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Firm Govind Hanumanprasad of UjjaIn Vs. Shamsingh S/O Sardar Lakhansingh of UjjaIn and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Appeal No. 103 of 1960
Judge
Reported inAIR1962MP354
ActsProvincial Insolvency Act, 1920 - Sections 4, 21(2), 75(2) and 75(3)
AppellantFirm Govind Hanumanprasad of Ujjain
RespondentShamsingh S/O Sardar Lakhansingh of UjjaIn and ors.
Appellant AdvocateK.A. Chitale, Adv.
Respondent AdvocateHarbansingh, Adv. for Respondent No. 1
DispositionAppeal allowed
Cases ReferredBibhuti Bhusan v. Birendra Nath
Excerpt:
.....further and held that the transfer of the same in favour of the objector was good and for valid consideration and on that consideration it ordered the release of property from attachment......question can be examined under section 4 after adjudication.8. it is competent therefore for an objector to question the attachment even at a stage prior to adjudication by contending that the property when attached was not in the possession or under the control of the insolvent but had properly passed on to him and was under his control.9. the determination of such objection will be akin to determination under order 21 rules 60 and 61 and will be of summary character and at a stage after adjudication the insolvency court can examine the question of title at the instance of the party aggrieved by the summary order. it is of course open for the objector not to resort to summary procedure and claim adjudication on the question of his title straightway. in that case the determination of.....
Judgment:

V.R. Newaskar, J.

1. This appeal arises out of a proceedingstarted on a petition of a creditor Firm Govindram Hanumanprasad of Ujjain for securing adjudication of thedebtors Hemant Kumardas and Chittaranjan Rai as insolvents.

2. The creditor firm was alleged to be entitled to a debt of Rs. 20,453/-. Certain acts of insolvency were attributed to the insolvents. After the filing of the application for the adjudication of insolvents the creditor moved under Section 21 of the insolvency Act for the attachment of the properties of the insolvents. Amongst the list of property sought to be attached there were National Savings Certificates of the denomination of Rs. 6,000/-. The Insolvency court by its order dated 314-1959 directed attachment of these certificates alleged to be standing in the name of the insolvents by issuing an order to the Superintendent Post Office Ujjain, Malwa Division, informing him that the same had been attached in the insolvency proceedings and directing him not to permit encashment of the same until otherwise ordered. While making the initial order no specification as to number etc. were supplied by the creditor. On a further direction by the court the creditor gave what according to the best of his knowledge were the numbers.

These numbers were No. G/0-237673 dated 164-1958 of the denomination of Rs. 5,000/- and No. G/2 129525 dated 16-4-1958 of the denomination of Rs. 1000/-. The certificates stood in the name of Shri H. K. Das who is one of the debtors. On receipt of the above information from the Insolvency Court the Superintendent of Posts by his letter dated 2-5-1959 brought to the notice of the Court that the aforesaid certificates had been cancelled and the National Plan Savings Certificates of 12 years had been issued in lieu of the same. The letter also gave the details as to valuation and number of the converted certificates and enquired as to whether the attachment order should be taken to operate on these converted certificates. This letter was followed by subsequent reminders dated 25-54959, 23-6-1959 and 10-12-1959. While these letters were being exchanged respondent Shamsingh submitted an application to the insolvency Court on 6-5-1959 alleging that the debtor firm H. K. Das and Co. through its partner Chittaranjan Rai had borrowed Rs. 3100/- on 1-2-1958 and issued a post dated cheque on the State Bank of India dated 25-2-1958; that on the due date the debtors informed him that they had not succeeded in securing necessary balance in their bank account and asked for more time which had been given; that, on 15-4-1958 the said debtors took further loan of Rs. 3300/- from him, and gave another post dated, cheque of the same denomination due on 30-5-1958, that later the debtors again expressed their inability to secure encashment of the cheques and asked for further time; that ultimately on 28-10-1958 the debtors handed over to, them the 12 years National Plan Savings Certificates four in number each of Rs. 1,000/-; that when he sought encashment on due date i.e., on 16-4-1959 he was informed that the same had been attached.

The objector Shamsingh on these allegations counted that the four certificates of Rs. 1,000/- each while had been made over to him had become his property on 28-10-1958 and that for that reason they were not liable to attachment. The creditor resisted this objection petition contending that in the absence of observance, of necessary formalities and requirements of law mere handing over of the said certificates could not clothe the holder with rights in respect of the same. The details of the circumstances in which the objector obtained the converted certificates were also denied for want of knowledge.

3. The Insolvency Court without recording any evidence allowed the objection holding that having regard to the nature of the documents produced on behalf of the objector his case regarding the genuineness of the transfer of certificates to him is beyond doubt or suspicion.

4. The creditor firm preferred the present appeal under Section 75(2) of the Provincial Insolvency Act. An application has also been given for permission to appeal in case the order in question Is not treated as one under Section 4 of the Provincial insolvency Act.

5. It may be mentioned here that no order of adjudication is yet passed in the case. The attachment order was passed in purported exercise of the power of the Insolvency Court under Section 21(2) of the Act. To the attachment of National Savings Certificates mentioned on the application of the creditor petitioner, Shamsingh submitted his objection alleging that the certificates, which had been made over to him by the debtor in lieu of his debt, bore different numbers and that he is properly entitled to them although the same might be ones which had been converted from those mentioned by the creditor. This objection was considered by the Insolvency Court without affording opportunity to the parties to lead evidence and no more examination of the documents filed on behalf of Shamsingh and his objection was allowed and a direction for the release of the shares was passed. The creditor who had secured an order of attachment treated this as an order under Section 4 of the Act and has preferred appeal.

It is no doubt true that the Insolvency Court should determine questions of disputed title only after an order of adjudication is made and not before. When an objection to attachment is made by a third party claiming interest in the property attached under Section 21(2) of the Act all that it is expected to determine, at a stage before adjudication, is whether the property was or was not under the control of the debtor at the time of attachment. Section 21 in so far it is material for our present purpose is:

'At the time of making an order admitting the petition or at any subsequent time before adjudication the court may either of its own motion or on the application of any creditor make one or more of the following orders, namely :

(1) ...............

(2) order the attachment by actual seizure of the Whole or any part of the, property in the possession or under the control of the debtor, other than such particulars (not being his books of account) as are exempted by the Code of Civil Procedure, 1908, or by any other enactment for the time being in force from liability to attachment and sale in execution of a decree;

(3) ...............

Provided that an order under Clause (2) or Clause (3) shall not be made unless the Court is satisfied that the debtor with intent to defeat or delay his creditors or to avoid any process of the Court-

(i) has absconded or has departed from the local, limits of the jurisdiction of the court, or is about to abscond or to depart from such limits, or is remaining outside them, or

(ii) has failed to disclose or has concealed, destroyed, transferred or removed from such limits, or is about to conceal, destroy, transfer or remove from such limits, any documents likely to be of use to his creditors in the course of the hearing, or any part of his property other than such particulars as aforesaid.'

6. It Is thus clear that the powers of attachment under Section 21(2) are somewhat analogous to powers of ordinary Civil Courts with reference to suits under Order 38 Rule 5, vide AIR 1938 Cal 182, Patit Paban Daw v. Harisadhan Nandi. In AIR 1939 Nag 10, Jasodabai v. Firm Shrikishan Radhakishan, Vivian Bose, J., while dealing with this provision observed:

'There is a wide difference between the position and powers of the insolvency Court before and after adjudication. Before adjudication the debtor continues in possession of the property and is, subject to the provision of the Act, entitled to deal with it like any other owner. Therefore, in order to prevent alienations and waste, the Insolvency Court is empowered under Section 21(2) to order attachment by actual seizure of the whole or any part of the property 'in the possession or under the control of the debtor', provided the conditions laid down in the Proviso obtain. But, these powers of attachment are limited to the position before adjudication and it will be observed that they are not as wide as the power of attachment conferred upon a Civil Court under the Civil Procedure Code, nor is it possible to resort to the wider powers of the Civil Courts under Section 5, because that section applies the procedure of the Civil Courts 'subject to the provisions of the Act'.'

7. Now the power of attachment under Section 21(2) is confined to the property of the insolvent which is either in his possession or under his control. When therefore the objector third party claims exclusive possession and not through the insolvent, this question as it concerns the Jurisdiction of the court to attach has to be determined summarily apart from the question as to insolvent's title. The latter question can be examined under Section 4 after adjudication.

8. It is competent therefore for an objector to question the attachment even at a stage prior to adjudication by contending that the property when attached was not in the possession or under the control of the insolvent but had properly passed on to him and was under his control.

9. The determination of such objection will be akin to determination under Order 21 Rules 60 and 61 and will be of summary character and at a stage after adjudication the Insolvency Court can examine the question of title at the instance of the party aggrieved by the summary order. It is of course open for the objector not to resort to summary procedure and claim adjudication on the question of his title straightway. In that case the determination of that question ought properly be made after the order of adjudication is passed. When the determination of objection to attachment under Section 21 is of summary character the same not being under Section 4 an appeal will be competent only with the leave of the court. But where the determination is under Section 4 then the appeal will be as of right under Section 75(2) of the Act read with Schedule (I).

10. In the present case the Insolvency Court did not merely determine the question whether the certificates sought to be attached were in the possession or under the control of the insolvent at the time of their attachment. It has gone further and held that the transfer of the same in favour of the objector was good and for valid consideration and on that consideration it ordered the release of property from attachment. Although the Insolvency Court should not ordinarily inquire prior to the making of an order of adjudication whether the transfer made by the insolvent in favour of a third person is genuine or not as held in AIR 1935 Cal 558 Bibhuti Bhusan v. Birendra Nath, yet inasmuch as the court below has determined the validity of transfer in favour of the objector, though merely on the basis of certain documents produced before it and without affording opportunity to the parties to lead evidence, an appeal under Section 75(2) of the Provincial Insolvency Act is competent and resort to Section 75(3) is not necessary. But if any such thing were necessary I would feel no hesitation in granting such permission as the order in question suffers from serious infirmities as will be seen later.

11. Now in this case the court below held the transfer to be genuine merely on consideration of certain documents which were merely produced, It could have taken up for consideration the question whether, the property was at the time of attachment in the possession or under the control of the debtor. This was the proper course as the stage for determining question of title or regarding validity of transfer had not arrived. Instead of this it determined validity of transfer and that too without, giving full opportunity to the parties to lead evidence. The decision therefore deserves to be set aside.

12. The decision of the court below is consequentlyset aside and the case is remanded to the Insolvency Courtwho will proceed to determine the question in light ofthe observations made above after giving opportunity tothe parties to lead evidence. The appellant is entitledto his costs of this appeal.


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