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Muthusami Samiar (Died) and Pakkiria Pillai, L.R. of the Deceased Vs. Somoo Kandiar and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil;Property
CourtChennai
Decided On
Reported in(1920)39MLJ438
AppellantMuthusami Samiar (Died) and Pakkiria Pillai, L.R. of the Deceased
RespondentSomoo Kandiar and ors.
Cases ReferredThe Official Receiver of Trichinopoly v. Somasundaram Chetty
Excerpt:
- - any postponement of the vesting of the estate in an authority more competent to administer it than that court is to be deprecated and may have disastrous results, if moveable property is in question. but the only conclusion can be that the adoption of the english procedure to indian circumstances has been imperfect and that reason has not been shown for the rejection of an explanation of the wording of the indian section 19(2), for which appellant has failed to account and which must receive effect......clause is, ' on the appointment of a trustee the property shall forthwith pass to and vest in the trustee appointed.' in this case, the use of the words ' a trustee ' indicates that there is but one trustee from the beginning of the adjudication and that the official receiver will be that trustee until the creditors appoint a trustee, and on such an appointment, the latter shall step into the shoes of the official receiver. that this is the meaning of the section i have referred to is made clear in in re cohen (1905) 2 k.b. 704 lord justice vaughan williams, in delivering the judgment of the court of appeal, says in page 710, ' section 54 sub-section 2 ' the learned lord justice was referring to the act of 1883 which provides that on the appointment of a trustee the property shall.....
Judgment:

Oldfield, J.

1. Plaintiff, here appellant, purchased the mortgage right now sued on at a sale held by the Official Receiver, Tanjore District in the insolvency of 4th defendant and has sued 1st defendant, the mortgagor, to recover by sale of the mortgaged property. The only defence with which we are concerned at present, is that plaintiff did not obtain the mortgage right by his purchase, because it had not vested in the Official Receiver and could not be sold by him. The lower Courts accepted this with reference to Official Receiver, Trichinopoly v. Somasundaram Chetty, in which two learned Judges held that, when, as in the present case, an adjudication of insolvency is made by an Official Receiver in the exercise of the powers delegated to him under Section 52(1)(a) Provincial Insolvency Act, the Insolvent's Estate does not vest in him under Section 18 or any other provision and will not do so, unless an order vesting it in him is passed by the Court. Official Receiver, Trichinopoly v. Somasundaram Chetty : (1916)30MLJ415 has not been judicially noticed except by one of the learned Judges responsible for it in Rama Krishna Aiyar v. Official Receiver Trichinopoly : (1917)32MLJ520 . The reasoning supporting the portion of the judgment in question, is very shortly stated but the conclusion reached must affect insolvency practise throughout the Presidency. That conclusion entails the Official Receiver's inaction after passing the order of adjudication, until he has reported his doing so to the Court, which orginally entertained the insolvency petition and has obtained its order appointing him receiver and vesting the estate in him. Any postponement of the vesting of the estate in an authority more competent to administer it than that Court is to be deprecated and may have disastrous results, if moveable property is in question. We think it necessary to satisfy ourselves that this result is inevitable by close scrutiny of the law.

2. It is urged first that it is not, because the Official Receiver in the exercise of his delegated powers under Section 52 becomes ' the Court ' for purposes ancillary to that exercise of which the vesting of the insolvent's estate in ' the Court' under Section 16(2)(a) is one. This can be rejected shortly. The stages of adjudication and administration are distinct. Under Section 52 the Official Receiver does not become the ' Court ' in the exercise of his delegated powers, but under Section (52)(2) his orders or acts are merely to be deemed to be those of the Court and he does not come within the definition of 'the Court ' in Section 2(1)(9), Alla Pichai v. Kuppai 32 M.L.J 449.

3. To turn to more substantial considerations the decision in Official Receiver of Trichinopoly v. Somasundaram Chetty (1916) 80 M.L.J. 415 was reached with reference to the provision in Section 16(2)(a) for the vesting of the estate ' in the Court or in a Receiver as hereinafter provided ' ; and the construction of the last three words as relating only to the provision in Section 18(1) for the appointment of a Receiver and the vesting in him thereupon of the estate. Reliance is placed on the absence of any provision for vesting in Section 19 relating to Official Receivers and the argument that the Act does not provide for it except in connection with an appointment which is therefore necessary in each case. The alternative contention is that under Section 19(2) the Official Receiver becomes by operation of law the receiver in each case and that such receivership also, and not only those conferred by appointment under Section 18 are within the purview of the words already referred to, as hereinafter provided in Section 16(2)(a).

4. The balance of convenience is, as I have pointed out, in favour of the second of these constructions. But consideration of the wording of Section 18(2) and of the English Act, on which this procedure is founded forbids its adoption. For Section 18(2) assumes by its reference to an order of appointment of a receiver that such an order is to be passed, even if the Official Receiver is to act and, although there is no separate provision for such an order, this reference cannot be disregarded. Its significance and probably its origin are disclosed by comparison with Section 9 of the English Bankruptcy Act of 1883, under which ' on the making of a receiving order an Official Receiver shall be thereby constituted receiver of the property of the debtor,' the word ' thereby ' supporting no appointment by mere implication, since, as the forms of receiving order Nos. 28 and 29 show, a distinct order constituting a receiver for the estate is to be passed. The necessity for such an order is accounted for by the fact that in England as Section 66(3) of the Act and Rule 323-A framed under it show, the contingency of the existence of more than one Official Receiver for each area is contemplated ; and it is possible that, although no explicit reference is made to this contingency in the Indian Act, it was in the mind of the draftsman and is provided for in Section 19(2), the introduction of the procedure authorised by Section 17 of the Presidency Act with its immediate vesting of the property in the Official Assignee being deliberately avoided. It is consistent with this that, whilst under Section 77, Presidency Act, only one person can be appointed to the office of Official Assignee of insolvents' estates for each High Court, under Section 19(1) of the Provincial Act there is no restriction on the number of appointments for a particular area, it may be said on the one hand that this conflicts with the reference in Section 19(2) to the appointment of an Official Receiver for the local limits of any Court having jurisdiction under the Act, his designation as the receiver to act in all cases arising in it and the omission of any direction, such as the English Act gives, regarding the method of selection of the Official Receiver to act, when more than one have been appointed, and on the other hand that the Indian provisions cannot be explained by reference to the English, when the scheme of the latter, including the employment as matter of course of the Official Receiver as receiver from the receiving order until the order of adjudication and the subsequent vesting in him as trustee under the English Section 54 differs radically from that of the former. But the only conclusion can be that the adoption of the English procedure to Indian circumstances has been imperfect and that reason has not been shown for the rejection of an explanation of the wording of the Indian Section 19(2), for which appellant has failed to account and which must receive effect.

5. In these circumstances I am constrained to hold that the law was stated correctly in The Official Receiver of Trichinopoly v. Somasundaram Chetty : (1916)30MLJ415 .

6. The appeal is dismissed with costs.

Seshagiri Aiyar, J.

7. While not disagreeing with my learned brother I cannot help saying that the previous decisions of this Court and the conclusion to which he has come have the effect of unsettling the practice in the Lower Courts and of making an unnecessary departure from what obtains in insolvency matters in the Presidency towns. The drafting of the Act, and especially of Clause 2, Section 19 of the Provincial Insolvency Act, is responsible for this state of things.

8. Mr. Justice Oldfield has stated the facts and the law fully. I shall only add a few sentences. The contention of Mr. Seshagiri Sasfriar, vakil for the 3rd respondent is that, unless the Official Receiver is appointed in each case of insolvency, as receiver of the estate, the property of the insolvent does not vest in him. Section 16, Clause 2 provides for the vesting of the property, in the Court or in a Receiver as hereinafter provided. Under Section 52, the High Court, can by rules invest the Official Receiver with jurisdiction to hear insolvency petitions to examine the debtors and to make orders of adjudication. Reading these two provisions, the natural inference is that the Official Receiver, appointed by the Local Government and invested with powers to adjudicate by the High Court, would, have the property of the insolvent under his control. Unfortunately Section 19, Clause 2, uses this language. ' Where any Official Receiver has been so appointed for the local limits of the jurisdiction of any Court having jurisdiction under this Act, he shall be the receiver for the purfose of every order appointing a receiver issued by any such Court....' I do not find it easy to understand the meaning of the words underlined by me. If it was the intention of the legislature that the property should not vest in the Official Receiver unless he was appointed receiver in the particular insolvency, fewer words would have sufficed. It is equally open to argument as was suggested by the learned Vakil for the 3rd respondent, that, if the legislature intended that if in the Official Receiver, by virtue of his appointment, the property of the insolvent vests the section would have been differently worded. The real trouble arises from the difference in language between the Presidency Towns Insolvency Act and the Provincial Insolvency Act. In Section 17 of the Presidency Towns Insolvency Act, there is an express declaration that on the making of an order of adjudication, the property shall vest in the Official Assignee. There is no reason why an Official Receiver appointed by the Local Government should not have the same authority. There is nothing in principle to suggest a distinction. In the Presidency towns as in the mufassal, in addition to the Official Assignee or the Official Receiver, there can be a special Trustee or lieceiver, but, whereas in the Presidency Towns Insolvency Act, a special provision is inserted for vesting the property in the Official Assignee there is no such provision in the Provincial Insolvency Act.

9. My learned brother has referred to the sections of the English Bankruptcy Act. I shall examine them with some care. Section 7 of 4 and 5 George V, says. ' On the making of a receiving order an Official Receiver shall be thereby constituted receiver of the property of the debtor.... ' Section 18, Clause 6 and 8 provide for the Official Receiver assuming management and directing the proceedings in case the debtors do not appoint a trustee. Section 53, Clause 1 says ' Until a trustee is appointed, the Official Receiver shall be the trustee for the purposes of this Act, and immediately on a debtor being adjudged bankrupt, the property of the bankrupt shall vest in the trustee.' There can be no doubt that this section makes the Official Receiver the trustee of the property without requiring that he should be appointed specially for that purpose. The next clause is, ' On the appointment of a trustee the property shall forthwith pass to and vest in the trustee appointed.' In this case, the use of the words ' a trustee ' indicates that there is but one trustee from the beginning of the adjudication and that the Official Receiver will be that trustee until the creditors appoint a trustee, and on such an appointment, the latter shall step into the shoes of the Official Receiver. That this is the meaning of the section I have referred to is made clear in In re Cohen (1905) 2 K.B. 704 Lord Justice Vaughan Williams, in delivering the judgment of the Court of Appeal, says in page 710, ' Section 54 Sub-section 2 ' the learned Lord Justice was referring to the Act of 1883 which provides that on the appointment of a trustee the property shall forthwith pass to and vest in the trustee appointed--in my judgment contrasts the case where the property of the bankrupt vests in the official receiver independently of any appointment of him as trustee, and the case where the property of the bankrupt passes to a trustee forthwith on his appointment. There can be no doubt but that in Sub-section 2 of Section 54 the word ' appointed ' is used in the sense in which it is employed in Section 21. 'Then the learned Lord Justice quotes two decisions, certain dicta of Lord Selborne and Lord Esher and proceeds.' The provisions of Sub-section 1 of Section 54 will necessarily, in every case in which the creditors appoint the trustee, make the official receiver the trustee, before there is a creditor's trustee, because a creditor's trustee is appointed by a meeting called after the adjudication.

10. A similar view was taken in an earlier case in in re Calcott and Elvins' Contract (1898) 2 Ch. 460 . There the Court of Appeal had to consider whether an order of adjudication in bankruptcy is not a conveyance and whether the, title of the Official Receiver was not postponed to that of the mortgagee until the adjudication order was registered. Lindley L.J. the Master of the Rolls says in page 466, referring to Section 54 of the old Act. 'The order by which a man is adjudicated a bankrupt, and which by the rules has to be in writing and in a particular form is simply to the effect that the debtor has been adjudged a bankrupt. Is that a deed or a conveyance within the meaning of the statute of Anne No doubt the effect of it is that all the property vested in the debtor becomes vested in the trustee but that does not make it a conveyance.'

11. I may also mention that the law is stated in 2 Halsbury, Section 169 in the same way. Referring 1o the Official Receiver it is said, he is not appointed trustee under the provisions of the Bankruptcy Act, but he becomes so automatically.

12. The interpretation of the English Statute is not quite consistent with forms Nos. 28 and 29 under the English Bankruptcy Act to which my learned brother has referred in his judgment. Those forms seem to contemplate that a prospective order in every case of Bankruptcy is to be made, constituting the Official Receiver the receiver of the estate of the debtor. These forms are known as the receiving orders. By adopting similar forms in this country also, the difficulty may perhaps be got over. For that purpose it may become necessary that the High Court should prescribe forms of employment by the muffassil Courts.

13. I am therefore not prepared to differ from the conclusion which my learned brother has reached and which has the sanction of the previous decision of this Court. I agree with the order as to costs.


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