1. This is an appeal under Section 46 of the Provincial Insolvency Act against an order of the District Judge of Trichinopoly under Section 36 of the Act, which set aside a sale by the insolvent of some of his properties to the 1st respondent for a sum of Rs. 4,000 within two years of the date of the insolvency, as not made in good faith; the order stated that he may be given a charge for the amount on the property.' The application under Section 36 was made by the Official Receiver against the 1st respondent who was also the 7th creditor; but to this application, contesting 4th and 5th creditors were also parties and they appeared by the same Vakil as the Official Receiver. The appeal to us is by the 5th contesting creditor against the 7th creditor, the alienee, the Official Receiver and the 4th creditor being joined as 2nd and 3rd respondents; and it is against that portion of the lower Court's order which purports to give a charge on the property, the 1st respondent has tiled a memorandum of objections, objecting to the order setting aside his sale.
2. A preliminary objection is taken to the maintainability of this appeal, on the ground that the creditor appellant has no right of appeal under Section 46 against the lower
3. Court's order, such right being entirely confined to the Receiver. Section 46, Clause (2), gives the right, of appeal against an order under Section 36 to 'any person aggrieved' by it. The question for decision is whether the 5th creditor is a person falling within that description.
4. The first respondent's Vakil has relied on the cases of Ex parte Sidebotham, In re Sidebotham (1830) 14 Ch. D. 458 : 42 L.T. 783 : 28 W.R. 715 and of Ex parte Official Receiver, In re Reed, Bowen of Co. (1887) 19 Q.B.D. 174 : 56 L.J.Q.B. 447 : 4 Man 226 to show the meaning of the term 'person aggrieved' in the English Bankruptcy Act. In the first case James, L.J., held that, a 'person aggrieved' is 'not a man who is disappointed of a benefit which he might have received if some other order had been made, but a man who has suffered a legal grievance, a man against a whom decision has been pronounced which has wrongfully deprived him of something, or wrongfully refused him something, or wrongfully affected his title to something,' His Lordship was dealing with an appeal by the insolvent where the Court had refused to act on the Comptroller's report. He observed that 'the appellant has suffered no grievance, he had hardly sustained even a damnum; if he has, it is damnum absque injuria'; the appellant was entitled to apply to the first Court and make out his own case against the trustee but he bad nothing to do with the Comptroller's report. In this case His Lordship cited with approval Ex parte Ellis, In re Ellis (1870) 2 Ch. D. 797 : 34 L.T. 705, where a bolder of a bill of sale from the bankrupt was held to be a person aggrieved by the adjudication, and also In re Webb, Ex parte Walter (1876) 2 Ch. D. 326, where a creditor who had not been heard before the Registrar on the question of registration of liquidation resolutions was held entitled to appeal as the matter was one affecting the interests of all creditors. The case of Ex parte Official Receiver, In re Reed, Bowen & Co. (1887) 19 Q.B.D. 174 : 56 L.T. 870 : 4 Mans 226 decided nothing more than that the Official Receiver was a person aggrieved by an order refusing or adjourning his application for immediate adjudication of: a debtor. The majority of the Court, Fry, L.J., dissenting, held that a party against whom an order had been passed refusing something he was entitled to demand, was a person aggrieved by it though he had no pecuniary or beneficial interest in the result. Lord Esher, M.R., while accepting the definition of person aggrieved' given in EX parte Sidebotham, In re Sidebotham (1830) 14 Ch. D. 458 : 49 L.J. Bk. 41, pointed out, however, that it was not an exhaustive one. In lie hang try, Ex parte Stevenson (1894) 63 L.T.Q.B. 570 : 70 L.T. 736: 42 W.R. 490 a creditor was allowed to appeal against an order approving a scheme of arrangement though he had, at the time of order, not tendered proof of his debt but had so tendered before the date of appeal. In the case of Ex parte Ditton, In re Woods (1870) 11 Ch. D. 56 : 49 L.T. 297 the creditor was refused the right of appeal only because he had not proved his debt at all.
5. The English authorities on the question as to who is a person agrrieved and who is not are collected in Williams on Bankruptcy, 11th Edition, pages 383 and 389. From a consideration of them I have come to the conclusion that in the following cases a person is a person aggrieved by the order, viz., (1) where a person is a party to an order, or even if he is not, he is bound by the order, and the order affects his interests, i.e., his person or his property injuriously and (2) where a person is a party to an order and has suffered a 'legal grievance' thereby, inasmuch as something was wrongly refused which he was entitled to demand or Something was wrongly granted to some one which lie was entitled to object to, though he was not beneficially interested in the result. On the other band, a person who is not a party to an order and is not bound by it at all and whom the order does not touch, even though it may indirectly affect him or disappoint him of a benefit which be might have received if the order had been different and a person who though a party has suffered no grievance thereby, legal or beneficial, are not persons aggrieved by the order.
6. The case of Hanseswar Ghosh v. Rakhal Das Ghose 20 Ind. Cas. 633: 18 C.W.N. 366 is an example of the 1st class of persons not aggrieved as stated above. In it, a person who was originally a creditor but who had ceased to be one at the time, was held not to be a person aggrieved by the action of the Receiver in including his properties in the proclamation of sale of the insolvent's properties, as he was a stranger whose title could not be legally affected by the intended sale.
7. In Thiruvenhatachariar v. Tkangayi Ammal 29 Ind. Cas. 294 : 17 M.L.T. 432 : 39 M.k 479 we have a case where a creditor was allowed to apply to the Court under Section 22 as a person aggrieved against an order of the Receiver varying the terms of the sale proclamation of the insolvent's properties, and to ask the Court to set aside the sale; it was held that as an unsecured creditor she was damnified by the order which, of course, would conclude her if not appealed against Lo the Court.
8. We have now to see what the position of the appellant is in the present case. The order of the lower Court granting a charge on the property to the 1st respondent is clearly one that affects him injuriously, as it will diminish pro tanto the dividend payable to him. It will be conclusive against him if not appealed against both because the Receiver who was a party, represented the body of creditors including himself and because, as stated above, be was himself a party to the order. It has been held in Khushhali Ram v. Bholar Mal 28 Ind. Cas. 573 : 13 A.L.J. 270 that a creditor can apply under Section 36 of the Act and I agree with that ruling. I am, therefore, clearly of opinion that the appellant was entitled to appeal and I overrule the preliminary objection.
9. It was urged that this view would lead to great inconvenience in practice as every creditor may prefer a separate appeal from a single order of the District Judge. I do not apprehend any such inconvenience will really arise, as I imagine the Receiver will ordinarily appeal if there are good grounds. I agree entirely with the observations of my learned brother as to what should be done by the Official Receiver in these matters. If, however, for any reason he does not appeal, I do not see why any creditor should not appeal to safeguard his own interests. If there is more than one appeal in the same matter, the Court can hear them all together, as is not infrequently done in the case of batches of appeals from connected rent suits. I think the objection is not valid.
10. On the merits, this appeal stands on the same footing as Appeal against Order No. 42 of 1915, except that in this case the District Judge relied entirely upon evidence taken by the Receiver. For the reasons stated in my judgment in Appeal against Order No. 42 of 1915 which equally apply to this case, I set aside the order of the District Judge and remand the whole case to him for fresh disposal according to law after taking fresh evidence. Costs of the appellant and of the 1st respondent in the appeal and in the memorandum of objections will abide and follow the result and will be provided for in the final order.
Old field, J.
11. I agree with my learned brother's conclusion in favour of the creditor-appellant's right to appeal and with the order be proposes.
12. In doing so, I think it advisable to guard against the inference that the procedure, allowed by the lower Court, by which that creditor carried on the proceedings before it, was satisfactory. For I think that the Official Receiver misunderstood his duty in restricting himself to reporting to the Court and leaving it to deal with his report and the evidence relevant to it unaided, except by any creditor who might choose to interest himself. The Official Receiver, from the moment at which the insolvent's estate vests in him, represents the body of creditors and ought to protect their interests. If in the exercise of his discretion he thinks it unnecessary to appear to do so, but finds that a particular creditor thinks an appearance necessary, the proper practice is for him to obtain an indemnity from such creditor and to carry on the contest, recovering his costs from him in case of failure. The advisability of this practice is clear for it enables the Official Receiver to retain in his hands the control of the proceedings and prevent their abandonment or their being compromised capriciously or collusively by any one creditor, who interests himself in them, to the pre-judiction of the creditors as a body. The lower Court should, in my opinion, act on these principles in dealing with insolvency work in future, bearing in mind that the work in future, being in mind that the Official Receiver is its Officer, whose proceedings it is its duty to control. It will consider whether it can act on them at the rehearing in the present case.