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Ratna Bai Alias Hira Bai and ors. Vs. the Official Assignee of Madras and anr. - Court Judgment

LegalCrystal Citation
Decided On
Reported inAIR1916Mad415; 29Ind.Cas.168
AppellantRatna Bai Alias Hira Bai and ors.;murlidoss Brijrathna Doss and ors.
RespondentThe Official Assignee of Madras and anr.
Cases ReferredAbdul Kareem Sahib v. The Official Assignee of Madras
insolvency - insolvency act, 1848, 11 and 12 vict. c. 21, sections 26, 86, 7, 21--after-acquired, property of insolvent, vesting of, in official assignee--possession of insolvent for over 12 years, if adverse against official assignee--limitation act (ix of 1908), applicability of, to proceedings in insolvency--claims relating to properties in hands of insolvent and his representatives--jurisdiction of court to decide on application. - .....on his mother's death in 1897 and that the property in the next instant passed over to the official assignee. the widow's case that she held it adversely to her husband afterwards is not worth serious notice. i have also nothing to add to the reasons given by my learned brother in support of his conclusion that for the vesting of the property in the official assignee, it is not necessary to have judgment entered up under section 86 of the indian insolvency act of 1843 and i join with him in respectfully dissenting from the decision in in re ackrill 18 m.p 24.2. coming to the contention that, the official assignee should have been deferred to a suit even as regards this house (as he was referred to a suit in respect of the moveables), i am inclined to hold that even as regards the.....

Sadasiva Aiyar, J.

1. I entirely agree with the judgment, just now pronounced by my learned brother, and for the reasons stated by him, that the house in question could not be claimed by the insolvent's widow, Raton Bai, through any gift from her mother-in-law that the house vested in the insolvent on his mother's death in 1897 and that the property in the next instant passed over to the Official Assignee. The widow's case that she held it adversely to her husband afterwards is not worth serious notice. I have also nothing to add to the reasons given by my learned brother in support of his conclusion that for the vesting of the property in the Official Assignee, it is not necessary to have judgment entered up under Section 86 of the Indian Insolvency Act of 1843 and I join with him in respectfully dissenting from the decision in In re Ackrill 18 M.P 24.

2. Coming to the contention that, the Official Assignee should have been Deferred to a suit even as regards this house (as he was referred to a suit in respect of the moveables), I am inclined to hold that even as regards the moveables, the questions raised, not only might; have been, but ought to have been decided in the insolvency proceedings themselves. There is nothing in the Insolvency Act of 1848 (which has continued to apply to present proceedings by reason of Section 127, Clause (1) of the new Insolvency Act) which empowers the High Court exercising jurisdiction in insolvency proceedings to refer the Official Assignee, who has taken such proceedings under Section 26, to a similar suit on original side. In In the matter of Umbica Nundun Biswas 3 C.P 434 : 1 C.L.R. 561 the learned Judges say (page 442): 'We believe that it has always been the practice of this Court to abstain from deciding difficult questions of title under that section,' that is, Section 26 of the Insolvency Act of 1848, 'and to leave parties to settle such questions by a regular suit and we entirely approve of that practice.' Speaking for myself, I think that when jurisdiction is given by Statute to the Court sitting as an Insolvency Court to decide a case in proceedings taken in a particular form and when there is no special reservation of the remedy by a suit to be filed in another Court, or in the same Court in its ordinary original civil jurisdiction the special procedure pointed out by the Legislature in respect of the decision of those particular questions ought to be brought to their natural and intended conclusion by the Court which is directed to try those questions, and the Court has no jurisdiction to refer the applicant to resort to another mode of seeking the same reliefs. As, however, it is the same Court, namely, the High Court, which (after the Supreme Court was abolished) tries the suit to which the Assignee is referred, the judgment in the suit to which the Official Assignee is so referred, might be taken as a further judgment of the High Court in the insolvency proceedings in respect of the moveables and the matter becomes one of mere, form and not of substance or jurisdiction.

3. As regards the last question (prescriptive title) if Section 28 of the Limitation Act applies, there can be no doubt that not only the Official Assignee's right to the property was extinguished, but the person whose adverse possession so extinguished the Official Assignee's right acquired a title to the property. Section 28, no doubt, does not expressly state that the person in adverse possession himself gets the right which has been extinguished in his opponent. But as West, J., pointed out in Radhabai and Ramchandra Konher v. Anantrav Bhagvant Deshpande 9 B.P 198 and as Sir R. Conch, C.J., said in Ram Lochun Chuckerbutty v. Ram Soonder Chuckerbutty 20 W.R. 104 the title of a true owner is, to use the language of the Judicial Committee, extinguished in favour of the persons who have been in possession of the land for more than 12 years.' Statutes of Limitation, though they are in form, they are construed so as to operate as laws of acquisitive prescription.' See also Budesab v. Hanmanta 21 B.P 509 in which it is said that adverse possession for more than 12 years 'creates' a title by negation in the occupant which he can actively assert, if he loses possession, even against the true owner,' quoting Scott v. Nixon 3 Dr. and War. 388 : 2 Con. & L. 185 : 6 Ir. Eq. R.S. 61 R.R. 84; Brassington v. Llewellyn 27 L.J. 9 Ex. 297 : 1 F. & F. 27 and Sanders v. Sanders 19 Ch. D. 373 : 51 L.J. Ch. 276 : 45 L.T. 637 : 30 W.R. 280.

4. The next question is whether Section 28 of the Limitation Act is applicable so as to extinguish the Official Assignee's right and to vest it in the insolvent. That depends on the answer to the question, whether the Official Assignee had a right to institute a suit for possession against the insolvent in respect of the property that vested in the Official Assignee. Section 21 of the Act of 1848 directs the Official Assignee to reduce into possession all the property of the insolvent. The Assignee being an officer of Court in whom the property of a party to a litigation (namely, the insolvent) has become vested by operation of law, it follows, that all questions between that purty and Official Assignee in respect of that property have become the subject of the insolvency proceedings themselves. All assets which become vested in the Official Assignee for the purpose of the insolvency proceedings become part of the property involved in such proceedings. Now it is clear law in an ordinary suit if A sues on a good title for possession of his land after 11 years of dispossession, even if the defendant continued in possession for another 12 years during the pendency of litigation and before the suit became finally ripe for decision, judgment ought to be given for possession in plaintiff's favour, the continuance of the defendant's possession for 12 years during the pendency of the suit being wholly ignored. It seems to me that on the same principle rights to properties, which are or become involved in the insolvency proceedings and which rights have to be decided in those proceeding's, cannot be affected by the possession in any of the parties to those proceedings during the continuance of those proceedings.

5. Under Sections 20, 21 and 7 of the Insolvency Act, the Official Assignee becomes vested with the rights of the insolvent in all the real and personal estates of the insolvent for certain purposes, those purposes being shortly stated in Section 20, to be used in 'trust for the benefit of the creditors of such insolvent'. Thus the Official Assignee is clearly made an express trustee for the benefit of the insolvent's creditors. Under the new Act, Section 33, every insolvent has to wait at such times and places on the Official Assignee as may be required by the Official Assignee' and lie is also to aid to the utmost of his power in the realisation of his property and the distribution of the proceeds among his creditors.' Though the duty of the insolvent to assist the Official Assignee and the creditors is not stated in such express terms in the old Act of 1848, I am inclined to hold that from the time of his adjudication as insolvent until his final discharge, the insolvent, by the force of the statutory provisions in that Act also, holds the position of an express trustee for his creditors just like the Official Assignee and as a trustee can never plead adverse, that is, hostile possession against his nestui que trust, the insolvent cannot also do so. It is on this principle that all the properties acquired by him become vested in the Official Assignee for the benefit of his creditors. Further, any possessory right which he gets by possession for say six months becomes vested in the Official Assignee, because that possessory right is also property belonging to the insolvent and if a man is prohibited by Statute from having such possession in himself as will entitle him to claim for himself the possessory right, it follows that possessory right which also becomes his every six months and which is lost in favour of the Official Assignee at the end of the six months, cannot go on accumulating for 12 years so as to give him a prescriptive title at the end of the 12 years. The accumulation cannot go on when the units which are to be accumulated become nonexistent. A man who is prohibited by the Statute to claim hostilely and adversely to the Official Assignee and to his creditors represented by the Official Assignee cannot, it seems to me, be allowed to set up that he did so act adversely or hostilely. I, therefore, respectfully dissent also from the decision in Kristocomul Mitter v. Suresh Chunder Deb 8 C.P 556 : 12 C.L.R. 253 in which it was held that an insolvent can hold after-acquired property adversely to the Official Assignee.

6. In the result I concur in dismissing the appeals with costs.

7. Napier, J.--These are appeals from two judgments of the Chief Justice (then Mr. Justice Wallis) in Insolvency Petition No. 2 of 1890, arising out of a motion made by the Official Assignee for a declaration that certain moveable and immoveable property was the property of the insolvent. The other parties were the widow and the four sons of the insolvent. The learned Judge declined to deal with the moveable property and referred the Official Assignee to a suit. But he inquired into the claim for the immoveable property and held that it vested in the Official Assignee. The first judgment dealt with the question of limitation and the second with the other points arising in the matter. I shall deal with both in one judgment.

8. The points urged before us, some of which were also urged before the learned Judge, are, (1) that the Court had no jurisdiction to entertain the motion as the insolvent was dead, (2) that the matter was not one which could properly have been dealt with on motion, (3) that the property belonged to the widow of the deceased, either by gift from her mother-in-law or by adverse possession, and (4) that even if at one time it vested in the Official Assignee through the insolvent, the latter had acquired against the Official Assignee a new title by adverse possession.

9. The widow's claim by gift from her mother-in-law is given up, there being no registered document. Her claim by adverse possession is negatived by the learned Judge, on the ground that the husband treated the property as his own by mortgaging and that, therefore, the evidence did not establish possession in her at all. I entirely agree in this conclusion.

10. It remains to consider the claim through the insolvent. I am entirely unable to accept the contention that the Court had no jurisdiction. The suggestion was that the property had not vested in the Official Assignee completely before the death of the insolvent, the-argument being that judgment should have been entered up under Section 86 of the Indian Insolvency Act of 1848, 11 and 12 Vic., C. 21, and reliance is placed on the case reported in Ackrill, In re 18 M.P 24 and the cases quoted therein. Undoubtedly there is an observation in that case which supports the contention. But I am unable to agree with the observations of the learned Judge therein, and think that they must have been intended to be limited to the facts of that case, which was one of money paid under a policy of insurance on th life of the insolvent to a person who had purchased his interest in the policy from the Official Assignee. It being found that the purchase was partly for the benefit of the insolvent the Court held that it vested in the Administrator-General, it being treated as property acquired after death. The observation, however, is as follows: Seeing that future-acquired property does not vest in the Official Assignee from the date of the filing of the petition, it is only by proceedings subsequently taken during the lifetime of the discharged insolvent that it may be made available for the scheduled creditors when a judgment is entered up under Section 86 of the Insolvency Act.' With great respect to the learned Judge, if he intended this observation to apply to property acquired by the insolvent prior to his death, it is not supported by the language of the section or the recognised practice of the Court. Section 86 clearly has application only to the conditions that arise after the granting of a discharge in the nature of a certificate. After the discharge has been granted the Insolvency Court has no jurisdiction and, therefore, for the purpose of making future-acquired property available for the creditors, the Court was empowered on granting the final 'discharge to make it a condition that the insolvent shall consent to judgment being entered up against him in the High Court for so much of the creditors' claims as, appear at that time to be due. To apply it to the stage prior to the issue of the certificate would be inconsistent with the clear language of the Act and create a double jurisdiction over the insolvent. Sections 7 and 11 are perfectly clear. By the vesting order all the real and personal estate and all future estate, right, title and interest in real or personal estate etc., is vested in the Official Assignee for the time being, and by Section 21, every such Assignee is required with all convenient speed to take possession of all such estate of which immediate possession may be obtained and use his best endeavours to reduce into possession the rest of such estate. By the terms of the Act nothing further is required to complete the title of the Official Assignee. Mr. Shenai has relied on certain English cases in support of his contention. It is sufficient to say those depisiong are on Insolvency Acts with an entirely different procedure, a procedure under which future-acquired property does not vest in the Official Assignee until an order has been made on motion after notice to the insolvent. These cases are of no assistance to us in construing the Indian Insolvency Act. There can be no question that all further-acquired property at once vests in the Official Assignee and this is the every day practice of the Court, vide Rowlandson v. Champion 17 M.P 21 and Abdul Kareem Sahib v. The Official Assignee of Madras 28 M.P 168.

11. The next point is that the learned Judge should have referred the Official Assignee to a suit. This is entirely a matter for the discretion of the Court, and it is hardly necessary to say that we shall be slow in appeal to differ from the view of a Judge on the original side on a matter of discretion. Further in my opinion the learned Judge exercised, if I may say so, a very wise discretion. The two claims were of an entirely different character. The widow and the sons claimed the moveable property against the insolvent as being their self-acquired property. On that view they were third parties, and although the Court has power under Section 26 and other sections to adjudicate on the claim, the learned Judge thought a regular suit would be the more fitting course. The claim for the house was not against the insolvent but through, him and was a matter entirely between him and the Official Assignee. The disposal of the matter by the learned Judge as Commissioner was, therefore, prima facie the more proper course.

12. I now come to the last point which is a far more difficult question. The facts are as follows: The house was purchased by the insolvent's mother from one of the creditors in 1894, four years after the petition. In 1897 the mother died and the property undoubtedly vested in the insolvent. From that date to the year 1913 when he died, he was in undisputed possession of the house. It is contended that, if the title of the Official Assignee accrued from the date when the insolvent acquired the property in 1897, which he undoubtedly did, the insolvent has acquired by 12 years' adverse possession a title against the Official Assignee of virtue of Article 144 and Section 28 of the limitation Act, IX of 1908. The learned Judge has negatived this contention on two grounds: (1) that the possession of the insolvent was that of an agent for the Official Assignee and (2) that if the title did vest in him in the year, 1909 by 12 years' adverse possession, it immediately re-vested in the Official Assignee. It is argued that both these views are incorrect. Speaking for myself I am not prepared to rest my decision on either of these views, though I must not be taken to have dissented from them. I have grave doubts whether the decisions that have bold the insolvent to be an agent of the Official Assignee can be applied as between them. The learned Judge relies on In the Bennet; Ex parte Official Receiver (1907) 1 K.B. 149 : 76 L.J.K.B. 134 : 95 L.T. 887 : 14 Manson, 6 : 23 T.L.R. 99 in support of the proposition. Quoting Herbert v. Sayyr (1844) 5 Q.B. 965 : 8 Jur. 812 : 114 E.R. 1512 and Cohen v. Mitchell 25 Q.B.D. 262 : 59 L.J.Q.B. 409 : 63 L.T. 206 : 38 W.R. 551 : 7 Morrell 207 Bigham, J. states that the first case establishes that a bankrupt who acquires property after his bankruptcy acquires it as agent for the trustee and is entitled to deal with it as such agent, unless and until the trustee as principal intervenes. Tindal, C.J., gives as the basis of: that decision that otherwise there would be no protection to persons dealing with an uncertified bankrupt and in Cohen v. Mitchell 25 Q.B.D. 262 : 59 L.J.Q.B. 409 : 63 L.T. 206 : 38 W.R. 551 : 7 Morrell, 207 Lord Bsher states the proposition as follows: Until the trustee intervenes, all transactions by a bankrupt niter his bankruptcy with any person dealing lionafide and for value, in respect of his after-acquired property, whether with or without knowledge of the bankruptcy, are valid against the trustee.' It is clear, therefore, that the cases at all events confine the proposition to the relations between the insolvent and third parties and expressly base it on the protection of the rights of third parties.

13. The learned Judge also relies on the fact that this contention would have afforded a ready answer in Abdul Kareem Sahib v. The Official Assignee of Madras 28 M.P 168 but that decision did not turn on that point. That is so, but it is clear from the report that the point was not raised, in Suja Hossein v. Monohur Dan 24 C.P 244 O'Kinealy and Hill, JJ., took the opposite view, though in that case the basis of the decision in favour of the insolvent appears to have been that the Official Assignee had knowledge of his possession and that, therefore, the possession was adverse. For these reasons I am doubtful whether the doctrine of agency is an answer to the claim, by adverse possession. I am further doubtful whether assuming a title by adverse possession to have been acquired, that title would vest in the Official Assignee. Section 28 of the Limitation Act does not say in express terms that the title is acquired. It says that at the determination of the period hereby limited to any person for instituting a suit for possession of any property, his right to such property shall be extinguished.' It is true that decisions have construed this as meaning that the title becomes vested in the adverse owner. But it seems to me to be rather straining the language of the section to say that, although the Official Assignee's title has been extinguished, he at once acquires a new title. I prefer to rest my decision on the view that the Limitation Act has no application. The Limitation Act provides for periods with reference to suits, appeals and applications, the last being applications in matters arising out of suits. It is contended that the Official Assignee could have brought a suit against the insolvent. In my opinion the High Court would have no jurisdiction to entertain any such suit. Under the Insolvency Act the insolvent becomes subject to the peculiar jurisdiction of the Insolvency Court. Orders are made against him on the application of the Official Assignee. He can be directed to hand over property and he can even be tried and sentenced by the Commissioner. Where the intervention of the procedure of the High Court is provided for, it is only, as pointed above, for the purpose of affecting him after he has passed out of the jurisdiction of the Insolvency Court, and even then it has to be noted that by Section 86 no proceeding by suit in the High Court is contemplated, but only that he shall consent to judgment being entered up against him in the High Court. It seems to me impossible that there could be a concurrent jurisdiction with respect to the insolvent. Obviously if the Official Assignee could bring a suit against the insolvent in the High Court, the latter could institute a suit against the former. I have asked for a reference to any case where either of these have been done and the learned Advocate has beeti unable to refer me to any. It seems to be impossible that the Legislature could have contemplated that a man should in respect of his property be subject to two concurrent jurisdictions and that while the Commissioner in Insolvency was making an order against the insolvent with respect to any property, the High Court might be deciding that he was entitled to the property. Such a position would, of course, lead to conflict and an insolvent might, if that were possible, find himself being tried for contempt by the Insolvency Court for claiming the benefit of a decree of the High Court. I have no doubt that there has never been either in the Supreme Court or in the High Court any original civil jurisdiction as between the Official Assignee and an insolvent. The Official Assignee is an officer of the Court in a position analogous to that of a Receiver. A Receiver would not be required to proceed by suit in ejectment against a party who persists in remaining in possession of a portion of the property, but would apply to the Court for orders for his eviction vide Kerr on Receivers (6th edition), page 226, and In re Sacker, Ex parte Sacker 22 Q.B.D. 179 : 58 L.J.Q.B. 4 : 60 L.T. 344 : 37 W.R. 204, the judgment of Fry, L.J., on page 185. In like manner under the Insolvency Act the Official Assignee could apply for orders in respect of a recalcitrant insolvent, and I have no doubt that the Court could deal with him, if necessary, in contempt. It is true that there is no provision in the Insolvency Act of 1848 corresponding to the specific words in the Presidency Towns Insolvency Act, III of 1909, Section 33(4), under which such an insolvent is held to be guilty of contempt of Court and can be punished accordingly, and that though the old Act specifically provides for orders to deliver up property being issued against third parties, it nowhere speaks of such orders as against the insolvent. But the absence of the specific provision with regard to a person, who is under the personal control of the Court, no more prevents the application of the process for contempt against him than does the corresponding absence of any such provision in the case of Receivers or with respect to other disobedience of a party to suit to the orders of the Court, where the Court has been held to have an inherent power to commit. I am not certain that this procedure by contempt is not of itself an answer to the theory of adverse possession, for it would be strange that an insolvent could acquire a title to property by refraining from doing his duly to assist the Official Assignee in realising his assets for the creditors. I am aware that in Abdul Kareem Sahib v. The Official Assignee of Madras 28 M.P 168 it was held that there is no provision in the Insolvency Act of 1848 imposing upon an insolvent the duty of disclosing to the Official Assignee that he has become possessed of property since the making of an order of personal discharge, and that consequently non-disclosure by an insolvent that he has become so possessed of a house cannot be regarded as a fraud either on the creditors or on the Official Assignee, so as to render Section 18 of the Limitation Act applicable. But speaking with the very greatest deference to the learned Judges, I am not satisfied that that view is correct. It is the duty of the insolvent to assist the Official Assignee. They are not at arm's length and it is difficult to draw a line between non-disclosure and concealment. I am more inclined to take the view that Section 33(4) does not alter the law, and if so, whether it be fraud within Section 18 of the Limitation Act or whether the principle is that an insolvent will not be allowed to defy the jurisdiction of the Insolvency Court over his property, I am inclined to think that he could not rely on adverse possession against the Official Assignee. It is not, however, necessary to decide this point and I rest my decision on the language of the Insolvency Act. Dismissed with costs. (One Counsel).

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