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Musammat Mahrana Kunwar Vs. Mr. E.V. David, Official Receiver of the Property of Ram Dutt and ors., Insolvents and anr. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1924All40; 77Ind.Cas.57
AppellantMusammat Mahrana Kunwar
RespondentMr. E.V. David, Official Receiver of the Property of Ram Dutt and ors., Insolvents and anr.
Cases ReferredBhairo Prasad v. S.P.C. Dass
.....act (v of 1920), sections 4, 68, scope of - stranger aggrieved by act of receiver--remedy--civil suit, maintainability of--leave of court, whether necessary--hindu law--property purchased in name of wife--presumption. - - ram dutt--a commission agency business which ultimately failed in 1920. on the petition of certain creditors the firm was adjudicated an insolvent and the official receiver took charge of the insolvent's estate. 10. the argument is that an official receiver under the insolvency act is an officer of the court, that, therefore, the act complained of must be deemed to be an act of the court and the person aggrieved thereby should have recourse to that court and to no other tribunal. in my opinion where a person has made no attempt to bring the matter up before..........count's permission. but there is, in my opinion, no authority for the proposition that, where in a suit a receiver has been appointed, no person who is a stranger to the suit can question an act of the receiver without the sanction of the court. that seems to be an absolutely untenable proposition and opposed to all principle. in the present case i am satisfied (1) that the plaintiff was under no obligation to seek any relief in the insolvency court; (2) that she had the ordinary remedy under the civil law against the official receiver; and (3) that for the purpose of maintaining the suit she was under no obligation to seek any sanction from the insolvency court.29. the order of the court is that the appeal is allowed, the decree of the court below is set 9 side and the plaintiff's suit.....

Sulaiman, J.

1. This is a plaintiffs appeal arising out of a suit for a declaration that' she is the owner in possession of a certain house situated in the City of Cawnpore; and that the insolvent defendant No. 2 had no concern with it, and it is not liable to be attached by the Official Receiver. The house in question was purchased on the 29th of May 1914 under a registered sale-deed in the name of the plaintiff. Some years afterwards, in 1919, Chhote Lal defendant, the plaintiff's husband, entered into a partnership with one. Ram Dutt--a commission agency business which ultimately failed in 1920. On the petition of certain creditors the firm was adjudicated an insolvent and the Official Receiver took charge of the insolvent's estate. On the 6th of November 1920 he attached the house in question as property belonging to the insolvent Chhote Lal. The report of the Receiver says that the present plaintiff protested and stated that the house belonged to her parents.

2. It is important to note that she made no attempt to seek redress in the Insolvency Court, but filed this regular suit for declaration on the 21st of February 1921.

3. The Official Receiver, who mainly contested the suit, pleaded that the house belonged to the insolvent and not to the plaintiff. It was further urged that the plaintiff not having raised any objection at the time of the attachment was estopped from suing; that her only remedy was to file objections in the Insolvency Court within 21 days of the attachment and the Civil Court had no jurisdiction to try this case, and, lastly, that the permission of the Insolvency Court was necessary before the institution of the suit.

4. The insolvent, as might be expected in either view of the matter, supported the plaintiff's claim.

5. The learned Subordinate Judge decided the three legal issues in favour of the plaintiff, but on the question of fact came to the conclusion that the house in dispute belonged to Chhote Lal and not to the plaintiff.

6. The plaintiff has come up in appeal to this Court and on her behalf the finding of fact arrived at by the Court below is challenged. The learned Advocate for the defendant-respondent has not only supported the decree on the finding of fad, but also on the legal pleas decided against him.

7. As the questions of law come first in logical sequence, I propose to dispose of them first.

8. The plea of estoppel raised in the Court below has not been pressed at all, and it may be said at once that there was manifestly no substance in it.

9. The points which have been very strongly pressed in appeal are: (1) that under the new Provincial Insolvency Act, V of 1920, exclusive juris did ion is conferred on Insolvency Courts with the result that no regular suit on the civil side is maintainable as against the Official Receiver, and (2) that in any case no such suit 'without the permission of the Insolvency, Court can lie.

10. The argument is that an Official Receiver under the Insolvency Act is an officer of the Court, that, therefore, the act complained of must be deemed to be an act of the Court and the person aggrieved thereby should have recourse to that Court and to no other Tribunal. But the present plaintiff not claiming title through the insolvent was a stranger to the proceeding and was in no way represented therein. It is difficult to see how her rights can in any way be prejudiced by an act done by the Receiver in spite of her protest. It is suggested that the policy of the act is to expedite matters and not to permit claims to be brought after a number of years, and it is argued that it was with this' object ^ in mind that Section 4 was enacted which in effect means that the question should forthwith be disposed of finally by the Insolvency Court.

11. In my opinion Section 4 of the Act is an enabling section and confers full power on the Insolvency Court to decide all questions of title or priority or of any nature whatsoever which arise before it, or which it may deem necessary to decide. Sub-cause 2 makes 'such' decision final and binding for all purposes on all claimants against him. In reality Section 5 gives to the Insolvency Court the powers of a Civil Court.

12. It is to be noted that prior to the passing of this Act there was a conflict of opinion between this Court and the Calcutta High Court, the view prevailing in the latter Court being that questions of title could be disposed of by a regular suit only. Obviously the enactment of Section 4 gives effect to the view which prevailed in this Court. I accept the contention of Dr. Katju that under the new Act if a question of title has been actually raised by a stranger to the insolvency and decided by the Insolvency Court the decision is final and the question cannot be re-opened in a separate regular suit.

13. This, however, does not mean that exclusive jurisdiction has been conferred on the Insolvency Court, and that the only remedy open to the aggrieved stranger is to apply to that Court. In my opinion where a person has made no attempt to bring the matter up before the Insolvency Court and there is no order of the Insolvency Court which can be pointed out as amounting to a decision within the meaning of Sub-clause (2) of Section 4, he is at perfect liberty to have recourse to the ordinary Civil Courts. In the present case the plaintiff never appeared before the Insolvency Court nor put her case before it, nor was any evidence led nor any adjudication of her rights made. How then can it be said that there is a 'decision' against her which precludes her from suing? The a ct of attachment was a n act of the Receiver and not necessarily an act of the Court, much less was it a 'decision' by the Court.

14. The act of the Receiver may be compared to the act of the Civil Court Amin-who wrongly attaches the property of a third person in execution of a decree. Such an act is done as much under the authority of the Execution Court as the act of a Receiver under that of the Insolvency Court. No special sanctity attaches to the acts of the Receivers under the Act, It is true that in certain particulars and subject to certain conditions the decision of the Court is final and absolute against third patties also and in that, way the proceeding differs from proceedings in execution where the order disallowing the objection is not final. But in other respects the similarity certainly exists. In the absence of such decision the Civil Court remedy is not barred.

15. Reliance was also placed on Section 63 of the Act which says that if the insolvent or any of the creditors or any other person is aggrieved by any act or decision of the Receiver, he may apply to the Court, and the Court may confirm, reverse or modify the act or decision complained of, and make such order as it thinks just. It is strongly contended that the word 'may' in the section should be read as 'mist' and that, therefore, the only remedy open to the aggrieved person is by way of an application under this section In my judgment this contention is untenable. Section 68 provides a speedy remedy, to which recourse can be had if the person aggrieved chooses to seek it. It is not the only remedy open to hint. Of course if a person applied under that section, he would be subject to the time limit prescribed therein. But if he wanted to enforce his claim in a Civil Court under Section 9 of the Code of Civil Procedure, his rights would be those of an ordinary person. I am of opinion that it is open to a third person who does, not claim title through the insolvent, to treat the Receiver as a trespasser and maintain his claim in a Civil Court. There is no provision in the Act other than that contained in Section 4, which in any way takes away the jurisdiction of a Civil Court to try such a suit.

16. In the case of Bhairo Prasad v. S.P.C. Dass 51 Ind. Cas. 113 : 17 A.L.J. 787 : 1 U.P. L.R. (A.) 118 which came under the old Act, the opinion was expressed that a stranger to the insolvency may, at his option, seek his redress in the ordinary Civil Court. The effect of Section 4 of the new Act has in no way been to alter the law so far as this point is concerned.

17. The next point urged is that before instituting the suit it was necessary to obtain the leave of the Insolvency Court. It is conceded that there is no statutory provision under which such leave is necessary. On the other hand, it may be pointed out that whatever provision there is in the Act relating to the grant of such leave is confined to claims of creditors. Reference may be made to Section 28 Sub-clause (2) which provides that no creditor to whom the insolvent is indebted shall commence any suit or other legal, proceeding, except with the leave of the Court' and on such terms as the Court may impose. If leave were necessary in the suits, this provision would be altogether superfluous. I may also point out that under Section 20(6) the power of a secured creditor to realise or otherwise deal with his security remains unaffected. Much less can then the rights of a stranger who claims an independent title be prejudiced. The utmost that cm be said is that an Official Receiver is a public officer within the meaning of Section 2 sub-clause (17)(d) of the Civil] Procedure Code, and that notice under Section 80 is necessary In the present case it is not disputed that such notice was sent before the institution of the suit.

18. It is, however, very strongly urged that on 'general principles it should be held that an Official Receiver is merely an officer of the Court and that no suit can be maintained against him unless the leave of the Court which appointed him has first been obtained. Reliance has been placed on some cases of the Bombay, Madras, Calcutta and Patna High Courts in support of, this contention. None of the cases cited, however, are cases arising out of insolvency proceedings. A Receiver appointed under the Code of Civil Procedure merely holds the estate on behalf of the Court. The estate does not vest in him, nor does he in any way represent it. Leave of the Court is necessary in order that by impleading him the estate may be bound. Without leave of the Court he represents nobody; after leave he represents the real beneficiary. A Receiver under the Insolvency Ad holds a different capacity altogether. He is more than a mere officer of the Court, Under Section 28(2) the insolvent's estate vests in him Be alone, and no one else, represents the estate. He, therefore, is the property to be impleaded in the action. No leave is accordingly necessary for suing him.

19. It should also not be overlooked that there is a distinction between the case where the plaintiff suing the Receiver had been represented in the previous proceeding and where he was rot represented, her instance a creditor in an. insolvency proceeding, a share-holder in the liquidation proceedings of a Company or a party to a litigation is represented in the proceeding when a Receiver of the property is appointed. In cases of this kind it may be that a party to that proceeding having himself submitted to the jurisdiction of the Court cannot subsequently challenge it, and start a fresh proceeding against the Receiver appointed in that litigation without having first obtained the leave of that Court. The position may, however, be quite different where a person c who was a strange to the proceeding in which the Receiver was appointed wants to sue the Receiver.

20. In certain Acts am express provision is made that no suit shall be instituted against an officer appointed by the Court; for instance Section 171 of Act VII of 1913 so provides. It is conceded that there is no such provision is the present Act. And independently of a statutory provision; lean find no rule of law under which a suit against a receiver in insolvency can be thrown out on the mere ground that no; leave of the Insolvency Court had been obtained. This disposes of the questions of law raised in the appeal.

21. Coming to the merits of the case I can say without hesitation that it is impossible to uphold the finding of the Court, below. The learned Subordinate Judge recorded a finding that the property in dispute Belonged to Chhote Lal land not to the plaintiff. The question whether the plaintiff has succeeded in proving that the property belongs to her, I shall consider presently. But there can be no question that there is no evidence whatsoever on the record to support the finding that; the property. in dispute belonged to Chhote Lal. Undoubtedly as the plaintiff came to Court asking for a declaration of title the burden lay on her to establish a prima facie case that the property belonged to her. But after she had proved that the title-deeds stood in her name, that her name was entered and the Municipal registers and she had been flaying the Municipal rates she taxes and had been Assessed as owner; and that for all practical purposes she was the ostensible owner of the property, then if the defendant wanted to prove that she was a mere benamidar, the burden shifted on to him to show that the purchase money had been found by her husband. I wholly disagree with the view expressed by the Court below that there is s: presumption that property standing in the name of a Hindu widow, even though purchased in her name, belongs to her husband.

22. In this case, as I have already remarked, the sale-deed of the 29th of May 1914 stood in her name. There had been a number of previous transfers which need not be mentioned, except the mortgage-deed dated the 13th of May 1913, executed by Kali Charan and Musammat Alpi, the previous owners, in favour of Dip Chand and Shimbhu Dat for a sum of Rs. 900. When the sale-deed of 1914 was executed, the amount due under this document was left in the hands of the vendee for payment to the previous mortgagees. Shimbhu Dat, one of the mortgagees, was an attesting witness to the sale-deed and he also admittedly received the mortgage-money after the sale-deed had been executed.

23. The plaintiff has produced a building permit dated the 5th of May 1918 which shows that at application for making some new erections was made by her to the Municipal Board and permission was granted on that date. There are also receipts for payment of water and house taxes standing in the plaintiff's name. At the time when the Receiver went to attach this house the plaintiff admittedly was occupying a part of the house, the other portion being let out to certain tenants. These circumstances in themselves make out a sufficient prima facie case in favour of the plaintiff. In addition to these piece of documentary evidence, the plaintiff produced a number (if witnesses in support of her claim. She herself went into the witness-box and stated that the he use had been purchased by her father and uncle some seven years ago. Then she said that the money was paid by her father and the sale transaction was carried out by Mathura Prasad. In a later portion of her statement she said that the money was given to the vendee by Mathura Prasad. In paragraph No. 1 of the plaint she had alleged that the house was purchased by her father with his own money. One of the points pressed on behalf of the contesting defendant is that there is a gross inconsistency in these statements. In my opinion there is no inconsistency or contradiction whatsoever. It is an admitted fact that the plaintiff's father and uncle were members of a joint family. The plaintiff's mother died when she was an infant and she was brought, up in the house of her father and uncle. If the property, was purchased will the money belonging to the family the money may be said to have belonged to either of the two or to both. She next slated that on account of some quarrel with the relations of her husband she had to leave her husband's house, and this was why her father and uncle thought p getting a house for her.

24. Her father was dead when the suit was brought. Her uncle, Mathura Prasad, went into the witness-box and swore that he had provided the money for the purchase of this house. Mathura Prasad owns some zemindari property, he also carries on some business, and is, a Lambardar in one of the villages. He stated that he had Rs. 1,000 in the village and brought the amount to the city for payment to the vendee. It is true that he said that there were no account books kept by him, and that he was not in a position to produce any documentary evidence to prove the payment. He produced two witnesses, Mahadeo and Hanuman, to show that he actually brought the money from the village. It is unnecessary to comment on the evidence of these witnesses who are men of no status. But there is the evidence of Babu Chhote Lal, Vakil, a distant relation of the plaintiff, to the effect that before the sale-deed in question was executed, Mathura Prasad had gone to him and shown him some papers relating to the house and consulted him. His evidence certainly shows that Mathura Prasad was in sortie way or other connected with the transaction. Two witnesses, Gaya Din and Raghunath, were examined to prove that the rents were paid to the lady by them, and that the house taxes were also paid by the plaintiff. The evidence on behalf of the defendant Receiver is practically nil. No circumstances a re shown which would make it at all probable that Chote Lal was the real purchaser and that the property had been obtained fictitiously in the name of the plaintiff. For instance it is not shown that in the yea r 1914 Chhote Lal had any motive to enter into a benami transaction, or that he was contemplating the starting of any business and it, was with a view to cheat the future creditors that the property was purchased in the name of his wife. In fact it was many years after the sale, that he entered into the partnership business which failed. The oral evidence produced by the defendant consists of three persons, Gur Dayal, Kanhaiya Lal and Jhabu Lal, whose statements are mainly to the effect that Chote Lal was in a position to advance Rs. 1,000 towards the 'acquisition of this house. They also tried to prove that Chote Lal, after the sale-deed was executed, made some statements alleging himself to be the real owner. Such a statement even if true, is of no value against the plaintiff Gur Dayal is a general attorney of one of the petitioning creditors. The sale-deed was not executed in. his presence nor is he able to say where the purchase-money came from. Kanhaiya Lal is a him-self a creditor. Jhabu Lal is a general attorney of another creditor. In the presence of neither of these the sale transaction took place. In my opinion, therefore, the evidence adduced by the defendant is wholly insufficient to overweigh that adduced by the plaintiff. The documentary evidence is entirely in favour of the plaintiff and there are no circumstances which in any way throw any suspicion on the transaction. The burden which lay, on the plaintiff of establishing a prima facie case was sufficiently discharged by her evidence and no rebutting evidence worth the name has been adduced on behalf of the defendant. In. this view of the matter the finding of the learned Judge must be overruled. I would, therefore, allow the appeal, set aside the decree of the Court below and decree the plaintiff is suit with costs.

Lindsay, J.

25. I agree with my learned colleague that this appear should be allowed. There are no merits in the case of the respondent. I wish, however, to say a few words regarding the legal points which have been raised in the case. The questions which arise for decision, are simple questions of the interpretation of Act V of 1920 and it does not appear to me necessary to resort to any previous decision or authority for the purpose of construing the relevant Sections 80 far as Section 68 is concerned it cannot, in my opinion, be maintained on the language of that section that a person who is aggrieved by any act of a Receiver is under an obligation to apply to the Court for relief. What the section says is that such a person 'may apply' to the Court, and it is further provided that if he exercises his option of applying to the Court he must make an application within 21 days from the date of the act complained of. On the face of it the language of the section is permissive, not mandatory. The person aggrieved ha s the choice either of applying to the Court or of seeking his ordinary remedy under the civil law.

26. It is argued that because of the provisions of Section 4 of Act V of 1920, whereby jurisdiction has been conferred upon Insolvency Court to determine questions of title arising in insolvency cases, it must necessarily follow that any person who has a question of title to raise must apply to the Insolvency Court; in ot he words it must be assumed from the provisions of Section 4 that because these powers of deciding questions of title have been conferred upon Insolvency Courts, therefore, the Insolvency Court has exclusive jurisdiction. That appears to me to be a deduction which cannot be made from the language of Section 4. All that; the section intended to provide was that if a question involving title is raised before an Insolvency Court, then the Insolvency Court is to be deemed to have power to decide that question a of title. I must not be taken to subscribe to the view the has been expressed by my learned co-league regarding what follows if an aggrieved person doe select to make an applicantio to the Insolvency Court. I am not pr pared to take the view that a decision under Sub-Section 2 of Section 4 would be binding upon a stranger, like the plaintiff in the present case, who, in my opinion, is not making any claim against the debtor or the; debtor's estate. What the plaintiff in the present suit is saying is that the property about which the dispute exists does not belong to the debtor's estate and never did belong to it, and so I cannot see how it can be said that she in the present proceedings is claiming against the debtor or his estate. That question, however, does not arise for decision and these observations are consequently obiter. I have only made them in order that I may not be supposed to hold the opinion that a decision under sub-Section 2 is binding upon all parties including parties who are entire strangers to the insolvency proceedings.

27. It being settled, therefore, that the plaintiff in the present case had the ordinary civil remedy which was open under the law, the further question arises why she would be bound in any way to solicit the sanction of the Insolvency Court before the brought the suit against the Official Receiver. There is no statutory provision for such sanction being asked or given, and an principle I fail to see why any such authority is required. The Official Receiver may be an officer of the Court but no special sanctity attaches to his office when his brought in contact with a person who is an entire stranger to the proceedings in the Insolvency Court. I can well understand the position that so far as the insolvency proceedings are concerned the Receiver or Official Receiver stands in a peculiar relation to all parties who are interested in the proceedings, that is to say, the insolvent himself or the creditors or other persons, who are seeking satisfaction out of his estate. But he has no particular status as against parties who are entire strangers to the proceedings' in the Insolvency Court, and it under colour of his office is Receiver or Official Receiver he communist an act of trespass, it is difficult to understand on what principle the person against whom the trespass is committed is under any obligation to ask permission of the Insolvency Court to bring an action against the Receiver. The remedy of the person s complaining is the ordinary remedy at, law and no question, therefore, of any sanction arises. It may, of course, be that in cases where the defendant has an, official status notice of the suit must be given to him as required by the Civil Procedure Code. In the present case I understand that such notice was necessary and was actually given.

28. It is admitted, as I have said, that there is no statutory authority for the proposition that a person who is suing a Receiver' or Official Receiver appointed under the Insolvency Act has to obtain the permission of the Insolvency Court. There have been, no doubt, numerous cases in which it has been laid down that proceedings against a Receiver should not be taken without the leave of the Court. 'Where a Receiver has been appointed in the course of a suit it seems reasonable enough that all parties to that suit should be bound by the order appointing him and consequently, being subject to the jurisdiction of the Court, should no the allowed to question the acts of a Receiver without the Count's permission. But there is, in my opinion, no authority for the proposition that, where in a suit a Receiver has been appointed, no person who is a stranger to the suit can question an act of the Receiver without the sanction of the Court. That seems to be an absolutely untenable proposition and opposed to all principle. In the present case I am satisfied (1) that the plaintiff was under no obligation to seek any relief in the Insolvency Court; (2) that she had the ordinary remedy under the civil law against the Official Receiver; and (3) that for the purpose of maintaining the suit she was under no obligation to seek any sanction from the Insolvency Court.

29. The order of the Court is that the appeal is allowed, the decree of the Court below is set 9 side and the plaintiff's suit is decreed with costs in both Courts including in this Court fees on the higher scale.

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