1. The facts of this case are very simple. I take the following statement of them from the order of Varadachariar, J., who referred this matter for disposal by a Bench:
This Second Appeal arises out of a suit brought by a creditor of the third defendant to have it declared that a decree for partition which defendants 1 and 2 obtained in O.S. No. 1466 of 1926 on the file of the Additional District Munsif's Court of Coimbatore against the fourth defendant, the Official Receiver of Coimbatore, is not binding upon the creditors. The plaintiff has been permitted to file the suit on behalf of all the creditors of the insolvent. Defendants 1 and 2 are the sons of the third defendant admittedly born after the property had vested in the Official Receiver by reason of the third defendant's insolvency. They nevertheless filed O.S. No. 1466 claiming partition of the family property and the Official Receiver who was impleaded as a defendant in that suit did not appear at the hearing, with the result that they got a decree for partition which is obviously unsustainable on the merits. The Official Receiver filed a belated application for setting aside the ex parte decree, pleading his forgetfulness in the midst of heavy work; but as even this application was filed out of time, the Court dismissed the application. The creditors have accordingly filed this suit to have it declared that that decree which was the result of gross neglect on the part of the Official Receiver is not binding upon the estate.
2. The learned District Munsif dismissed the suit holding that the creditors could not file such a suit and that:
the remedy of the creditors who are aggrieved by the fraudulent or negligent conduct of the Receiver is to take proceedings against the Official Receiver under Section 56 of the Provincial Insolvency Act.
3. The learned Subordinate Judge in appeal supported the decision of the learned District Munsif. He agreed that the Official Receiver had been guilty of gross negligence but held that the creditors must be bound by the result of the suit irrespective of the negligence of the Official Receiver.
4. The question for decision is whether this view taken by the learned Subordinate Judge is right or not. There is no decided case on this point so far as we have been able to ascertain. The learned Advocate for the appellant bases his argument mainly on analogies. It is quite clear that in the case of a minor, negligence on the part of the minor's next: friend or guardian ad litem in a suit, is on precisely the same footing as fraud or collusion. This was laid down in the case of Punnayyah v. Viranna I.L.R.(1921) 45 Mad. 425 : 42 M.L.J. 429 where Spencer and Ramesam, JJ., held that:
a person who had been impleaded as a'minor defendant represented by a guardian-ad-litem in a suit in which a decree was passed ex parte against him, can institute a suit to set aside the decree on the ground of gross negligence, apart from fraud or collusion, of the guardian-ad-litem in not defending the suit properly on his behalf.
5. This decision was followed by Phillips and Odgers, JJ., in Moolaswami v. Tatayya (1925) 51 M.L.J. 389. Odgers, J., in that case said:
I do not think that any good ground has been shown for distinguishing a case of gross negligence on the part of the guardian of the minor from that of fraud and collusion.
6. There can be no doubt of the soundness of this principle.
7. In the case of trustees there is no doubt that fraud or collusion on the part of a trustee would be a good ground for a suit on behalf of the cestui que trust, and there seems to be no good reason why the negligence of the trustee should not be on the same footing Vide page 982, Lewin on Trusts, 13th Edition where the author quotes Sir R. Jekyll:
The forbearance of the trustees in not doing what it was their office to have done, shall in no sort prejudice the cestui que trust since at that rate it would be in the power of the trustees, either by doing or delaying to do their duty, to affect the right of other persons; which can never be maintained.
8. The Receiver in bankruptcy in whom the property of the insolvent vests is in the position for all practical purposes of a trustee on behalf of the creditors. It is difficult to see why if the Official Receiver negligently allows property to be usurped by others which ought to and might have been available for payment to creditors, any of the creditors should not be at liberty to file a suit for the recovery of the suit property.
9. Mr. Srinivasagopalachariar who appears for the minor respondents contended that no suit could be filed by a creditor in this case because the Official Receiver had put in an application under Order 9, Rule 13, Civil Procedure Code, to have the ex parte decree set aside and that application had been dismissed. He relied upon the decision in Puran Chand v. Sheodat Rai I.L.R.(1906) 29 All.212 which was followed in this Court in Yogamba Bai Ammani v. Arumuga Mudaliar (1916) 2 M.W.N. 63. These decisions we think are clearly not applicable. This is not a case of an attempt to file a suit by a person whose application under Order 9, Rule 13 had been dismissed. Nor is it a suit based upon the same grounds as those alleged, or which might properly be alleged, in an application under Order 9, Rule 13, Civil Procedure Code. As pointed out in Pran Nath Roy v. Mohesh Chandra Moitra I.L.R. (1897) 24 Cal. 546 and Khagendra Nath Mahta v. Pran Nath Roy (1902) L.R. 29 I.A 99 : I.L.R. 29 Cal. 395 (P.C.) a suit to set aide an ex parte decree on the ground of fraud and collusion or negligence is based upon far wider grounds than an application under Order 9, Rule 13, Civil Procedure Code and the fact that an application under Order 9, Rule 13 has been dismissed is no bar to the maintainability of a separate suit.
10. Mr. Srinivasagopalachariar contended further that this suit is barred because the Insolvency Act itself provides a remedy for cases of gross negligence by the Official Receivee. In Section 56(4)(c) of the Provincial Insolvency Act it is laid down that where a receiver appointed under this section:
occasions loss to the property by his wilful default or gross negligence, the Court may direct his property to be attached and sold, and may apply the proceeds, to make good any balance found to be due from him or any loss so occasioned by him.
11. The contention is that where a remedy is thus provided in the Act itself a separate suit will not lie and Mr. Srinivasagopalachariar relies upon the case in Iswarananda Bharathi Swami v. Commissioners, H.R.E. Board : AIR1931Mad574 . We are of opinion however, that this reference to the principle enunciated in Iswarananda Bharathi Swami v. Commissioners, H. R E. Board : AIR1931Mad574 is very far-fetched. It was there held that since in Section 84(2) of the Madras Hindu Religious Endowments Act it is provided that a trustee affected by a decision under Sub-section (1) may within one year apply to the Court to modify or set aside such decision, but subject to the result of such application, the order of the Board shall be final and therefore a separate suit will not lie. The principle of that case is certainly not applicable here. It is quite impossible to say for instance, whether the property of the Official Receiver would be sufficient to recoup the loss occasioned by his negligence in allowing the suit to be decreed ex parte and moreover in a case like this where it is perfectly clear that the whole of the insolvent's property ought to be available to the creditors it is not reasonable to hold that a suit to recover that property is barred merely because the Official Receiver might be punished for his negligence in another way. We would hold therefore that both the lower Courts were wrong in deciding that this suit was not maintainable.
12. On the merits there is no question whatevee. The two minor defendants who were the plaintiffs in O.S. No. 1466 of 1926 were neither of them born on the date on which the property of their father vested in the Official Receiver. In fact the elder of the two was not born till the 26th November, 1919 whereas the vesting order was passed on the 23rd January, 1919. It is therefore clear that the elder son was not even conceived on the date when his father's properties vested in the Official Receiver. The minors therefore could have no reasonable claim to a share in their father's property. This appeal is accordingly allowed and the plaintiff will get the declaration for which he prayed, with costs throughout to be paid by respondents 1 and 2.