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Sahu Tota Ram and anr. Vs. Thakur Bhagwant Singh and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAllahabad High Court
Decided On
Case NumberFirst Appeal No. 444 of 1945
Judge
Reported inAIR1957All262
ActsProvincial Insolvency Act, 1920 - Sections 41(2), 60 and 67
AppellantSahu Tota Ram and anr.
RespondentThakur Bhagwant Singh and anr.
Appellant AdvocateG.S. Pathak and ;D. Sanyal, Advs.
Respondent AdvocateKrishna Sahai, Adv.
DispositionAppeal dismissed
Excerpt:
commercial - possession by insolvent - section 41(2) ( c) and 67 of provincial insolvency act, 1920 - sale of property under conditional discharge - sale null and void - insolvent not owners and not entitled to recover possession. - - they claimed mesne profitsas well. but they do not get back the property which has vested in the official receiver because that property is to be distributed amongst the creditors and the insolvents are entitled only to the surplus that may remain after the claims of the creditors and of the expenses of the insolvency proceedings have been satisfied as provided in section 67 of the act......powers conferred on him by paragraph 10 of the third schedule of the code of civil procedure.7. a sale held in contravention of the provisions of paragraphs 2 to 10 of the third schedule of the code of civil procedure has been held to be null and void and not only voidable, vide narotam das v. bhagwan das : air1934all314 and mohan manucha v. manzoor ahmad khan .the last is a privy council decision. it has however been held by a single judge of the allahabad high court that a sale in contravention of the provisions of section 60 of the provincial insolvency act is not void but voidable, vide madan mohan lal v. laxmi narain, air 1947 all 293 (c). we are doubtful about the correctness of the last mentioned decision. but according to the view we take on the other point arising in the case.....
Judgment:

Agarwala, J.

1. This is an appeal by certain insolvents, who have been granted a conditional discharge under Section 41(2)(c) of the Provincial Insolvency Act, for the recovery of certain property originally belonging to them but which had been sold by the receiver and which sale was alleged to be void. The facts, briefly stated, are as follows.

2. The appellants Tota Ram and Hazari Lal were declared insolvents in the year 1926. An official receiver was appointed who took possession over their properties, the properties vesting in such receiver. Two items of these properties were the properties in dispute. They were revenue paying estates. At the instance of the appellants themselves the property was not sold by the Collector as required by Section 60 of the Provincial Insolvency Act but was sold by the receiver himself in a private manner by means of two sale deeds dated the 34th of October, 1932, to Sarup Singh father of defendant-respondent Th. Bhagwant Singh.

The purchaser paid the price and got into possession after having his name mutated in the revenuepapers. All the properties belonging to the appellants having been sold they applied for dischargein the year 1933. The Court granted discharge oncondition that 'money in bank or with receiver, i.e.,the sale proceeds of properties will be distributedamong creditors and that if any property is foundwithin 30 days of to-day to belong to the insolvents,that too will be sold and proceeds divided amongthe creditors.'

This order is dated 10th of March, 1934. The amount in deposit in bank or with the receiver was distributed by the receiver and the receiver got his discharge from the Court. No other properties were discovered.

3. Ten years later, on 30th September, 1944, the discharged insolvents filed the suit which has given rise to this appeal for possession over the properties which were transferred by the receiver by means of the two sale-deeds dated the 24th of October, 1932, on the allegation that the sales in favour of Sarup Singh being in violation of the provisions of Section 60 of the Provincial Insolvency Act were null and void and that they were entitled to recover possession over the same. They claimed mesne profitsas well. The receiver having been discharged was not a party to the suit.

4. The defence was that the sale was not void, that the plaintiffs were estopped because it was at their own request that the receiver sold the property by private sale and that the plaintiffs had no cause of action for the suit because even if the sale was void the property revested in the receiver and was liable to be resold and the proceeds to be distributed amongst the creditors. The Court below held that though the sale was void the plaintiffs were not entitled to the property as it revested in the receiver. In the result the suit was dismissed.

5. In this appeal it has been urged on behalf of the plaintiffs-appellants that the plaintiffs being the original owners of the property and the insolvency proceedings having come to an end after the plaintiff's discharge, they must be held to be the owners of the property as the sale was null and void.

6. On behalf of the respondents it is contended that the sale was not null and void but was voidable only and that in any case the plaintiffs are not entitled to the property.

6-a. Section 60 of the Provincial Insolvency Act lays down that-

'In any local area in which a declaration has been made under Section 63 of the Code of Civil Procedure, 1908, and is in force, no sale of immovable property paying revenue to the Government or held or let for agricultural purposes shall be made by the receiver;'

The section further lays down the procedure to be followed and says that the Collector shall sell the property in exercise of the powers conferred on him by paragraph 10 of the third Schedule of the Code of Civil Procedure.

7. A sale held in contravention of the provisions of paragraphs 2 to 10 of the third Schedule of the Code of Civil Procedure has been held to be null and void and not only voidable, vide Narotam Das v. Bhagwan Das : AIR1934All314 and Mohan Manucha v. Manzoor Ahmad Khan .

The last is a Privy Council decision. It has however been held by a single Judge of the Allahabad High Court that a sale in contravention of the provisions of Section 60 of the Provincial Insolvency Act is not void but voidable, vide Madan Mohan Lal v. Laxmi Narain, AIR 1947 All 293 (C). We are doubtful about the correctness of the last mentioned decision. But according to the view we take on the other point arising in the case it is unnecessary to express any opinion on the matter.

8. Assuming that the sale was null and void it appears to us that the property would then revert to the official receiver in whom it had'vested at the time of the sale. No doubt originally the plaintiffs' predecessors-in-interest were the owners of the property, but on the order of adjudication being made the property vested in the official receiver. Did it ever revest in the insolvents? The insolvents were discharged under Section 41 of the Act, The effect of the order of discharge is that subject to the conditions laid down in the order the insolvents are free men after the order of discharge.

They are not bound by the debts incurred by them or proved against them up to the date of dis-charge. But they do not get back the property which has vested in the official receiver because that property is to be distributed amongst the creditors and the insolvents are entitled only to the surplus that may remain after the claims of the creditors and of the expenses of the insolvency proceedings have been satisfied as provided in Section 67 of the Act. Even though the receiver had been discharged the creditors are entitled in case the property reverts to the receiver for some reason or other to apply to the insolvency court for the re-appointment of the receiver and the sale of the property and distribution of the proceeds amongst them.

It may be noted that in the present case the creditors were not fully paid. If they had been fully paid the case would have fallen under Section 67 and the insolvents would no doubt have been entitled to the property in dispute. The plaintiffs therefore cannot be held to have become the owners of the property on account of the sale being discovered to be null and void.

9. Learned counsel for the appellants has relied upon the decision in Desikachari v. Official Receiver, Chingleput, AIR 1943 Mad 26 (D). The facts of that case were entirely different. In that case the insolvents were discharged on the ground that no creditor had proved any debt. In those circumstances the insolvents' property which had vested in the receiver was held to revest in the insolvents after their discharge.

The principle underlying Section 37 of the Act was extended to their case even though it was found that there was a creditor who had not been paid. The facts of the present case are entirely different and we do not think that the decision can be relied upon in this case.

10. The suit was rightly dismissed. The appeal accordingly fails and is dismissed with costs.


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