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K. Sambasiva Aiyar and ors. Vs. the Official Receiver - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in(1941)2MLJ918
AppellantK. Sambasiva Aiyar and ors.
RespondentThe Official Receiver
Cases Referred(ii) Balarami Reddi v. Official Receiver
Excerpt:
- .....21, rule 84, and the remaining three-quarters on 4th july. the sum of rs. 12,020 was treated as assets realised and rateably distributed amongst the appellants and another creditor who has not appealed. on 3rd july, an insolvency petition was presented against kasinatha aiyar which resulted in his adjudication. the official receiver in administering his estate applied to the court for an order directing the appellants to pay to him the sums which had thus been distributed to them, with interest: and such an order has been passed in appeal by the learned district judge of west tanjore under the provisions of section 51 of the provincial insolvency act. whether that order is right or wrong is the issue in these appeals.2. section 51 (1) of the provincial insolvency act runs as.....
Judgment:

King, J.

1. These are appeals by five persons who were in 1933 some of the creditors of one Kasinatha Aiyar. One of the appellants in C. M. S. A. No. 136 (respondent 6 in the Courts below) was pursuing execution against Kasinatha Aiyar and on 30th June, 1933, three lots of Kasinatha Aiyar's property were sold in Court auction. Two lots in Annakudi village were sold for Rs. 7,500, which amount was paid in full there and then. The third lot in Manikandi village was sold for Rs. 4,520. One quarter of this amount was deposited on 30th June as required by Order 21, Rule 84, and the remaining three-quarters on 4th July. The sum of Rs. 12,020 was treated as assets realised and rateably distributed amongst the appellants and another creditor who has not appealed. On 3rd July, an insolvency petition was presented against Kasinatha Aiyar which resulted in his adjudication. The Official Receiver in administering his estate applied to the Court for an order directing the appellants to pay to him the sums which had thus been distributed to them, with interest: and such an order has been passed in appeal by the learned District Judge of West Tanjore under the provisions of Section 51 of the Provincial Insolvency Act. Whether that order is right or wrong is the issue in these appeals.

2. Section 51 (1) of the Provincial Insolvency Act runs as follows:

Where execution of a decree has issued against the property of a debtor no person shall be entitled to the benefit of the execution against the Receiver except in respect of assets realised in the course of the execution by sale or otherwise before the date of the admission of the petition.

There are four points for determination in these appeals:

(i) What is the date of the admission of the insolvency petition?

(ii) What is the date (or, are the dates) of the realisation of the assets?

(iii) If the Receiver is found entitled to all or any of these assets what is the precise meaning of benefit of the execution? and

(iv) Is the Receiver entitled to interest on any sum awarded to him?

3. On the first point the District Judge has held that the insolvency petition was admitted on 3rd July. I have already mentioned that it was presented on that date. On its presentation the Court ordered 'check and file emergently'. It was checked and was filed, and on the same day the Court further ordered that publication charges should be deposited by 7th July. On 7th July, notice and publication were ordered. It is now argued for the appellants that the insolvency petition was not 'admitted' until 7th July, and I am referred to a ruling in Narasimha Pattamahadevi v. Annan Naidu : AIR1940Mad624 as an authority for the position that the order to issue notice constitutes the act of admission. In many cases this may well be so but it cannot be a universal rule of law. In the present case it cannot be disputed that the Court on 3rd July accepted the insolvency petition as having been validly presented, and that, in my opinion, means that the insolvency petition was admitted on that day. I hold accordingly and it will now follow that any assets realised after 3rd July must go to the Official Receiver.

4. I come accordingly to the second point, and here repeat that two sums, Rs. 7,500 and Rs. 1,130 respectively, were paid into Court on 30th June and that Rs. 3,390 was paid in on 4th July. Clearly then the Official Receiver is entitled to at least Rs. 3,390. He is also entitled to the sum of Rs. 1,130. It has been held by a Bench of this Court (see Ramanathan Chettiar v. Subramania Chettiar : (1924)47MLJ759 that in a case of this kind assets are realised only when the full amount of the bid is deposited. There remains the principal item of Rs. 7,500. This sum too has been held by the learned District Judge to have been realised only on 4th July, on the authority of Ramanathan Chettiar v. Subramania Sastrial : (1902)12MLJ276 . That is the decision of a single learned Judge Sir Arnold White, then Chief Justice of Madras, from which I must most respectfully express my dissent. I do so for the following reasons: In the first place it seems contrary to plain language and to common sense to say that Rs. 7,500 which was actually realised on 30th June was not realised until 4th July. The learned Chief Justice gives no reasons for his view. It seems to me upon a critical examination of the position that the assets can be deemed not to have been realised on 30th June only if they are held insecurely and may prove, on the happening of some subsequent event, not to be assets after all, but only a temporary deposit. That is clearly the reason why the 25 per cent. deposit of Rs. 1,000 in this case was not assets, until the remaining 75 per cent. had been paid. If the 75 per cent. were not paid, immediate re-sale of the property is obligatory (see Order 21, Rule 86). There is therefore no sale and no assets can have been realised.

5. Now the subsequent event which the learned District Judge here holds converts the Rs. 7,500 paid on 30th June into assets realised on 4th July is the payment of the remaining Rs. 3,390 upon the third lot. I ask myself in vain why it should have this effect. The two transactions are quite distinct. If the Rs. 3,390 were not paid and a re-sale were necessary under Order 21, Rule 86 it is conceded that the re-sale would be confined to the third lot. How then can the nature of the payment made on 30th June be in any way affected by the payment or non-payment on 4th July, of money due on different property? It is also clear law that when a sale is set aside under Order 21, Rule 90 it can be set aside in respect of one lot only. (See Ramachandra Aiyar v. Parvathi Ammal (1910) M.W.N. 834 and Narasimhamurthy v. Official Receiver, West Godavari (1916)(1935)Mad. 438.) It seems to me therefore very evident that the sale of three lots of property--though originating from a single proclamation of sale--is really equivalent to three sales. It is impossible to regard such a sale as one and indivisible on which basis alone, I think, can there be any logical principle for following Ramanathan Chettiar v. Subramania Sastrial : (1902)12MLJ276 .

6. I have been referred to only two other decisions on this matter. In Barendra v. Martin & Co. (1920) 33 C.L J. 7, (a judgment delivered in 1920) a Bench of the Calcutta High Court follows Ramanathan Chettiar v. Subramania Sastrial : (1902)12MLJ276 without any discussion. In Girindra Nath Ray v. Kedar Nath Bidyanta 29 C.W.N. 575, (a judgment delivered in 1924) another Bench of the same High Court takes the opposite view, though without reference to Ramanathan Chettiar v. Subramania Sastrial : (1902)12MLJ276 . It sets out the essence of what is in my opinion a very simple matter in these simple words:

The properties were sold separately, their sale proceeds were realised separately, and the sale of each lot was completed when the whole of the balance of the purchase money was deposited in Court.

I accordingly hold that the sum of Rs. 7,500 represents assets realised on 30th June, and that the Official Receiver's claim in respect of this sum must be dismissed.

7. As I have held that the appellants have no title to retain the sum of Rs. 4,520 realised for the third lot the question next arises whether they must refund that sum in full, or whether the 'benefit of execution' means that sum less any expenses incurred in realising it, and if so, what is the measure of those expenses. Three different views have been taken by three learned Judges of this Court, all sitting singly. These cases in chronological order are:

(i) Swaminatha Aiyar v. Official Receiver, South Malabar : AIR1933Mad703 , where it was held that the benefit of execution meant the amount realised less both expenses of the execution petition and expenses of the suit in which the decree was obtained;

(ii) Balarami Reddi v. Official Receiver, Nellore : AIR1939Mad291 , in which the benefit was held to be the gross sum realised without any deductions; and

(iii) an unreported decision of Wadsworth, J., in C.M.A. No. 175 of 1937 in which the benefit is held to mean the sum realised less the costs of execution.

8. I do not think I am called upon to discuss these points of view in detail. I need only say that I agree entirely with the view expressed by Wadsworth, J., in the latest case, and following it, direct that the appellants here be permitted to deduct such costs of the execution petition as were necessary to realise the Rs. 4,520 payable to the Official Receiver.

9. The final question is whether on the sum so calculated the, Official Receiver is entitled to interest. The District Judge holds that he is so entitled, as this is a matter analogous to restitution. The appellant's learned advocate attempts to distinguish this case by arguing that, unlike persons whose decrees have been reversed, the appellants had a 'right' to receive the money. But as Section 51 denies them any such right they cannot be said to have possessed it. The parallel with restitution is I think complete, and interest must be allowed. The parties will pay and receive proportionate costs throughout.

10. Leave granted.


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