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The Official Assignee of Madras and ors. Vs. the Official Assignee of Rangoon by His Agent, Subramania Aiyar and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in(1918)35MLJ533
AppellantThe Official Assignee of Madras and ors.
RespondentThe Official Assignee of Rangoon by His Agent, Subramania Aiyar and ors.
Cases Referred and Morgan v. Knight
Excerpt:
.....parties since the date of the act of insolvency complained of in the petition. dicey in commenting upon the rule says :the rule probably holds good where the earliest of several bankruptcies, and the assignment under it, takes place in a country beyond the limits of the united kingdom, e. i am therefore of opinion that the 9. madras adjudication which was earlier in date did vest all the properties of the insolvent in the madras official assignee not-withstanding the fact that the act of insolvency complained of in the petition for adjudication is said to have been committed on a date later than the act of insolvency with reference to which the rangoon order of adjudication was passed......by one of the creditors, while in o.s.a. no. 89 the official assignee of rangoon asks that the madras insolvency should not merely be stayed but annulled. no question was raised before the learned judge as to the petition for annulment having been presented by the official assignee of rangoon instead of by one of the creditors and it is unnecessary for us to consider the question, as to which we decide nothing.2. on 17th april 1917 two of the creditors of the firm of t.a.r.a.r.m. ramanatham chetty presented a petition for the adjudication of the firm to this court, alleging that the firm consisted of ramanatham chetty and his son annamalai chetty and setting out various acts of insolvency. this was supported by an affidavit in nearly the same terms by adaikappa chetty the agent of.....
Judgment:

John Wallis, C.J.

1. These are cross appeals from an order of Bakewell, J., in insolvency by which, acting under Section 22 of the Presidency Towns Insolvency Act, he stayed the proceedings of the Official Assignee of Madras in I.P. No. 83 of 1917. In O.S.A. No. 27 the Official Assignee of Madras challenges the order of stay and O.S. No. 29 is an appeal to the same effect by one of the creditors, while in O.S.A. No. 89 the Official Assignee of Rangoon asks that the Madras Insolvency should not merely be stayed but annulled. No question was raised before the learned Judge as to the petition for annulment having been presented by the Official Assignee of Rangoon instead of by one of the creditors and it is unnecessary for us to consider the question, as to which we decide nothing.

2. On 17th April 1917 two of the creditors of the firm of T.A.R.A.R.M. Ramanatham Chetty presented a petition for the adjudication of the firm to this Court, alleging that the firm consisted of Ramanatham Chetty and his son Annamalai Chetty and setting out various acts of insolvency. This was supported by an affidavit in nearly the same terms by Adaikappa Chetty the agent of the petitioning creditors, and on the 23rd of April an order of adjudication was made. The order, which was drawn up by filling in a printed form, recites that the insolvents had committed acts of insolvency mentioned in the petition and does not specify the precise acts of insolvency on which the order was made. This form may have been sufficient under the scheme of the old Act, in which the insolvency related back to the date of the petition, but, to enable due effect to be given to the provisions of the present Act, the acts of insolvency which are found to have been proved should be shown specifically in the order and not be left to be gathered from a perusal of the affidavit. Another defect of practice which has come to light is that the order on the creditor's petition was not notified forthwith, as it should have been, in the Fort Saint George Gazette. On the 10th of May 1917 the T.A.R.A.R.M. Firm was again adjudicated by the Chief Court of Lower Burma in respect of acts of insolvency found to have been committed in or about the month of February. The affidavit in support of the Madras Petition, on which this Court acted, did not allege with sufficient certainty any acts of insolvency prior to the month of March; and, therefore, the acts of insolvency upon which the firm was adjudicated in Madras must be taken to have been later in time than the acts on which the adjudication was made in Rangoon, though the date of adjudication in Rangoon was subsequent to the adjudication in Madras. Now in these circumstances it is contended for the Madras creditors and the Madras Official Assignee that the property of the insolvents wherever situated in British India having vested in the Official Assignee of Madras, the subsequent adjudication in Rangoon hal nothing to operate upon, and that the property of the insolvents has ever vested in the Official Assignee of Rangoon and cannot west in him until the Madras insolvency is annulled under Section 22. In my opinion the whole property of the insolvents having vested in the Official Assignee of Madras by virtue of the adjudication here, there was nothing to vest under the subsequent adjudication ine Rangoon. If authority be wanted for what appears to me to be an obvious proposition, it is to be found in the series of cases both at law and equity referred to in Morgan v. Knight (1864) 15 C.B. 669, in which a later commission of bankruptcy had been held to be a nullity so long as the earlier commission was outstanding. In delivering the judgment of the

3. Court of Common Pleas overruling these decisions, Erle, C.J., observed that they rested on two propositions, one, that an uncertificated bankrupt could have no property, and the other, that, if there is no property, a commission is void, by reason of the fact that there cannot be any effects administered under it. He then -pointed out that it was not essential to the validity of a bankruptcy that the bankrupt should be possessed of property, and, secondly, that in certain circumstances an uncertificated bankrupt might acquire property. It was not questioned in this case, or in any of the later cases in England that have followed it, that the later adjudication could not operate on the property which had once belonged to the bankrupt but had vested in the Assignee under the earlier adjudication. This was also regarded as beyond question by Strachey, J., and on appeal from his judgment by Farran, C.J., in Be Arqnvayal Sabapathi I.L.R. (1897) B. 297. There are no doubt some observations of Henderson, J., in In the matter of William Watson I.L.R (1904) C. 761, as to the Official Assignee having some sort of title to assets which under an earlier bankruptcy in England had vested in the English trustee, but they appear to have been made obiter, and Morgan v. Knight (1864) 15 C.B. (N.S.) 669, on which the later English cases proceed, was not cited to the court.

4. It is said however that, assuming this to be so, the property vested in the Official Assignee of Rangoon by virtue of the fact that the adjudication in Rangoon was based on acts of insolvency earlier in date than those on which the order was made in Madras. None the less, when the adjudication was made in Rangoon all the property of the insolvents had already vested in the Official Assignee of Madras and there was nothing on which the Rangoon adjudication could operate. The provision in Section 17 that on the making of an order of adjudication the property shall vest in the Official Assignee is express, and there is no provision in the Act divesting the property so vested in that Official Assignee and transferring it to another Official Assignee under a later adjudication. Section 51, no doubt, provides that the insolvency is to date back and to be deemed to commence at the date of the first of the acts of insolvency proved to have been committed within three months of the date of the presentation of the insolvency petition, but this is a provision intended to enable the Official Assignee to recover property in the hands of third parties, and has not the effect of divesting property which has been duly vested in an Official Assignee in accordance with law under a prior adjudication.

5. The point, moreover, has been expressly decided by the House of Lords in Exparte Geddes: In re Mowat (1824) 1 Clause & J. 414, a case of competition between an earlier Scotch sequestration and a later English bankruptcy. The English bankruptcy, which was before the statute of 6 Geo. IV, was governed by the statute of Elizabeth and the subsequent acts under which the doctrine of relation back was applied without the restrictions which have been imposed upon the doctrine in modern statutes. It was there held by the House of Lords that the Scotch sequestration, which under the Sequestration Act operated on the bankrupt's estate in England and took effect from the date of the presentation of the petition on the 26th of January, was not superseded or annulled by an English commission of Bankruptcy granted in the month of March by relation back to the act of bankruptcy on which it was founded, which was committed on the 4th of January. As observed by Mr., Dicey, citing this case, priority depends on the date of the assignment, and not on the date of the commission of the act of bankruptcy (Conflict of laws Note to Rule 113). In British India we have not only four insolvency jurisdictions under the Presidency Towns Insolvency Act, but also the very numerous jurisdictions under the Provincial Insolvency Act, so that cases like the present may not infrequently arise. In all such cases it should, we think, be recognised that the vesting depends on priority of adjudication, and that steps should at once be taken to annul the prior adjudication where it is convenient that the estate should be administered by another jurisdiction. Great confusion might ensue if competing assignees or receivers were to have concurrent authority to realise the insolvent's estate independently of one another, instead of the insolvency being in one jurisdiction only at a time and the other jurisdictions being required to act in aid of it if necessary.

6. It follows that the estate of the insolvent is now vested in the Official Assignee of Madras and not in the Official Assignee of Rangoon. The question then arises whether we should annul the Madras Insolvency and leave the estate to be administered in Rangoon. Bakewell, J., was of opinion that in the interests of the creditors the estate should be administered in Rangoon, and unless we are prepared to differ from him as to this, we think we are bound to give effect to this view by annulling the insolvency in Madras and allowing the title of the Rangoon Official Assignee to operate on the assets. The insolvents are Nattukottai Ghetties, who according to their custom have their permanent home in the southern districts of this Presidency, where their families reside, and carry on business in India, Burmah and the near East. The insolvents carried on business in this way,both in Madras and Rangoon, but there can be no doubt that that Rangoon was their principal place of business, and that latterly little or no business was done in Madras. While in Madras for nearly a year after the adjudication no assistance was given to the Official Assignee to enable him to get in the assets, the Official Assignee of Rangoon, who did not come to know of the prior Madras Insolvency until the middle of December 1917, was enabled with the assistance of the local creditors to make considerable progress with the winding-up of the estate. Properties which had been mortgaged by the insolvents were sold, and the surpluses recovered for the general body of creditors, and various suits were instituted against the debtors of the estate. The chief ground on which we have been asked not to annul the Madras Insolvency but to allow it to proceed is, that with knowledge of the prior insolvency in Madras, the Official Assignee of Rangoon entered into a contract in April of this year to sell valuable properties of the insolvents in the Coimbatore district of this Presidency in one lot for five lakhs of rupees. It is alleged, and has been strongly pressed, that this sale was at a serious under-value, and that, if the property had been sold in lots very much higher prices would have been realised, and counteroffers to purchase in one lot at an advance of half a lakh were placed before the court. As regards the action of the Official Assignee of Rangoon in proceeding to enter into the contract of sale, it cannot be said, having regarding to the observations in In the matter of Willian Watson I.L.R. (l904) C. 761, that the law was clear. Even before Bakewell, J., the point as to the absence of authority does not appear to have been very strongly pressed as the learned Judge does not deal with it in his order. There were, also, circumstances connected with the property which the Official Assignee of Rangoon may have considered to necessitate immediate action. We do not think that in these circumstances, the conduct of the Official Assignee in proceeding with the administration or in entering into the contract of sale affords sufficient ground for refusing to make the order of annulment which we consider on other grounds, to be desirable. Nor dp we think that the terms of the contract afford such a ground, further than this it is unnecessary for us to go; and we express no opinion whatever as to this contract, because we think it is a question for the Rangoon Court to deal with after the annulment of the Madras Insolvency. In order that the creditors should have an opportunity of questioning it, if so advised, in the Rangoon Court, we have decided to make the, annulment conditional on the Official Assignee of Rangoon undertaking not to execute the deed of sale for two months from this date which will give time for an application to the Chief Court, and on his paying the costs of the Official Assignee of Madras both here and before the learned Judge as between solicitor and client out of the estate. As regards the memorandum of objections we set aside so much of the order of the learned Judge as makes the petitioning creditors and Thiagaraja Ohetti liable for the costs of the Official Assignee of Rangoon.

Seshagiri Aiyar, J.

7. I entirely agree with the judgment of the learned Chief Justice. As was pointed out by Strachey, J.,in Re Aranvayal Sabapathy I.L.R. (1897) B. 294 an adjudication of insolvency by one court is not a bar to the jurisdiction of another court exercising similar powers. Section 22 of the Insolvency Act by implication recognises concurrent adjudication. It may be as was pointed out in In the matter of William Watson I.L.R (1904) C.761 that the subsequent adjudication may give a sort of contingent or reversionary interest in the assets of the Insolvency in the event of the previous order being set aside.

8. The further question is whether we should annul the adjudication made in Madras. The Madras adjudication was undoubtedly earlier in date. The learned Advocate-General referred to the Madras petition and the order of adjudication thereon as showing that the title of the Madras Official Assignee was inferior to that of the Rangoon Official Assignee. He relied upon Section 51 of the Act which declares that the insolvency of a debtor shall be deemed to have relation back to the time of the commission of the act of Insolvency on which an order of adjudication is made. In my opinion, this section was not intended to refer to the conflicting claims of different Assignees. As was contended by Mr. Chamier, its operation should be limited to questioning titles created by the Insolvent in favour of third parties since the date of the act of insolvency complained of in the petition. If the other contention were upheld, the result would be that there would be a complete vesting order under one of the adjudications from a particular date, and an equally effective order by another adjudication from an earlier date. In my opinion, Section 51 was not intended to give priority to an adjudication by one court over the adjudication of another court by reference to the act of Insolvency adjudicated upon. The decisions in Ex parte Learoy : In re Foukls (1879) 10 Ch. D. 3 In re Pollett: Ex parte Minor (1898) 1 Q.B. 455 and In re Carl Heath: Ex parte the Trustee (1899) 1 Q.B. 612 relied on by the Advocate-General and which were given under the corresponding section of the English Bankruptcy Act are only authorities for the proposition that as between the trustee in bankruptcy and a creditor of the Insolvent, the title of the former relates back to the act of Insolvency mentioned in the petition. Lord Esher Master of the Rolls, in In re Pollett: Ex parte Minor (1898) 1 Q.B. 455 gave this definition of relating back :--'The result of the relation back is, that all subsequent dealings with the debtor's property must be treated as if the bankruptcy had taken place at the moment when the act of bankruptcy was committed. The, debtor must be considered as having become a bankrupt the moment the deed was executed.' It is true that the decision of the House of Lords commented on by Dicey in his book under Rule 113 related to acts of adjudications of bankruptcy made under different statutes. None the less it seems to me, that this principle should be applied to adjudications male under the same statute. Dicey in commenting upon the rule says :-' The rule probably holds good where the earliest of several bankruptcies, and the assignment under it, takes place in a country beyond the limits of the United Kingdom, e. g., Victoria or Prussia. As was pointed out by the learned Chief Justice, there is nothing in the Presidency Towns Insolvency Act which says that a vesting order once made can be divested except it be by annulling the adjudication altogether. I am therefore of opinion that the

9. Madras adjudication which was earlier in date did vest all the properties of the Insolvent in the Madras Official Assignee not-withstanding the fact that the act of Insolvency complained of in the petition for adjudication is said to have been committed on a date later than the act of insolvency with reference to which the Rangoon order of adjudication was passed.

10. On the question of convenience as to which of the two courts should administer the estate, I entirely agree that the Rangoon Official Assignee should have the preference. I agree in the order proposed by the learned Chief Justice.


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