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Nachimuthu Chettiar Vs. Ramakkal - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtChennai
Decided On
Reported inAIR1933Mad475; 147Ind.Cas.494
AppellantNachimuthu Chettiar
RespondentRamakkal
Cases Referred and Krishnamurthy v. Sundaramurthi
Excerpt:
.....both that the insolvency court has no jurisdiction to investigate a matter of that sort, and even if it has, after deciding the matter it would have no power to sell the sons' share if liable in a case like the present where they had partitioned from their father. it is perfectly obvious that the sale by the official receiver, without the expenses of attachment and court-fees, and with the interest amount on the mortgage considerably reduced, is much more beneficial to the estate than for the mortgagee to file a suit on his mortgage on the basis of the decree in the partition suit and sell the property under a mortgage decree......an insolvent. the application was on 21st march 1923. it was transferred on 26th march 1923 to the official receiver who was appointed interim receiver. the official receiver compounded with the appellant who agreed to relinquish his mortgage and have the properties sold free of encumbrance provided he was first satisfied out of the sale proceeds. the official receiver got him to reduce the interest also substantially, applied for permission to sell the property free of the mortgage and advertised it for sale for 26th april 1924. then a suit was filed in the name of the minor sons for partition and an injunction was obtained restraining the official receiver from proceeding with the sale. the official receiver and the appellant were made parties to the suit. the minor sons, represented.....
Judgment:

Walsh, J.

1. The appellant is a mortgagee from a Hindu father of a joint family consisting of himself and his two minor sons. The father applied in I.P. No. 37 of 1923 of the District Court of Coimbatore to be adjudicated an insolvent. The application was on 21st March 1923. It was transferred on 26th March 1923 to the Official Receiver who was appointed interim receiver. The Official Receiver compounded with the appellant who agreed to relinquish his mortgage and have the properties sold free of encumbrance provided he was first satisfied out of the sale proceeds. The Official Receiver got him to reduce the interest also substantially, applied for permission to sell the property free of the mortgage and advertised it for sale for 26th April 1924. Then a suit was filed in the name of the minor sons for partition and an injunction was obtained restraining the Official Receiver from proceeding with the sale. The Official Receiver and the appellant were made parties to the suit. The minor sons, represented by their mother as next friend, contended that the mortgage by the father in the appellant's favour was for purposes not binding on them and therefore should not be recognized. The Court found that the mortgage was for paying off antecedent debts and other binding purposes. A preliminary decree was accordingly given on 24th June 1926 for partition of the entire family property subject to the encumbrance in favour of the appellant. The final decree was passed on 10th August 1926. With that decree the injunction against the Official Receiver came to an end. He again applied to the insolvency Court for permission to sell the entire property including the son's shares. He set out the advantages to the minors, and pointed out the benefit to the estate by selling the property free of the mortgage. On this the District Court passed an order dated 3rd March 1927. The report of the Official Receiver is there summed up as one

requesting that he may be permitted to hold a sale of the insolvent's property free of the mortgage dated 1st June 1919 and to pay the mortgagee the amount due out of the proceeds of sale as per reduced rate of interest.

2. The order is'permitted.' It may be noted that what the Official Receiver actually asked permission to sell in his application was the whole of the suit properties. It is unfortunate that the gist of his application in the order is stated as 'the sale of the insolvent's property' which creates some uncertainty as to what the Court really ordered to be sold. The minor sons then presented a petition to the Official Receiver that their shares should be excluded from the sale. It was dismissed and the sale was held on 14th April 1927 and the properties were purchased by the mortgagee. The minor sons then filed an appeal under Section 68, Provincial Insolvency Act, against; the order of the Official Receiver. This appeal was first filed in the District Court, but subsequently, jurisdiction having been extended to the Sub-Court, it came up for disposal before the Subordinate Judge of Coimbatore. I may perhaps remark that this has unfortunately tended to increase the difficulties of the case. The District Judge who sanctioned the sale in the order referred to above was Mr. Mackay and as noted above the application of the Official Receiver is not correctly set out in the abstract on which the order was passed. And Mr. Burn (now Burn, J.) who succeeded Mr. Mackey had taken the view throughout what was sold was only the insolvent's interest in the property. It is contended before me that everybody understood that what was sold was the whole property including the sons interest and the view of the Subordinate Judge throughout is that the entire interest of both the father and the two sons was sold.

3. When this appeal by the minor sons was transferred to the Subordinate Judge he dismissed it on the ground that as the debt has been found to be binding on the minors, the entire property could be sold. Against this decision the minor sons preferred an appeal to the District Court. The learned District Judge without calling on the respondent, the auction purchaser (the present appellant) dismissed the appeal on the ground that

the sale deed executed by the Official Receiver expressly conveys to the purchaser only the right, title and interest of the insolvent himself and as it was executed after the insolvent's sons had got a decree for partition of their shares it is quite clear that the sale deed could not by any stretch of the language or of the imagination be held to convey the shares of his sons also.

4. As regards the request for a declaration that the sale by the Official Receiver did not affect the sons' shares he held there was no provision in the Insolvency Act for an application to the insolvency Court to declare the effect of a sale deed executed by the Official Receiver; and that as the appellants were not aggrieved by the sale itself, there could be no appeal. This order adversely affected the present appellant the auction-purchaser. It was passed without notice to him, and the sons and their mother had obstructed him, from taking possession. He therefore filed an application on 6th October 1927 described as being under Section 4 and Section 56 of the Act, to remove the obstruction. The minor sons had also on 27th June 1927, filed a petition before the Subordinate Judge under Section 68 praying that the sale of the land should be set aside. These two petitions were heard together by the Subordinate Judge. The appeal by the minors was dismissed on the ground that mortgage deed had been held to be binding on the shares of the sons and the present appellant's petition was allowed. Against this decision an appeal was taken to the District Court but only by the mother of the minors and in this appeal she did not describe herself as representing the minors. The learned District Judge held that the Official Receiver did not sell the shares of the minors so he had no power to deliver their shares to the vendee and that even if he had been able, on the date of the sale, to exercise the disposing power of the father with regard to the shares of the minors he could not put the appellant in possession by means of an application to the insolvency Court. He must have recourse to a separate suit. He quoted Venkataram v. Chokkier AIR 1928 Mad 531. The appeal was accordingly allowed and against this, the auction-purchaser has preferred this second appeal.

5. A preliminary objection is raised that this appeal does not lie because the learned District Judge has found that the appellant's remedy was by way of a separate suit, therefore impliedly holding that Section 4 is not applicable and there is no second appeal under Section 56(vide Section 75). The contention cannot I think be sustained. The petition was put in under Section 4 as well as under Section 56 in the Court of first instance which treated it as one under Section 4. The appellate Court entertained the appeal on this basis. Though one of the two reasons which it gave for dismissing the application was that the appellant could not have proceeded under Section 4 originally, yet its discussion of the power of the Official Receiver to sell the sons' shares was incompetent, if the insolvency Court had no jurisdiction to decide the matter on the ground that no appeal lay. In any case the appeal ability of the order does not depend upon the view taken by the lower appellate Court with regard to the competency of the appeal before it. Ram Ratan Prasad v. Banarsi Lal : AIR1930Pat280 is clear authority where it was held at p. 692 (of 9 Pat.), that if the District Judge entertains an appeal which does not lie to his Court, a second appeal lies against his decision. I do not find that any of the cases quoted would render the present second appeal incompetent. Adinarayana Chetty v. Narasimha Chetty AIR 1931 Mad 471 was a case decided by the learned Chief Justice and myself where what was described as an order was really a decree. We held that it must be regarded as a decree and therefore the remedy was by way of a second appeal. In that case we distinguished certain cases like that in Abdur Rahiman Sahib v. Ganapathi Bhatta (1900) 23 Mad 517 where the Court passed an order which it had no power to pass but which was an appealable order against which an appeal would not be barred. In such a case we remarked that the question was whether or not by adoption of a wrong procedure by a Court the litigant should be deprived of his remedy. I hold that the preliminary objection fails.

6. I will now first deal with the first ground on which the learned District Judge dismissed the appeal, namely, that the Official Receiver did not sell the sons' shares to the purchaser and therefore cannot deliver them. I have pointed out that a wrong summing up of the Official Receiver's original application itself was given at the head of the sale order and the fact that during the course of the proceedings the original insolvency power was transferred from the District Court to the Sub-Court and that the two Courts afterwards proceeded to take differing views as to what was sold has considerably increased the difficulty in deciding this question. The dismissal of the petition of the sons to the Official Receiver to exclude their shares no doubt shows that the Official Receiver meant to sell what he had applied to sell, that is, the whole property including the sons' shares. But as pointed out by the learned District Judge though he may have meant to sell the entire property the sale deed executed by the Official Receiver to the appellant conveys only 'the right, title and interest of the insolvent' in the property. Sripat Singh Dugar v. Prodyot Kumar Tagore AIR 1916 PC 220 is quoted for the appellant to show that in spite of this the sale may be regarded as that of the sons' interest also. But that case is clearly distinguishable. In view of a suit which was being brought at the time by the sons to have it declared that the debt was not binding upon them, the Court there allowed the sale to proceed stating that it was 'the right, title and interest of the father' which was being sold but also stating at the time that these words could not have the effect of taking away the rights of either party. Subsequently, it was held that the debt was binding on the sons.

7. The Privy Council held that their rights had been conveyed under the sale, in spite of the insertion of those words. That case differs from the present in two points: the liability of the sons in the present case had been found by the civil Court before the sale itself was held and there was therefore no reason for putting in any limiting clause in the sale deed to meet the contingency of the sons' shares not being held liable; secondly, it appears in the case in Sripat Singh Dugar v. Prodyot Kumar Tagore AIR 1916 PC 220 that at the time of inserting the words the Court stated to the parties that they would not affect their future rights. I am of opinion therefore that the learned District Judge is right in holding on the clear terms of the sale deed that the share of the sons in the property was not sold and so delivery cannot be given. However some other objections raised by the appellant against the validity of the appeal to the District Court itself have to be considered. The first of these is that the minor sons were not parties to the appeal and therefore it was not maintainable and that the learned District Judge was not entitled to discuss the question of the son's position at all. It is certainly somewhat curious that in an appeal against the order on a petition put in by the minor sons, they should drop out in the appeal and that the appeal should be presented only by the mother apparently on her own behalf. However that may be, I think the objection cannot be sustained. The petition by the respondent to remove the obstruction which was heard at the same time as the petition by the sons and disposed of the order, says that for the reasons stated in I.A. 876/27 (that is the sons' petition) the respondents have no right to obstruct delivery to the petitioner.

8. The appellant had stated in that petition that he had been obstructed by the mother and the two minor sons and that these three persons had no business to do so against the decree of the civil Court. Having asked for the obstruction by these three persons to be removed I think he cannot reasonably say that an appeal by one of them against that order which was virtually a joint one, with the order on the sons' petition is incompetent. In cases of this sort a person who is obstructed in taking possession must prove his title to possession, and it can be objected to even by third party who is not in possession. This ground, viz., that the appeal to the District Court is incompetent therefore fails. The second objection rests on the argument that under Section 4, Provincial Insolvency Act, the Court which is asked to remove the obstruction is acting under Order 21, Rule 98, Civil P.C., and that the order passed under this section is not appealable, the only remedy being by way of a separate suit.

9. The respondent has argued that the power of the Court under Section 4 is confined to giving a declaration as to the rights of the parties and that it has no power to carry it into execution. This must be done by the party taking the declaration to another Court. It is clear I think that the insolvency Court must have some power to remove the obstruction of the sort indicated in Section 53. Such form is I think at best only analogous to the powers under Order 21, Civil P.C., as was held in Hashmat Bibi v. Bhagwandas AIR 1914 All 264, which was a decision under the old Code. For instance the insolvency Court has not got to attach the property in order to bring it to sale which it is required to do under Order 21, Civil P.C., and it can set aside sales (for reasons which are not permitted under that order). Again, the order of sale by the Official Receiver can be confirmed at once if there is no objection. Surely, if by some unexpected windfall the insolvent is freed from debt and is put in possession of funds, it could not be within the power of the insolvency Court after the sale to the purchaser has been completed to cancel it by paying down the sale amount plus 5 per cent and costs. I merely mention these points to indicate that while conceding that the insolvency Court must have some powers of execution the procedure is only analogous to and not identical with that under Order 21.

10. Now, with regard to the power of the insolvency Court to determine the liability as between the father and the son and the power to act on a petition to be put in possession by the purchaser from the Official Receiver, there is no doubt that Venkatram v. Chokkier AIR 1928 Mad 531 has held that the Official Receiver is not entitled to apply under Section 4, Provincial Insolvency Act, for delivery of possession of the property so far as the sons' share is concerned. His remedy is there said to be by way of instituting a suit in the ordinary civil Courts. In that case Ramaswami Chettiar v. Ramaswami Iyangar AIR 1922 Mad 147 was not followed though no doubt it is said in the judgment that some distinction can be made because there both the property of the sons and the property of the insolvent was in dispute. It has been argued before me that the series of cases subsequent to Ramaswami Chettiar v. Ramaswami Iyangar AIR 1922 Mad 147, referred to as placing the position of the sons on a different footing from that of the father. Official Receiver South Arcot v. Perumal Pillai AIR 1924 Mad 387 and Chittammal v. Ponnuswami Naicker AIR 1926 Mad 363, do not really support the argument of Ramesam, J. Sitting as a single Judge I cannot canvass such arguments. I am bound by the decision in Venkatram v. Chokkier AIR 1928 Mad 531 relied on by the lower appellate Court provided it is applicable. But the distinction sought to be drawn by the appellant between that case and the present is this: In that case the purchaser from the Official Receiver proceeded directly under Section 4 to get delivery made to him by the Official Receiver and without getting any previous adjudication by Court as to the liability of the son's share. In this case it is argued that the liability of the sons' share for the mortgage debt had been already adjudicated on. The insolvency Court had therefore power to proceed against the sons' shares in execution. Now if the insolvency Court had decided the liability of the sons, I should have felt that it would have raised very several difficult questions. It has in fact been argued before me both that the insolvency Court has no jurisdiction to investigate a matter of that sort, and even if it has, after deciding the matter it would have no power to sell the sons' share if liable in a case like the present where they had partitioned from their father. In Re, Balaswami Aiyar : AIR1928Mad735 , it was pointed out that the partition only deprived the Official Receiver of one remedy, that is by way of private sale, but that he had still other remedies open, viz. (1) to sue the sons for debts; : AIR1930Pat280 to make himself a party in the action and compel an adjudication on the binding nature of the creditor's debts and ask the Court to discharge the binding debts and then divide the rest of the property; (3) possibly to proceed against the sons on a garnishee action provided that they fill that character, before the insolvency Court itself.

11. Acting on this third possible remedy, it was held by a Bench in Ramchandra Aiyar v. Official Assignee, Madras AIR 1931 Mad 317, that the insolvency Court could go into the question of liabilities between the father and the sons and it was remarked obiter by Curgenven, J., that after such a declaration the Court has consequently the power to direct the sale of the sons' share in the property. But in a later Bench case Krishnamurthi v. Sundaramurthy : AIR1932Mad381 , it was stated by Ramesam, J., who had in his judgment in Re, Baluswami Aiyar : AIR1928Mad735 , alluded to the possible course against the sons in the insolvency Court as garnishees that the procedure against the sons as garnishees is not possible as the sons are not indebted to the father; and secondly, the Court should not decide this matter nor proceed to find the debt binding on the sons to sell their share. If, in the present case, the insolvency Court had passed the decision holding the sons liable for the debt I should have been inclined to ask for a reference to a Full Bench in view of the conflict between Ramachandraiyar v. Official Assignee of Madras AIR 1931 Mad 317 and Krishnamurthy v. Sundaramurthi : AIR1932Mad381 . But I am saved discussing the matter at all and also a great many other further difficult points by the fact that the Court which found the sons liable for the mortgage debt is not the insolvency Court, and that when the Official Receiver proceeded to sell the property he was not executing a decree of the insolvency Court passed by it under Section 4. It is urged for the appellant that the Official Receiver had in fact taken course No. 2 referred to in Re, Baluswami Aiyar : AIR1928Mad735 , had made himself a party to the partition suit and could therefore as a result of the decree in that suit proceed to sell the property of the sons. It' may be noted in the first place, that the sort of decree contemplated in Re, Baluswami Aiyar : AIR1928Mad735 is that the binding debt should first be discharged and then the property divided.

12. In the present case there has been no such decree asked for or obtained in the civil Court, the decree merely being that in the partition the sons' share is also liable for the mortgage debt. Assuming, however that this can be taken, as a decree to first realize the mortgage debt by sale of the properties and then effect the partition no case has been quoted to me to support the argument that the insolvency Court can proceed to execute through the Official Receiver a decree of a civil Court. It seems clear to me that the insolvency Court could not execute such a decree, which must be executed by the Court which passed it, or by some Court to which it had transferred it. Therefore the case is in my opinion on all fours with in Re, Baluswami Aiyar : AIR1928Mad735 and it is not open to me to canvass the correctness of that decision. So far as the insolvency Court is concerned this is a simple case of the Official Receiver selling the property without any previous declaration having been made by the insolvency Court under Section 4, as to the liability of the sons' share and the purchaser from the Official Receiver applying to the Court to be put in possession. The case directly falls under the decision in Re, Baluswami Aiyar : AIR1928Mad735 and it is unnecessary to discuss the various questions which might arise had the insolvency Court itself decided in an inquiry under Section 4 as to the binding nature of the mortgage on the share of the sons. I hold therefore that the view which the lower appellate Court took in this matter is correct.

13. The appellants appear to have, I am bound to say, very little merits in the matter. It is perfectly obvious that the sale by the Official Receiver, without the expenses of attachment and court-fees, and with the interest amount on the mortgage considerably reduced, is much more beneficial to the estate than for the mortgagee to file a suit on his mortgage on the basis of the decree in the partition suit and sell the property under a mortgage decree. As the learned District Judge himself states:

It is quite possible as contended by the learned vakil for the contesting respondent that the obstruction to delivery and the suit for partition were vexatiously engineered by the insolvent himself. If that is the case, it has to be admitted that his scheme has so far been successful.

14. I must however decide this appeal purely on the question of law and procedure and following in Re, Baluswami Aiyar : AIR1928Mad735 I dismiss this second appeal, but without costs in the circumstances. Leave to appellants to apply to the insolvency Court to have the sale by the Official Receiver cancelled subject to the objections if any by the respondent allowed.


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