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The Official Receiver Vs. B.S. Nataraja Sastrigal and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1923Mad355; (1923)44MLJ251
AppellantThe Official Receiver
RespondentB.S. Nataraja Sastrigal and ors.
Cases ReferredJurisdiction. Official Assignee of Madras v. Ramachandra Iyer
Excerpt:
.....section 75 and that, even if he is so entitled, the court has given good reasons for appointing a special receiver in the present case and that we should not interfere with the district judge's discretion. 6. the reasons given in the district judge's order are that it was better in the interests of all parties concerned that a special receiver residing in negapatam should be appointed to deal with the insolvent's property. the property of the insolvents is not situate at negapatam, where the special receiver lives, but in a village, which is accessible from tanjore as well as from negapatam; insolvencies within the control of the official receiver, unless very exceptional reasons, such as reasons connected with the personality of the receiver, are put forward to deprive him of that..........tanjore district. he appeals against the orders of the district judge of east tanjore appointing a special receiver in l.p. no. 3 of 1921 instead of the official receiver, in whom the insolvent's property would ordinarily vest under section 57 of act v of 1920. it appears that when the adjudication of insolvency was made the district judge vested the property in the official receiver on the 26th july, 1922. the next day at the instance of the vakil for some of the insolvents the district judge re-considered his order and substituted 'special receiver 'for 'the official receiver 'in his order. section 57, clause 2 permits the court to make such an order for special reasons. the official receiver moved the court to reconsider this second order, but the district judge declined to do so on.....
Judgment:

Spencer, J.

1. The appellant is the Official Receiver of the Tanjore District. He appeals against the orders of the District Judge of East Tanjore appointing a special receiver in L.P. No. 3 of 1921 instead of the Official Receiver, in whom the insolvent's property would ordinarily vest under Section 57 of Act V of 1920. It appears that when the adjudication of insolvency was made the District Judge vested the property in the Official Receiver on the 26th July, 1922. The next day at the instance of the vakil for some of the insolvents the District Judge re-considered his order and substituted 'Special Receiver 'for 'the Official Receiver 'in his order. Section 57, Clause 2 permits the Court to make such an order for special reasons. The Official Receiver moved the Court to reconsider this second order, but the District Judge declined to do so on the 15th August, 1922.

2. In these appeals a number of points have been raised on either side. It is contended that the Official Receiver is not entitled to appeal under Section 75 and that, even if he is so entitled, the Court has given good reasons for appointing a special Receiver in the present case and that we should not interfere with the District Judge's discretion. On the other hand the appellant contends that the Court having passed a final order on the 26th of July had no power under the Provincial Insolvency Act to review that order; secondly that the rules framed under the Madras Provincial Insolvency Act, which have the effect of law by virtue of Section 79 Clause 3, give no power to a Court to remove an Official Receiver once appointed (vide Rule XII); and lastly that the reasons given by the District Judge for appointing a special Receiver are not sufficient reasons for making an exception to the general rule.

3. On the first point it is clear from Section 75 that the Official Receiver is one of the persons who has a right of appeal if he is aggrieved by the order of a Court acting in its insolvency Jurisdiction. Official Assignee of Madras v. Ramachandra Iyer (1880) 14 Ch.D. 458 affords an instance where the Official Assignee, who stands in a similar position to the Official Receivers in the mofussil, was regarded as a person ' aggrieved ' and was permitted to appeal. That case proceeded largely on the authority of an English case Ex parte Sidebotham: In re Sidebotham (1880) 14 Ch. D. 458. It appears from the notes at page 459 that the question of the removal of the Trustee was one of the matters that came up for consideration, and the learned Judges declared that a Trustee in Bankruptcy would be entitled to appeal from an order of the Court if he thought it unjust and that he would be a person 'aggrieved ' if a decision had been pronounced which had wrongfully refused him something to which he was entitled. I hold therefore that the appellant has a right of appeal.

4. Although the Provincial Insolvency Act does not contain any provision for reviewing orders already passed, Section 5 provides that the Court 'shall have the same powers and shall follow the same procedure as it has and follows in the exercise of its original civil jurisdiction. 'I am therefore not prepared to hold that the District Judge acted illegally in altering his order after it had been passed.

5. Next the provision in Rule 12 that 'the Court may remove or discharge any Receiver or interim Receiver other than an Official Receiver 'appears to have been so worded in consideration of the fact that under Section 57 of the Act the power of appointing Official Receivers is vested in the Local Government and, therefore, no Court has the power to remove an Official Receiver from his office. Where the appointment of an Official Receiver to take charge of a particular insolvency'is concerned, the proviso to Rule 11 allows the party to apply to the Court to set aside the appointment of the Official Receiver and to ask that a special Receiver may be appointed in his place. Even if that proviso was intended to apply to cases where orders of adjudication have been made by the Official Receiver himself, unless the contrary appears we may assume that Courts have power to make such orders from time to time as are necessary for dealing with the insolvent's estate. Under Section 16 of the General Clauses Act whenever a power to make an appointment is conferred, the authority having such power must be deemed to have power also to remove any person appointed by it in exercise of that power. I therefore hold that the District Judge was legally empowered to set aside his own order appointing the Official Receiver, if there were special reasons for doing so.

6. The reasons given in the District Judge's order are that it was better in the interests of all parties concerned that a special Receiver residing in Negapatam should be appointed to deal with the insolvent's property. The Official Receiver was an Interim Receiver before the adjudication, and there is nothing to show that any personal reason existed for his being superseded. The property of the insolvents is not situate at Negapatam, where the special Receiver lives, but in a village, which is accessible from Tanjore as well as from Negapatam; and during the management of the Interim Receiver, he was leasing out the lands and doing such other necessary acts for the management of the insolvent's estate. The remuneration of Official Receivers, who are paid a fixed salary by Government, depends partly upon the receipts obtained by them in administering various estates in their district; and those receipts will be diminished if special Receivers are appointed superseding the authority of the Official Receiver. The reasons given by the District Judge and those appearing in the affidavits of the creditors are not sufficient in my opinion to outweigh the general importance of keeping all. insolvencies within the control of the Official Receiver, unless very exceptional reasons, such as reasons connected with the personality of the Receiver, are put forward to deprive him of that control.

7. The District Judge's order must be vacated and in lieu thereof the Official Receiver will be directed to take charge of the insolvent's estate. The appellant's costs in C.M.A. 307 in this Court will be defrayed out of the insolvent's estate. There will be no order as to costs in C.M.A. No. 308. The 1st respondent will bear his own costs in C.M.A. No. 307 in this Court.

Venkatasubba Rao, J.

8. The first question to be decided is whether the Official Receiver is entitled to appeal against the orders passed. Is he a person aggrieved under Section 75 of the Act? On the 26th July, 1922 an order of adjudication was made and the Official Receiver was appointed Receiver of the property of the insolvents. On the following day the District Judge varied his order of the 26th and appointed a special Receiver. The latter applied for the setting aside of the order made on the 27th of July, and on the 15th of August, the District Judge passed an order refusing to reconsider his decision. The Official Receiver has filed two appeals, one against the order of the 27th of July and the other against that of the 15th of August.

9. Various cases were cited in the argument bearing on the interpretation of the words 'a person aggrieved. 'But I think it is sufficient to refer to two of them. In Exparte Side-botham (1880) 14 Ch. D. 458, James, L.J. observed that if the Court acted on a report by the Comptroller in Bankruptcy that the trustee had been guilty of a misfeasance, or neglect, by which the estate had sustained a loss which the trustee ought to make good, the trustee would be entitled to appeal from the order of the Court, if he thought it unjust. This observation is no doubt obiter but is entitled to great weight. The Lord Justice said''A person aggrived ' must be a man who has suffered a legal.grievance, a man against whom a decision has been pronounced which has wrongfully deprived him of something or wrongfully refused him something, or wrongfully affected his title to something. 'Lord Esher, M.R. in Re Reed Bowen & Co. (1885) 19 Q.B. D. 174, referring to the definition given by James, L.J.

10. observed that the words used were 'legal grievance 'and not 'pecuniary grievance or grievance to person or property 'and further added that 'a person aggrieved'must be a man against whom a decision has been pronounced which has wrongfully refused him something which he had a right to demand.

11. I think the Official Receiver suffered a legal grievance and he was 'wrongfully deprived of something '. He was removed from office and his application to reconsider the order was refused. He was entitled to say that his appointment should not have been set aside; he had a right to ask that he should be restored to office. He was aggrieved by the orders made against him.

12. This leads me to the consideration of the second question, Can the Court remove an Official Receiver who has been appointed Receiver of an insolvent's estate from his office of such receiver of that estate? The answer would depend upon the construction of Section 57 Clause (2).

13. Section 56 Clause (1) and Clauses (1) and (2) of Section 57 run thus:

Section 56 Clause (1): The Court may, at the time of the order of adjudication, or at any time afterwards, appoint a receiver for the property of the insolvent, and such property shall thereupon vest in such a receiver.

Section 57 Clause (1): The Local Government may appoint such persons as it thinks fit to be called Official Receivers under this Act within such local limits as it may prescribe. '

Section 57 Clause (2):--'Where any Official Receiver has been so appointed for the local limits of the jurisdiction under this Act, he shall be the Receiver for the purpose of every order appointing a Receiver or an interim Receiver issued by any such Court, unless the Court for special reasons otherwise directs.

14. It will be seen that an Official Receiver becomes in virtue of his holding that office, a Receiver of the property of the insolvent, if a receiver for the property is appointed. The Court however for special reasons may otherwise direct. In my opinion the words 'otherwise direct 'refer not only to the point of time when the appointment of a Receiver under Section 56 is made, but also the period subsequent to the appointment. That is to say, the Court may not only at the initial stage appoint a special Receiver for valid reasons but it may if good grounds are shown, remove the Official Receiver appointed originally at any time whatsoever. This construction will avoid an absurdity viz., that the Official Receiver once appointed can never be removed by the Court even though he may be guilty of misappropriation or fraud or is shown to have an interest adverse to that of the creditors of the insolvent. I am therefore of the opinion that under Section 57, Clause 2, the Court has the power to remove the Official Receiver from his office of Receiver for the property of an insolvent.

15. It has been argued that Rule 12 of the Insolvency Rules negatives this power. I must say that there is considerable force in this argument. If this be the effect of Rule 12, I am prepared to hold that it is ultra vires.

16. It has next been pointed out that Rule 11 specifically provides for the setting aside of the appointment of the Official Receiver and for the appointment of a special Receiver. If this be the right construction, Rule 11 would be inconsistent with Rule 12. I am inclined to think that the proviso refers only to the cases specified in Clauses 4 and 5 i.e. to the Official Receiver appointed for the property of the insolvent 'in cases where the Official Receiver is empowered to make orders of adjudication. 'The decision of the question however does not depend on a construction of these rules but I would take this opportunity to suggest that a revision of rules 11 and 12 may be made.

17. The third point relates to the merits of the appeal. The Official Receiver was removed on the ground that his headquarters was at Tanjore, that there was a single Receiver appointed by the Government for the two districts, the East and West Tanjore and that therefore a person in the locality should be preferred. The Government has appointed one Official Receiver for the area comprised within the two districts, and if the reason given by the District Judge should be held sufficient to appoint a special Receiver, the reason would exist in every case and the Official Receiver could never be appointed Receiver for any property within the jurisdiction of the District Judge of East Tanjore. I am utterly unable to regard this a special reason under Section 57 of the Act.

18. I therefore agree with the order proposed by my learned brother.


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