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Smt. Kishan Piarey Vs. Smt. Ram Dei and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal No. 6 of 1960
Judge
Reported inAIR1965All248
ActsCode of Civil Procedure (CPC) , 1908 - Sections 11 - Order 21, Rule 58; Provincial Insolvency Act, 1920 - Sections 4 and 20
AppellantSmt. Kishan Piarey
RespondentSmt. Ram Dei and ors.
Appellant AdvocateHari Swarup, Adv.
Respondent AdvocateMaharaja Bahadur Lal and ;Bajrang Bahadur Lal, Advs.
DispositionAppeal allowed
Excerpt:
.....under section 4 of the act, and that in a proceeding under section 4, he would be bound by the same rules and by the same conditions by which he would be bound if he had agitated the matter in a regular suit. if the insolvency judge is satisfied that the earlier judgment was obtained under fraud, collusion etc......can either stay the proceeding or hear the case on such terms as may be considered proper. if the suit or appeal is stayed, the matters in issue are to be decided by the insolvency court, of course, subject to appeal and revision as provided in the act, and any decision given by the insolvency court would be binding on the parties and the appeal or suit, stayed by the other court, shall be decided accordingly; but if that court decides to proceed with the suit or appeal, it shall be necessary to implead the official receiver to represent the estate of the debtor, and after impleading the official receiver, the proceeding can continue. 7. in the appeal arising out of suit no. 10 of 1953, smt. raj rani made no attempt to implead the official receiver, nor does she appear to have brought.....
Judgment:

D.S. Mathur, J.

1. This is a Second Appeal by Smt. Kishan Piari against the order dated 2-1-1960 of the District Judge of Bareilly dismissing her appeal and thereby maintaining the order of the insolvency Judge, whereby her exclusive claim to the house in dispute was disallowed. The insolvency Judge while disallowing the exclusive claim of Smt. Kishan Piari upheld the report of the Official Receiver that the insolvent Lachman Singh had one half share in the house.

2. In execution of her decree against Lachman Singh, Smt. Raj Rani, wife of Raghoram, respondent No. 3 had the disputed house attached with the allegation that it belonged to the judgment-debtor. Smt. Kishan Piari thereupon filed an objection under Order 21, Rule 58, C. P. C. claiming to be the exclusive owner thereof. When the objection was dismissed, she instituted suit No. 10 of 1953 in the Court of the Civil Judge, Bareilly, for declaration that she was the owner of the whole of the House and that it was not liable to attachment and sale in execution of the above decree. The suit was decreed on 18-5-1953 and, it is said, Smt. Raj Rani alone preferred an appeal against that decree. Lachman Singh was also a defendant to the suit, but he appears to have submitted to the decree. That appeal was dismissed on 23-9-1963. It is of importance that even though Lachman Singh was adjudicated an insolvent sometimes in 1956, Smt. Raj Rani made no attempt to implead the Official Receiver in the appeal either in his personal capacity or as representing the estate of the Insolvent.

3. After Lachman Singh was adjudicated an Insolvent, the Official Receiver took possession of the house, and thereupon Smt. Kishan Piari made an objection before the insolvency Judge also. As already mentioned above, she claimed to be the exclusive owner of the house, on the basis of the gift made by her father, while, according to the Official Receiver, half the house belonged to the insolvent. The objection was disallowed under order dated 13-10-1958. Smt. Kishan Piari then preferred an appeal before the District Judge which was dismissed under the impugned order dated 2-1-1960. She has preferred this Second Appeal and is challenging the lower appellate Court's order chiefly on the ground that the judgment in the other litigation has become final, neither Smt. Raj Rani or her successor-in-interest, nor the Official Receiver or the insolvent having preferred any Second Appeal before the High Court, and the respondents are bound by this decree.

4. It has been contended before me that in view of the judgment in suit No. 10 of 1953, it is not open to the Official Receiver, nor to me insolvent and also the creditors, to challenge the finding that Smt. Kishan Piari is the exclusive owner of the house.

5. The important point for consideration is whether the decision in suit No. 10 of 1953 acts as res jutdicata, and it is not open to the insolvency Court to take a view contrary to the decree in suit No. 10 of 1953.

6. Sections 4(1) and 29 of the Provincial Insolvency Act (to be referred hereinafter as the Act) are of significance. Sub-section (1) of Section 4 lays down that:

'Subject to the provisions of the Act, the Courtshall have full power to decide all questions whether of title or priority, or of any nature whatsoever, and whether Involving matters of law orof fact, which may arise in any case of insolvencycoming within the cognizance of the Court, or whichthe Court may deem it expedient or necessary todecide for the purpose of doing complete justice ormaking a complete distribution of property in anysuch case.'

The insolvency Court exercises all the powers of a civil court, in fact, it functions as such. Consequently, if a question could not be reagitated before the civil court, it cannot be allowed to be reagitated before the insolvency Court. The Insolvency court deciding a question of title etc. can be treated as a civil court, of course, a Court which can adjudicate disputes irrespective of what the valuation may be. From this point of view, the decision of a Civil Judge, who exercises unlimited jurisdiction, shall act as res judicata and such question cannot be reagitated before the insolvencyCourt. Whether the earlier litigation had or had not come to a close prior to the commencement of the insolvency proceeding shall not make any difference. The moving of an insolvency petition, or the adjudication of a person as insolvent does not automatically stay other proceedings or suits, and when such proceedings can continue, any decision given in that case should have a conclusive effect.

6a. Section 29 of the Act clearly lays down that:

'Any court in which a suit or other proceeding is pending against a debtor shall, on proof that an order of adjudication has been made against him under this Act, either stay the proceeding, or allow it to continue on such terms as such Court may impose.'

On being satisfied that the debtor has been adjudicated insolvent the Court including the appellate Court can either stay the proceeding or hear the case on such terms as may be considered proper. If the suit or appeal is stayed, the matters in issue are to be decided by the insolvency Court, of course, subject to appeal and revision as provided in the Act, and any decision given by the insolvency Court would be binding on the parties and the appeal or suit, stayed by the other Court, shall be decided accordingly; but if that Court decides to proceed with the suit or appeal, it shall be necessary to implead the Official Receiver to represent the estate of the debtor, and after impleading the Official Receiver, the proceeding can continue.

7. In the appeal arising out of suit No. 10 of 1953, Smt. Raj Rani made no attempt to implead the Official Receiver, nor does she appear to have brought to the notice of the appellate Court that Lachman Singh had been adjudicated insolvent. For the omission on the part of Sm. Raj Rani, wife of Raghoram, respondent No. 3, Smt. Kishan Piari cannot be held responsible. She had a decree in her favour and it was for the party challenging the decree to take necessary steps, consequently, she can unhesitatingly lay claim on the basis of the decree passed in her favour, a decree which was later confirmed in first appeal and against which none of the aggrieved parties preferred a Second Appeal before the High Court. When Smt. Raj Rani and Raghoram seriously contested the objection of Smt. Kishan plan made before the insolvency court, it cannot, by any stretch of imagination, be said that the Official Receiver was not impleaded in the appeal arising out of suit No. 10 of 1953 with the connivance or collusion of Smt. Kishan Piari.

8. The principle of res judicata is laid down in Section 11, C. P. C. which provides that:

'No Court shall try any suit or issue in whichthe matter directly and substantially in issue hasbeen directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigatingunder the same title, in a Court competent to try such subsequent suit or the suit in which eachissue has been subsequently raised, and has been heard and anally decided by such Court.'

The Official Receiver represents the estate of the debtor insolvent and consequently, he is a person who claims through the debtor. Creditors stand in the same category as they are laying claim to the estate of the debtor, in other words, through him. If the matter is considered too technically, it can be said that a civil Judge not invested with the powers of an insolvency Judge is not competent to try matters coming before the Insolvency Judge for decision; but If the question is considered from a broader angle, it can be held that a Civil Judge is competent to try disputes of title etc., which can be raised and are raised before the Insolvency Judge and which he decides to adjudicate upon.

9. On taking a broader view it can be held that Section 11, C. P. C. is applicable and the Judgment in suit No. 10 of 1953 shall act as res judicata. Even if for some reason it may not be possible to depart from a too technical view, the general principle of res Judicata can be made applicable.

10. A similar view was taken in Dinshaw and Co., (Bankers) Ltd., Lucknow v. Anand Behari Lal AIR 1942 Oudh 327, wherein it was held that a creditor attempting to assert the title of his debtor must be held to be claiming under him, and he had no more right to assert his title than the debtor had himself, and consequently the decision in a declaratory suit brought successfully against the administrator of the debtor's estate, operated as res judicata against an official liqudator having a claim against the debtor's estate and attempting to assert the title of the debtor, similarly, it was held in N. Venkateswaralu v. B. Lingayya AIR 1924 Mad 689 that a decision against a person before his becoming an insolvant binds the Official Receiver in his insolvency.

11. The principle laid down in Rang Lal v.Gajraj Singh : AIR1939All202 and Ram Jiwanv. Inder Bahadur Singh : AIR1936All722 can usefully be made applicable to the facts of the present case.

12. The learned Advocate for the legal representatives of respondent No. 1 and of respondents Nos. 3 and 4, however, placed reliance upon Oudh Narain Lal v. Mt. Sukh Dulari : AIR1950All402 and Arunachalam Chettiar v. Official Receiver, Coimbatore : AIR1940Mad733 , : AIR1950All402 (Supra) is a case where in a declaratory suit the Munsif had held that the will was a forgery. The question of the genuineness of the will was later raised before the probate court, where an application was made for the grant of probate or letters of administration with a copy of the will annexed. It was held that the Munsif was not competent to try the probate case and consequently it was open to the party to raise the question of genuineness of the will before the probate court. The facts of this case are thus different, but the point for consideration is whether the rule laid down therein can be made applicable to proceedings under the Act.

13. Similarity between probate cases and proceedings, under the Act is that judgments in both arejudgments in rem, but in other respects, specially in. so far as the representation of the estate is concerned, they stand in distinct groups. For so long as no probate or letters of administration is granted, there is no person or authority in whom the estate vests and who can lawfully dispose of the estate. Any person claiming under the will is a mere claimant whose action can be challenged by a duty appointed executor or administrator. Farmer, a person claiming the estate of the deceased may be a mere intermeddier. But the estate of an insolvent automatically vests in the Official Receiver and any action taken by him has the sanctity of law.

14. The other dissimilarity is that a person is adjudged insolvent during his lifetime, while the will takes effect on the death of the testator and the question of the validity of the will arises after his death. Consequently, no judgment can be binding on the estate of the deceased unless the estate is duly represented by an executor or administrator which is not possible till the probate Court grants a probate or letters of administration. In the circumstances, the judgment of a civil court on the genuineness or validity of a will shall not act as res judicata, nor can it be binding on the parties to a probate proceeding. Out there can he judgments in favour of or against the estate of an insolvent, obtained prior to the insolvency in a suit filed by or against the insolvent, or obtained subsequent to insolvency to which the Official Receiver may or may not be a party. All such judgments shall bind the estate of the insolvent, unless they can be challenged before the civil Court and after insolvency before the insolvency Judge, and have been successfully challenged. I am thus of opinion that the rule laid down in : AIR1950All402 (supra) cannot be made applicable to insolvency proceedings.

15. In : AIR1940Mad733 (supra), it was observed that a prior Judgment against an insolvent was liable to be reopened in the insolvency Court at the instance of the Official Receiver in certain circumstances; for example, in cases in which before insolvency, judgments, were obtained against debtor and they are sought to be re-opened on the debtors' adjudication to see whether they are binding on the Official Receiver as representing the general body of creditors. However, at another place, it was clearly laid down that a party who was bound by a decree or order of a civil Court was not entitled to re-agitate the same question by another suit and what could not be done by another suit could not be achieved by means of proceedings under Section 4 of the Act, and that in a proceeding under Section 4, he would be bound by the same rules and by the same conditions by which he would be bound if he had agitated the matter in a regular suit. This view is in consonance with the earlier decision of the Madras High Court already referred to above. In any case, the general observation relied upon by the respondents cannot show that at the instance of the creditors, any decision which is otherwise binding on the Official Receiver can, in each and every case, be reagitated before the insolvency Court in a proceeding under Section 4 of the Act. Before such a decision can be reagitated in a proceeding. under Section 4, conditions must exist in which the decree can be reagitated before the Civil Court. If the insolvency judge is satisfied that the earlier judgment was Obtained under fraud, collusion etc., he can re-open the matter and adjudicate upon the rights of the parties; but for so long as no fraud, collusion etc., was played by any of the parties to the earlier proceeding, or by the Official Receiver while representing the estate of the debtor, the insolvency Judge shall have no Jurisdiction to entertain matters which have already been subject to a final decision in an earlier suit or proceeding.

16. TO sum up, the general principle of res judicata, is applicable to proceedings under the Act in the sense that any decision, which the parties including the Official Receiver cannot challenge before the civil Court, cannot be challenged in the insolvency proceeding also. But if the judgment or decree is such as can be challenged before the civil Court, say on the ground of fraud, collusion etc., it can be challenged before the insolvency Court also in a proceeding under Section 4 of the Act at the instance of the Official Receiver or otherwise. In the instant case, the Official Receiver could avail of two alternative remedies, one by moving the appellate Court before whom the appeal of Smt. Raj Rani was pending, to implead him in place of Lachman Singh, insolvent, and to transpose him among the array of the appellants, on being so impleaded as a co-appellant, the Official Receiver could prosecute the appeal upto the High Court, or he could, under Section 29 of the Act, request that Court to stay the hearing of the appeal to enable the parties to raise the disputes before the insolvency Court.

In case the hearing of the appeal was stayed, the final decision in the Insolvency proceeding could be utilized for the final decision of the appeal, otherwise the Insolvency Court shall have to pass orders on the basis of the decision of the civil Court. The other remedy which the Official Receiver could avail of was to challenge the decree in suit No. 10 of 1953 before the insolvency Court on one of the grounds which could entitle him to re-agitate the decree before the civil Court. No such step was taken by the Official Receiver, and hence for purposes of this appeal, we can start with the assumption that the decree in suit No. 10 of 1953 is, for the time being, binding on the Official Receiver and that decree conferred a right on Smt. Kishan Piari to claim exclusive rights in the house in dispute.

17. Considering that the appeal is being allowed on grounds which came into existence after the decision of the appeal by the lower appellate Court, costs should be on the parties.

18. The S. A. F. O. is hereby allowed and the orders of both the lower Courts are set aside. It is further ordered that the objection of Smt. Kishan Piari, appellant, shall be deemed to have been allowed and she treated as the sole owner of the house. It is made clear that it shall be open to the Official Receiver to seek such other remedy, as he may be advised. Costs of all the Courts on the parties.


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