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J.V. Venkatakrishna Ayyar Vs. the Official Receiver - Court Judgment

LegalCrystal Citation
SubjectCivil;Property
CourtChennai
Decided On
Case NumberCivil Revn. Petn. No. 180 of 1949
Judge
Reported inAIR1950Mad311
ActsProvincial Insolvency Act, 1920 - Sections 68
AppellantJ.V. Venkatakrishna Ayyar
RespondentThe Official Receiver
Appellant AdvocateD. Ramaswami Iyangar and ;P.S. Srinivasa Desikan, Advs.
Respondent AdvocateV.V. Raghavan and ;S. Kothandarama Nayanar, Advs.
DispositionPetition dismissed
Cases ReferredIn Hanseswar Ghosh v. Rakhal Das Ghosh
Excerpt:
.....sale - section 68 of provincial insolvency act, 1920 - order setting aside auction sale held by official receiver challenged by successful bidder - official receiver himself had moved court for getting sale set aside for reason of mistake committed by him in valuating insolvent's assets - official receiver can invoke provisions of section 68 to have his acts or decisions reversed or modified - official receiver is official of court upon whom court exercises its power - court has inherent power to rectify its officials erroneous acts - held, setting aside of auction sale held by official receiver justified. - - thereupon notice was issued to the successful bidder who raised an objection that the insolvency court had no jurisdiction to set aside, at the instance of the official..........reddi, j.1. this revision petition is filed by a successful bidder at an auction sale held by the official receiver, salem, against the order of the district judge, salem, dismissing his appeal which was prefered against the judgment of the subordinate judge of salem, setting aside the sale in his favour. a brief reference may be made to the facts of the case which are not in dispute.2. the official receiver, salem, held an auction sale of the property of an insolvent in i. p. no. 15 of 1941 on 20th december 1946. in a proclamation of sale, he notified that the properties of the insolvent were subject to an encumbrance of rs. 7000 due to the insolvent's brother. in a partition suit between the insolvent and his brother items 1 and 3 which were valued at rs. 11,000 and which form the.....
Judgment:
ORDER

Chandra Reddi, J.

1. This revision petition is filed by a successful bidder at an auction sale held by the Official Receiver, Salem, against the order of the District Judge, Salem, dismissing his appeal which was prefered against the judgment of the Subordinate Judge of Salem, setting aside the sale in his favour. A brief reference may be made to the facts of the case which are not in dispute.

2. The Official Receiver, Salem, held an auction sale of the property of an insolvent in I. P. No. 15 of 1941 on 20th December 1946. In a proclamation of sale, he notified that the properties of the insolvent were subject to an encumbrance of Rs. 7000 due to the insolvent's brother. In a partition suit between the insolvent and his brother items 1 and 3 which were valued at Rs. 11,000 and which form the subject matter of the present litigation, were allotted to the insolvent, while item 2 which was valued at Rs. 4000 fell to the share of his brother. To equalise the value the insolvent had to pay a sum of Rs. 3600. But in the judgment in the final decree proceedings in the partition suit, the insolvent was directed to pay to his brother, evidently by mistake, the difference in value between items 1 and 3 that fell to the share of the insolvent and item 2 that was allotted to his brother, and a charge was created for that amount over items 1 and 3. Misled by this direction, the Official Receiver notified in the proclamation of sale that the properties were subject to an encumbrance of Rs. 7000. At the auction sale on 20th December 1946 the petitioner who happened to be the only bidder purchased this property for a sum of Rs. 253 subject to the encumbrance. It is obvious that if it was notified in the proclamation of sale that it was subject to an encumbrance of only Rs. 3500 it would not have fetched such a low price as Rs. 255.

3. When the mistake was discovered by the Official Receiver, he moved the Court for setting aside the auction sale and thereby rectify the error committed by him. Thereupon notice was issued to the successful bidder who raised an objection that the insolvency Court had no jurisdiction to set aside, at the instance of the Official Receiver, the sale held by him, as Section 68 of the Provincial Insolvency Act is not applicable to a case like this. Overruling this objection, the Subordinate Judge set aside the sale relying on two decisions of this Court, one reported in Ramabadra Chetti v. Ramaswami Chetti, : AIR1923Mad350 and the other in Kasim Sahib v. Official Receiver, Guntur : (1945)2MLJ553 . The successful bidder who was aggrieved by that order preferred an appeal to the District Judge who upheld the order of the Subordinate Judge setting aside the sale. It is against that judgment of the District Judge that the present revision petition has been preferred.

4. The question that falls to be decided in this revision petition is whether there is any power vested in an insolvency Court to set aside a sale held by the Official Receive outside the provisions of Section 68, Provincial Insolvency Act.

5. Learned counsel for the petitioner contended that the view of the Courts below that the insolvency Court has jurisdiction to set aside, at the instance of an Official Receiver, a sale held by him on the ground of mistake or error committed by him, is erroneous and the decisions relied on by him do not support that proposition. According to him Section 63, Provincial Insolvency Act hag no application to the present case because that section cannot be relied on by the Official Receiver to have the sale held by him set aside as that section provides only a remedy for persons aggrieved against the acts of the Official Receiver, by an appeal to the Insolvency Court, within 21 days and there is no other provision of law under which an Official Receiver can invoke the jurisdiction of the Court to have the sale set aside. Section 68, Provincial Insolvency Act enacts, that

'if the insolvent or any of the creditors or any other person is aggrived by any act or decision of the receiver, he may apply to the Court, and the Court may confirm, reverse or modify the act or decision complained of, and make such order as it thinks just.'

6. The terms of this section are unambiguous and there can be no doubt that an official receiver cannot invoke the provisions of this section to have his acts or decisions reversed or modified, by the insolvency Court. But that does not conclude the matter. The question remains whether an insolvency Court has inherent powers vested in it, to rectify the defects, mistakes, or errors committed by an Official Receiver. It cannot be disputed that if the insolvent, or any of the creditors had applied to the Court to have the sale avoided by reason of the obvious mistake committed by the Official Receiver in notifying the encumbrance to which the properties of the insolvent were subject, the Court could have set aside the sale. Does it make any difference in this case that the person that sought to have the sale set aside on the ground of an error committed, is the Official Receiver himself who was responsible for the mistake and hot an insolvent or a creditor or any other person aggrieved by it? In my opinion it should not. It cannot be said that the Court is powerless to prevent an injury being done to the general body of creditors and the insolvent in consequence of a mistake committed by the Official Receiver in the conduct of an auction-sale held by him, merely because the person who applied to the Court to have the mistake rectified is the receiver himself and not a creditor or the insolvent.

7. An Official Receiver is an officer of Court and the Court which exercises control over its officers has ample power to rectify such errors as would result in prejudice to the general body of creditors. This principle has been recognised in a series of decision. In Kasim Sahib v. Official Receiver, Guntur : (1945)2MLJ553 it was laid down by Yahya All J. that as the receiver was an officer of Court, an insolvency Court had inherent jurisdiction to rectify the errors or mistakes committed by him. In that case an application was filed under Section 68, Provincial Insolvency Act, by a creditor who had not proved his debt to set aside a sale of the insolvent's property. An objection was taken to the maintainability of the application on the ground that a creditor who had not proved his debts had no locus standi to maintain the application as he could not be said to be a person aggrieved within the meaning of Section 68 of the Act. Overruling that objection the District Judge entertained the application and set aside the sale. In a revision petition against that order the learned Judge who dismissed the revision petition agreeing with the view taken by the District Judge observed :

'When a receiver has been appointed, he, becomes an officer of the Court and if he is about to act in excess of his authority, it is competent even to a stranger to bring that fact to the notice of the Court, which has inherent power to review the conduct of the receiver, so that the stranger may not be prejudiced by an unlawful act of its own officer.'

It is clear from these observations that an insolvency Court which exercises control over the official receiver who is an officer of Court has power to rectify the errors or mistakes committed by a receiver and to reverse or modify his acts in its inherent jurisdiction outside the provisions of Section 68 of the Act. The same principle is laid down in Dataram v. Deoki Nandan 1 Lah. 307 : A. I. R. 1920 Lah. 361. It was laid down in that case that any person and not merely an insolvent or creditor or any other aggrieved person could bring to the notice of the Court the conduct of the receiver in any particular respect for the purpose of having the acts or decisions of such a receiver reversed or modified and that inherent powers are vested in an insolvency Court to rectify the errors or mistakes or reverse or modify the acts or decisions of an Official Receiver. The facts of that case were that a receiver appointed by Court sold by public auction certain agricultural land belonging to the insolvent at which the highest bid of one Datta Ram was accepted by the receiver and some-time later a sale-deed was executed in favour of the highest bidder. Subsequently, the mortgagees of the property and two other persons filed applications in the insolvency Court complaining of irregularities in the conduct of the sale which resulted in the property fetching a very low price. It was contended in that case on behalf of the receiver that the objection to the sale was time-barred under Section 22, Provincial Insolvency Act of 1907 (which corresponds to Section 68 of the present Act). This objection did not find favour with the trial Court and on appeal, it was held that the power of a Court to rectify the errors or mistakes and to modify or reverse the acts or decisions of a receiver is not confined to a case where the act or the decision complained of is brought to the notice of the Court by either an insolvent or a creditor or any other person aggrieved thereby. The following observations of the learned Juges at p. 309 of the report are pertinent :

'. . . . It is not merely the insolvent or the creditors or any other aggrieved person who can take action to bring the conduct of a receiver in any particular respect to the notice of the Court with a view to having the receiver's act or decision in any particular matter reversed or modified. The receiver is an officer of the Court, and when it comes to the knowledge of the Court that his action in any particular respect is open to objection, the Court must have inherent powers to rectify the receiver's errors or mistakes, or to reverse or modify his acts or decisions. From this point of view it would be immaterial if the Court acted upon information supplied by person who were outside the scope of Section 22 of the Act; and. in such a case the time limit prescribed by Section 22 would be no bar to action being taken by Court.'

The learned Judges relied upon a decision of the Calcutta High Court in Hanseswar Ghosh v. Rakhal Das Ghosh, 18 C.W.N. 366: 20 I. C. 683: A.I.R. 1914 Cal. 885. In my view the principle enunciated in these decisions is sound and is in accordance with public policy.

8. The ruling in In re Rassul Haji Cassum, 9 I.C. 344: 13 Bom. L. R. 13 is also to the effect that the Court has inherent powers to remedy a wrong resulting out of the acts or decisions of an Official Assignee or an Official Receiver. It was pointed out in that case that :

'Since the Official Assignee is an officer of the Court, what he does in that character is clothed with those special powers and is deliberately an act of the Court over which the Court has and ought to have power of control. Thus, if the Official Assignee is shown upon evidence to have acted in excess of his powers, as recovering property alleged to belong to the insolvent which did not in fact belong to him and thus amounting to grave injustice, there must surely be inherent powers in the Court summarily to provide a remedy for a wrong ultimately referable to itself.'

In Hanseswar Ghosh v. Rakhal Das Ghosh, 18 C.W.N. 366 : 20 I.C. .683: A. I. R. 1914 Cal. 885 it was laid down that the Court has inherent power to review the conduct of a receiver and to make an appropriate order so that the stranger may not be prejudiced by any unlawful act of its own officer. In that case the properties of an insolvent purchased by a third party were included in the sale proclamation and sold as properties belonging to the insolvent. Thereupon the purchaser presented a petition to the Court after the expiry of 21 days from the date of the order of the receiver objecting to the inclusion of this property in the sale held by the Official Receiver. The petition was dismissed under the proviso to Section 22, Provincial Insolvency Act of 1907. On appeal, the High Court reversed the decision of the trial Court holding that when a receiver was appointed he became an officer of the Court and if he was about to act in excess of his authority, it was competent to the insolvency Court to prevent, in its inherent jurisdiction, by an appropriate order, a stranger being prejudiced by an unlawful act of its officer.

9. All these decisions make it abundantly clear that the Official Receiver can invoke the inherent jurisdiction of the insolvency Court to rectify any error or mistake committed by him and the Court has ample power to prevent an injury to the estate resulting from any act or decision of the receiver. For the reasons stated above, I agree with the view taken by the Courts below and confirm the judgment of the lower appellate Court. The petition is therefore dismissed with costs.


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