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D.D. Italia and anr. Vs. the Official Assignee of Madras and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1941Mad183; (1940)2MLJ979
AppellantD.D. Italia and anr.
RespondentThe Official Assignee of Madras and ors.
Cases ReferredSoobul Chunder Law v. Russick Lall Mitter I.L.R.
Excerpt:
.....the administration in insolvency of the estate. sub-section (2) of this section says that with the modifications thereinafter mentioned, all the provisions of part iii of the act, shall, so far as they are applicable, apply to the case of an administration order in like manner as to an order of adjudication under the act. the administration in insolvency of a deceased debtor's estate under section 108 of the presidency towns insolvency act must necessarily mean that the uncharged assets of the estate are to be utilised for the benefit of the general body of creditors and, as a mere attachment creates no charge, an attaching creditor is in no better position than any other ordinary creditor. as the appellants have in the main failed there will be no order as to posts in the appeal......properties.2. section 108(1) of the presidency towns insolvency act provides that a creditor of a deceased debtor, whose debt would have been sufficient to support an insolvency petition had the debtor been alive, may present a petition to the court praying for an order for the administration of the estate of the deceased under the presidency towns insolvency act. sub-section (2) states that, on the prescribed notice being given to the legal representative of the deceased debtor, the court may, upon proof of the debt, unless it is satisfied that there is a reasonable probability that the estate will be sufficient for the payment of the debts owing by the deceased, make, an order for the administration in insolvency of the estate. sub-section (3) says that a petition of this nature shall.....
Judgment:

Alfred Henry Lionel Leach, C.J.

1. This appeal raises two questions of law with regard to the administration in insolvency of the estate of a deceased person. On the 15th July, 1938, one S.V. Kannabhiran Pillai died, and by an order of the Original Side of this Court passed on the 18th April, 1939, it was directed that his estate should be administered in insolvency under the provisions of Section 108 of the Presidency Towns Insolvency Act. The appellants are creditors. On the 9th August, 1938, they obtained a decree against the deceased's estate in C.S. No. 154 of 1938. In execution proceedings filed on the 26th January, 1939, they attached the deceased's interests in certain immovable property, which was the subject-matter of another suit, C.S. No. 189 of 1938 and in movable properties, which were in dispute in a third suit, C.S. No. 198 of 1939. The movable properties included a sum of Rs. 483-7-10 which was standing to the credit of the deceased in the books of the Egmore Benefit Society. A garnishee order was issued by the Court in respect of this sum on the 13th February, 1939 and the money was paid into Court on the 27th March, 1939.

2. The first question which arises is whether the, order of this Court directing the estate to be administered in insolvency puts an end to the execution proceedings and relegates the appellants, to the position of ordinary creditors. The second question is whether the appellants' claim to the sum of Rs. 483-7-10 paid Into Court by, the Egmore Benefit Society stands on a different footing from their claims in respect of the other attached properties.

2. Section 108(1) of the Presidency Towns Insolvency Act provides that a creditor of a deceased debtor, whose debt would have been sufficient to support an insolvency petition had the debtor been alive, may present a petition to the Court praying for an order for the administration of the estate of the deceased under the Presidency Towns Insolvency Act. Sub-section (2) states that, on the prescribed notice being given to the legal representative of the deceased debtor, the Court may, upon proof of the debt, unless it is satisfied that there is a reasonable probability that the estate will be sufficient for the payment of the debts owing by the deceased, make, an order for the administration in insolvency of the estate. Sub-section (3) says that a petition of this nature shall not be presented after proceedings have been commenced for the administration of the deceased debtor's estate, but in that event, on proof that the estate is insufficient to pay its debts, the Court may transfer the proceedings to the Court exercising jurisdiction in insolvency under the Act.

3. Section 109(1) provides that, upon an order being made for the administration of a deceased debtor's estate under Section 108, the property of the debtor shall vest in the Official Assignee, who shall forthwith proceed to realise, and distribute the assets in accordance with the provisions of the Act. Sub-section (2) of this section says that with the modifications thereinafter mentioned, all the provisions of Part III of the Act, shall, so far as they are applicable, apply to the case of an administration order in like manner as to an order of adjudication under the Act. The only modification is in Sub-clause (3) which makes the proper funeral and testamentary expenses incurred by the legal representative of the deceased debtor a preferential claim payable in full in priority to all other debts. Part III of the Act contains the provisions with regard to the administration of the property of an insolvent and included in this part is Section 53, t he first sub-Section of which reads as follows:

Where execution of a decree has issued against the property of a e debtor, no person shall be entitled to the benefit of the execution against the Official Assignee, except in respect of assets realized in the course of the execution by sale or otherwise before the date of the order of adjudication, and before he had notice of the presentation of any insolvency petition by or against the debtor.

4. The learned advocate for the appellants has conceded that, if Section 53 applies to an administration of a deceased debtor's estate under Sections 108 and 109 his clients are out of Court, except as regards the sum of Rs. 483-7-10 paid into Court by the Egmore Benefit Society. This case was decided on the Original Side by Mockett, J., who held that Section 53 is not applicable to proceedings under Sections 108 and 109 and in this connection relied on the judgment in Hasluck v. Clark (1899) 1 Q.B.D. 699. The learned Judge, however, decided against the appellants on the ground that in this country an attachment confers no title and (creates no charge, relying here upon the decision in Re Prem Lal Dhar: Ex parte The Official Assignee I.L.R.(1917)Cal. 1016 and Nicholson Town Bank, Ltd. Tanjore v. Varadarajulu Naidu (1938) M.W.N. 1127.

5. In Re Prem Lal Dhar: Ex parte The Official Assignee I.L.R.(1917)Cal. 1016, the Calcutta High Court also held that Section 53 is not applicable to cases of administration under Sections 108 and 109 and discussed Hasluck v. Clark (1899) 1 Q.B.D. 699. In Hasluck v. Clark (1899) 1 Q.B.D. 699, the Court of Appeal said that an order for the administration of the estate of a deceased debtor under Section 125 of the Bankruptcy Act, 1883 (which corresponds to Section 108 of the Presidency Towns Insolvency Act) is not equivalent to a receiving order for the purposes of Section 45 of the Act (which corresponds to Section 53 of the Presidency Towns Insolvency Act) and that a creditor who had proceeded in execution was entitled to retain as against the trustee of the debtor's estate, the benefit of an execution not completed' before the date of the administration order. In that case a writ of fieri facias had issued. By Section 26 of the Sale of Goods Act, 1893, it was enacted that a writ of fieri facias should bind the property in the goods of the execution debtor as from the time when the writ was delivered to the sheriff to be executed. Therefore Section 45 of the Act could not apply. The Calcutta High Court, in following Hasluck v. Clark (1899) 1 Q.B.D. 699 on the question of the applicability of Section 53(1) of the Presidency. Towns Insolvency Act, held that an attachment in India only prevents alienation and does not confer any title or create any charge or lien on the property such as attaches in England upon, seizure under the writ of fieri facias. In these circumstances the attaching creditor in India has merely the right of sharing rateably with the other creditors of the estate.

6. For the purpose of this appeal it is not necessary to decide whether Section 53 of the Presidency Towns Insolvency Act applies to the administration in insolvency of a deceased debtor's estate, because it is manifest that in any event the appellants are not entitled to succeed, except as regards the sum of Rs. 483-7-10 paid into Court by the Egmore Benefit Society. There are two decisions of this Court, each by a Full Bench, which lay down that in this country an order of attachment does not create any charge. The first decision was in Krishnaswami Mudaliar v. Official Assignee of Madras : (1903)13MLJ278 , where it was said that the effect of an attachment under the Code of Civil Procedure was to prevent alienation and not to confer title. The second decision was in Manickam Chettiar v. Income-tax Officer, Madura South : (1938)1MLJ351 , where it was again contended that inasmuch as an attachment had taken place the petitioner was in the position of a secured creditor. It was pointed out that this question had been decided by this Court in Krishnaswqmi Mudaliar v. Official Assignee of Madras : (1903)13MLJ278 and that the Privy Council in Ananthapadmanabhaswami v. Official Receiver, Secunderabad (1933) 64 M.L.J. 562 : L.R. 60 IndAp 167 : I.L.R. 56 Mad. 405 had not overruled it, as was suggested. The Judicial Committee had refused to go into the question 'and reserved their decision for a future occasion. The judgments in Krishnaswami Mudaliar v. Official Assignee of Madras : (1903)13MLJ278 and Manickam Chettiar v. Income-tax Officer, Madura South : (1938)1MLJ351 conclude the question so far as this Court is concerned. It may be mentioned, however, that the Calcutta High Court gave 'a similar decision 'in Soobul Chunder Law v. Russick Lall Mitter I.L.R.(1888)Cal. 202 which was also decided by a Full Bench.

7. As the result of decisions of this Court we must hold that in India no charge is created by an attachment and when the judgment-debtor becomes an insolvent the attachment falls to the ground, provided, of course, that the attachment has not resulted in a sale. There is no difference here between the administration of the estate of an insolvent who is alive and the administration of the estate of a person who dips insolvent, but was not adjudicated before his death. The administration in insolvency of a deceased debtor's estate under Section 108 of the Presidency Towns Insolvency Act must necessarily mean that the uncharged assets of the estate are to be utilised for the benefit of the general body of creditors and, as a mere attachment creates no charge, an attaching creditor is in no better position than any other ordinary creditor. If he were, there would be little virtue in the provisions of Sections 108 and 109 of the Act.

8. The learned Official Assignee has conceded that, if fee attachment has resulted in a sale and the sale proceeds are in Court, the attaching creditor is entitled irrespective of Section 53, to the money or so much of it as is necessary to meet his claim. Except as regards the sum of Rs. 483-7-10 paid into Court by the Egmore Benefit Society the attachments have not resulted in the realisation of any of the assets attached With regard to the Rs. 483-7-10 it has transpired that after the Egmore Benefit Society had paid the money into Court the Master passed an order giving the appellants the right to withdraw it from Court. The matter has gone beyond the interim 6rder stage and in these circumstances the learned Official Assignee has rightly conceded that the appellants are entitled to this money.

9. The result is that the appeal will be allowed to the extent of this sum of Rs. 483-7-10, but it will stand dismissed in all other respects. As the appellants have in the main failed there will be no order as to posts in the appeal.


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