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In Re: K. Audisesha Naidu, an Insolvent - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtChennai
Decided On
Reported in118Ind.Cas.70; (1929)56MLJ95
AppellantIn Re: K. Audisesha Naidu, an Insolvent;The Nedungadi Bank Ltd.
Respondent;The Official Assignee of Madras
Cases ReferredEthirajulu Chetty v. Rajagopalachari Reported
Excerpt:
- .....d on the 7th of may asking for a copy of the order of court appointing a receiver. on the 8th of june the receiver wrote ex. e enclosing a copy of the order. on the 22nd of june the bank wrote ex. f to the receiver sending him a copy of the mortgage deed (ex. a) and asking for payment by the 1st of july. on the 26th of june the receiver wrote ex. g stating that the financial position of the company prevents him from making payment as desired by the bank, that he was running the business under the order of court, that he had been directed to pay certain creditors including the bank and requesting the bank to wait for some time and stating that he would pay the amount in easy instalments from the collections. on the 28th of june the bank wrote ex. h stating that it could not wait any.....
Judgment:

Kumaraswami Sastri, J.

1. This is an application by the Nedungadi Bank, Ltd., for an order directing the Official Assignee to deliver possession of five motor cars specified in the application and to pay Rs. 44 which is alleged to be the amount realised by the sale of one motor car which was sold by the Official Assignee.

2. The affidavit in support of the application sets out that the insolvent Audisesha Naidu was the proprietor of the City Taxi Company, that he obtained an overdraft from the bank on the terms set out in a deed, dated the 1st of June, 1926, by which it was inter alia provided that the bank should allow accommodation to the insolvent to the extent of Rs. 5,000 on the security of six motor cars described in the schedule to the registered deed, that the bank became the mortgagee of the six cars to the extent of the advances made, that the deed also provides that the bank would be entitled to take possession of the cars whenever desired by it, that one Sambamurthi claiming to be a creditor of the insolvent filed C.S. No. 69 of 1928 on the file of this Court for the enforcement of his claim in that suit and Mr. K. G. Ramaswami Aiyangar, Advocate, was appointed receiver of the properties belonging to the insolvent and the receiver took possession of the cars which had been mortgaged to the bank, that the bank on being informed of it wrote to the receiver on the 22nd of June, 1928, demanding Rs. 2,225-3-11 due to the bank and asking that it should be paid on or before the 1st of July, 1928 and stating that in default possession would be taken, that the receiver applied for further time on the 26th of June, 1928, which was refused by the bank, that subsequently Audisesha Naidu was adjudicated insolvent on the 10th of July, 1928, that the Official Assignee has taken possession of the cars from the receiver, that the bank called on the Official Assignee to give possession of the cars, that one of the cars was sold by the Official Assignee for Rs. 44 and that the other cars are still with the Official Assignee.

3. The Official Assignee states that he is not aware of the claim of the bank, that the insolvent carried on the business of hiring motor cars in this City under the name of the City Taxi Company and for the purpose of that business he purchased and registered cars in his own name and the cars remained in his possession till the date of his adjudication, that under the deed of mortgage, dated the 1st of June, 1926, the cars were allowed to remain in the possession, order and disposition of the insolvent with the consent of the bank, the insolvent being the reputed owner thereof; that the receiver was appointed with a view to run the business under the guidance of the insolvent and pay certain creditors specified in the order including the bank, that the appointment of the receiver has not the effect of changing the ownership of the insolvent over the cars, that the acts of insolvency mentioned in the petition began from April, 1928, and the adjudication of the 10th of July relates back to April, that the insolvent was the reputed owner of the cars and that the bank has no claim. He says he did not take possession of one car No. 6110.

4. The deed of mortgage, dated the 1st of June, 1926, has been marked as Ex. A. It provides that the bank shall have a first charge on the motor cars and that the bank may at any time require possession to be delivered to it. It also empowers the bank to take possession of all the cars in case the amount due is not paid when demanded. It also provides that if the mortgagor commits any breach of the agreement or if he commits any acts of insolvency or assigns his estate for the benefit of his creditors, the bank is entitled to enter on the premises and take possession of the cars.

5. It is not disputed that the cars were left in the possession of the insolvent nor is it disputed that on the 12th of April, 1928, a receiver was appointed to manage and run the business. The receiver's application was opposed but ultimately the receiver was appointed. The receiver was to be in charge of, manage and run the business of the City Taxi Company; he was to be guided by the advice of the defendant in the running of the business and he was directed to make payments from the net earnings of the business to the creditors named in the counter-affidavit. It was also ordered that all the stock and goodwill of the company shall vest in the receiver.

6. This order (Ex. B) was passed on the 12th of April, 1928. The receiver wrote to the bank Ex. C on the 5th of May, 1928, intimating that he has taken possession. The bank wrote Ex. D on the 7th of May asking for a copy of the order of Court appointing a receiver. On the 8th of June the receiver wrote Ex. E enclosing a copy of the order. On the 22nd of June the bank wrote Ex. F to the receiver sending him a copy of the mortgage deed (Ex. A) and asking for payment by the 1st of July. On the 26th of June the receiver wrote Ex. G stating that the financial position of the company prevents him from making payment as desired by the bank, that he was running the business under the order of Court, that he had been directed to pay certain creditors including the bank and requesting the bank to wait for some time and stating that he would pay the amount in easy instalments from the collections. On the 28th of June the bank wrote Ex. H stating that it could not wait any longer unless it knew something definite about the date of closing the loan. On the 3rd of July the receiver wrote Ex. J stating that he hoped to pay something from the collections every month and that the bank cannot take possession because the goods have vested in him as receiver.

7. On the 26th of June the petition for adjudication was filed. On the 10th of July the debtor was adjudicated. On the 30th of July notice went to the bank informing it of the adjudication.

8. It is contended for the bank that by reason of the vesting of the property in the receiver, the order and disposition clause in Section 52 of the Act does not apply as the property was in custodia legis, that the bank had prior to the insolvency petition given notice that it would take possession and that any subsequent possession by the receiver being wrongful, the property was not with the consent of the bank in the possession of the defendant even assuming that the receiver's possession was the possession of the defendant.

9. I am of opinion that Section 52 does not apply as the property was not in the possession, order and disposition of the debtor either at the date of the presentation of the petition or at the date of adjudication. There is no evidence of any acts of insolvency committed before the petition so as to make the adjudication relate back.

10. I am of opinion that the appointment of receiver removes the property from the possession of the insolvent. In Taylor v. Eckersley (1877) L.R. 5 Ch. Dn. 740 it was held that the order and disposition clause does not apply when the property is taken possession of by the receiver appointed by Court. In Fletcher v. Manning (1844) 12 M. & W. 571 it was held that goods mortgaged before insolvency and which were at the time of bankruptcy in the hands of the Sheriff under an execution against the bankrupt were not under the order and disposition of the insolvent.

11. It has been argued by the respondent that as the receiver appointed did not give notice to all the creditors the property must be deemed to have remained in the order and disposition of the insolvent and reference has been made to Rutter v. Everett (1895) L.R. 2 Ch. 872 and In re Neal : Ex parte The Trustee (1914) L.R. 2 K.B. 910. In the present case the property is tangible moveable property and unlike debts notice to the debtor is unnecessary to complete the title of the transferee.

12. It has also been argued that the Court had no jurisdiction to appoint a receiver in C.S. No. 69 of 1928 which was a simple claim for money and reference has been made to Chockalingam Pillai v. Pichappa Chettiar (1925) 22 579. I have in Ethirajulu Chetty v. Rajagopalachari Reported p. 115 of this volume dealt with all the authorities on the subject and come to the conclusion that under Order 40, Rule 1 of the Code of Civil Procedure the Court has power to appoint a receiver even in case of simple mortgages. I am also of opinion that when an order has been made by a Court and the receiver takes possession, it is not open to third parties to question the legality of the possession of the receiver so long as the order appointing a receiver is in force.

13. It is argued for the bank that the notices sent by the bank to the receiver demanding possession put an end to the right of the mortgagor to remain in possession and that where notice is given of the determination to take possession conferred by the deed of mortgage it is sufficient to take the property out of the order and disposition of the insolvent. In view of my decision on the first construction as to the effect of the appointment of a receiver I think it unnecessary to decide this question.

14. I allow the application except car No. 6118 of which the Official Assignee did not take possession with taxed costs payable out of the estate. The assignee will take the taxed costs of the application out of the estate.


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