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Lakhmi Chand Vs. Kedar Nath - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1928All12
AppellantLakhmi Chand
RespondentKedar Nath
Cases ReferredCohen v. Mitchell
Excerpt:
- - 262. these decisions show clearly that a bankrupt, who has not obtained his discharge, may enter into transactions in respect of properties acquired after the bankruptcy, and that until the trustee intervenes, all such transactions with any parson dealing with the bankrupt bona fide and for value and whether with or without knowledge of the bankruptcy are valid against the trustee......not been discharged. the decree-holder is applying to execute his decree by attaching the judgment-debtor's property acquired after the insolvency, but has not issued notice to the official assignee. the claim of the judgment-debtor in the first court was that the decree could not be executed without making the official assignee a party to the proceedings. the first court relying an a decision of this court published in chhote lal v. kedar nath a.i.r. 1924 all. 703, allowed the objection. the learned district judge decided that the first court had been misled by that decision, and allowed the appeal; but at the same time directed that a copy of his order should be sent to the official assignee.3. in view of the decisions quoted on either side, the legal position is at first sight.....
Judgment:

Kendall, J.

1. This is an appeal against the order of the District Judge of Agra, setting aside the order of the Second Additional Subordinate Judge disallowing an objection of the judgment-debtor, named Kedar Nath, to the execution of a decree against him. The decree-holder in the present appellant. The circumstances of the case are briefly as follows:

2. The judgment-debtor, Kedar Nath, was declared an insolvent under the Insolvent Debtors Act, '1848, and has not been discharged. The decree-holder is applying to execute his decree by attaching the judgment-debtor's property acquired after the insolvency, but has not issued notice to the official assignee. The claim of the judgment-debtor in the first Court was that the decree could not be executed without making the official assignee a party to the proceedings. The first Court relying an a decision of this Court published in Chhote Lal v. Kedar Nath A.I.R. 1924 All. 703, allowed the objection. The learned District Judge decided that the first Court had been misled by that decision, and allowed the appeal; but at the same time directed that a copy of his order should be sent to the official assignee.

3. In view of the decisions quoted on either side, the legal position is at first sight somewhat difficult. Under Section 7, Indian Insolvency Act 1848, the Court of insolvency may order that all the estate and effects of the petitioner at the time of the petition and also all future estate, etc., shall vest in the official assignee and it has never been denied that such an order was made in the present case. A series of rulings have been quoted on behalf of the appellant in the present case to show that, in spite of this provision of the Act, the judgment-debtor does, nevertheless, retain an interest in his property. Thus, in Chhote Lal v. Kedar Nath A.I.R. 1924 All. 703 a Bench of this Court held that, in spite of the fact that the future property of an insolvent under this Act was to vest in the official assignee, the insolvent had power to dispose of any property that he might acquire after being declared an insolvent and also that parsons dealing with him bona fide and for a consideration were to be discharged from making a further payment to the official assignee, provided the transaction took place before the official assignee intervened and claimed the property on behalf of the insolvent's estate. That order was passed after a consideration of various rulings to the same effect, including Alimahmad Abdul Hussain v. Vadilal Devchand Parekh [1919] 43 Bom. 890 and Cohen v. Mitchell [1890] 25 Q.B.D. 262. These decisions show clearly that a bankrupt, who has not obtained his discharge, may enter into transactions in respect of properties acquired after the bankruptcy, and that until the trustee intervenes, all such transactions with any parson dealing with the bankrupt bona fide and for value and whether with or without knowledge of the bankruptcy are valid against the trustee.

4. On what principle are these decisions based? The learned District Judge appears to have considered that they were based on the principles of equity only, and he has not dealt with the principle of law underlying the decisions on which the decree-holder-appellant comes into Court, which is said to be that the judgment-debtor himself, though he has been declared insolvent, still retains an interest in his property in spite of the provisions of the Act by which the title vests in the official assignee. The principle relied on in the case of Cohen v. Mitchell [1890] 25 Q.B.D. 262 appears to me as follows: The bankrupt can still enter into transactions dealing with the property which vests in the Court; but he only does so as an agent of the Court, unless and until the official assignee intervenes. The title to the property still vests in the Court or the official assignee as indeed is shown by the provisions of the Act to which I have already referred; and to this extent [ agree with the lower appellate Court, but if the insolvent enters into transactions with other persons, which transactions are bona fide and for value, so far as the other persons are concerned, the Court and the official assignee will not be able to repudiate those transactions to the detriment of the persons who have entered into them with the bankrupt. I can find no authority for the view that has been argued on behalf of the appellant in this Court that the effect of these decisions is to show that the insolvent still retains a proprietary interest in the property that is vested in the Court by virtue of his insolvency; but, on the other hand, the judgment-debtor has no locus standi in his own right and can only object to the attachment through his principal, viz. the Court of insolvency or the official assignee.

5. The effect of the District Judge's order would be that the application for execution would be disallowed. For the reasons given above, I am of opinion that it should not be disallowed. At this stage, however, it is clear that the official assignee should be made a party to the proceedings, and I notice that the learned District Judge has directed a copy of his order to be sent to him. I need not do any more as regards the official assignee than to order a copy of this appellate order to be sent to him in continuation.

6. The final result is that the appeal is allowed to this extent, that the application for execution will be allowed to proceed. If the official assignee takes no steps in the matter, the judgment-debtor may be considered to be representing the Court of insolvency, and execution may proceed against him. The appellant-decree-holder will receive his costs throughout, as in the view I have taken the judgment-debtor-respondent was wrong in objecting to the attachment in the first Court.


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