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Ramathai Anni Vs. K. Kanniappa Mudaliar and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in110Ind.Cas.167; (1928)55MLJ235
AppellantRamathai Anni
RespondentK. Kanniappa Mudaliar and anr.
Cases ReferredThe Official Assignee of Madras v. Sheikh Moideen Rowther
Excerpt:
- - the facts are one vedamurthi mudaliar, a well-to-do landowner of melasevval in the tinnevelly district, was the karaswan of two chits to which the 1st respondent was a subscriber. (2) there was no good petitioning creditor's debt on which an application for adjudication could be founded;.....be so adjudged, for no order can be passed against the estate as the court can only adjudge a person an insolvent and not his estate. reliance is also placed upon sections 21, 24 and 25. section 21 refers to interim proceedings against the debtor, section 24 to the procedure on hearing and section 25 to the dismissal of the petition. these sections no doubt provide for the course to be pursued in hearing a petition for adjudication. there are provisions in sections 21 and 24 for service of notice on the debtor and for his appearance and for other matters. from this it is argued that the provincial insolvency act can only be enforced against a person who is alive and not against a person who is dead. this argument, however ingenious it may be, overlooks the plain provisions of.....
Judgment:

Devadoss, J.

1. This appeal arises out of an application of a creditor to adjudge a person an insolvent. The facts are one Vedamurthi Mudaliar, a well-to-do landowner of Melasevval in the Tinnevelly District, was the Karaswan of two chits to which the 1st respondent was a subscriber. He drew the prizes but was not paid the prize amount excepting a small portion. Vedamurthi Mudaliar became heavily involved in debt and became unable to pay the amount due to the 1st respondent and on 24th January, 1922, he filed an application under the Provincial Insolvency Act for adjudging Vedamurthi Mudaliar an insolvent alleging various acts of fraudulent preferences and fraudulent alienations, particularly one in favour of a relation, Muthu Kamakshiappa Mudaliar, for Rs. 48,000. Vedamurthi Mudaliar contested the petition on various grounds, the main ones being that the 1st respondent was not a creditor and that nothing was due to him in respect of the chit transaction, that he had not committed any act of bankruptcy, that the alienation in favour of Muthu Kamakshiappa Mudaliar was bona fide and for valuable consideration, that he was not in insolvent circumstances, and that he was able to pay his debts. He died in August, 1924, before his adjudication. The 1st respondent applied to the Sub-Court of Tinnevelly to bring on record the widow of Vedamurthi Mudaliar as his legal representative and hear his petition on the merits. The Subordinate Judge overruling the objection of the widow made her a party to the petition and adjudicated Vedamurthi Mudaliar an insolvent. On appeal the District Judge of Tinnevelly confirmed the order of the Subordinate Judge. The widow has preferred this appeal.

2. Mr. K.V. Krishnaswami Aiyar who appears for the appellant, raises three contentions against the order of the District Judge:

(1) If a person against whom a petition for adjudication as an insolvent is presented dies before the passing of the order of adjudication, no adjudication order can be passed against him or his estate;

(2) There was no good petitioning creditor's debt on which an application for adjudication could be founded; and

(3) Vedamurthi Mudaliar did not commit an act of bankruptcy, or, in other words, there was no available act of bankruptcy which could be the foundation of a petition for adjudication.

3. Point No. 1. - The argument of Mr. Krishnaswami Aiyar is that a person in order to be adjudged an insolvent must be alive and that there is no provision in the Provincial Insolvency Act for passing an adjudication order against the estate of a deceased person, and he relies upon the wording of Section 7 as supporting his contention. The last clause of the first paragraph of Section 7 is

and the Court may on such petition make an order (hereinafter called an order of adjudication) adjudging him an insolvent.

4. It is urged that the words 'adjudging him an insolvent' must be given its ordinary meaning and therefore after a person's death he cannot be adjudged an insolvent and his estate cannot be so adjudged, for no order can be passed against the estate as the Court can only adjudge a person an insolvent and not his estate. Reliance is also placed upon Sections 21, 24 and 25. Section 21 refers to interim proceedings against the debtor, Section 24 to the procedure on hearing and Section 25 to the dismissal of the petition. These sections no doubt provide for the course to be pursued in hearing a petition for adjudication. There are provisions in Sections 21 and 24 for service of notice on the debtor and for his appearance and for other matters. From this it is argued that the Provincial Insolvency Act can only be enforced against a person who is alive and not against a person who is dead. This argument, however ingenious it may be, overlooks the plain provisions of Section 17 of the Act which is in the following terms:

If a debtor by or against whom an insolvency petition has been presented dies, the proceedings in the matter shall, unless the Court otherwise orders, be continued so far as may be necessary for the realisation and distribution of the property of the debtor.

5. This section provides for the case of a debtor who has presented an insolvency petition or against whom an insolvency petition has been presented dying during the pendency of the proceedings against him. Mr. Krishnaswami Aiyar's contention with regard to this section is that it only applies to a person who has been adjudged an insolvent before his death and not to a person dying before the order of adjudication is passed. This argument is against the clear terms of the section. It applies to the cast of a debtor by whom or against whom an insolvency petition has been presented and does not confine itself only to the case of a debtor who had been adjudged an insolvent, and who dies before the proceedings come to a termination. There is no warrant for reading into the section the words 'and adjudged insolvent' after the words 'has been presented'. If the legislature wanted this section to govern only the cases of persons adjudged as insolvents, it could have said so in plain terms. This section is a re-enactment of Section 10 of the Provincial Insolvency Act, III of 1907, with a slight modification. That section was in these terms:

If a debtor by or against whom an insolvency petition has been presented dies, the proceedings in the matter shall, unless the Court otherwise orders, be continued as if he were alive.

6. The words 'as if he were alive' were omitted and the words 'so far as may be necessary, for the realization and distribution of the property of the debtor' were introduced in Section 17. Mr. Krishnaswami Aiyar argues that the legislature made a deliberate change in the law by the introduction of the words 'so far as may be necessary for the realization and distribution of the property of the debtor' and whatever may be the law under the old Act, under the present Act a person who has not been adjudged insolvent before his death could not be adjudged after his death even though he dies pending the application for adjudicating him an insolvent. The old Section 10 was the same as Section 93 of the Presidency Towns Insolvency Act of 1909 and Section 108 of the Bankruptcy Act of 1883. It was held both under the English Bankruptcy Act and the Presidency Towns Insolvency Act that the proceedings in insolvency did not come to an end if a person by or against whom an insolvency petition was presented died before the order of adjudication was made. In In re Hardy, Hardy v. Farmer (1896) 1 Ch. 904 it was held that the Court of Bankruptcy had jurisdiction to proceed in the bankruptcy of a person under Section 108 and Section 18, Sub-section 11 of the Bankruptcy Act notwithstanding his death. Chitty, J., observed:

I think, following the principle on which the Divisional Court acted, there would be jurisdiction in the Court of Bankruptcy to proceed under the 108th section, as there are no circumstances in that case to make it unjust for the Court to order otherwise, that is, to stop the bankruptcy proceedings.

7. Mr. Krishnaswami Aiyar relied upon the case of Ex parte Sharp (1886) 34 W.R. 550 as laying down the law that Section 108 could only apply to the case of a debtor who has presented an insolvency petition and not to a person against whom an insolvency petition has been presented. No doubt, in that case, Cave, J., and Grantham, J., sitting as a Divisional Court held that where the petition is presented by the debtor himself the adjudication could be made after his death. But Section 108 is not to be confined only to the case of a debtor dying after he presented the insolvency petition, for the wording is 'If a debtor by or against whom a bankruptcy petition has been presented dies.' There is no warrant for overlooking the clear words 'or against whom' as if they had no meaning. With regard to Ex parted Sharp (1886) 34 W.R. 550, In re Easy (1887) 19 Q.B.D. 538 Chitty, J., observed:

These decisions show that the construction put upon the 108th Section is a general one, and I am not able to find any ground upon which it would be reasonable, in my opinion, to say that the provisions of that section are not applicable to Sub-section 11 of Section 18.

8. See also Re Walker (1886) 3 Morr. 69.

9. There was some difficulty felt as to service of notice after the debtor's death. Rule 156(a) of the Bankruptcy Rules was framed in order to give power to the Court to order substituted service in the case of death, or in cases where notice could not be served on the debtor. The portion of the rule that is relevant for the present purpose is as follows:

. . . or that for any other cause prompt personal service cannot be effected, it may order substituted service to be made by delivery of the petition to some adult inmate at his usual or last known residence or place of business, or by registered letter, or in such other manner as the Court may direct, and that such petition shall then be deemed to have been duly served on the debtor.

10. Rule 7 of the Madras Provincial Rules framed under the Provincial Insolvency Act puts the matter beyond doubt:

If a debtor, against whom an insolvency petition has been admitted, dies before the hearing of the petition, the Court may order that notice of the order fixing the date for hearing the petition shall be served on his legal representative or on such other person as the Court may think fit in the manner provided for the service of summons.

11. In the old Indian Insolvency Act there was no specific provision for continuing the proceedings on the insolvent's death before adjudication, notwithstanding that, the proceedings were continued against the debtor. This defect has now been remedied by Section 93 of the Presidency Towns Insolvency Act.

12. The words 'so far as may be necessary for the realization and distribution of the property of the debtor' were enacted in the place of the words 'as if he were alive' in order to obviate any objection that may be put forward to the continuation of the proceedings by reason of some of the provisions contained in the Provincial Insolvency Act such as those in Section 43 with regard to the application for discharge. The latter portion of the first paragraph of Section 43 is:

If the debtor does not apply for an order of discharge within the period specified by the Court, the order of adjudication shall be annulled, and the provisions of Section 37 shall apply accordingly.

13. A deceased person cannot apply for discharge. If the words 'as if he were alive' were in Section 43, it might be contended that no application having been made within the time fixed by the Court for discharge the adjudication should be annulled. There are other provisions in the Act with regard to the conduct of the insolvent. In order to obviate any difficulty that might arise in continuing the proceedings by reason of these provisions the words abovementioned were enacted. All that is necessary after the insolvent's death is to see that the assets of the insolvent are realized and distributed among the creditors. The Court is not interested after the insolvent's death in considering his conduct except in so far as applications for setting aside fraudulent preferences and fraudulent alienations are concerned. The words 'so far as may be necessary,' etc., make the meaning of the Section 17 clear, namely, that after the debtor's death the proceedings in insolvency do not come to an end, whether he had been adjudicated an insolvent before his death or not.

14. It is not disputed that if the adjudication had been made before the debtor's death the proceedings could be continued against the estate, and the objection that it cannot be continued if he had died before adjudication is on the face of Section 17 untenable.

15. A further argument was urged that the Presidency Towns Insolvency Act makes provision for the administration of the estate of a person dying in insolvent circumstances and there is no corresponding provision in the Provincial Insolvency Act. It is no doubt true that under Section 108 of the Presidency Towns Insolvency Act the estate of a person dying in insolvent circumstances could be administered in insolvency on the application of a creditor whose debt would have been sufficient to support the insolvency petition against the debtor had he been alive. But the absence of this provision in the Provincial Insolvency Act does not lend support to the contention of the appellant that if the debtor dies before the adjudication order, the proceedings against him under the Insolvency Act cannot be proceeded with.

16. It is further urged that no order of adjudication could be passed but the proceedings may be continued for the purpose of paying the creditors. This argument overlooks the fact that the assets of the insolvent could not be realized unless his estate is vested in the Official Receiver, for no person would sell what is not vested in him, and the property of an insolvent vests in the Court only on adjudication under the Provincial Insolvency Act, and the Court by an order vests the property in the Official Receiver. If there is no vesting of the property in the Court or in the Official Receiver, how could the Court or receiver proceed to realise the insolvent's assets? The order of adjudication is therefore essential for the realisation and distribution of the property of the debtor. When the Court orders an insolvent's estate to be administered in insolvency under Section 108 of the Presidency Towns Insolvency Act, the property of the deceased vests in the Official Assignee under Section 109 of the Act, and under the Provincial Insolvency Act it is only on adjudication that the property of the insolvent could be ordered to vest in the Official Receiver.

17. This point was specifically decided by Madhavan Nair and Jackson, JJ., in Venkatarama Aiyar v. Official Receiver, Tinnevelly I.L.R. (1927) M. 344 : 1927 54 M.L.J. 585. The learned Judges held that

There is no reason why we should assume that the law according to the Provincial Insolvency Act should be understood in a different way from the law according to the Presidency Towns Insolvency Act.

18. We have no hesitation in holding that Section 17 of the Provincial Insolvency Act applies to a case of a debtor dying before the order of adjudication whether the petition for adjudication was presented by a creditor or by the debtor.

19. Point No. 2. - It was attempted on behalf of the appellant to show that the judgment of the Subordinate Judge in a previous proceeding, Exhibit B, was misunderstood by the District Judge. We have looked at the judgment and we cannot say that the learned District Judge has misconstrued Exhibit B. What the Subordinate Judge found in O.S. No. 34 of 1921 was that, instead of the 1st respondent being indebted to Vedamurthi Mudaliar, Vedamurthi Mudaliar was indebted to the 1st respondent, and so he dismissed Vedamurthi Mudaliar's suit against the 1st respondent. From the evidence it is quite clear that a large sum of money was due to the 1st respondent from the deceased Vedamurthi Mudaliar. We agree with the learned Judge in holding that the 1st respondent's debt was one upon which an application for adjudication could be founded.

20. Point No. 3. - This is also one of fact. It was urged that there is nothing to show that Exhibit A was executed with a fraudulent intention and that the learned Judge was not justified in finding that it was an act of bankruptcy. From the nature of the document and from the circumstances of the case both the Courts have come to the conclusion that the document was executed for the purpose of defeating or delaying creditors. A mere perusal of the document is sufficient to show that the debtor received no present advantage by transferring the larger portion of his property in favour of Muthu Kamakshiappa Mudaliar. The consideration was Rs. 48,000 and the present advance was only Rs. 439; the rest was all to be paid to creditors. This was executed on the 25th October, 1921 and the petition for adjudication was filed on 24th January, 1922. Muthu Kamakshiappa Mudaliar is a near relation of the debtor. The debtor was in embarrassed circumstances at the time as is clear from the evidence. He could not have derived any benefit to himself by selling the property at that time; and the consideration for the sale deed was a large amount, nearly the whole of which was to be paid to creditors. A jury is entitled to come to the conclusion on the evidence that the transaction was a fraudulent one and under Section 6 such a transaction is an act of bankruptcy. In a case not dissimilar to the present it was held by a Bench of this Court that the transaction was a fraudulent one - The Official Assignee of Madras v. Sheikh Moideen Rowther : AIR1927Mad1013 . We agree with the lower Courts in holding that the transaction was a fraudulent one and that there was an available act of bankruptcy for the creditor to apply under the Act for the adjudication of Vedamurthi Mudaliar as an insolvent.

21. In the result the appeal fails and is dismissed with costs. Two sets to be paid out of the estate.

22. The Civil Revision Petition is dismissed.

Ramesam, J.

23. I agree.


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