become vested cannot exercise greater rights or rights which the father himself did not possess on the date when he was adjudicated as insolvent.

6. The only question that arose before the District Court was whether by reason of attachment effected on the properties of the sons prior to the adjudication of the 1st respondent as insolvent the Official Receiver is precluded from bringing those properties under attachment for sale on the ground that the father's power of the sale of the sons' shares even for antecedent debts not tainted with illegality or immorality came to an end the moment of the property was attached in execution of the decree obtained by the 4th respondent. The lower Court held that there is no dispute regarding the fact that the 4th respondent had obtained an order of attachment prior to the adjudication of the father and therefore ' the share of the sons can no longer be dealt with by the Official Receiver ' and in that view dismissed the petition. It is that order that came up before our learned brother, A. D. V. Reddy J., in appeal and he chose to refer the civil miscellaneous appeal to the Division Bench.

7. It would appear from the order of reference that the decision in : AIR1965AP52 was not brought to the notice of the Division Bench, with the result that the Division Bench did not consider the correctness of the view expressed by the learned single Judge.

8. The two relevent sections, which have a bearing on the questions involved are Sections 4 and 28-A of the Provincial Insolvency Act. The material parts of these sections are in these terms :

Section 4 : Subject to the provisions of this Act, the Court shall have full power to decide, all questions whether of title or priority, or of any nature whatsoever and whether involving matters of law or of fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide justice or making a complete distribution of property in any such case '.

'Section 28-A : The property of the insolvent shall comprise and shall always be deemed to have comprised also the capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the insolvent for his own benefit at the commencement of his insolvency or before his discharge '.

9. We may first consider the scope of Section 28-A. This provision was inserted by the Provincial Insolvency ( Amendment ) Act, 1948 ( XXV of 1948 ). The necessity for inserting this provision arose as a result of the conflicting opinion expressed by the various High Courts as to whether, in the case of adjudication under the Provincial Insolvency Act, the power of the father to sell his sons' shares in the joint family estate to meet his own legitimate debts devolves upon the Official Receiver as it does under the Presidency Towns Insolvency Act. The effect of adjudication is that the whole of the property of the insolvent vests in the Court or in a Receiver and shall become divisible among the creditors in the manner provided in the Act, the underlying principle being that, when once a person is adjudicated as insolvent, the creditors enforcing their rights against him must come to the insolvency Court seeking remedies against him. Under Section 18-A it is not only the share of the father in a Hindu Joint family that is vested in the Official Receiver, but also the power of the father to dispose of the sons' shares. In other words, the right or the power which the father had to sell or otherwise alienate the sons' shares comes to an end as the ' property ' of the insolvent comprises that power also and is vested in the Official Receiver.

10. The sole question in this case, when the father's power of disposal of the sons' shares in the joint family properties is lost or extinguished by reason of a decree-holder attaching the shares of the sons prior to the adjudication of the father, whether the Official Receiver, in whom the property of the insolvent father, which comprises also the power of the father in or over the property of the undivided sons vests, would acquire any better rights in the matter of disposal of the properties under attachment prior to adjudication.

11. It is not disputed by Mr. Ramanujachari that the attachment of the sons' shares prior to the adjudication of the father denudes him of the power to alienate or otherwise of the sons' shares in discharging antecedent debts which have not suffered from the vice of illegality or immorality. What Mr. Ramanujachari contends in this Court is that, notwithstanding the fact that the father's power of disposal is lost on account of the attachment the general body of creditors are not precluded or debarred from seeking relief under Section 4 for a declaration that the sons' shares are also to be made liable for the discharge of the father's debts.

12. This necessarily takes us to the scope of Section 4 of the Act. It is true that the insolvency Court has full power to decide all questions arising in insolvency - whether they relate to title or whether they involve matters of law or fact or such matters which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of the property. According to Mr. Ramanujachari, the sons' shares, notwithstanding the attachment prior to the adjudication of the father should be made available to the general body of creditors for making a complete distribution or doing justice to all the creditors including the 4th respondent who had obtained a decree and subjected the sons' shares to attachment and the general body of creditors should not be made to suffer by reason of one of the creditor shaving filed a suit before adjudication and obtained a decree and got the properties attached. The learned Counsel sought to illustrate his point by stating that if there was no adjudication at all, the other creditors also could have obtained decrees and asked for rateable distribution and the fact that the insolvency proceedings intervened after one of the creditors have obtained a decree and got the property attached should not make any difference in so far as the rights of the general body of the creditors are concerned. The fact that the insolvency proceedings have intervened makes all the difference between a creditor who obtained a decree and got the property attached prior to the adjudication and a creditor who failed to obtain a decree in time and waited till the adjudication was over. The provisions of the Insolvency Act have overriding effect and the rights of the creditor, who obtained a decree and got the property attached prior to the adjudication and the creditors who seek to prove their debts after adjudication, have to be determined having regard to the provisions of the Provincial Insolvency Act. The rights of a decree-holder creditor who obtained a decree and got the sons' shares attached prior to the adjudication of the father have been stated in a number of decisions of the Madras High Court and this Court, some of which may now be noticed.

13. A Division Bench of the Madras High Court consisting of Mr. Justice Ramesam and Mr. Justice Devadoss in Adusumelli Gopalakrishnayya v. Peyyeth Gopalan, ILR 51 Mad 342 = ( AIR 1928 Mad 479 (1) ) held that although on the insolvency of the father of a joint Hindu family, the power of the father to sell the sons' share in the family property passes to the Official Receiver in insolvency yet if the sons' share was attached by a creditor, the Official Receiver has no power to sell the share after the attachment but the attaching creditor is entitled to proceed with the execution by selling the sons' share. The same principle was again stated by another Division Bench of the same court consisting of Chief Justice Beasley and Mr. Justice Bardswell in the Official Receiver Coimbatore v. Arunachalam Chettiar, 66 Mad LJ 412 = ( AIR 1934 Mad 217 ). According to the learned Judges, on the adjudication of the father in a joint Hindu family, the shares of the sons do not vest in the Official Receiver ; what vests in the Official Receiver with respect to these shares is only the father's power of disposal and where, however, the entire joint family property belonging to the judgment-debtor and his sons had been attached by the creditor before the petition for adjudication of the father, the father's power of sale is destroyed by the attachment and is no longer available to the Official Receiver, and he has no power to deal with the sons' shares or, if they have been sold to appropriate the sale proceeds representing those shares. The learned Judges were also of the view that it is immaterial whether the sons were not parties to the suit by the creditor or if the property attached was merely described as the property of the judgment-debtor and no specific reference was made to the shares of the sons. Venkata Subba Rao, J., in Paramaswaramma v. Venkata Ramayya, AIR 1936 Mad 698 dealing with the rights of an attaching creditor prior to the adjudication of the father as insolvent relying upon Balavenkateseetharama v. Official Receiver, Tanjore, AIR 1926 Mad 994 ( FB ), observed that the adjudication of the father in a joint Hindu family does not defeat the decree-holder's right in respect of sons' shares in the joint family property where sons' shares have been attached before father's adjudication, that the official receiver, in whom the father's share vests after his adjudication, sells not only his interests but also that of his sons and that the decree-holder is entitled to the proceeds of the sale and the fact that what was immovable property is converted into money makes no difference.

14. A Division Bench of this Court consisting of Satyanarayana Raju, J., ( as he then was ) and Chandrasekhara Sastry, J., in : AIR1965AP451 after referring to the case law on the topic, observed as follows :-

'Under Section 28-A, Provincial Insolvency Act, the share of the son of the insolvent in the joint family property does not vest in the Official Receiver. What vests in the Official Receiver is only the father's power to sell the sons' share for discharging the father's debts which are not illegal and immoral.

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when the father's power itself is lost by the filing of the suit for partition by the son, the Official Receiver's power also ceases. So that, if a suit for partition is filed by the son before the Official Receiver exercised the father's power to sell the sons' share, the Official Receiver cannot thereafter exercise the father's power and sell the sons' share '.

15. So, the line of authority is that the father's power to sell the sons' share for his personal debts ceases when once his son's share is attached by the creditor either for the antecedent debts not tainted by illegality or immorality or the son's debts or both and that being the case, the Official Receiver, whose powers are only co-extensive with that of the father under Section 28-A will have no more powers than the father to deal with the son's share for distributing it among the creditors. In other words, if the father's power stood extinguished by reason of attachment prior to the adjudication, the Official Receiver, by reason of the adjudication of the father, will get no better or higher rights than the father.

16. It is true that Mr. Justice Venkatesam has struck a different note in : AIR1965AP52 but we are unable to agree with the learned Judge that by the order of adjudication made after attachment before sale the property vests in the Official Receiver for the benefit of the general body of creditors and that the attaching creditor is not entitled to obtain satisfaction of his decree by sale of the attached property. With great respect to the learned Judge, we must say that this decision runs counter to the law as laid down by a long catena of decisions. We may also in this connection refer to a recent decision of this Court rendered by our learned brother, Parthasarathi, J., in A. A. A. O. No. 68 of 1967, D /- 5-9-1970 ( Andh Pra ). The learned Judge, after referring to several decisions on this topic concluded that, if there is an attachment of the interest of the sons, the Official Receiver's power lapses and the power of disposal vested in the Official Receiver can, if at all be exercised only before it is subjected to the attachment at the instance of the creditor. If there was no attachment of the sons' shares prior to the adjudication of the father as an insolvent, then certainly the general body of the creditors would be entitled to file petitions under Section 4 impleading the sons also as parties and the Court will have necessarily to go into the question whether the sons' shares will also be liable. The attachment of the sons' shares in the joint family properties, prior to the adjudication of the father as an insolvent, makes all the difference in so far as the power of the Official Receiver to sell the sons' shares is concerned, for all that is vested in the Official Receiver is only the father's power to sell the sons' shares for discharging the father's debts, which are not illegal or immoral, but not the shares of the sons of the insolvent in the joint family properties, and that power is lost when once the sons' share is attached prior to the adjudication of the father.

17. We therefore, find no merits in this Civil Miscellaneous Appeal and accordingly dismiss it with costs.

18. Appeal dismissed.


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