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The Official Assignee of Madras Vs. D. Sahadeva Mudaliar - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1967)2MLJ462
AppellantThe Official Assignee of Madras
RespondentD. Sahadeva Mudaliar
Cases Referred and Italia v. Official Assignee
Excerpt:
- k.s. venkataraman, j.1. this application has been put in by the official assignee under section 7 of the presidency towns insolvency act in the insolvency of one p.c. john. one sahadeva mudaliar (respondent in this application) filed a suit o.s. no. 425 of 1964 on the file of the city civil court and sought to attach before judgment some movables of the insolvent. to avert the attachment a sum of rs. 1,647-85 was deposited by p.c. john into court sometime in 1964. later p.c. john denied his liability in the suit and himself filed a suit o.s. no. 1117 of 1964 or. the file of the city civil court for recovery of a sum of rs. 3,300 from sahadeva mudaliar. when the suits were pending p.c. john filed an application in this court on 7th april, 1966 to be adjudicated insolvent. he was so.....
Judgment:

K.S. Venkataraman, J.

1. This application has been put in by the Official Assignee under Section 7 of the Presidency Towns Insolvency Act in the insolvency of one P.C. John. One Sahadeva Mudaliar (respondent in this application) filed a suit O.S. No. 425 of 1964 on the file of the City Civil Court and sought to attach before judgment some movables of the insolvent. To avert the attachment a sum of Rs. 1,647-85 was deposited by P.C. John into Court sometime in 1964. Later P.C. John denied his liability in the suit and himself filed a suit O.S. No. 1117 of 1964 or. the file of the City Civil Court for recovery of a sum of Rs. 3,300 from Sahadeva Mudaliar. When the suits were pending P.C. John filed an application in this Court on 7th April, 1966 to be adjudicated insolvent. He was so adjudicated on 8th April, 1966.

2. Claiming that under Sections 17 and 51 of the Presidency Towns Insolvency Act the property in the sum of Rs. 1,647-85 belonging to the insolvent became vested in the Official Assignee, the Official Assignee filed Application No. 7045 of 1966 for withdrawing that amount. Thereafter the suit O.S. No. 425 of 1964 was decreed for Rs. 650 and costs, being the amount admitted by the insolvent. Eventually the insolvent's suit O.S. No. 1117 of 1964 was dismissed with costs of Sahadeva Mudaliar. The City Civil Court dismissed Application No. 7045 of 1966 by order dated 10th October, 1966. The Official Assignee did not prefer any suit to set aside that order, but filed the present application on 10th March, 1967 under Section 7 against the respondent Sahadeva Mudaliar claiming the sum of Rs. 1,647-85.

3. The respondent Sahadeva Mudaliar resists this application on the ground that he is entitled to priority in respect of the amount of Rs. 650 and costs decreed in O.S. No. 425 of 1964.

4. It seems to me however that the claim of the Official Assignee must prevail in view of Sections 17 and 51 of the Act. Section 17 states that on the making of an order of adjudication, the property of the insolvent shall vest in the Official Assignee. Under Section 51 the insolvency shall date back to the time of commission of the act of insolvency on which on order of adjudication was made, that is to say in this case on 7th April, 1966. The question for the Court is whether the sum of Rs. 1,647-85 is still the property of the insolvent which will so vest in the Official Assignee. It is still obviously the property of the insolvent and the only question would be whether the respondent Sahadeva Mudaliar could claim a charge over that amount in respect of the amount which was ultimately decreed to him in O.S. No. 425 of 1964, namely, Rs. 650 plus costs. Now it is well settled that an attachment does not have the effect of creating any such charge and where property is attached, the attachment would merely have the effect of postponing the claims of other persons or transferees of the judgment debtor to the claim of the attaching creditor (vide Section 64 of the Civil Procedure Code). It does not create a charge as such. The vesting of the assets of the insolvent is however absolute under Section 17 of the Presidency Towns Insolvency Act. Section 53 of the Presidency Towns Insolvency Act, which is in the nature of an exception to Section 17 says:

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 Official Assignee, except in respect of assets realised in the course of the execution by sale or otherwise before the date of the admission of the insolvency petition.

This provision also cannot be invoked, by the respondent Sahadeva Mudaliar because the sum of Rs. 1,647-85 was deposited by P.C. John not in execution of any decree. In fact the decree had not yet been obtained against him.

5. There is a direct decision of a Bench of this Court (Wallis, C.J., and Seshagiri Ayyar, J.) in Errikulappa Chetty v. The Official Assignee of Madras I.L.R. (1916) Mad. 903, on the point under consideration. There also a creditor of the debtor took out a summons under Order 38, Rule 5, Civil Procedure Code to attach some properties of the debtor before judgment. By the terms of the warrant, the defendant-debtor was called upon either to furnish security for Rs. 4,150-5-0 or to show cause why he should not furnish security. The defendant in order to avoid the attachment paid the sum of Rs. 4,150-5-0 and deposited it in Court. The defendant subsequently become insolvent. It was held by Bakewell, J., that the creditor was not entitled to the rights of a secured creditor in respect of the amount as against the Official Assignee in whom the defendant's estate had vested on insolvency. The creditor filed an appeal and the appeal was dismissed by the Bench. The learned Judges pointed out that under Order 38, Rule 5, the defendant was only ordered to give security 'to produce and place at the disposal of the Court, when required, the said property, or the value of the same, or such portion thereof as may be sufficient to satisfy the decree.' Wallis, C.J., went on to observe:

There is nothing in the language of the rule to give the plaintiff a charge on the money furnished as security for this purpose, and, in default of the security being given the property is ordered to be attached, and it is Well settled that such attachment before or after judgment does not confer title on the attaching creditor, it would as pointed out by Mr. Chamier, be most anomalous that the plaintiff should acquire a charge on money which is merely paid as security for the production of the said property and to render attachment unnecessary.

Seshagiri Ayyar, J., observed:

It is to be enforced against the defendant only to prevent him from screening the property from his creditors. No doubt the attaching plaintiff would benefit by such an order; but the object of the law is not to secure his rights alone. I am therefore of opinion that the aim of the rule is to give a control to the Court over the property and not to give a preferential right to the plaintiff who moves the Court over others who have claims against the debtor.

6. I have already discussed the question in greater detail in my order dated 23rd February, 1957 in Application No. 281 of 1966 in I.P. No. 31 of 1966. As pointed out there, in an early decision in Krishnaswami Mudaliar v. Official Assignee of Madras : (1903)13MLJ278 , it was held that the attachment would not confer any title to the debt in the attaching creditor and that the title of the Official Assignee would prevail. I indicated the other decisions on the point including Manickam Chettiar v. Income-tax Officer, Madurai South : (1938)1MLJ351 , and Italia v. Official Assignee, Madras : AIR1941Mad183 . The matter has also been discussed in Mulla's insolvency in para. 575. It remains only to point out that the dismissal of Application No. 7045 of 1966 on 10th October, 1966 by the City Civil Court will not stand in the way of the Official Assignee succeeding in the present application. The order was made under Order 38, Rule 8, which says that

Where any claim is preferred to property attached before judgment, such claim shall be investigated in the manner herein before provided far the investigation of claims to property attached in execution of a decree for the payment of money.

This only means that the investigation of the claim should be in the manner prescribed in Order 21, Rule 58. But it cannot mean that the further provision in Order 21, Rule 63, which makes the order in a claim petition conclusive subject to the result of a suit, will come into play in respect of an order on a claim petition preferred under Order 38, Rule 8. In the absence of any provision like Order 21, Rule 63 making it incumbent on the Official Assignee to get rid of the order of 10th October, 1966 by a regular suit, it is certainly open to the Official Assignee for getting rid of the order to file an application under Section 7 of the Presidency Towns Insolvency Act as he has done.

7. In the result it is declared that the Official Assignee is entitled to the sum of Rs. 1,647-85.


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