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Govada Balabharathi Co-operative Credit Society, Represented by Its President, T. Suryanarayana Vs. Alapati Venkatakrishnayya and anr. - Court Judgment

LegalCrystal Citation
SubjectTrust and Societies
CourtChennai
Decided On
Reported inAIR1940Mad932; (1940)2MLJ388
AppellantGovada Balabharathi Co-operative Credit Society, Represented by Its President, T. Suryanarayana
RespondentAlapati Venkatakrishnayya and anr.
Cases ReferredRajagopala Chettiar v. The Hindu Religious Endowments Board
Excerpt:
.....sale itself is good and under clause (1) the sale proceeds go to the receiver if realised after the date of the admission of the petition and to the creditor if realised before that..........to get some money from one ramatulasamma. the society, proceeded under section 51 of the madras co-operative societies act of 1932 to recover the dues and an award was passed directing payment of the sum due. the award was being executed against the property of the debtor. at that stage, another creditor of the debtor who is the first respondent in this civil revision petition filed i.p. no. 105 of 1934 to adjudicate ramatulasamma as an insolvent and applied for the appointment of a receiver under section 20 of the provincial insolvency act. the subordinate judge before whom the application was made rejected the application holding that the co-operative credit society had a first charge upon the entire estate of the debtor. the matter was taken up on appeal, and the districts judge held.....
Judgment:

Somayya, J.

1. Balabharathi Co-operative Credit Society of Govada had to get some money from one Ramatulasamma. The society, proceeded under Section 51 of the Madras Co-operative Societies Act of 1932 to recover the dues and an award was passed directing payment of the sum due. The award was being executed against the property of the debtor. At that stage, another creditor of the debtor who is the first respondent in this Civil Revision Petition filed I.P. No. 105 of 1934 to adjudicate Ramatulasamma as an insolvent and applied for the appointment of a receiver under Section 20 of the Provincial Insolvency Act. The Subordinate Judge before whom the application was made rejected the application holding that the Co-operative Credit Society had a first charge upon the entire estate of the debtor. The matter was taken up on appeal, and the Districts Judge held that the Co-operative Society had no prior charge over the general estate of the debtor and that the prior charge refers only to the interest of the member in the share capital of the Society. By the time the appeal was decided by the District Judge, the properties of Ramatulasamma had been sold by the Sale Officer under Rule 22 of the Rules ma4e under the Act, and hence, there was no scope for the appointment of a receiver of the properties. The District Judge, therefore, dismissed the appeal with a direction that the appellant before him might take necessary steps as regards the sale proceeds in the hands of the society.

2. The application out of which the present revision arises, was filed in the Subordinate Judge's Court under Section 51(1) of the Provincial Insolvency Act and Section 151 of the Civil Procedure Code, requesting the Court to call for the entire sale proceeds of about Rs. 2,100 or at least the balance due after deducting the amount due to the society. The Subordinate Judge dismissed the application holding that neither Section 51(1) of the Provincial Insolvency Act nor Section 151 of the Civil Procedure Code applied to this case. On appeal, the District Judge came to the conclusion that Section 51(1) of the Provincial Insolvency Act applies and that the Co-operative Society was bound to remit the sale proceeds to the Insolvency Court. The Appellate Court held that the Cooperative Society is not entitled to the benefit of the execution against the receiver in the insolvency because the assets were realised after the date of the admission of the Insolvency Petition.

3. This revision petition is filed in this Court by the Cooperative Credit Society. It is argued that Section 51(1) of the Provincial Insolvency Act applies only where execution of a decree has issued against the properties of the judgment-debtor. It is said that in this case the property was sold not in execution of a decree but that it was sold in execution of an award under the Co-operative Societies Act (Madras Act VI of 1932).

4. The expression 'decree' is not defined in the Provincial Insolvency Act and under Section 2, Clause 2, of the Act:

Words and expressions used in this Act and defined in the Code of Civil Procedure, 1908 and not hereinbefore defined shall have the same meanings as those respectively attributed to them by the said Code.

5. Under Section 2(2) of Civil Procedure Code decree means:

The formal expression of an adjudication which so far as regards the Court expressing it conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit.

6. What is urged is that the Registrar or Arbitrator is not deciding a suit. The Registrar or the Arbitrator in passing the award under the Act is certainly acting as a Court.

7. So, the real question is whether a proceeding under the Act is a 'suit'. The procedure laid down under the Co-operative Societies Act is a substitute for an ordinary suit in a Civil Court and the requirements of a -suit are, I think, satisfied in a proceeding under the Co-operative Societies Act.

8. Under Rule 15, Clause (1) of the Rules made under the Madras Co-operative Societies Act the reference under Section 51 of the Act is required to be in writing. This corresponds to the plaint in an ordinary suit; the other clauses of r. 45 show that the subsequent procedure is substantially the same as that followed in an ordinary suit. But Mr. V. Subramaniam, the earned Counsel for the petitioner, relies upon the decision of the Full Bench in Rajagopala Chettiar v. The Hindu Religious Endowments Board (1933) 66 M.L.J. 43 : I.L.R. 57 Mad. 271. The decision was rendered under the Hindu Religious Endowments Act and it was held that a proceeding under Section 84(2) of the Act was not a suit. There are various provisions in that Act where the proceedings are referred to as suits, but the proceeding under Section 84(2) is referred to as a petition and the decision of the Full Bench may be distinguishable on this ground. But the decision lays down that an adjudication in a proceeding will be a decree only where the proceeding starts with a plaint. I do not, therefore, wish to base my judgment on the question whether a proceeding under the Madras Co-operative Societies Act is or is not a decree within the meaning of Section 2(2) of the Civil Procedure Code* and therefore covered by Section 51(1) of the Provincial Insolvency Act, though my own view is that an award under the Madras Co-operative Societies Act is a decree as used in Section 51(1) of Provincial Insolvency Act.

9. Under Section 28(7) of the Provincial Insolvency Act the order of adjudication relates back to and takes effect from the date of the presentation of the petition. Under Section 28(2) on the making of an order of adjudication the whole property of the insolvent vests in the Court or in the Receiver and shall be divisible among the creditors. Reading Section 28(2) and Section 28(7) together, the result is that on an adjudication the properties of the insolvent vest in the Receiver with effect from the date of the presentation of the petition. There are similar provisions in the Presidency Towns Insolvency Act and in the English Bankruptcy Act. If matters stood there all dealings with the property after the date of the insolvency petition would be null and void but certain provisions are enacted to protect persons who deal bona fide with the insolvent before the date of actual adjudication. A payment by the insolvent to any of his creditors, a payment or delivery to the insolvent, any transfer by the insolvent for valuable consideration and any contract or dealing by or with the insolvent for valuable consideration, are protected provided that the transaction took place before the date of the order of adjudication and the person with whom such transaction takes place had not at that time notice of the presentation of any insolvency petition by or against the debtor. (See Section 55 of the Provincial Insolvency Act.) Then we have Section 51 of the Act which provides for sales in execution of the property of the insolvent. Under Section 51 (3):

A person who in good faith purchases the property of the debtor under a sale in execution shall in all cases acquire a good title to it against the receiver.

10. This does not restrict the sales to those held in execution of a decree but applies to sales in execution in general. Therefore, the sale in execution of an award of the Registrar or the Arbitrator under the Madras Co-operative Societies Act gives a good title to the purchaser who in good faith purchased it as against the Receiver, in insolvency. Section 51(1) deals with the assets realised in execution. The clause itself begins with the expression 'where execution of a decree has issued against the property of the debtor' and provides that in such a case no person shall be entitled to the benefit of the execution against the Receiver except in respect of assets realised in course of the execution by sale or otherwise before the date of the admission of the petition. It appears to me that both Sections 55(1) and 55(3) refer to the same classes of cases; under Clause (3) the sale itself is good and under Clause (1) the sale proceeds go to the receiver if realised after the date of the admission of the petition and to the creditor if realised before that date. There is no reason to suppose that a decree-holder under an award under the Act is intended to be placed on any higher footing than an ordinary decree-holder.

11. If the contention advanced by Mr. Subramanian is correct, then the protection given under Section 51(1) will not apply. If the award under the Madras Co-operative Societies Act is not a decree, then the whole of Section 51(1) becomes inapplicable. In such a case there is no other provision in the Act which will give the society any immunity even to the extent to which such immunity is provided in the case of executions of decrees by Section 51(1). The acceptance of the argument far from benefiting the petitioner, is against him.

12. I think, therefore, that Section 51(1) should beheld to apply to all execution sales and should not be confined to assets realized in execution of 'decrees' as restricted by the decision of the Full Bench in Rajagopala Chettiar v. The Hindu Religious Endowments Board (1933) 66 M.L.J. 43 : I.L.R. 57 Mad. 271.

13. In either view therefore whether the word 'decree' as used in Section 51 of the Provincial Insolvency Act is to be understood in a general sense or in the restricted sense, I think the same result follows so far as this revision is concerned.

14. This Civil Revision Petition is therefore dismissed with costs.


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