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Minor Ratnavelu Chettiar by Mother and Guardian Madhuravalli Ammal and anr. Vs. Franciscu Udayar and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1945Mad388; (1945)1MLJ472
AppellantMinor Ratnavelu Chettiar by Mother and Guardian Madhuravalli Ammal and anr.
RespondentFranciscu Udayar and ors.
Cases Referred and Kothandarama Rowth v. Murugesa Mudaliar
Excerpt:
- - the adjudication order was set aside and the effect of the subsequent order sotting aside the adjudication was held to make the transfer of the promissory note a good one so as to entitle the transferee to maintain a suit on the note. 21, provided that in case, after the making of any vesting order, the insolvency petition should be dismissed, the vesting order shall, from and after such dismissal, become null and void, subject however, to the condition that all acts done by the official assignee prior to the dismissal of the petition shall be good and valid. narasinga rao who was good enough to help me in arguing the case for the respondents who are unrepresented......vests in the official receiver. but a subsequent order dismissing the insolvency petition has the effect of revesting the debtors property in the debtor as from the date of the order of adjudication. there a promissory note which had been executed in favour of the insolvent was transferred to a third party. the adjudication order was set aside and the effect of the subsequent order sotting aside the adjudication was held to make the transfer of the promissory note a good one so as to entitle the transferee to maintain a suit on the note. two early decisions of this court support this view though they were decided before the enactment of the presidency towns insolvency act, which contains a provision similar to section 28 of the provincial insolvency act. the law prevailing at the time.....
Judgment:

Somayya, J.

1. Defendants 3 and 4 are the appellants The suit properties were originally owned by one Murugappa Chetti. The first defendant purchased them from third defendant's guardian on the footing that the third defendant is Murugappa's son and the fourth defendant is an alience from the first defendant. The plaintiff claims under a Court sale held in execution of a money decree obtained against the second defendant. His case is that the second defendant was the adopted son of Mrugappa Chetti, the original owner of the property and that the third defendant was not the son of Murugappa. Defendants 1, 3 and 4 danied the second defendant's adoption.

2. The lower appellate Court found that the second defendant's adoption by ' Murugappa is true and that the third defendant is the legitimate son of Murugappa. On this finding the plaintiff would be entitled to a half share and defendants 1, 3 and 4 to another half share.

3. But the validity of the Court auction at which the plaintiff became the purchaser is attacked on another ground which has been upheld by the lower appellate Court. It is necessary to state a few facts in order to understand that contention.

4. The second defendant was adjudged an insolvent in I.P. No. 6 of 1928 on the file of the Sub-Court. The first Court did not adjudge him so; but on appeal, C.M.A. No. 72 of 1930, the District Judge adjudicated him an insolvent on 16th February, 1931. The adjudication was annulled on 10th February, 1937.

5. Plaintiff filed a small cause suit S.C. No. 755 of 1933, against the second defendant without obtaining the leave of the Insolvency Court, got a decree, attached the suit properties and brought them to sale. He purchased the suit properties and Ex, A dated 23rd March, 1936, is the sale certificate. To this suit, and the execution proceedings the Official Receiver was not a party.

6. Under Section 28 of the Provincial Insolvency Act no creditor can commence any suit against the insolvent without the leave of the Insolvency Court, and the Court sale would not be binding against the Official Receiver.

7. The adjudication was annulled on 10th February, 1937, under Section 43 of the Act unconditionally without a vesting order under Section 37. So the property reverted unconditionally to the insolvent. The effect of such a reverter is the question in this second appeal. Does the reverter have the effect of wiping out all proceedings from the presentation of the insolvency petition subject only to the exception expressly provided in Section 37 that the intermediate acts of the Court and the Official Receiver and the payments made are valid? Has the reverter the effect of validating the proceedings in the samll cause suit which was filed without the leave of the Insolvency Court?

8. The appellants say that on the date when the suit was filed, it was incompetent. They rely on the decisions of the Court that a suit filed without the leave of the Insolvency Court cannot be validated by the subsequent leave of the Court. It is therefore urged that the subsequent annulment of the adjudication cannot have the effect of validating that which was void in its inception. On the other hand it is urged that once the adjudication is annulled unconditionally under Section 37 of the Act, we have to take it that there never was an adjudication subject only to the exception laid down in Section 37. Stress is laid on the word 'reverts' and it is urged that the expression means that the prior state of things is restored and' that consequently the Court sale is valid. This is the view accepted by the lower appellate Court. On a consideration of the authorities cited and on principle, I think this view is correct. The appellants first rely upon the decisions in Cuddappah Ghoiise Khan v. Balasubba Rowther : AIR1927Mad925 and other cases which lay down that a suit commenced without the leave of the Insolvency Court is not rendered valid by the subsequent leave of the Court. These decisions, however, do not touch the question which arises for decision in this case. No doubt a suit filed without the leave of the Insolvency Court and a decision rendered thereon would not bind the Official Receiver.

9. In Lingappa v. Official Receiver, Bellary : AIR1927Mad925 , Beasley, C.J., held that after an order of adjudication the insolvent had no power to deal with his property which by reason of the order of adjudication vests in the Official Receiver. But a subsequent order dismissing the insolvency petition has the effect of revesting the debtors property in the debtor as from the date of the order of adjudication. There a promissory note which had been executed in favour of the insolvent was transferred to a third party. The adjudication order was set aside and the effect of the subsequent order sotting aside the adjudication was held to make the transfer of the promissory note a good one so as to Entitle the transferee to maintain a suit on the note. Two early decisions of this Court support this view though they were decided before the enactment of the Presidency Towns Insolvency Act, which contains a provision similar to Section 28 of the Provincial Insolvency Act. The law prevailing at the time of the decisions was 11 and 12 Viet. ch. 21. No doubt it did not contain an express prohibition as is now enacted in the Presidency Act III of 1909 and in the Provincial Act III of 1907 and V of 1920. But there were provisions in 11 and 12 Viet. ch. 21, vesting the property in the Official Assignee. The suit filed after adjudication may even under that statute be said to have been filed against an estate which was not represented at all by any one competent to represent it. The Official Assignee being the person in whom the estate had vested, he alone could represent it. A suit conducted without him on record is not effective and the decree and execution sale would not bind the estate. See Raghunath Doss v. Sundar Doss Khetri (1914) 37 M.L.J. 150 : L.R. 411.A. 251, and Kalichand Banerjee v. Jagannath Marwari. (1927) 52 M.L.J. 734: L.R. 541.A. 199 I am therefore of opinion that the decisions in Ramaswami Kottadiar v. Murugesa Mudaliar : (1897)7MLJ229 and Kothandarama Rowth v. Murugesa Mudaliar : (1903)13MLJ372 are in point. In the first case the attachment was effected after the vesting order had been made; subsequently the insolvency petition was dismissed and the vesting order discharged. On the same day a trust deed was executed vesting the properties in certain trustees. The attachment had not been 'raised before the vesting order was discharged. It was held that the attachment and the subsequent Court sale held in pursuance of the attachment were valid and bound the trustees. In the latter case a vesting order was made vesting the properties in the Official Assignee. Then a deed of composition was executed by the debtors for the benefit of the creditors. The insolvency petition was then dismissed on its being represented to the Court that the creditors had agreed to the deed of composition and later on one of the creditors attached the insolvent's properties. In support of the creditors' right to do this, it was contended that inasmuch as the deed of composition had been executed after the vesting order and prior to the dismissal of the insolvency petition, it was inoperative to transfer the property to the trustees and that in consequence it could not prevail against the attachment. Benson and Bhashyam Ayyangar, JJ., held that the provision in Section 7 of the Insolvency Act that in case after the making of any vesting order, the petition should be dismissed, the vesting order shall become null and void had the effect of revesting the property in the insolvent retrospectively from the date of the vesting order. This retrospective vesting had the effect of wiping out all intermediate proceedings. Section 7 of the Insolvency Act, 11 and 12 Viet ch. 21, provided that in case, after the making of any vesting order, the insolvency petition should be dismissed, the vesting order shall, from and after such dismissal, become null and void, subject however, to the condition that all acts done by the Official Assignee prior to the dismissal of the petition shall be good and valid. The learned Judge said that this last provision for validating all acts done by the Official Assignee prior to the dismissal of the petition would have been unnecessary if the revesting had no retrospective effect. The prior decision was referred to and followed. The provision in Section 7 just referred to is analogous to section?;7 of the Provincial Insolvency Act. Under Section 37, Clause (1) where an adjudication is annulled, all sales and dispositions of property and payments duly made and all acts theretofore done, by the Court or the Receiver, shall be valid, but subject as aforesaid, the property of the debtor who was adjudged insolvent shall vest in such person as the Court may appoint, or in default of any such appointment, shall revert to the debtor to the extent of his right or interest therein on such conditions as the Court may by order in writing declare. This is an express provision saving the intermediate sales and dispositions of property and payments duly made or acts done before the annulment order whether made by the Court or the Receiver. This provision would be unnecessary if the reverter is not to be given retrospective effect. If retrospective effect is to be given as the decisions just referred to say, the retrospective effect must date back to the date of the insolvency petition. We must take it as though all the intermediate proceedings had been wiped out.

10. Where the adjudication itself is set aside on appeal, the position might be different. But we are not concerned with a case of that kind. There is only one decision which calls for special notice. In Ponnuswamiv.Kaliaperumal1, Wallace, J., held that a suit instituted without the leave of the Court during the pendency of the insolvency proceedings is not maintainable and that it did not cease to be so even where the insolvency proceedings came to an end after the institution of the suit. The learned Judge doubted whether an annulment ipso facto in all cases will put an end to the insolvency proceedings. It does not appear that the learned Judge's attention was drawn to the decisions of this Court in Ramaswami Kottadiar v. Murugesa Mudaliar (1914) 37 M.L.J. 150 : L.R. 411.A. 251 and Kothandarama Rowth v. Murugesa Mudaliar (1927) 52 M.L.J. 734: L.R. 541.A. 199. The learned Judge thought that the suit ought to have been dismissed in limine and the plaintiff cannot claim that he can continue it merely because the only order which could have been passed on it, namely, one of dismissal was not passed before the insolvency proceedings came to an end. This is no doubt in favour of the appellants but it suffers from the defect that the earlier decisions were evidently not brought to his notice. In any event they have not been referred to by the learned Judge. I am of opinion that I am bound by the earlier decisions in Ramaswami Kottadiar v. Murugesa Mudaliar (1914) 37 M.L.J. 150 : L.R. 411.A. 251 and Kothandarama Rowth v. Murugesa Mudaliar (1927) 52 M.L.J. 734: 1927 L.R. 541.A. 199 both Bench decisions of two Judges which have been followed by Beasley, C.J., after the present Acts were passed in the decision already referred to. No doubt there are some observations in certain other decisions, but I do not think they decide this question and contain no useful observations. I therefore do not discuss them.

11. I am greatly indebted to Mr. T.S. Narasinga Rao who was good enough to help me in arguing the case for the respondents who are unrepresented.

12. I think the lower appellate Court is right and I dismiss this second appeal. (No leave).


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