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Kusampudi Sunadra Rama Raju Vs. Official Receiver, Guntur and ors. - Court Judgment

LegalCrystal Citation
SubjectContract;Civil
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 139 of 1960
Judge
Reported inAIR1964AP299
ActsContract Act, 1872 - Sections 39 and 62; Provincial Insolvency Act, 1920 - Sections 20, 28, 37, 43, 53, 54 and 56
AppellantKusampudi Sunadra Rama Raju
RespondentOfficial Receiver, Guntur and ors.
Appellant AdvocateG. Venkatarama Sastri, Adv.
Respondent AdvocateA.S. Prakasam, Adv.
DispositionAppeal allowed
Excerpt:
(i) contract - sale by insolvent - sections 39 and 62 of indian contract act, 1872 and section 28 of provincial insolvency act, 1920 - initiation of insolvency proceedings does not terminate all contracts entered into by insolvent - performing of insolvency proceedings acts as notice for other party to terminate contract at will - official receiver can enforce contract if he is willing to perform contract to some extent - transfer under contract is valid till official receiver or other party terminates it. (ii) powers of official receiver - sections 20, 28 , 56, 37, 43, 53 and 54 of provincial insolvency act, 1920 - interim receiver appointed under section 56 does not have power to dispose off property of insolvent - insolvency court cancels adjudication order passed earlier under section.....satyanarayana raju, j.1. the 1st plaintiff is the appellant in this appeal which arises out of the judgment and decree of the court of the subordinate judge, bapalla, in original suit no. 4 of 1958. that was a suit for a declaration of the plaintiffs' title to the plaint schedule properties and for a permanent injunction restraining the defendants from laying any claim or dealing with the properties in any manner, and for rendition of accounts for the income of the suit properties from 1948-49 to 1956-57.2. the plaintiffs are the sons of one peda nagaraju and are residents of khajipalem, in the bapatla taluk of the guntur district. the 1st defendant is the official receiver, guntur. the 2nd defendant is a resident of kottarajulapalem, hamlet of karlapatem, situated within the same.....
Judgment:

Satyanarayana Raju, J.

1. The 1st plaintiff is the appellant in this appeal which arises out of the judgment and decree of the Court of the Subordinate Judge, Bapalla, in Original Suit No. 4 of 1958. That was a suit for a declaration of the plaintiffs' title to the plaint schedule properties and for a permanent injunction restraining the defendants from laying any claim or dealing with the properties in any manner, and for rendition of accounts for the income of the suit properties from 1948-49 to 1956-57.

2. The plaintiffs are the sons of one Peda Nagaraju and are residents of Khajipalem, in the Bapatla Taluk of the Guntur District. The 1st defendant is the Official Receiver, Guntur. The 2nd defendant is a resident of Kottarajulapalem, hamlet of Karlapatem, situated within the same District.

3. The material facts which have given rise to this appeal may be briefly stated. An extent of Ac. 39-30 cents of land, partly situated in the village of Khajipalem and partly in Ganapavaram, originally belonged to the plaintiffs. Out of it an extent of Ac. 18-95 cents of land, is comprised in the plaint schedule. The plaintiffs executed a mortgage deed in respect of the total extent of Ac. 39-90 cents in favour of Govada Ranganayakulu and two others. The first of them obtained a decree in O. S. No. 78 of 1943 on the file of the Court of the Subordinate Judge, Bapatla, on the foot of the mortgage. Belpre the hypotheca was brought to sale in execution of the mortgage decree, the plaintiffs and the 2nd defendant entered into a contract of sale on April 12, 1948, under which the 2nd defendant agreed to purchase the entire extent of Ac. 39.90 cents of land at Rs. 900/-per acre. On the date of the contract, a sum of Rs. 5,500/- was paid as earnest money and it was agreed that out of the balance of consideration, the vendee should discharge the debts of the plaintiffs and that on demand by the 2nd defendant after payment of the balance of the consideration, a sale deed should be executed by the plaintiffs.

While so, the decree-holder in O. S. No. 78 of 1943 brought the entirety of the extent of Ac. 39-90 cents of land, which was the subject-matter of the contract of sale, (Ex. A-1) to sale in execution of his decree. The 2nd defendant purchased an extent of Ac. 20-25 cents out of the Ac. 39-90 cents in the Court auction sale, with his own monies. Thereafter the plaintiffs filed a petition to set aside the Court sale, but it was dismissed. Against the order dismissing their petition, they filed an appeal to the High Court of Madras, which was subsequently transferred to the file of the High Court of Andhra. The appeal was dismissed on August 24, 1956. While the said appeal was pending, on April 21, 1956, a creditor of the 2nd defendant filed a petition for adjudicating him as an insolvent. During the pendency of the insolvency petition, the Official Receiver was appointed as interim Receiver by an order of the Court of the Subordinate Judge, Bapatla, dated December 3, 1956. The 2nd defendant was adjudged an insolvent by the order of the Court dated March 29, 1957. These facts are not disputed.

4. The case of the plaintiffs is that after the 2nd defendant purchased the extent of Ac. 20-25 cents in the Court auction sale in execution of the decree in O. S. No. 78 of 1943, it was agreed between them and the 2nd defendant that the contract of sale should be confined to the balance of Ac. 18-95 cents and that the other terms embodied therein should remain the same. It is further averred that a sum of Rs. 150/- was later on paid by the 2nd defendant in two instalments and was duly endorsed on Ex. A-1. The plaintiffs have further pleaded that according to the contract, they had undertaken to dig a 'bode' channel for providing additional facilities for irrigation of the suit land; that they purchased 10 cents from Manthena Nagaraju, excavated a channel therein and put the 2nd defendant in possession of the suit land; and that he remained in possession and enjoyment of the same till March 12, 1957.

It is alleged that the 2nd defendant committed default in the performance of the suit contract of sale, that he became heavily involved in debts which made it impossible for him to pay the balance of the sale consideration and to obtain a sale deed; that the plaintiffs thereupon issued a registered notice through their advocate to the 2nd defendant demanding specific performance of the contract or re-delivery of the possession of the land together with damages; and that when they were contemplating to file a suit for possession of the suit land, the 2nd defendant, on the advice of mediators, agreed to redeliver the possession of the land to the plaintiffs and requested them to excuse him from performing the obligations embodied in the contract of sale. It is stated that this agreement was engrossed on stamps on March, 12, 1957, and that the agreement recited that the 2nd defendant rescinded the contract and gave back possession of the suit land to the plaintiffs; that when, after taking possession, the plaintiffs had raised crops on the suit lands, the interim Receiver sold a part of the standing crops, and that therefore the plaintiffs were obliges to file the suit for the reliefs stated above.

5. The Official Receiver, 1st defendant, while admitting the truth of the contract of sale (Ex. A-1) dated 12th April 1948, has contended that the entire consideration due to the plaintiffs was paid to them by the 2nd defendant but that the plaintiffs commuted default by not executing a sale deed, as was agreed to by them. He denies that the possession of the suit land was redeliver-ed to the plaintiffs. He also denies the truth and validity of the agreement, Ex. A-7 said to have been executed between the 2nd defendant and the plaintiffs on March 12, 1957. Alternatively he has contended that Ex. A-7 would not bind him as -the properties of the 2nd defendant originally vested in the interim Receiver and subsequently in him on the adjudication of the 2nd defendant as an insolvent.

6. The 2nd defendant filed no written statement though he entered appearance through an Advocate.

7. The following issues were framed by the lower Court:--

'1 Whether the contract dated 12-3-1957 is true, valid and binding on the 1st defendant?

2. Whether the 2nd defendant has committed default under contract dated 5-4-1948 as pleaded by the plaintiffs

3. Whether the suit is barred by res judicata by virtue of the decision in E. A. No. 705 of 1957 in I. P. No. 15 of 1955, Sub-court Bapatla?

4. Whether plaintiff is entitled to rendition of accounts?

5. Whether the 1st defendant is entitled to rely on the contract dated 5-4-1948 and resist the claim of the plaintiffs if necessary by paying any amount that may be found due?

6. Whether the 1st defendant cannot get any rights in the suit property unless he files a suit for specific performance?

7. To what relief? Additional issue framed on 22-2-1360: (1) Whether the plaintiff is entitled to declaration and injunction as prayed for?'

8. On a consideration of the evidence adduced by the parties, the learned trial Judge found an issue (1) that Ex. A-7, the agreement of sale dated March 12, 1957 was true but that it was not valid and binding on the 1st defendant. On issue No. 2 the finding was that the 2nd defendant committed default in the performance of the contract, Ex. A-1. The lower Court did not record a finding on issue No. 3 as that issue was not pressed. On issue 5 the finding was that the Official Receiver was entitled to resist the plaintiff's claim by reason of Ex. A-1. On issue 6 the Court below found that the 1st defendant obtained rights in the suit land without filing a suit for specific performance. On issue 4 and additional issue 1, the lower Court found that the plaintiffs were not entitled to a rendition of accounts. The learned trial Judge found that the plaintiffs were in possession of the suit land by the date of suit but that this fact would not help them in obtaining the reliefs sought for by them.

While finding that the tide to the suit lands pass to the Official Receiver which was in fact conceded by the Receiver the lower Court held that on account of the intervention of the insolvency proceedings and on account of Ex. A-7, without reference to the Official Receiver, the plaintiffs are unable to enforce any of the rights in this suit. The learned trial Judge, however, observed that it would be advisable and desirable even at that stage that the Official Receiver (1st defendant) should pay the balance of the consideration to the plaintiffs to put an end to the litigation. Pursuant to these, findings, the suit was dismissed, and against the decree of dismissal, the 1st plaintiff has preferred this appeal.

9. Before us, it is contended by the learned counsel for the appellant that the lower Court should have held that the original contract, Ex. A-1 was superseded by Ex. A-7; and that the 2nd defendant having rescinded the original contract and given up possession to the plaintiffs under Ex. A-7, the Official Receiver is not entitled to revise Ex. A-1.

10. At the outset, it may be stated that the 1st defendant has admitted truth of Ex. A-1. It recites the payment of a sum of Rs. 5,500/- on the date of the contract and bears an endorsement of the payment of a sum of Rs. 150/- in two instalments on subsequent dates. The document mentions that the plaintiffs agreed to sell the land at Rs. 900/- per acre. It is not disputed that the 2nd defendant purchased ac. 20-25 cents in the Court auction sale in execution of the decree in O. S. No. 78 of 1943. Therefore, out of the total extent of ac. 39-90 cents, originally agreed to be sold by the plaintiffs to the 2nd defendant there remains only ac. 18-95 cents. It is common ground that it was agreed by the plaintiffs and the 2nd defendant that in substitution of the extent agreed to be sold under Ex. A-1, the said extent of ac. 18-95 cents should be conveyed to the 2nd defendant at Rs. 900/- per acre, which works out at Rs. 17,100/-.

11. The 1st defendant has pleaded that the entire consideration due to the plaintiffs was already paid to them by the 2nd defendant and that an endorsement to that effect was made by the plaintiffs on the contract of sale which the 2nd defendant has with him (of which Ex. A-1 is a counterpart) and that, therefore, the plaintiffs are bound to execute a conveyance in his favour.

12. In the evidence of D.W. 1, examined by the 1st defendant, it was stated that the 2nd defendant has agreed to sell certain lands to one Srinivasa Raju and that the said Srinivasa Raju had paid Rs. 5,000/- on one occasion and another sum of Rs. 5,000/- on a subsequent occasion. There is nothing on record to show that there was a contract of sale between the 2nd defendant and Srinivasa Raju and no document has been filed to show that he made the above payments to the plaintiffs. On a consideration of the evidence, the lower Court has found that the 2nd defendant did not pay any amount excepting what had been paid under Exs. A-1 to A-3. The aggregate of these three payments is Rs. 5,650/-.

13. Sri A. S. Prakasam, the learned counsel for the 1st respondent (Official Receiver. has contended that as Srinivasa Raju is closely related to the plaintiffs, it was not possible for the 1st defendant to secure his evidence. If, in fact, there was a contract of sale between Srinivasa Raju and the 2nd defendant, and if he had, in fact, paid a substantial sum of money to the tune of Rs. 10,000/- to the plaintiffs pursuant to that contract, it is difficult to hold hat Srinivasa Raju was unwilling to speak to the contract in his favour and the payments made by him. On the ether hand, be should have been too anxious to affirm the contract, if there was any in his favour, and prove the payment of Rs. 10,000/- thereunder. Admittedly the Official Receiver has no document in his possession which would support the existence of the contract of sale in favour of Srinivasa Raju and the alleged payments made thereunder.

He has no other evidence except that of D.W. 1. That Srinivasa Raju is a material witness is not disputed, and under the circumstances of the case, we have no reason to believe that he would have been averse to come as a witness. In the absence of any documentary evidence to prove that there was a contract of sale between the 2nd defendant and Srinivasa Raju and the payments alleged to have been made by Srinivasa Raju to the plaintiffs, the lower Court was not willing to accept the testimony of D.W. 1. We are in agreement with the conclusion reached by the Court below that there was no proof that 2nd defendant had paid any amount save those evidenced by Exs. A-1 to A-3. We are also in agreement with the conclusion reached by the lower Court that me 2nd defendant committed default in the performance of the contract. The finding on issue No. 2 is therefore affirmed.

14. The next of the question is as to whether the plaintiffs could, in law, rescind the contract evidenced by Ex. A-1. On this part of the case, the learned counsel for the 1st respondent strongly relied upon the fact that the suit lands were vested in the Interim Receiver who was appointed by the Court on December 3, 1956.

15. It may be initially stated that the contract entered into by the 2nd defendant for the purchase of land under Ex. A-1 was not put an end to by reason of the insolvency of the 2nd defendant. It is well settled that insolvency does not determine a contract. Nor does insolvency per se operate as rescission of a contract. But conduct on the part of the insolvent or the Official Assignee, which practically amounts to notice to those with whom the insolvent had contracted, that he does not mean to perform any of his contracts, may amount to a refusal of performance entitling the other party to the contract to rescind. It is equally true that a contract by the insolvent to buy property cannot be specifically enforced against the Official Receiver. Where, however, the Official Receiver, insists on the performance of we contract, he must be ready and willing to perform the insolvent's part of the contract to the same extent to which the insolvent should have done had he remained solvent.

16. It is contended by Mr. Venkatarama Sastry that under Section 23 of the Provincial Insolvency Act, vesting only takes place upon adjudication; that the property of the debtor does not vest in an Interim Receiver, who has only the powers of a Receiver appointed under Order 40, Rule 1 of the Code of Civil Procedure; and that till the date of his adjudication it is open to the debtor to rescind the contract. It is also contended by him that any transaction entered into by the insolvent is only voidable and not void; and that the Official Receiver not having taken any steps to avoid the transaction, he has no right to impeach Ex. A-7 or to enforce Ex. A-1.

17. Before considering these contentions, it is necessary to state that it was fairly conceded by the 1st defendant in the lower Court that so far, the legal title in respect of the property in suit had not vested in him, The lower Court, in fact, during the pendency of the suit, suggested to the 1st defendant that he should pay the balance of the sale consideration but, for some reason or other, this was not done. Though the 1st defendant stated in his written statement that he was willing to pay the balance of the sale consideration and in spite of the suggestion made by the lower Court that he should do so, the balance of the sale consideration was not admittedly paid by the 1st defendant to the plaintiffs. That apart, the question is whether by reason of the Interim Receiver having taken possession of the suit lands from the insolvent on December 3, 1956, it can be said that the property vested in him.

18. As pointed out in Mulla's Treatise on the Law of insolvency (2nd edition, page 270):

'There is no statutory prohibition against the sale of property by an insolvent after insolvency proceedings have been initiated. The vesting of the property in the Official Receiver is for the benefit of the creditors and so does not purport to affect the transactions between the insolvent and other persons except in so far as they affect the administration of the insolvent's estate for the benefit of the creditors. As far as the parties to the transaction are concerned, they are binding on them.'

19. In Perayya v. Kondayya, ILR 1948 Mad 872 : (AIR 1948 Mad 430), a sale deed was executed by the insolvent before the insolvency petition was filed but the registration of the sale deed took place in the course of the insolvency proceedings. Horwill and Rajamannar, JJ. held that even on the assumption that the sale took place during the course of the insolvency proceedings, the sale was valid and binding on the parties.

20. As to the effect of the appointment of an Interim Receiver, a Divisional Bench of the Madras HighCourt, consisting of Spencer and Madhavan Nair, JJ. Held in Subramania Aiyar v. Official Receiver, Tanjore, 50 Mad LJ 665 : (AIR 1926 Mad 432) as follows:

'Under Section 28 of Act 5 of 1920 vesting only takes place upon adjudication and under Section 29 it is not till then that a Court in which proceedings are pending against a debtor, is bound to stay them.

An interim Receiver has under Section 20 only the powers of a Receiver appointed under the Code of Civil Procedure and he is not clothed even with those powers till he takes possession of the debtor's properties. This is clear from the section itself. A receiver appointed under the Code must obtain possession before the leave of the Court is required for disturbing his possession. Until he is actually in possession a creditor is not debarred from proceeding to execution .....'

The learned Judge further pointed out that even if the Official Receiver had that power, it was not possessed by the Interim Receiver in which, for want of an order of adjudication, the property of the insolvent had not yet vested.

21. Much the same view taken by Jackson, J. in Official Receiver, Tanjore v. Sankara Aiyar, 50 Mad LJ 239 : (AIR 1926 Mad 357). There the question for decision was whether an Interim Receiver by virtue of his appointment under Section 20 of the Provincial Insolvency Act, had power to apply under Order 21, Rule 89, C. P. C., in other words, whether, by virtue of his appointment under that section he stood in the place of the owner. It was held that in order to entitle a person to apply under Order 21, Rule 89, C. P. C., he must be the owner of such property. The learned Judge held that Section 20 which governs the powers of the Interim Receiver, invests him with only such of the powers conferable on a Receiver appointed under the Code of Civil Procedure and that an interim Receiver cannot therefore apply under Order 21, Rule 89, C. P. C.

22. Whatever may be the powers conferred on an Interim Receiver, the property of the debtor does not vest in him as it does in a Receiver appointed after adjudication under Section 56 of the Act; in other words, his appointment has not that same effect as the effect of the appointment of an Official Receiver after adjudication. It is only after adjudication that an insolvent can be said to have been divested of his property and it is only then and not otherwise that the property would vest in the Receiver. But before adjudication, the debtor continues to be the legal owner of the property.

23. Sri A. S. Prakasam, learned counsel for the 1st respondent while not disputing these propositions has contended that on July 10, 1957, the plaintiffs filed I. A. No. 706 of 1957 (Ex. A-8) under Sections 4 and 5 of the Provincial Insolvency Act, praying that it should be declared and decided that the suit land belonged to them, and that the sale held by the Official Receiver, and the order for delivery of the land should be set aside or rescinded and possession be restored to them. It may be mentioned that the complaint of the plaintiffs then was that the crop on certain of the suit lands, which wore in their possession, was auctioned as the property of the insolvent by the Official Receiver and that the auction-purchasers were attempting to disturb their possession, which they wore not entitled to do, and that therefore the Court should protect their possession.

This application was dismissed on the ground that as sale certificate had already been issued in favour of the auction-purchaser of the crop by the Official Receiver and that if the Plaintiffs were anxious about their claims, they could have raised objections before the sale certificate was issued or during the sale by the Official Receiver, and that at that stage after the sale certificate was issued and delivery of possession was effected, the application was not maintainable. Having made this order, the Court, however, observed that the plaintiffs might, if they were so advised and so chose, file a separate suit to establish their claims. From a perusal of this order it is clear that the rights of the plaintiffs were not finally adjudicated upon. Their remedy to have their rights determined in a separate suit was expressly reserved.

24. It may also be mentioned that the adjudication of the 2nd defendant was annulled on November 3, 1958, and the present suit was filed on January 2, 1958. Where, the insolvency Court annuls an adjudication order under Section 43 of the Provincial insolvency Act and chooses to pass an order under Section 37 vesting the properties of the quondam insolvent in an appointee, the Official Receiver or any other person, the administration in insolvency can be continued for the realisation and distribution of the assets of such a person despite the annulment of the adjudication itself. But, however, the powers which inhere in an appointee under Section 37 of the Provincial insolvency Act on an annulment of the adjudication would not entitle the Official Receiver appointee to initiate proceedings under Sections 53 and 54 of the insolvency Act; in other words, the Official Receiver, who functions as an appointee after the annulment of the adjudication, cannot initiate proceedings under Sections 53 and 54 of the Insolvency Act, though if the proceedings were, already initiated he can continue them. This was the view taken by a Full Bench of the Madras High Court in Veerayya v. Sreenivasa Rao, 69 Mad LJ 364 : (AIR 1935 Mad 826) (FB).

25. That a transfer by an insolvent is voidable and stands till it is set aside has been laid down by their Lordships of the Supreme Court in Ramaswami Chettiar v. Official Receiver, Ramanathapuram at Madurai, : [1960]1SCR616 . There it was observed as follows:

'We will assume for the purpose of the present case that when an order is made under Section 54 of the Act annulling a transfer, the transfer stands annulled as from the date it was made. But even so, the transfer stands till it is annulled and therefore, till then, the transferee has all the rights in the property transferred. So long as the transferee had such rights he was competent to exercise them and such exercise would be legal and fully in accordance with law. The fact if it be so, that the transfer on annulment becomes void as from the date of the transfer cannot turn the exercise of a right under the transfer, made prior to the annulment and which was legal than made, illegal.' Referring to Sub-sections (2) and (7) of Section 28 of the Provincial Insolvency Act, their Lordships stated as follows: 'These sub-sections cannot have the effect of vesting the decree in the Receiver till its transfer to Meenakshi Achi had been annulled. Till then it was not a part of the insolvent's estate. The annulment as we have earlier pointed out, was made under Section 54 of the Act. That section provides that certain transfers of property by the insolvent would be deemed fraudulent and void as against the Receiver in insolvency and shall be annulled by Court. 'It is obvious that a transfer liable to be annulled under this Section remains a perfectly valid transfer till it is annulled. If it had become void automatically on an order of adjudication being made, there would be no need to provide for its annulment by Court'.' (Italics (here in ' ' ) ours).

26. The argument before their Lordships of the Supreme Court was inasmuch as the order of adjudication founded on an act of insolvency constituted by a transfer of property amounting to a fraudulent preference, itself and without more annuls that transfer. In dealing with this contention, their Lordships referred to the decision of the Privy Council in Mahomed Siddique Yousuf v. Official Assignee of Calcutta, 70 Ind App 93 : (AIR 1943 PC 130). They held that decision clearly proceeded on the basis that even where the order of adjudications based on an act of insolvency constituted by a transfer of property found to be a fraudulent preference, the transfer stands till it is set aside.

27. We may also refer to a Full Bench Decision of the Madras High Court in Subbaiah V. Ramaswami, : AIR1954Mad604 , wherein Mr. Justice Subba Rao pointed out as follows:

'Insolvency does not operate as civil death. The insolvent's property vests in the Official Receiver for the purpose of administering the estate and for meeting me claim of the creditors. The act does not affect the capacity of the insolvent to enter into contracts and otherwise deal with the property. He is in the position of a person who has alienated all his property or otherwise lost it. But his position cannot be equated to that of a minor or a lunatic.'

28. On a review of the authorities, it is clear that there is no statutory prohibition against the sale of the debtor's properties after the insolvency proceedings have been initiated. So too, a contract entered into by an insolvent, after the insolvency proceedings have been initiated but before he is adjudged an insolvent, is not per se void. The best that can be said is that it is open to the Official Receiver to get the transaction set aside but until the transaction is impeached and set aside, the transaction would stand. In the present case the agreement, Ex. A-7 entered into by the 2nd defendant before ha was adjudged an insolvent, rescinding the contract entered into by him with the plaintiffs, is valid and binding. On this conclusion, it follows that the rescission of the contract of sale, Ex. A-1, is binding on the 1st defendant.

29. The Court below found as a fact that the plaintiffs were in possession of the property on the date of the suit. The learned counsel for the 1st respondent has canvassed the correctness of this finding. It is urged by him that the fact that the plaintiffs themselves filed the application, I. A. No. 706 of 1957 (already referred to), praying that the sale of the crops in favour of the auction-purchaser should be set aside and that possession be restored to them, itself furnishes proof positive that the plaintiffs were not in possession of the suit land. It is clear from the proceedings referred to by the learned trial Judge in paragraph 32 of his judgment that the Official Receiver sold the lease hold rights in items 3 to 5 on May 15, 1957 and they were purchased by D.W. 2. It is stated by D.W. 2 that he went to the lands to take possession but that he was told that there would be obstruction by the plaintiffs and so he filed an application in the Criminal Court under Section 144, Cr. P. C. (Vide Ex. A-17). That petition was dismissed on June 10, 1957, as evidenced by Ex. A-9. D.W. 1 also admitted that D.W. 2 came to the land to take possession but that D.W. 2 could not take possession.

It was then that D.W. 2 came to the civil Court and obtained an order of delivery. Ex. B-1 is the petition filed by him, and Ex. B-2 is the delivery receipt dated July 14, 1947. After the delivery through Court, D.W. 2 filed a petition under Section 144 of the Code of Criminal Procedure and obtained orders on July 22, 1957. While it is no doubt true that these orders were passed, it is an admitted fact the D.Ws. 1 and 2 raised the 'sarva' crop in 1957. It is the contention of the defendants that D.Ws. 1 and 2 did not vacate the land after they raised the sarva crop; and that they also raised the second crop but that the plaintiffs unlawfully cut and removed that crop. It was pointed out by the Court below that the second crop was cut and removed by the plaintiffs. The learned trial Judge was prepared to believe that the plaintiffs were in possession of items 3 to 5 of the suit lands by the date of the suit; that except for the fact that they were disturbed in their possession of items 3 to 5 for a short period, the other items remained in the possession of the 1st plaintiff; and that even with respect to these items the plaintiffs got into possession alter the crops was removed; and that by the dale of the suit, the plaintiffs were in possession of all the properties.

30. On a consideration of the material placed before us, we are inclined to hold that the lower Court was right in holding that the plaintiffs were in possession of the suit lands at least on the date of the suit. As we have already pointed out, the contract of sale, Ex. A-1, was rescinded by the 2nd defendant under Ex. A-7. On this conclusion it follows that the right of enforcing that contract is no longer subsisting. The legal title not having passed to the Official Receiver, coupled with the facts that the possession still remains with the plaintiffs and the contract Ex. A-1 has been validly determined by the 2nd defendant, the plaintiffs are entitled to a declaration of their title to the plaint schedule, property and for a permanent injunction restraining the defendants from laying any claim or dealing with the property in any manner. There must therefore be a decree in favour of the plaintiffs for the above reliefs.

31. There is one subsidiary question which remains for determination and that is whether the plaintiffs are entitled to profits. One of the prayers in the plaint is that the defendants should render an account of the in come on the suit land from the year 1948-49 to 1956-57.

The learned trial Judge held that the plaintiffs were not entitled to a rendition of accounts. The basis of the claim for rendition of accounts as given in the plaint, may be set out:

'These unauthorised and illegal acts of the first defendant in dealing with the suit properties in spits of the fact that the plaintiffs alone are the absolute owners and are in possession since 12-3-1957 indicate that he is trying to repudiate the arrangement dated 12-3-1957 at the instigation of 2nd defendant and his confidant R. Sankararao. The plaintiffs are therefore compelled to file this suit. The plaintiffs are therefore entitled under law to demand the defendants to render a true and proper account for the income of 9 years enjoyed by 2nd defendant and restore the same to the plaintiffs. The plaintiffs are ready and willing to give credit for the sum of Rs. 5650/- received by them.'

32. It may be stated that this claim for rendition of accounts runs counter to the arrangement evidenced by Ex. A-7. We have now found that Ex. A-7 is valid and binding and that by reason of the rescission by the 2nd defendant under this document, the original agreement, Ex. A-1 stood cancelled. It is necessary to state that under Ex. A-7 the agreement between the parties was as follows:

'We have therefore agreed that, as the 3rd individual (2nd defendant) of us is not in position to pay the balance of the sale consideration as per the terms of the contract, the sale contract shall be hereby cancelled, that the 3rd individual (2nd defendant) should give up the contentions raised in his registered notice dated 14-12-1957 by his pleader, and deliver possession of the schedule mentioned lands to the 1st and 2nd individuals (plaintiffs); and that, as the 3rd individual has been in enjoyment of the profits for the past 9 years, he should give up the amount of Rs. 5,650/- received from him by individuals 1 and 2 (plaintiffs) towards the sale consideration under the contract, and that though the 1st and 2nd individuals (plaintiffs) are entitled to recover under the Act the value of the profits for the 9 years, remaining after deducting the said sum of Rs. 5,550/- (5650) they shall give up the same since they have been so advised by elders in the interests of compromise.'

33. Under the above terms of the agreement, therefore, in return for the 2nd defendant giving up his claim for the recovery of the amount of Rs. 5,650/- paid by him under Ex. A-1 to A-3, which payments have been found to be true, the plaintiffs agreed to give up their claim for profits for nine years, that is, from the year 1948 to 1957. It is the case of the plaintiffs that pursuant to this agreement, dated March 12, 1957, they were put in possession of the suit land. We have found that the plaintiffs were actually in possession of the suit land on the date of the suit which was instituted on January 2, 1958. The lower Court found that but for the possession of the plaintiffs in respect of items 3 to 5 having been disturbed for a short while, they continued to be in possession. On these facts, there is no justifiable ground for the plaintiffs asking for a rendition of accounts for the profits on the suit land for the years 1948-49 to 1958-57.

34. The learned counsel for the appellant, however, relied upon the following clause in the agreement.

'This agreement has been entered into without prejudice to the right of the 1st and 2nd individuals (plaintiffs. to recover, in case this compromise should fall to take effect for any reason on account of any person whomsoever, the sum of Rs. 20,000/- remaining after deducting the sum of Rs. 5,650/- from out of the profits for 9 years, on the liability of the estate belonging to the 3rd individual (2nd defendant).'

35. We do not think that there is any justification for the plaintiffs invoking this clause because we have found that Ex. A-7 is valid and binding on the defendants.

It may also be stated that at no time did the 2nd defendant dispute the truth and validity of Ex. A-7. The fact that the 1st defendant in whom the properties of the 2nd defendant nave vested, on his adjudication as an insolvent, pleaded that the agreement Ex. A-7 was not valid and Binding on him, does not in any way entitle the plaintiffs to seek the benefit of the above clause. We, therefore, hold that the plaintiffs are not entitled to the relief of rendition of accounts from the defendants.

36. This relief cannot, therefore, be granted.

37. In the result, the appeal is allowed and the suit is decreed except with respect to the relief for rendition of accounts, with costs here and in the Court below. The plaintiffs will be entitled to recover their costs from the estate. The Official Receiver (1st defendant) will also be entitled to recover his costs from the estate.


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