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Nori Ramasastrulu Vs. Teluguntla Balakrishna Rao and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtChennai
Decided On
Reported inAIR1942Mad682; (1942)2MLJ457
AppellantNori Ramasastrulu
RespondentTeluguntla Balakrishna Rao and anr.
Cases ReferredSubramaniam Chettiar v. Annamalai Chettiar
Excerpt:
- - having stated that they were satisfied that it was not the intention of the act. that case was argued on the basis that it was well-settled law that where a father who is joint with his son becomes insolvent the right of realising the son's share in the family estate under the pious obligation rule devolves upon the official assignee or the official receiver as the case may be, and the statement to this effect in the judgment merely embodied what counsel there were agreed upon......course of his judgment he indicated that the question whether the manager's right to sell joint family property devolved upon the official receiver under the provincial insolvency act required further consideration in view of the decisions of the privy council in sat narain v. behari lal (1924) 47 m.l.j. 857: l.r. 52 indap 22 : i.l.r. 6 lah. 1 (p.c.). and sat narain v. sri kishen das (1936) 71 m.l.j. 812 : l.r. 63 indap 384 : i.l.r. 17 lah. 644 (p.c.).3. before proceeding to examine the effect of the judgments of the judicial committee in sat narain v. behari lal (1924) 47 m.l.j. 857 : l.r. 52 indap 22 : i.l.r. 6 lah. 1 (p.c.). and sat narain v. sri kishen das (1936) 71 m.l.j. 812 : l.r. 63 indap 384 : i.l.r. 17 lah. 644 (p.c.). it is necessary to refer to certain provisions of the.....
Judgment:

Alfred Henry Lionel Leach, C.J.

1. This Letters Patent Appeal raises the important question whether the right of a manager of a joint Hindu family to sell family assets to discharge debts which are payable out of the joint estate devolves on the Official Receiver when the manager has been adjudicated an insolvent under the Provincial Insolvency Act.

2. Two brothers, Ayodhyaramayya and Raghava Rao, were joint in estate. Raghava Rao died in 1923, leaving a son who is the 2nd defendant. After Raghava Rao's death Ayodhyaramayya and his nephew continued to be undivided. On the 24th November, 1927, Ayodhyaramayya was adjudicated an insolvent under the Provincial Insolvency Act, On the 12th March, 1931, in order to discharge debts binding on the family the Official Receiver sold to one Saravayya certain family properties, which included the properties in suit. The properties were subject to mortgages and the sale to Saravayya, was, of course, subject to the rights of the mortgagees. The plaintiff purchased the properties in suit from Saravayya. Ayodhyaramayya and the 2nd defendant owed monies to the 1st defendant, who obtained a decree against them. On the 28th January, 1933, the. 1st defendant attached the properties in suit, whereupon the plaintiff objected, but his objection was overruled. As the result the Court sold the properties by auction and they were purchased by the 1st defendant. The plaintiff then filed the present suit in the Court of the District Munsiff of Bezwada for a declaration that the properties were not liable to attachment by the 1st defendant. The District Munsiff held that the manager's right to sell properties to meet family debts devolved upon the Official Receiver and consequently a valid title had passed to Saravayya. Accordingly the District Munsiff granted the declaration asked for and on appeal the decision was upheld by the Subordinate Judge of Bezwada. The 1st defendant then appealed to this Court. The appeal was heard by Venkataramana Rao, J., who, feeling himself bound by decisions of this Court to which reference will be made later, dismissed the appeal, but in the course of his judgment he indicated that the question whether the manager's right to sell joint family property devolved upon the Official Receiver under the Provincial Insolvency Act required further consideration in view of the decisions of the Privy Council in Sat Narain v. Behari Lal (1924) 47 M.L.J. 857: L.R. 52 IndAp 22 : I.L.R. 6 Lah. 1 (P.C.). and Sat Narain v. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.).

3. Before proceeding to examine the effect of the judgments of the Judicial Committee in Sat Narain v. Behari Lal (1924) 47 M.L.J. 857 : L.R. 52 IndAp 22 : I.L.R. 6 Lah. 1 (P.C.). and Sat Narain v. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.). it is necessary to refer to certain provisions of the Presidency Towns Insolvency Act and the Provincial Insolvency Act.

4. Section 2(e) of the Presidency Towns Insolvency Act states:

'Property' includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit.

The definition of property in the Provincial Insolvency Act is contained in Section 2 (d) and is word for word the same.

5. Section 17 of the Presidency Towns Insolvency Act states that the property of the insolvent shall vest in the Official Assignee. Eliminating a proviso which does not apply here the section reads as follows:

On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the Official Assignee and shall become divisible among his creditors, and thereafter, except as directed by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt or shall commence any suit or other legal proceeding except with the leave of the Court and on such terms as the Court may impose.

The corresponding provision in the Provincial Insolvency Act is -contained in Section 28 (2) which says:

On the making of an order of adjudication, the whole of the property of the insolvent shall vest in. the Court or in a receiver as hereinafter provided, and shall become divisible among the creditors, and thereafter, except as provided by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceeding, except with the leave of the Court and on such terms as the Court may impose.

There is a slight difference in the wording at the commencement, but this does not alter the meaning.

6. Sub-section (1) of Section 52 of the Presidency Towns Insolvency Act states that the property of the insolvent divisible among his creditors shall not comprise property held by the insolvent on trust for any other person, and tools of his trade, necessary wearing apparel, bedding, cooking vessels and furniture of himself, his wife and children to the value of Rs. 300. Sub-section (2) states that subject to the provisions of Sub-section (1), the property of the insolvent shall comprise the following particulars:

(a) all such property as may belong to or be vested in the insolvent at the commencement of the insolvency or may be acquired by or devolve on him before his discharge;

(b) the capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the insolvent for his own benefit at the commencement of his insolvency or before his discharge; and

(c) all goods being at the commencement of the insolvency in the possession, order or disposition of the insolvent, in his trade or business by the consent and permission of the true owner under such circumstances that he is the reputed owner thereof.

Two provisos follow, but it is unnecessary to set them out.

7. There is no section in the Provincial Insolvency Act which corresponds to Section 52 of the Presidency Towns Insolvency Act. Under the Provincial Insolvency Act the vesting of the property of the insolvent in the Official Receiver is governed only by Section 2' (d) and Section 28 and therefore there can be no vesting of the right of a manager of a joint Hindu family to sell family property for family necessity, unless that right can be regarded as property. The powers of a father-manager are greater that the powers of a manager who is not the father of the other coparceners, because the father has power not only to sell family property in order to discharge a family liability, but also the right to sell his sons' interest in the family estate to discharge his own personal debts, provided that they have not been incurred for any immoral or illegal purposes. In the light of the decisions of the Privy Council to which reference has been made and will be considered in a moment a father's power to sell his sons' property must be taken to be a power falling within Section 52(2)(b) of the Presidency Towns Insolvency Act. but the power of a manager who is not the father of the other coparceners to sell family assets to meet a family liability is not a power which he can exercise for his exclusive benefit, and Section 52(2)(6) may not apply in such a case. That question does not, however, arise in this appeal and therefore nothing further need be said in this connection.

8. In Sat Narain v. Behari Lal (1924) 47 M.L.J. 857 : L.R. 52 IndAp 22 : I.L.R. 6 Lah. I (P.C.). the Privy Council held that when a Hindu father is adjudicated an insolvent under the Presidency Towns Insolvency Act, the property which he and his sons possess jointly does not vest in the Official Assignee, although under Section 52 (2) of the Act or in some other way the property may be made available for the payment of his lawful debts. Their Lordships considered that the question had to be decided on the wording of the Presidency Towns Insolvency Act alone and observed that cases which have arisen under Section 266 of the Code of Civil Procedure, 1882, or under Section 60 of the Code of Civil Procedure, 1908, depended on different considerations. Therefore decisions in cases under those sections were likely to mislead a Court which had to construe the Presidency , Towns Insolvency Act. This meant the ruling out of consideration of certain earlier decisions of this Court. Having stated that they were satisfied that it was not the intention of the Act. that on the insolvency of a father the joint property of his family should vest in the Official Assignee their Lordships proceeded to sum up the position as follows:

It may be that under the provisions of Section 52 or in some other way that property may in a proper case be made available for payment of the father's just debts, but it is quite a different thing to say that by virtue of his insolvency alone it vests in the assignee and no such provision should be read into the Act.

In other words, the manager's power to sell family property for family debts was definitely not property within the meaning of Section 2 or Section 17. This decision was re-affirmed by the Privy Council in Sat Narain v. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.). In the course of the judgment in that case their Lord ships made it quite clear that the vesting section was Section 52 and this section alone. Therefore it is now settled that apart from Section 52 there is no provision in the Presidency Towns Insolvency Act which enables the Official Assignee to sell joint family property to meet joint family debts when the manager has been adjudicated.

9. In Sat Narain v. Behari Lal (1924) 47 M.L.J. 857 : L.R. 52 IndAp 22 : I.L.R. 6 Lah. I (P.C.). and Sat Narain V. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.). the Privy Council were only concerned with the Presidency Towns Insolvency Act, and no reference was made to the Provincial Insolvency Act. The effect of the judgment in Sat Narain v. Behari Lal (1924) 47 M.L.J. 857 : L.R. 52 IndAp 22 : I.L.R. 6 Lah. I (P.C.). on a case arising under the Provincial Insolvency Act where the father had been adjudicated was considered! in Seetharama Chettiar v. Official Receiver, Tanjore : AIR1926Mad994 . which was decided by a Full Bench of this Court consisting of Krishnan, Ramesam and Venkatasubba Rao, JJ. The judgment of the Judicial Committee in the later Lahore case, Sat Narain v. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.). had not then been delivered. Krishnan and Ramesam, JJ., held that the father's power to sell his sons' shares for his proper debts vested in the Official Receiver when the father was adjudicated under the Provincial Insolvency Act by virtue of the provisions of Section 28. They regarded the power as property within the meaning of that section, but not as property under Section 2 (d) of the Act. On the other hand, Venkatasubba Rao, J., held that it was property, even within the meaning of Section 2 (d). He was of the opinion that the provisions of the Presidency Towns Insolvency Act should be disregarded when construing the provisions of the Provincial Insolvency Act and therefore the Court was not concerned . with anything said by the Judicial Committee in Sat Narain v. Behari Lal (1924) 47 M.L.J. 857 : L.R. 52 IndAp 22 : I.L.R. 6 Lah. 1 (P.C.).

10. We find ourselves unable to share the opinion either of Krishnan and Ramesam, JJ., or of Venkatasubba Rao, J. We consider that the judgment in Sat Narain v. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.). makes these opinions untenable. The Judicial Committee in both the Lahore cases were interpreting the Act governing the law of insolvency in the Presidency Towns of India and when, as we have here, decisions of the higest tribunal construing Section 2 (e) and Section 17 of the Presidency Towns Insolvency Act, the same interpretation must be placed on identical provisions in the Provincial Insolvency Act unless the Act itself contains some additional provision running counter, which is not the case. The decisions of the Privy Council in the Lahore cases undoubtedly negatived what had been regarded as being settled law but if the power of the father is not property under the Presidency Towns Insolvency Act it cannot be regarded as property under the Provincial Insolvency Act, and if the father's power is not property the power of the manager who is not the father cannot be property.

11. The position of a manager who is not the father was considered by this Court in Official Receiver, Anantapur v. Ramachandrappa : AIR1929Mad166 . This case came before Odgers and Curgenven, JJ. Odgers, J., was of the opinion that in spite of Sat Narain v. Behari Lal (1924) 47 M.L.J. 857 : L.R. 52 IndAp 22 : I.L.R. 6 Lah. 1 (P.C.). the power to sell family property for family debts vested in the Official Receiver. Curgenven, J., was of the opinion that the decision in Sat Narain V. Behari Lal (1924) 47 M.L.J. 857 : L.R. 52 IndAp 22 : I.L.R. 6 Lah. 1 (P.C.). applied and consequently held that the power did not vest. As the result of the disagreement the case was placed before a third Judge, Devadoss, J., who agreed with Odgers, J., but indicated that the question called for consideration by a fuller Bench. The judgments in this case were also delivered before the decision in Sat Narain v. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.). which we consider puts beyond doubt the question now under discussion.

12. It is very regrettable that the law of insolvency should be different in cases which fall within the Presidency Towns Insolvency Act and cases which fall within the Provincial Insolvency Act. If we are to have regard to the judgments of the Privy Council in the Lahore cases, as we must, we must hold that under the Provincial Insolvency Act the manager's power to sell does not vest in the Official Receiver. Under that Act it can only vest: if the power is regarded as property, and in the light of what is said in Sat Narain v. Behari Lal (1924) 47 M.L.J. 857 : L.R. 52 IndAp 22 : I.L.R. 6 Lah. 1 (P.C.). and Sat Narain v. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.). with regard to the effect of Section 2 (e) and Section 17 of the Presidency Towns Insolvency Act the power cannot be regarded as property. The Judicial Committee have made it abundantly clear that it is not property and that the right to sell only vests under the Presidency Towns Insolvency Act by virtue of Section 52, which as we have already indicated, has no counterpart in the Provincial Insolvency Act. The remedy is in the hands of the Central Legislature and we trust that it will bring the two Acts into line and will do so without delay.

13. The only High Court which has considered the question since the delivery of the judgment in Sat Narain v. Sri Kishen Das (1936) 71 M.L.J. 812 : L.R. 63 IndAp 384 : I.L.R. 17 Lah. 644 (P.C.). is the Patna High Court. In Bishwanath Sao v. Official Receiver I.L.R. (1936) Pat. 60. a Full Bench of that Court held that the father's power to sell vested in the Official Receiver under the Provincial Insolvency Act. We have considered that judgment, but we do not find anything in it which tends to shake the opinion which we have just expressed.

14. In the 'course of the arguments our attention was drawn to the case of Subramaniam Chettiar v. Annamalai Chettiar : (1940)1MLJ553 . which was decided by my learned brother Krishnaswami Ayyangar and myself. That case was argued on the basis that it was well-settled law that where a father who is joint with his son becomes insolvent the right of realising the son's share in the family estate under the pious obligation rule devolves upon the Official Assignee or the Official Receiver as the case may be, and the statement to this effect in the judgment merely embodied what counsel there were agreed upon. The question in issue was very different from the question now before us and the Court was not called upon to consider the bearing of the Lahore cases on the Provincial Insolvency Act. We mention this in case it should ever be suggested that the judgment in the present case is in conflict with Subramaniam Chettiar v. Annamalai Chettiar : (1940)1MLJ553 .

15. The result is that it must be declared that the Official Receiver had no power to sell the 2nd defendant's undivided share of the property, and that the plaintiff merely acquired the interest of the insolvent manager in the properties in suit, his interest being, of course, subject to the mortgages created thereon. The parties will pay and receive proportionate costs throughout.


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