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Sri Raja Vatsavaya Venkata Suryanarayana Jagapathi Raju Bahadur Vs. the Official Receiver, East Godavari District - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtAndhra Pradesh High Court
Decided On
Case NumberA.A.O. No. 351 of 1963
Judge
Reported inAIR1965AP451
ActsProvincial Insolvency Act, 1920 - Sections 28, 28-A and 52; Code of Civil Procedure (CPC), 1908 - Sections 38, 47, 58 and 151 - Order 21, Rules 58 and 63
AppellantSri Raja Vatsavaya Venkata Suryanarayana Jagapathi Raju Bahadur
RespondentThe Official Receiver, East Godavari District
Appellant AdvocateS. Ramamurthy, Adv.
Respondent AdvocateA. Sambasiva Rao and ;C. Apparao, Advs.
Excerpt:
civil - execution of attached property - section 28, 28-a and 52 of provincial insolvency act, 1920 and sections 38, 47, 58 and 151 and order 21 rules 58 and 63 of code of civil procedure, 1908 - execution petition against attached property filed by decree holder excluding other creditors - claim for possession of such property raised by receiver allowed - dispute whether property is self acquired or joint family property to be decided by executing court - held, petitioner entitled to proceed against share in joint family property if established by executing court. - .....21, r. 58, c. p. c. and s. 52 of the provincial insolvency act praying in e. p. no. 268/62 to the official receiver for administration on the insolvency side. the subordinate judge ordered that the execution so far as the judgment-debtors 1, 2 and 5 to 8 are concerned, who were not insolvents, should be stopped and that the property belonging to the judgment-debtors 1 and 2 and should be delivered to the official receiver. in i. p. no. 16/64, one kancherla achiraju alias bulli jaggayya, kancherla mallikharjuna rao and devata china yerakayya were adjudged insolvents on 12-7-58 on a creditor's petition. during the pendency of the i. p., the appellant in this appeal filed o. s. no. 85/57 on 14-11-57 to recover a sum of rs. 12,691-10-8 from defendants 1, 3 and 5 therein personally and from.....
Judgment:

Chandrasekhara Sastry, J.

(1) This civil miscellaneous appeal came up for hearing before our learned brother, Venkatesam, J., who, by his order, dates 13-8-64, directed the case to be posted before a Bench for disposal, as he felt that an authoritative decision on the points arising in this appeal is necessary.

(2) The appeal is filed against the order of the Subordinate Judge, Kakinada, in E. A. No. 1130/62, filed by the Official Receiver, East Godavari, in O. S. No. 85/57 under Ss. 38. 47, 151 and O. 21, R. 58, C. P. C. and S. 52 of the Provincial Insolvency Act praying in E. P. No. 268/62 to the Official Receiver for administration on the insolvency side. The Subordinate Judge ordered that the execution so far as the judgment-debtors 1, 2 and 5 to 8 are concerned, who were not insolvents, should be stopped and that the property belonging to the judgment-debtors 1 and 2 and should be delivered to the Official Receiver. In I. P. No. 16/64, one Kancherla Achiraju alias Bulli Jaggayya, Kancherla Mallikharjuna Rao and Devata China Yerakayya were adjudged insolvents on 12-7-58 on a creditor's petition. During the pendency of the I. P., the appellant in this appeal filed O. S. No. 85/57 on 14-11-57 to recover a sum of Rs. 12,691-10-8 from defendants 1, 3 and 5 therein personally and from the joint family properties of all the defendants being the balance of principal and interest due on a promissory note, dated 26-11-51 executed by defendants 1, 3 and 5 in plaintiff's favour for Rs. 10,000. Defendants 1, 3 and 5 were the persons adjudged as insolvents in I. P. No. 16/64. The 2nd defendant is the son of the 1st defendant. China Yerakayya. The 6 and 7 are the sons of the 5th defendant. The 8th defendant is the son of the 6th defendant. Thus, it is clear that the suit was filed not only against their sons praying for a decree against their joint family properties. The Official Receiver, East Godavari, was added as the 9th defendant as per the order, dated 15-12-58 in I. A. No. 1660/58. The Subordinate Judge's Court, Kakinada passed a decree on 27-1-59 in plaintiff's favour, the operative portion of which is as follows:-

'This Court doth order and decree that plaintiff do recover Rs. 12,691-10-8 from defendants 1, 3 and 5 personally and from the joint family properties of all the defendants with interest on Rs. 10,000 at 6 per cent per annum from this date till date of realisation. It is further ordered and decreed that plaintiff do recover Rs. 1,744.81 nP. towards costs of the suit.'

The Official Receiver, who was the 9th defendant was absent and was set ex parte. The properties of defendants 1 and 2 were attached before judgment on 28-12-57.

(3) After obtaining the decree, the decree-holder filed E. P. No. 268/61 for executing the decree against the attached property. Then, the Official Receiver filed E. A. No. 1130/62, out of which this appeal arises. In the E. A., it was alleged that the decree-holder's right is only to claim a dividend along with the other creditors in the insolvency proceeding, but not to proceed in execution for his own benefit to the exclusion of the other creditors. It was further alleged that leave of the insolvency Court was not obtained for presenting the execution proceedings and that, therefore, the execution petition liable to be dismissed. It was also alleged that the properties sought to be sold in execution are the self-acquired properties of the judgment-debtors 1 and 5 and that their sons have no share therein and that even if they are found to be their joint family properties, the execution of the decree cannot be taken against the insolvent's share or even against the sons' shares in view of Ss. 28 and 28-A of the Provincial Insolvency Act. on these allegations, the Official Receiver prayed that the execution proceedings may be stopped in accordance with the provisions of S. 52 of the Provincial Insolvency Act and that the attached property may be ordered to be delivered to the Official Receiver for administration in insolvency. This application was opposed on behalf of the decree-holder. On his behalf, it was contended that the property attached and sought to be proceeded against is the joint family property of the insolvent and their sons and not the self-acquired property of the insolvents and that the decree-holder is entitled to proceed against their sons' shares by bringing them to sale to realise the decree amount. He also invited the executing Court to decide the question whether the property is the self-acquired property of the insolvents as alleged by the Official Receiver or the joint family property of the insolvents and their sons.

(4) The lower Court, following the decision in Official Receiver, Kistna v. Kodandaramayya, ILR 58 Mad 1056 : (AIR 1935 Mad 651), held that under S. 52 of the Provincial Insolvency Act, the executing Court is no longer competent to investigate or decide the question whether the property was the self-acquired property of the insolvents and their sons and that what all it has to do so is to order delivery of the property of the Official Receiver leaving the question to decide by the insolvency Court if it thinks fit or in a separate suit. it also held, following the decision of the Sanjeeva Row Nayudu, J. in N. Narasimhacharyulu v. P. Sambaiah, : AIR1960AP131 , that in view of S. 28-A of the Provincial Insolvency Act, the decree-holder has no right to proceed in execution even against the sons' shares even assuming that the properties are the joint family properties. The lower Court also held that as, in the present case, the execution petition was filed as against the insolvents also, leave of the insolvency Court was necessary and that, as such leave was not obtained the execution petition was not maintainable. In the result, the execution of the decree was stopped and the property was ordered to be delivered to the Official Receiver. Hence, this appeal is filed by the decree-holder.

(5) Though the order of adjudication was passed only on 12-7-58 under S. 28 of the Provincial Insolvency Act, the said order relates back to the presentation of the insolvency petition in the year 1954 in view of S. 28(7) of the said Act. Section 28-A was inserted by the Provincial Insolvency (Amendment) Act, 1948 and it provides:

'The property of the insolvency 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.'

It is not necessary to refer to the two provisos to this section. In cases governed by the Presidency Towns Insolvency Act, the power which the father of a joint family has to alienate the joint family property including the sons' shares in the joint family property for paying his antecedent debts not contracted for immoral or illegal purposes vested in the Official Receiver under S. 52, cl. (2) of that Act. Though there was no provision in the Provincial Insolvency Act corresponding to S. 52(2) of the Presidency Towns Insolvency Act, the High Court of Madras held till the decision of the Full Bench in Ramesastrulu v. Balakrishna, ILR (1943) Mad 83: (AIR 1942 Mad 682), that the powers of the father to alienate his son's share for his own debts which are not illegal and immoral vest in the Official Receiver under S. 28(2) or S. 2(1)(d) of the Provincial Insolvency Act. But the said Full Bench finally held that the power of a father to sell the joint family property including the interest of the son was not 'property of the insolvent' within the meaning of S. 2(1)(d) and S. 28 of the Provincial Insolvency Act which could vest in the Official Receiver and which be reason of S. 59, he was empowered to sell for distribution among the creditors. On this question, there was a divergence between the Madras High Court and the High Courts of Bombay, Lahore, Patna and Allahabad. In view of this, S. 28-A was inserted by the Provincial Insolvency (Amendment) Act, insolvent shall comprise also the capacity to exercise and to take proceedings for exercising all such powers in respect of the property as might have been exercised by the insolvent for his own benefit. Thus, there is no longer any distinction between the provisions of the Presidency Towns Insolvency Act and those of the Provincial Insolvency Act in this respect.

(6) But is must be noted that the share of the son itself 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 son's share for discharging the father's debts which are not illegal and immoral. But once the son files a suit for partition and thus divided in status from the father, the father's power to sell the son's share to discharge his debts thought incurred before the division in status, ceases, and the father would no longer sell his son's share for his debts. When the father's power itself is lost by the filling 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 son's share, the Official Receiver cannot thereafter exercise the father's power to sell the son's share, This was what was held by the Full Bench in In re Baluswami Ayyar, ILR 51 mad 417 : (AIR 1928 Mad 735) (FB). In that case, the adjudication of the insolvency was under the Presidency Towns Insolvency Act. It was held that the institution of a suit subsequent to the adjudication by the sons against the father for partition of the family properties put an end to the joint family status and with that, to the right of the father to alienate his son's shares also for his debts and by that means extinguished the right of the Official Assignee also, whose right was only co-extensive with that of the father to alienate privately the sons' share also for the father's debts. Since the power of the Official Receiver under S. 28-A of the Provincial Insolvency Act is the same as that of the Official Assignee under S. 52(2) of the Presidency Town Insolvency Act the decision of the Full Bench ILR 51 417 : (AIR 1928 Mad 735) (FB), applies to the power of the Official Receiver under the Provincial Insolvency Act also.

(7) Similarly, the son's share may be attached even after the insolvency of the father by a creditor of the father in execution of a decree obtained by him against the father or against the father and son in respect of a personal debt of the father, unless it has been previously sold by the Official Receiver. It is not disputed that the father's power to sell the son's share for his personal debts cannot be exercised, once the son's share is attached by a creditor either of the father or of the son both. Since the right of the Official Receiver is only co-extensive with that of the father, it necessarily follows that, if the son's share is attached by a creditor, the Official Receiver's power also to sell the son's share for distribution among the creditors is extinguished. In Goplakrishnayya v. Gopalan, ILR 51 Mad 342: (AIR 1928 Mad 479 (1)), it was held that, although, on the insolvency of the father of a joint Hindu family, the power of the father of a joint Hindu family, the power of the father to sell the son's share in the family property passes to the Official Receiver in insolvency, yet if the son's share was attached by a creditor, the Official Receiver has no power to sell the share after attachment, but the attaching creditor is entitled to proceed with the execution by selling the son's share. This decision was followed in Arunachalam Chettiar v. Sabaratnam Chettiar, (1939) 1 Mad LJ 889: (AIR 1939 Mad 572). In that case, the father of a joint Hindu family was adjudicated an insolvent and before the Official Receiver sold the shares of the sons for the benefit of the creditors, those shares had been attached in execution of a decree obtained by a creditor. It was held that S. 28(2) of the Provincial Insolvency Act refers only to the property of the insolvent and that proceedings can be taken in respect of the sons' interest in the family property without the leave of the Insolvency Court, and that, as a result of the attachment in that case, the Official Receiver has lost the power to sell the property of the sons for the lawful debts of the insolvent father. This decision lay down also that, when the creditor seeks to proceed against the sons' shares, leave of the insolvency Court is not necessary. As the Official Receiver's right to exercise the father's power to sell the sons' share for the debts of the insolvent father will be lost if the sons' shares are attached before the Official Receiver actually exercises that power, the question whether the attachment of the sons' shares was made before the filing of the insolvency petition to which date the adjudication relates back or after the filing of the insolvency petition becomes immaterial. Therefore, the decree-holder can, in execution of his decree, proceed against the sell the shares of the sons of the insolvent in the joint family properties without the leave of the insolvency Court.

(8) It remains to refer to the decision of Sanjeeva Raw Nayudu, J., in : AIR1960AP131 . The learned Judge after stating that the power of the father to alienate the interests of his sons for the satisfaction of his antecedent debts passes to the Official Receiver as 'property' within the meaning of the Provincial Insolvency Act, held that once it has passed by virtue of S. 28A, S. 28(2) of the Act debars any creditor from having any remedy over the property of the insolvent which property includes the property defined under S. 28-A. The learned Judge purported to follow the decision of the Supreme Court in Nageswaraswami v. Viswasundara Rao, : [1953]4SCR894 . But, we do not find anything in the judgment of the Supreme Court, which supports the view taken by the learned Judge. What all was decided by the Supreme Court was the power of a Hindu father to alienate the interest of his sons in the mortgaged properties for satisfaction of his antecedent debts passed to the Official Receiver on the father's insolvency as 'property' under S. 28-A of the Provincial Insolvency Act, which has been expressly made retrospective. The question whether, on filing a suit for being attached by a creditor, the Official Receiver's power to sell the son's share still subsists did not arise in that case and was not decided. Therefore, we must express our respectful dissent from the view taken by Sanjeeva Row Nayudu, J in : AIR1960AP131 .

(9) The next question is whether the executing Court is to try and decide the question whether the property is the self-acquired property of the insolvents or the joint family property in which the sons have a share. The lower Court, following the decision in ILR 58 Mad 1056: (AIR 1935 Mad 651), held that the question must be left to be decided by the insolvency Court or in a separate suit. In that case, two decree-holders attached certain properties in execution of the decrees obtained by them against two persons, father and son. Before the properties were actually brought to sale, the father filed an insolvency petition and in that petition, the Official Receiver, Kistna, was appointed Receiver. Thereupon, the Official Receiver filed application under S. 52 of the Provincial Insolvency Act praying that the sale of the properties may be stopped. The District Munsif, after enquiry, held that the properties brought to sale were the self-acquisitions of the father and accordingly stopped the sales and directed delivery of the entire properties to the Official Receiver. But, on appeal, the Subordinate Judge held that it was not competent to the executing Court, to whom an application is made under S. 52 of the Provincial Insolvency Act, to investigate and decide the questions of title arising between the insolvent and others and accordingly, he modified the order of the District Munsif to the extent of allowing the Official Receiver to take possession only of the interest of the insolvent, whatever it might be, in the properties, and allowing the decree-holders to proceed with the execution of their decrees so far as the son's interest in the attached properties, whatever it might be, was concerned. On further appeal to the High Court, while confirming the order of the Subordinate Judge, Pandrang Row, J. observed as follows:-

'The learned Subordinate Judge has given various reasons why in his opinion it would be more convenient that disputes of title as between the insolvent and his co-judgment-debtor should be decided by the Insolvency Court and not by the executing Court. Apart from these considerations which, I am bound to say, are entitled to considerable weight, I am of opinion that the policy of S. 51 is really to put an end, as it were, to the powers of the executing Court to proceed against or do anything in respect of property against which it has issued execution as soon as it is found that the judgment-debtor as whose property it was proceeded against has been adjudicated an insolvent, and an application is made by the Receiver under S. 52 of the Act. The subsequent fate of that property is left to the Insolvency Court to decide, if it thinks fit, or to a separate suit.'

It may be noticed at the time that the learned Judge confirmed the order of the Subordinate Judge directing execution to proceed against the son's share, whatever it might be. S. 51(1) of the Provincial Insolvency Act, provides:

'Where execution of a decree has issued against the property of a debtor, no person shall be entitled to the benefit of the execution against the receiver except in respect of assets realised in the course of the execution by sale or otherwise before the date of the admission of the petition.'

(10) This section obviously does not refer to execution issued against the property of a person, who was not sought to be adjudged an insolvent. So that, S. 51(1) cannot have any application to execution issued against the share of the son, who was not sought to be adjudged an insolvent. Section 52 prescribes the duty of the Court executing decrees as to property taken in execution and reads as follows:-

'Where execution of a decree has issued against any property of a debtor which is saleable in execution and before the sale thereof notice is given to the Court executing the decree that an insolvency petition by or against the debtor has been admitted, the Court shall, on application direct the property, if in the possession of the Court, to be delivered to the receiver, but the costs of the suit in which the decree was made and of the execution shall be a first charge on the property so delivered and the receiver may sell the property or an adequate part thereof for the purpose of satisfying the charge.'

It is clear from a perusal of this section that it relates only to the property of the insolvent. No doubt, the power of the father to sell his son's share for his own debts also vested in the Official Receiver on the father's insolvency under S. 28-A of the Provincial Insolvency Act. But, we have held above that, once the son's share is attached in execution of a decree by a creditor, the father's power to sell the son's share is lost and consequently, the Official Receiver's power to sell the son's share for the insolvent's debts also is lost. So that, after the attachment of the son's share in execution of the decree, the power to sell the son's share continues no longer to be the property of the insolvent which vested in the Official Receiver. Section 52 of the Provincial Insolvency Act applies only to the insolvent's property. The issue that was raised between the Official Receiver and the attaching decree-holder was whether the property, attached and sought to be brought to sale was the self-acquired property of the insolvents or was the joint property of the insolvents or was the joint family property of the father and the sons in which the sons have shares. The petition filed by the Official Receiver was also one under O. 21, R. 58, C. P. C. and the Official Receiver was a party to the decree. So, the question that arose for decision was one between the parties to the suit and relates to the execution of the decree within the meaning of S. 47, C. P. C. Therefore, the executing Court is bound to decide this question and it cannot be left to be decided either by the insolvency Court or in a separate suit. Even if the Official Receiver was not a party to the suit, the claim made by the Official Receiver in E. A. No. 1130/62 is one under O. 21, R. 58, C. P. C. and the executing Court will have to enquire into the same and decide it under Rr. 58 to 61 of O. 21, C. P. C. and any such decision of the executing Court will be conclusive as between the parties to the proceeding subject will be conclusive as between the parties to the proceeding subject to the result of any suit, which may be filed under O. 21, R. 63, C. P. C. We do not find that these considerations were placed before Pandrang Rao, J. when he gave his decision in ILR 58 Mad 1056 : (AIR 1935 Mad 651), and we do no also find that the learned Judge referred to these considerations in his judgment. With great respect, therefore, we are unable to agree with his view that the executing Court is not competent to decide the question of title when it is property raised before it, but has to defer it for a decision by the Insolvency Court or in a separate suit. In the present case, the executing Court is bound to decide the question whether the attached property, which is sought to be brought to sale, is the self-acquired property of the insolvents or the joint family property in which the sons have shares.

(11) The appellant is not entitled to dispute the right of the Official Receiver to take possession of the attached property as he is only an attaching decree-holder in execution of a simple money decree and he has no right to possession of the property attached. So, the order of the lower Court to the extent to be given to the Official Receiver will stand. Its decision in other respects is set aside.

(12) In the result, the civil miscellaneous appeal is allowed in part and E. A. No. 1130/62 is restored to the file of the lower Court for a consideration of the question whether the property sought to be proceeded against is the self-acquired property of the insolvents or the joint family property in which the sons have shares. If the Court comes to the conclusion that the sons have shares in the property, it shall permit the decree-holder (appellant) to execute the decree against the sons' shares for realisation of the decree amount in E. P. No. 268/62. It can stay the execution in its entirely only if it comes to the conclusion that the sons have no shares in the property.

(13) The appellant will have his costs of this appeal from the respondent.

(14) Appeal allowed partly.


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