1. The appellant in this C.M.S.A. was the Official Receiver of East Godavari at Rajamundry. In connection with the administration of I.P. No. 40 of 1932, a dividend was declared and a sum of Rs. 589-2-8 was payable to the 12th creditor, the 1st respondent in this appeal, as his share. According to the evidence no notice that the dividend had been sanctioned was sent to the 12th creditor or any of the creditors, as required by Rule 19 of the rules framed under the Provincial Insolvency Act. Nonetheless, after the dividend had been declared, a certain Bonam Ammiraju represented to the appellant that he was authorised by the respondent--12th creditor to receive payment of his dividend on his behalf and produced a receipt and letter of authorisation purporting to have been signed by the first respondent and attestors. The appellant, after having had Bonam Ammiraju identified by two witnesses, paid the dividend due to the first respondent over to him. Later, the first respondent himself appeared before the appellant and asked for payment and it transpired that a fraud had been played on both the appellant, the Official Receiver and the first respondent--the 12th creditor. As, however, the appellant refused to pay the first respondent on the ground that he had already in good faith paid the amount to Bonam Ammiraju, the first respondent made an application under Section 65 of the Provincial Insolvency Act to the Subordinate Judge of Amalapuram asking for a direction to the appellant that the dividend, namely, the sum of Rs. 589-2-8 should be paid to him. The learned Subordinate Judge dismissed this application on the ground that sanction had not been obtained to the filing of the application as required by Section 270 of the Government of India Act. On appeal to him, the District Judge reversed the decision of the Subordinate Judge, allowed the application and directed the appellant to pay the dividend to the first respondent.
2. It is conceded now that the view taken by the Subordinate Judge with regard to the application of Section 270 of the Government of India Act was wrong. It is argued, however, for the appellant that nonetheless the Court had no power in the circumstances of the case to direct payment of dividend to the first respondent under Section 65 of the Act, or, in the alternative, that even if the Court had such power, the first respondent should have been referred to the remedy of a suit in preference to a summary disposal of the application under the provisions of Section 65. There is no doubt some force in the contention for the appellant that the prohibition enacted by Section 65 against a suit for a dividend against the receiver would not apply to a suit brought by the first respondent in the circumstances of the present case. Such a suit, it is argued, would substantially be not a suit against the receiver for the recovery of the dividend but a suit for damages occasioned by the negligence of the receiver in making payment to the wrong person. Even, however, if a suit by the first respondent against the receiver would be maintainable, it does not follow that the first respondent had necessarily to be referred to a suit as his remedy by the Court; and, as the learned District Judge points out, in view of the provisions of Section 56, Sub-section (4) of the Provincial Insolvency Act, it cannot be contended with any force that the Court had no power to direct payment of the dividend. The lower appellate Court has found that the action of the appellant in making payment of the dividend to Bonam Ammiraju amounted to gross negligence and that finding cannot be canvassed in second appeal. Section 56(4)(c) provides 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.
3. On the footing therefore of the finding that the appellant was guilty of gross negligence it was clearly open to the Court to direct payment of the amount wrongly paid to Bonam Ammiraju to the first respondent creditor. The contention that the appellant has been prejudiced by the fact that the application was made under Section 65 only without reference to Section 56(4) has, in my opinion, no force. The evidence given by the appellant in his chief examination and his cross-examination show that he was aware that the application turned on whether in paying Bonam Ammiraju the amount, he had acted with due care. There is no suggestion that the appellant did not make the payment in good faith, but in face of the finding of fact by the lower appellate Court that there was gross negligence, there are no grounds for interfering with the direction that the dividend must now be paid to the first respondent.
4. The appeal is consequently dismissed with costs. [Leave to appeal is refused.]