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Palanivelu Odayar, Minor, by Guardian Kunju Alias Vijayalakshmi Vs. the Official Receiver - Court Judgment

LegalCrystal Citation
SubjectCivil;Property
CourtChennai
Decided On
Reported in(1931)61MLJ763
AppellantPalanivelu Odayar, Minor, by Guardian Kunju Alias Vijayalakshmi
RespondentThe Official Receiver
Cases ReferredIn Chittammal v. Ponnuswami Naicker I.L.R.
Excerpt:
.....a third party, a stranger to the insolvency proceedings, to make a payment in favour of the official receiver, in reply it is contended by the official receiver that section 4 of the provincial insolvency act gives ample power to the insolvency court to pass an order like the one in question. as the terms of section 4 of the provincial insolvency act are similar to the terms of section 7 of the presidency towns insolvency act, cases explaining the scope of the latter section 7 may well be relied on to interpret the nature of the jurisdiction of the insolvency courts under section 4 of the provincial insolvency act. before dealing with the provisions of the act, i observe that such an exclusive jurisdiction is well recognised elsewhere in insolvency systems, which are of longer..........under a hypothecation bond for rs. 20,000. after the estate of the insolvent became vested in the official receiver, he filed o.p. no,- 15 of 1924 for; the annulment of the two alienations in favour of appadurai odayar under section 53 of the provincial insolvency act. these alienations were annulled on 18th october, 1924. subsequently, the official receiver filed i.a. no. 556 of 1926 in which he asked the insolvency court to pass an order for the payment by appadurai odayar of rs. 4,000 as the profits for the two years from the 30th of may, 1923, to june, 1925. on 29th january, 1927, an ex parte order was passed against him in which he was directed to pay the official receiver rs. 4,000 as mesne profits for the two years 1924 and 1925 during which time he was illegally in possession of.....
Judgment:

Madhavan Nair, J.

1. One Singaram Chettiar was adjudged insolvent by the District Judge of West Tanjore on 26th October,, 1923, by the order on I.P. No. 24 of 1923. On 30th May, 1923, he had executed a usufructuary mortgage for Rs. 25,000 in favour of one Appadurai Odayar and had also transferred to him for Rs. 36,000 his rights under a hypothecation bond for Rs. 20,000. After the estate of the insolvent became vested in the Official Receiver, he filed O.P. No,- 15 of 1924 for; the annulment of the two alienations in favour of Appadurai Odayar under Section 53 of the Provincial Insolvency Act. These alienations were annulled on 18th October, 1924. Subsequently, the Official Receiver filed I.A. No. 556 of 1926 in which he asked the Insolvency Court to pass an order for the payment by Appadurai Odayar of Rs. 4,000 as the profits for the two years from the 30th of May, 1923, to June, 1925. On 29th January, 1927, an ex parte order was passed against him in which he was directed to pay the Official Receiver Rs. 4,000 as mesne profits for the two years 1924 and 1925 during which time he was illegally in possession of the property. After this order Appadurai Odayar died and his grandson was brought on record as his legal representative. In the petition out of which this appeal arises the Official Receiver sought to execute the order for mesne profits against the legal representative, the appellant before us.

2. Various objections against the execution of the order were pressed in the Lower Court but all were overruled by the learned District Judge. Of these, the only objection pressed before us is that the Insolvency Court has no jurisdiction to pass the order directing the payment of mesne profits, inasmuch as Appadurai Odayar against whom the order was passed was a stranger to the insolvency proceedings. It is obvious that the insolvency Court has no jurisdiction to pass the order in question under Section 53 of the Provincial Insolvency Act. That being so, it is argued that the Insolvency Court has no jurisdiction to pass an order on what is called 'a garnishee summons' directing a third party, a stranger to the insolvency proceedings, to make a payment in favour of the Official Receiver, In reply it is contended by the Official Receiver that Section 4 of the Provincial Insolvency Act gives ample power to the Insolvency Court to pass an order like the one in question.

3. Section 4, Clause (1) of Act V of 1920 is as follows:

Subject to the provisions of this Act; the Court shall have full power to decide all questions whether of title or priority, or of any nature whatsoever, and whether involving matters of law or of fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case.

4. The provision did not exist in the previous Provincial Insolvency Act of 1907. It is framed on the lines of Section 7 of the Presidency Towns Insolvency Act III of 1909, which is as follows:

Subject to the provisions of this Act, the Court shall have full power to decide all questions of priorities, and all other questions whatsoever, whether of law or fact which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case.

5. This section was later on amended in 1927 by the addition of a proviso to it. It is obvious that Section 4 of the Provincial Insolvency Act is almost identical in terms with Section 7 of the Presidency Towns Insolvency Act. Under both the sections the Insolvency Courts have wide powers not only to decide all questions of priority but all other questions...which the Courts may deem it expedient or necessary to decide for the purpose of doing complete justice or of making a complete distribution of property. The question is whether under the wide powers given under Section 4 of the Provincial Insolvency Act, the Insolvency Court has jurisdiction to adjudicate upon the claims of third parties or whether in such cases the Official Receiver should be directed to institute suits in ordinary Civil Courts. As the terms of Section 4 of the Provincial Insolvency Act are similar to the terms of Section 7 of the Presidency Towns Insolvency Act, cases explaining the scope of the latter Section 7 may well be relied on to interpret the nature of the jurisdiction of the Insolvency Courts under Section 4 of the Provincial Insolvency Act. The learned Counsel for the respondent has relied on some cases which are express decisions under Section 4 of the Provincial Insolvency Act itself. A recent Full Bench decision of this Court, The Official Assignee of Madras v. Narasimha Mudaliar I.L.R. (1929) 52 M. 717 : 57 M.L.J. 145, in which the scope of Section 7 of the Presidency Towns Insolvency Act prior to its amendment in 1927 is explained, has also been brought to our notice. We will now proceed to examine these cases.

6. In Abdul Khader v. The Official Assignee of Madras I.L.R. (1916) 40 M. 810, it was held that

Under Section 7, of the Presidency Towns Insolvency Act (III of 1909), the High Court of Madras in. the exercise of its insolvency jurisdiction, has jurisdiction to adjudicate on claims relating to immovable property situate outside the limits of its Ordinary Original Civil Jurisdiction I.L.R. (1916) 40 M. 810.

7. It was also pointed out that

The jurisdiction conferred by Section 7 of the Act is of a discretionary character, and it is seldom that the Insolvency Court will deem it expedient to try difficult questions of title; the Judge in such cases would ordinarily ask the Official Assignee in Insolvency to establish his title in an ordinary Civil Court.

8. In coming to this conclusion the learned Judges relied on various English cases which fully recognise the jurisdiction of the Court of Bankruptcy in England in deciding upon the rights of third parties. This decision was accepted as laying down the correct law in the decision in In re Kancherla Krishna Rao I.L.R. (1927) 51 M. 540 : 55 M.L.J. 171.

9. The decision in The Official Reciver, Tinnevelly v. Sankaralinga Mudaliar I.L.R. (1920) 44 M. 524 : 40 M.L.J. 219 was one under Act III of 1907 but in the course of the judgment the learned Judges refer to Section 4 of the Act V of 1920. In that case

Where after the appointment of a Receiver for the estate of an insolvent had been made by a District Court, some of the properties of the insolvent were sold in auction by a District Munsif's Court in execution of a decree for money passed by the latter Court prior to the order of adjudication, it was held that it was competent to the Receiver to make an application to the District Court for annulment of the sale and for delivery of possession of the properties from the purchaser, under Section 18, clause 3 of the Provincial Insolvency Act (III of 1907)

and the order of the District Judge that the Official Receiver had no locus standi to impeach the same by means of a petition to the Insolvency Court was set aside. With reference to the point under discussion the following observation of Oldfield, J., may be referred to with advantage:

The general question thus raised is whether the Court dealing with an insolvency under the Provincial Insolvency Act has either an exclusive jurisdiction or one concurrent with that of the ordinary Courts to deal, for the purpose of the administration of the. insolvents' estate, with claims against persons holding it adversely to him, whether they have arisen from purchase at Court sale or otherwise. Before dealing with the provisions of the Act, I observe that such an exclusive jurisdiction is well recognised elsewhere in insolvency systems, which are of longer standing than the Provincial Act, and which are usually referred to in its. construction. Reference may be made on this point to the decisions collected under Section 105 of the English Bankruptcy Act, 1914, at p. 375, William's Bankruptcy Practice, 11th Ed., and to Section 7 of the Presidency Insolvency Act (III of 1909) of which the material portion was reproduced from the English Act in force at its date; and it is significant that, although there is no reason for presuming any intention to change the law, the Legislature has included a similar provision, as Section 4 in the Provincial Insolvency Act (V of 1920), which is now in force.

10. Seshagiri Aiyar, J., even went to the extent of saying that the wide powers given by Section 4 of the present Act had already existed in the Insolvency Court and that Section 4 only declares what has been the law throughout. For our present purpose it is not necessary to discuss this position.

11. In Ramaswami Chettiar v. Ramaswami Aiyangar I.L.R. (1921) 45 M. 434 : 42 M.L.J. 185, which was a case under the present Act, it was held that

Under Sections 4, 5 and 56 of the Provincial Insolvency Act (V of 1920) a Court of Insolvency can inquire into disputed title and order delivery of an insolvent's property to a purchaser thereof from the Official Receiver removing the obstruction of a third party.

12. In the course of the judgment the learned Judges slated thus:

We have, therefore, no hesitation in holding that the Insolvency Court has plenary powers to deal with the claims of third parties under the provisions of the present Provincial Insolvency Act.

13. The next decision requiring notice is the Full Bench decision in The Official Assignee, Madras v. Narasimha Mudaliar I.L.R. (1929) 52 M. 717 : 57 M.L.J. 145 . In this case the Full Bench considered the nature of the jurisdiction vested in the Court under Section 7 of the Presidency Towns Insolvency Act before the amendment and how far that jurisdiction was limited by the amendment to that section introduced in 1927. It was held that

Section 7 of the Presidency Towns Insolvency Act is not limited in its scope to matters in which the Official Assignee by the operation of the Insolvency Law claims a higher title than what the insolvent himself would have had, and the Official Assignee is entitled to proceed by way of motion under Section 7 in cases where he has a money claim against strangers to the insolvency, the only limitation placed on the jurisdiction of the Insolvency Court being, that when once the Official Assignee has summoned a witness under Section 36 of the Act, and that witness disputes his indebtedness, the Official Assignee has no option but to proceed by way of suit.

14. It may be observed that Section 4 of the Provincial Insolvency Act has no proviso like the one in Section 7 of the Presidency Towns Insolvency Act. In the judgment of Beasley, J., as he then was, it was made clear

that Section 7 before its amendment was not limited in its scope to matters in which the Official Assignee by the operation of the Insolvency Law claims a higher title than the insolvent would himself have had.

15. Having pointed out how in one direction the amendment of Section 7 has affected the powers of the Insolvency Court, the learned Judge made the following observations regarding the discretionary nature of the jurisdiction vested in the Court by that section and how that jurisdiction should be exercised.

It is then for the Court to say whether the matter is one which it is reasonable, having regard to the convenience of all concerned, to deal with on a motion or whether it should be dealt with in a regular suit. But, in my opinion, no money claim in which any difficult questions arise should be dealt with by way of motion, nor should large claims; only simple, cases capable of easy and speedy proof Should be so dealt with.

16. It will be observed that in Abdul Khader v. The Official Assignee of Madras I.L.R. (1916) 40 M. 810 also the discretionary character of the jurisdiction was pointed out by Rahim, J.

17. It will be seen from all these cases that very wide powers are given to the Court under Section 4 of the Provincial Insolvency Act. It may decide any question which it may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property and in doing so it has ample power to decide questions of title arising between the estate of an insolvent and a third party. This jurisdiction is no doubt of a discretionary character and in cases which involve determination of difficult questions of title, the Insolvency Court will be well advised in asking the Official Assignee to institute proceedings in an ordinary Civil Court.

18. As against the above decisions the appellant has mainly relied upon two decisions of this Court, namely, Chittammal v. Ponnuswami Naicker I.L.R. (1925) 49 M. 762 : 50 M.L.J. 180 and In re Kancherla Krishna Rao.'' Neither of these decisions in our opinion helps him. In Chittammal v. Ponnuswami Naicker I.L.R. (1925) 49 M. 762 : 50 M.L.J. 180 the learned Judges held that an application will not lie under Section 56 of the Provincial Insolvency Act because the person in possession disputed the insolvent's title and they pointed out that

It is open to the Court on a proper application being made under Section 4 of the Act to try the issue whether the insolvent is entitled to the property or not.

19. The decision in In re Kancherla Krishna Rao I.L.R. (1927) 51 M. 540 : 55 M.L.J. 171 might at first-sight seem to support the appellant, but the reasoning in the judgment makes it clear that the decision really does not help him. In that case, on the insolvency of a Hindu father, the Official Receiver sold the family property including the son's share. The question was whether the purchaser from the Official Receiver of the sons' share can obtain delivery of possession of the shares of the sons under Section 4 of the Provincial Insolvency Act. It was held that, in so far as the sons' share was concerned, the remedy of the purchaser would be to institute a regular suit for possession in the ordinary Civil Court. The reasoning on which this conclusion was based is this:

Once the Official Receiver has sold the property to a stranger and converted the insolvent's estate into money, his business is to distribute this money among the creditors and it cannot be said that delivery of possession is a necessary part in the work of distributing the assets of the insolvent among the creditors. Where a claim is made against the insolvent himself in respect of his share only or against a rival purchaser of the insolvent's property itself, the matter may be different.

20. It is clear from this reasoning that it was held that Section 4 did not apply because the question that arose in that case was not a question which related to the distribution of the property of the insolvent; on this ground the case is clearly distinguishable.

21. We have not been shown how the wide powers vested in the Court under Section 4 as pointed out in the decisions we have referred to, which would include also power to adjudicate on the claims of third parties, has been curtailed by any other provision contained in the Act. It follows, therefore, that the Insolvency Court has full jurisdiction to pass an order for the payment of mesne profits against the father of the appellant in this case. Section 5 of the Act provides for effect being given to the orders and decrees passed by the Insolvency Court. The order directing the payment of mesne profits can therefore be executed in the same way as orders passed by Civil Courts.

22. For the above reasons we hold that the learned District Judge had jurisdiction to pass the order in question under Section 4 of the Provincial Insolvency Act and that this Civil Miscellaneous Application should be dismissed with costs.

23. In the view that the learned District Judge had jurisdiction to pass the order, it is not necessary to discuss whether the objection that the order was passed without jurisdiction can be taken in execution proceedings.


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