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Salig Ram Vs. Lachmi Prasad and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1930All622
AppellantSalig Ram
RespondentLachmi Prasad and ors.
Excerpt:
- - they sold the decrees to ram charan defendant 1, who is the father of the plaintiffs on 31st august 1911. this assignment was clearly a cloak to defeat or delay creditors and was not intended to be a genuine sale for consideration. 12. we are clearly of opinion that the judgment appealed against is correct and ought to be affirmed......to refer to them because they do not touch the point in issue. we hold that the decree dated 20th may 1919 was passed by a court without jurisdiction and that in the execution of the said decree the property in dispute cannot be touched.21. we dismiss the appeal with costs.
Judgment:

Mears, C.J.

1. Ramanand and Naurangi held two decrees against Abdur Rahman and Chhabraji Kuer in suits Nos. 144 and 38 of 1910. The decree-holders were in considerable financial difficulty about this time. They sold the decrees to Ram Charan defendant 1, who is the father of the plaintiffs on 31st August 1911. This assignment was clearly a cloak to defeat or delay creditors and was not intended to be a genuine sale for consideration. The decrees were put into execution and in July 1912 Ram Charan intimated that he had received the decretal amounts in their entirety and prayed that the execution cases be struck off in full satisfaction.

2. Ramanand and Naurangi applied for bankruptcy on 8th October 1913. They were adjudicated insolvents on 26th August 1914.

3. The Official Receiver applied to the learned District Judge in insolvency that the assignment of the decrees was a colourable transaction, that it was fictitious, was without consideration and was a mere device to defraud the creditors. He prayed for the annulment of the transfer. On 3rd July 1916 the learned District Judge granted the application, holding that the sale was a fictitious transaction and he further directed that the property should be transferred to the receiver. There was an appeal to this Court from the order of the District Judge, but the appeal was dismissed and the order upheld: Jagrup Sahu v. Ramanand Sahu [1917] 39 All. 633.

4. It appears that the receiver came to know some time in 1918 that Ram Charan, the assignee, had realized the decretal amounts from the original debtors of the insolvents. He applied for process against Ram Charan for recovery of Rs. 1909 with interest. Notwithstanding due service of notice, Ram Charan did not appear and the result was that an ex parte decree was passed against Ram Charan for Rs. 1,969-10-9 from the insolvency Court on 28th May 1919.

5. The Official Receiver sold this decree to Salig Ram, defendant-appellant, for Rs. 1,000 on 17th March 1921. Salig Ram got the decree transferred to Azamgarh. In execution of this decree he got some property attached.

6. The present suit was instituted by Lakshmi Prasad and Bishun Ram, the two sons of Ram Charan, for a declaration that the property sought to be attached was joint ancestral property, that the decree sought to be executed was collusive and fraudulent and that the two-thirds share of the plaintiffs was not liable to sale in execution of the simple money decree obtained by the Official Receiver from the Court of the insolvency.

7. The Official Receiver was no party to the suit. The main contestant was Salig Ram, the defendant-appellant, who pleaded that the decree was validly passed and could be enforced against the property in dispute.

8. The primary Court held that the decree, dated 28th May 1919, passed by the insolvency Court was ultra vires and therefore a nullity. It decreed the plaintiffs' suit.

9. On appeal to this Court the Bench which heard the appeal differed. One of the learned Judges was of opinion that the insolvency Court had wide and extensive powers and it was within the competence of that Court to pass the decree which is now impugned by suit and that there was no valid ground for setting aside the decree at the instance of the sons of the judgment-debtor. He was for allowing the appeal and dismissing the suit.

10. Sulaiman, J., agreed with the decision of the Court below that the decree was passed by a Court without jurisdiction. The result was that his judgment prevailed and the appeal was dismissed.

11. The present appeal is under Section 10 Letters Patent, from the judgment of Sulaiman, J.

12. We are clearly of opinion that the judgment appealed against is correct and ought to be affirmed. The sole and vital question in the case is whether the Court of insolvency had jurisdiction to pass the decree dated 28th May 1919 against Ram Charan, the father of the plaintiffs.

13. The question has to be determined with reference to the provisions of the Provincial Insolvency Act (Act 3 of 1907) which was then in force.

14. Under the aforesaid Act the Court of Insolvency had a limited jurisdiction and did not possess the same powers as a civil Court of ordinary jurisdiction. It ought to be remembered that Ram Charan was a stranger to bankruptcy. It is a debatable question whether the bankruptcy Courts in this country possessed any jurisdiction under Act 3 of 1907 over any person who was a stranger to bankruptcy. The insolvency Court in passing a decree against Ram Charan presumably acted under Section 18, Insolvency Act, which enacts:

(1) The Court may at the time of order of adjudication, or at any time afterwards appoint a receiver for the property of the insolvent, and such property shall thereupon vest in such receiver....

(3) Where the Court appoints a receiver, it may remove the person in whose possession or custody any such property as aforesaid is from the possession or custody thereof:

Provided that nothing in this section shall be deemed to authorize the Court to remove from the possession or custody of property any person whom the insolvent has not a present right so as to remove.

15. The position of affairs is this. The insolvent transferred certain decrees to Ram Charan in August 1911. The latter realized the decretal amount in 1912. It is admitted by Salig Ram appellant in his deposition dated 9th October 1924 that Ram Charan after realizing the amount applied it partly towards the payment of debt incurred in the marriage of his daughter, partly towards his business and partly towards the payment of revenue. The insolvent may charge Ram Charan with a flagrant breach of trust and with misappropriation of the money which belonged to him. The remedy of the insolvent lay by a suit against Ram Charan in the civil Court of ordinary jurisdiction for the refund of the money which Ram Charan had converted to his own use. It is clear, however, that in 1919 Ram Charan had not 'in his possession or custody any property belonging to the insolvent.'

16. Where a third person, who has been placed in a position to realize certain decretal amounts on behalf of another, upon the understanding that the money realized should be held for the use of the original creditor embezzles the said money, he places himself under a legal liability to re-coup the amount. The liability springs from a tortious breach of an obligation; and the breach is actionable. The liability of a person to recoup the money cannot be treated as amounting to his being in possession or custody of any property belonging to the insolvent.

17. The Court of insolvency therefore was not competent under Section 18, Clause 3, to pass a decree against Ram Charan.

18. It has been contended, however, that the insolvency Court had under Section 47 of the Act the power to pass the decree now in controversy. Section 47, Clause (1), pro vides as follows:

Subject to the provisions of this Act, the Court in regard to the proceedings under this Act, shall have the same powers and shall follow the same procedure as it has and follows in the exercise of original civil jurisdiction.

19. As we have indicated above the jurisdiction of the insolvency Court is narrow and limited. It is 'subject to the provisions of this Act' which means that it is subject to the provisions of the restricting sections including Section 18, Clause 3. Further, its powers have got to be exercised 'in regard to proceedings under this Act.' A proceeding initiated against a stranger to the bankruptcy for recovery of money due from him for breach of obligation to the insolvent is not a proceeding under this Act. Section 47 of the Act is therefore not helpful to the appellant but goes against him.

20. It follows that the insolvency Court had no jurisdiction to pass any decree against Ram Charan under Order 20, Rule 10 or Order 21, Rule 31, Civil P.C. Our attention was called to numerous rulings. We do not think it necessary to refer to them because they do not touch the point in issue. We hold that the decree dated 20th May 1919 was passed by a Court without jurisdiction and that in the execution of the said decree the property in dispute cannot be touched.

21. We dismiss the appeal with costs.


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