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Nagarur Subbarayudu Vs. Official Receiver and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1935Mad433
AppellantNagarur Subbarayudu
RespondentOfficial Receiver and anr.
Cases ReferredJathaji Peraji Firm v. Krishnayya
Excerpt:
- - it is true that in that case the learned judges passed an order under section 37 so as to put the matter on a perfectly regular footing, but it is clear that they hold that as section 37 by itself validates all previous acts of the official receiver, the effect of the saving in section 37 is to preserve the validity of the receiver's exorcise of his option of avoidance (p, 660). 2. in fact the only order which a court can pass under section 37 and which the learned judges did actually pass, is to vest the property of the insolvent in the receiver or other appointee and it is obvious that no sort of order is required to bring into force the first part of:.....j.1. pending the decision of an application to set aside a sale of the insolvent's property by the official receiver the adjudication was annulled. the petitioner sought to continue his petition but the court dismissed it on the ground that on the unconditional annulment of the adjudication the properties revest in the insolvent, and the insolvency court has ,no further jurisdiction. the learned district judge remarked that the official receiver no longer represents the insolvent or the general body of creditors and any decision given on the petition will not be binding on them. against that order the present appeal is preferred. the only case quoted by the lower court is maung hme v. po seik 1925 rang 301. that related to the question whether the official receiver could continua an.....
Judgment:

Walsh, J.

1. Pending the decision of an application to set aside a sale of the insolvent's property by the Official Receiver the adjudication was annulled. The petitioner sought to continue his petition but the Court dismissed it on the ground that on the unconditional annulment of the adjudication the properties revest in the insolvent, and the Insolvency Court has ,no further jurisdiction. The learned District Judge remarked that the Official Receiver no longer represents the insolvent or the general body of creditors and any decision given on the petition will not be binding on them. Against that order the present appeal is preferred. The only case quoted by the lower Court is Maung Hme v. Po Seik 1925 Rang 301. That related to the question whether the Official Receiver could continua an application under Section 53, Provincial Insolvency Act after there had been an annulment without any provision made under Section 37 for vesting the property of the insolvent with the Receiver. With regard to that particular question there are three decisions of our own Court, the latest being the Full Bench Decision in C.M.S.A. 135 of 1931 and Order E.P. 1194 of 1931 which decision was the result of a reference by Sundaram Chetty J. and myself with regard to the powers of a Receiver appointed to take charge of the insolvent's properties under Section 37, after an order or adjudication had been annulled. The first case is Jethaji Peraji Firm v. Krishnayya 1930 Mad 278 where a Bench of this Court held that if before annulment the Official Receiver had applied to set aside a mortgage under Section 54 of the Act as an 'act of fraudulent preference, he can prosecute the applicant after an annulment. It is true that in that case the learned Judges passed an order under Section 37 so as to put the matter on a perfectly regular footing, but it is clear that they hold that as Section 37 by itself validates all previous acts of the Official Receiver,

the effect of the saving in Section 37 is to preserve the validity of the Receiver's exorcise of his option of avoidance (p, 660).

2. In fact the only order which a Court can pass under Section 37 and which the learned Judges did actually pass, is to vest the property of the insolvent in the Receiver or other appointee and it is obvious that no sort of order is required to bring into force the first part of: Section 37 and that the validity of previous acts of the Court or of the Receiver does not depend, and cannot depend, on the Court passing any order under the second part of the section. Such acts are validated by the section itself 'proprio vigore.' The next case Somasundaram Chettiar v. Periakaruppan Chettiar 1930 Mad 520 held that on annulling an ad judication under Section 43, the Insolvency Court has ample jurisdiction to make an order vesting the property in the Official Receiver or any other person for distributing the assets among the creditors of the insolvents. As the precise power of the Receiver under this Section 37 was the matter referred by Sundaram Chetty, J. and myself, at a later ' date to the Full Bench the judgment of the Full Bench on this matter may be ' consulted. It is mostly not relevant to 'the matter before me now, but what is ' relevant, with regard to the Rangoon case followed by the lower Court is ' that it approves of the view taken in Jethaji Peraji Firm v. Krishnayya 1930 Mad 278 and disapproves of the Rangoon view which had been followed again in that Court in Somasundara m Chettiar v. Periakaruppan Chettiar 1930 Mad 520. So that even with regard to-the power of the Receiver to continue, after annulment, proceedings begun, under Sections 53 and 54 the view of this. Court is opposed to that of the Rangoon High Court.

3. But in effect the decision of the lower Court in this case, if considered in its real effect, is to validate the acts. of the Official Receiver during insolvency to a most extraordinary degree. For the net result of his order is that an act of the Official Receiver which would have been liable to challenge by appeal, had the insolvency not been annulled, is now immune from, any act by reason of the annulment of the adjudication. This is a very startling conclusion and the more so because the acts of the Court and of the Receiver are put on the same level by the section. Suppose, for instance, that the Court had under Section 4 of the Act adjudicated (which it has the power to do under that section which is very wide) the title to property between the insolvent and a third party, and that against that decree the third party, had appealed it would follow, on the view taken by the lower Court, that that appeal must be dismissed for no other reason that that the adjudication had been annulled, an. event over which the third party had not the smallest control. Considerations such as these make it clear to my mind that when Section 37 says that when an adjudication is annulled all acts-theretofore done by the Court or Official. Receiver shall be valid, it means that the order of adjudication will not invalidate them, not that they acquire &. degree of sacrosanctity and immunity from attack by way of appeal which they would not have possessed, had there-been no order of annulment.

4. It was suggested that this last result must follow unless the Court passes some order under Section 37, but as pointed out above, the order which the Court can pass only concerns the vesting of the insolvent's property under the second part of the section. Obviously a declaration by the Court that its own orders or acts or these of the Official Receiver during the insolvency are liable to be upset on appeal or are invalid to this extent, is entirely otiose for the meaning of the first part of the section cannot be made to depend on any order passed by the Court. Rielly v. Johnsn (1872) 7 Ex 263 was referred to for the respondents, but ak there is no section in the English Bankruptcy Act corresponding to Section 43 of the Presidency Towns Insolvency Act, English cases are of little use. If the appellant has the right to continue his appeal against the Official Receiver's act then he should not be deprived of it on account of any formal difficulty of procedure. As the appeal is by a creditor of the insolvent, on the ground that the sale price was unduly low, it is clear that the interests of the creditors are sufficiently represented. If the appeal succeeds they will gain, if it fails they will be no worse off than before. From that point of view, there would appear to be no difficulty arising from the fact he Official Receiver no longer represents them. Since however it is his act done when he did represent thern which is in question he would appear to be a proper party. An appeal to the insolvency Court against a sale made by an Official Receiver is rather a peculiar proceeding, for the Official Receiver being the officer of the Court the appeal is, from one point of view, a revision petition to the Court against its own order. The real contestants in such appeals are usually the appellant and the purchaser, but Official Receiver should certainly have a right to defend his action and is therefore naturally made aparty.

5. The only real difficulty in the present' case as regards procedure, is as regards what is to be done if the sale is set aside. Obviously the property should revert to the Official Receiver for resale for the creditors' benefit. It may regularise the position therefore to pass an order now under the latter part of Section 37 that this property shall be revest in the Official Receiver if the sale is set aside. There is the analogy of a similar order passed by the High Court in Jathaji Peraji Firm v. Krishnayya 1930 Ma 278. This is not property which has ever reverted to the insolvent under Section 37, and therefore that is nothing to prevent this Court revesting it contingently in the Official Receiver if the sale is set aside and I therefore pass the contingent order. The costs of this appeal will abide the result of the original petition before the lower Court.


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