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Amit Mukherjee Vs. Sm. Bibhabati Dasi and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtKolkata High Court
Decided On
Case NumberFirst Appeal No. 909 of 1969
Judge
Reported inAIR1979Cal344,83CWN500
ActsProvincial Insolvency Act, 1920 - Sections 28(2), 55 and 59; ;Transfer of Property Act, 1882 - Section 41; ;Hindu Law
AppellantAmit Mukherjee
RespondentSm. Bibhabati Dasi and ors.
Appellant AdvocateA.K. Mukherjee, ;Kiron Mitra and ;S.P. Gupta, Advs.
Respondent AdvocateDilip Banerjee, Adv.
DispositionAppeal dismissed
Cases Referred and Rup Narain v. Har Gopal
Excerpt:
- .....insolvent is legal and valid.2. one benoy krishna ghatak, since deceased, who was the owner of the disputed property, which is a four-storied building, being premises no. 151e, raja dinendra street, calcutta was declared an insolvent on aug. 6, 1953 by the court of the district judge at alipore, 24-parganas, in insolvency case no. 14 of 1952. after he was declared an insolvent, he mortgaged the disputed property by way of equitable mortgage in favour of the plaintiff on sept., 23, 1953 to secure repayment of a loan of rupees 14,500/-. in the insolvency case, the official receiver was appointed the receiver of the estate of the insolvent. a scheme for composition was filed bv the insolvent and it was accepted by the said court on june 16, 1955. the official receiver was directed by the.....
Judgment:

M.M. Dutt, J.

1. The only question that is involved in this appeal is whether an equitable mortgage by deposit of title deeds created by an undischarged insolvent is legal and valid.

2. One Benoy Krishna Ghatak, since deceased, who was the owner of the disputed property, which is a four-storied building, being premises No. 151E, Raja Dinendra Street, Calcutta was declared an insolvent on Aug. 6, 1953 by the Court of the District Judge at Alipore, 24-Parganas, in Insolvency Case No. 14 of 1952. After he was declared an insolvent, he mortgaged the disputed property by way of equitable mortgage in favour of the plaintiff on Sept., 23, 1953 to secure repayment of a loan of Rupees 14,500/-. In the Insolvency case, the Official Receiver was appointed the Receiver of the estate of the insolvent. A scheme for composition was filed bv the insolvent and it was accepted by the said Court on June 16, 1955. The Official Receiver was directed by the Insolvency Court to give effect to the scheme of composition. In terms of the said scheme of composition, the disputed property along with some other was sold by the Official Receiver to the defendant No. 1, Sm. Bibhabati Dasi by a deed of sale dated Oct. 14, 1955. The said Benoy Krishna Ghatak, however, died before the said sale. There is no dispute about these facts. The present suit was instituted by the plaintiff for the recovery of the sum of Rs. 25,540/-on account of principal and interest due under the mortgage, by the sale of the disputed property under the provisions of Order 34, Rule 4 of the Civil P. C.

3. The defendants are the heirs and legal representatives of the said Benoy Krishna Ghatak. The defendant No. 1 is his widow and the defendants Nos. 2 to 5 are his sons. The suit was contested by the defendant No. 1 alone, the other defendants did not appear in the suit. She denied that any equitable mortgage was created by her husband Benoy Krishna Ghatak in favour of the plaintiff. It was asserted by her that she had purchased the property from the Official Receiver and her purchase not being subject to the alleged mortgage, the plaintiff was not entitled to recover any amount from her.

4. The learned subordinate Judge, 10th Court, Alipore, came to the findings that before the mortgage was created the disputed property had vested in the Official Receiver bv virtue of the provision of Section 28(2) of the Provincial Insolvency Act and, as such, the said Benoy Krishna Ghatak had no title to create any mortgage in respect of the disputed property. The learned Subordinate Judge held that the mortgage was invalid and could not be enforced. Further, he held that the defendant No. 1 acquired title to the disputed property by virtue of the purchase made by her from the Official Receiver in terms of the scheme of composition free from all encumbrances. Upon the said findings, the learned Subordinate Judge dismissed the suit. Hence, this appeal.

5. The finding of the learned Subordinate Judge as to the invalidity of the equitable mortgage has been seriously challenged on behalf of the plaintiff appellant. It is contended by Mr. Amal Kumar Mukherjee, learned Advocate appearing on behalf of the appellant, that as the appellant was a bona fide transferee for value without notice of the insolvency proceeding or the declaration of the mortgagor as the insolvent, the mortgage was not at all affected. He submits that the position of the appellant was that of a bona fide purchaser for value without notice. He has placed reliance on the principles of law laid down in Hunomanpersaud Panday v. Mst. Babooee Munraj Koonweree, (1856) 6 Moo Ind App 393 (PC). In that case, it has been observed by their Lordships of the Judicial Committee; 'The power of the Manager for an infant heir to charge an estate not his own, is, under the Hindoo Law, a limited and qualified power. It can only be exercised rightly in a case of need, or for the benefit of the estate. But where, in the particular instance, the charge is one that a prudent owner would make, in order to benefit the estate, the bona fide lender is not affected by the precedent mismanagement of the estate.' In our view, the above principle has no manner of application to the facts and circumstances of the instant case. Under Section 28(2) of the Provincial Insolvency Act, on the making of an order of adjudication, the whole of the property of the insolvent shall vest in the court or in a receiver and shall become divisible amongst the creditors. The effect of the provision of Section 28(2) is that the insolvent loses title to the property which vests in the court or in the receiver. The order of adjudication debars an insolvent to deal with his property in any manner whatsoever. Section 55 of the Provincial Insolvency Act protects some bona fide transactions, namely, (a) any payment by the insolvent to any of his creditors, (b) any payment or delivery to the insolvent, (c) any transfer by the insolvent for valuable consideration, or (d) any contract or dealing by or with the insolvent for valuable consideration, provided, however, that any such transaction takes place before the date of the order of adjudication, and that the person with whom such transaction takes place has not at the time notice of the presentation of any insolvency petition by or against the debtor. It, therefore, follows that the above transactions are protected under two conditions, namely, (1) that any such transaction takes place before the date of the order of adjudication, and that (2) the person with whom such transaction takes place has no notice of the presentation of any insolvency petition. It is implied from the proviso to Sec. 55 that any transaction taking place after the date of the cruder of adjudication is not protected whether or not the person with whom such transaction takes place has any notice of the insolvency petition by or against the debtor. After an order of adjudication is made, Section 55 does not afford any protection to any transaction with the insolvent, however much the person with whom the transaction takes place acts bona fide and without notice of the presentation of the insolvency petition or the order of adjudication. We are, therefore, unable to accept the contention made on behalf of the appellant that as the appellant was a bona fide transferee for value without notice of the order of adjudication or of the insolvency proceeding, the mortgage was legal and valid.

6. Next, it has been argued on behalf of the appellant that as the receiver had by his conduct allowed the insolvent to deal with the disputed property as the ostensible owner thereof, the mortgage was not voidable in view of the provision of Section 41 of the T. P. Act. In this connection, much reliance has been placed on behalf of the appellant on the following principles of law as laid down by the Judicial Committee in Ramkumar v. Macqueen, (1872) Ind Apo (Sup) Vol p. 40 (PC). 'It is a principle of natural equity which must be universally applicable that, where one man allows another to hold himself out as the owner of an estate and a third person purchases it, for value, from the apparent owner in the belief that he is the real owner, the man who so allows the other to hold himself out shall not be permitted to recover upon his secret title, unless he could overthrow that of the purchaser by showing either that he had direct notice, or something which amounts to constructive notice, of the real title; or that there existed circumstances which ought to have put him upon an inquiry that, if pursued would have led to a discovery of it.' The said principle has been relied upon by Sir Asutofh Mukher-jee in a Bench decision of this Court in Baidya Nath Dutt v. Alef Jan Bibi, 36 Cal LJ 9 : (AIR 1923 Cal 240). It is complained by the appellant that even though the disputed property had vested in the receiver, he did not take possession of the same, but allowed the insolvent to remain in possession thereof. Further, the receiver did not get his name mutated in the Municipal register, nor did he take delivery of the documents of title to the disputed property from the insolvent. In these circumstances, it is contended, that the receiver had by necessary implication made the insolvent the ostensible owner of the disputed property and, accordingly, the transfer of the disputed property in favour of the appellant, who acted in good faith was legal and valid. This contention is equally untenable. There is no provision in the Provincial Insolvency Act that after an order of adjudication is made the receiver shall take possession of the property and also mutate his name in the municipal records as the owner thereof. The receiver has no power to remove any person from the possession of the property. It is only the court which can dispossess an insolvent or any person from the possession of the insolvent's property. The principal duty of the receiver is to realise the assets of the insolvent, and distribute them amongst the creditors. The duties and powers of the receiver have been enumerated in Section 59 of the Act. Such duties and powers do not include the taking of possession of any immovable property of the insolvent by dispossessing him. The doctrine of ostensible ownership, therefore, does not apply to a transfer of immovable property by a person who has been adjudicated an insolvent.

7. After an order of adjudication is made, the order is published in the Official Gazette as provided in Section 30 of the Provincial Insolvency Act. One of the objects of the publication of the order of the adjudication in the Official Gazette seems to be to warn all persons against entering into any transaction with the insolvent in respect of his property which is vested in the court or the receiver, as the case may be, under Section 28(2). Although there is no evidence that any such notice of the order of adjudication has been published in the Official Gazette, it may be presumed to have been so published, as such publication is an official act. It is difficult to say that even after the publication of the order of adjudication in the Official Gazette, the appellant had no notice of the same. Be that as it may, it has been stated already, any transaction with the insolvent is not protected. The question of the principle of ostensible ownership does not arise in the case of a transfer by an undischarged insolvent. We would, accordingly, overrule the contention of the appellant in this regard,

8. An application has been made by the appellant during the pendency of this appeal on July 7, 1977 praying for an order on the District Judge, 24-Parganas directing him to send to this Court the records of the Insolvency proceeding. It is alleged in this application that despite several attempts made by the appellant, he could not procure the certified copies of the relevant orders and documents relating to the insolvency proceeding. A plain copy of the order of the Insolvency Court being Order No. 42 dated June 2, 1955 whereby the learned District Judge accepted the scheme of composition has been annexed to this application. It is not stated anywhere in the application whether it is a copy from the certified copy of the order. It has been alleged in para. 5 of the application that the appellant could not obtain the certified copy of the order of composition. It is not understandable how the appellant could get a plain copy of the order. The appeal was filed on March 11, 1969, but the present application was filed on July 7, 1977, that is, more than eight years after the filing of the appeal. No prayer has been made in this application to adduce additional evidence. It has been only prayed that the records of the insolvency proceeding may be called for. In our view the application is not maintainable and moreover, we are unable to allow such a prayer. The application is, accordingly, dismissed.

9. It is contended on behalf of the appellant on the basis of the plain copy of the order dated June 10, 1955 that the learned District Judge in accepting the scheme of composit ion directed the sale of the disputed property to the defendant No. 1, the wife of the insolvent, subject to the mortgage. In the first place, we cannot look into the order which, as aforesaid, is not a certified copy of the order and, in the second place, there is no such direction in the order. In the circumstances, the contention is rejected.

10. Next it is contended on behalf of the appellant that in view of the decisions in Shiam Sarup v. Nand Ram, ILR 43 All 555 : (AIR 1921 All 232) and Rup Narain v. Har Gopal, ILR 55 All 503 : (AIR 1933 All 449) it should be held that the equitable mortgage was validly created. In the first mentioned case, a subsequent mortgage was created during the insolvency proceeding for the purpose of paying off the first mortgagee who was the only creditor of the insolvent and who consented to the realisation of his debt by a subsequent mortgage. In the second mentioned case, though the property was mortgaged after it had vested in the receiver, but before the date of the suit, an order was made by the learned District Judge the effect of which was that the mortgaged property revested in the insolvent. In this case, it was held that in view of the provision of Section 43 of the T. P. Act, the mortgagee was entitled to recover the mortgage debt by the sale of the mortgaged property. It is not necessary for us to consider whether the principles laid down in the above two Allahabad cases are sound, but suffice it to say that the facts of those two cases are completely different from the facts of the present case before us. The disputed property was not mortgaged by the insolvent in favour of the appellant with the consent of creditors for the purpose of paying off the debts, nor did the mortgaged property re-vest in the insolvent. In these circumstances, we are unable to accept the contention made on behalf of the appellant that on the basis of the principles laid down in the above two Allahabad cases, it should be held that the mortgage created by the insolvent in favour of the appellant was legal and valid.

11. The last point that has been argued on behalf of the appellant is that after the scheme of composition was accepted by the learned District Judge, there was an annulment of the order of adjudication by virtue of Section 39 of the Provincial Insolvency Act. Under Section 39 if the court approves the scheme of composition, the order of adjudication shall be annulled Section 39 does not provide that after the approval of the scheme of composition, there will be an automatic annulment. The court has to pass an order annulling the order of adjudication. Even assuming that there has been an annulment of the order of adjudication before the disputed property was sold to the defendant No. 1, still in view of Section 37, the property of the debtor who was adjudicated an insolvent, shall vest in such person as the court may appoint, or in default, shall revert to the debtor to the extent of his right or interest therein on such conditions (if any) as the court may, by order in writing, declare. There is no evidence before us to show as to what order has been passed by the court under Section 37. There is also no evidence that the property was sold to the defendant No. 1 after an order of annulment of the order of adjudication. In our view, the court could not pass any order directing the vesting of the disputed property in the insolvent or his heirs, since under the scheme of composition accepted by the court, the disputed property was directed to be sold by the receiver to the defendant No. 1. The contention made by the appellant in this regard has no substance at all and cannot be accepted.

12. Before we part with this case, we may dispose of a short point that has been urged on behalf of the appellant. It has been argued that the defendant No. 1 is the benamdar of the insolvent and, as such, is bound by the mortgage. It is now well established that a person who alleges a transaction to be a benami transaction must prove the same. The appellant has not adduced any evidence whatsoever to prove that the purchase of the disputed property by the defendant No. 1 from the receiver in insolvency was a benami purchase. It is, however, contended on behalf of the appellant that on the facts that low price was paid by the defendant No. 1 for the purchase of the property, and that she did not come to depose in the present suit disclosing her source of purchase money, it should be presumed that it was a benami purchase. We are unable to accept this contention. There is no evidence that the defendant No. 1 purchased the disputed property at a low price. In our opinion, the defendant No. 1 was not at all obliged to disclose the source of the money with which she purchased the disputed property. It may be that there is no mention in the sale deed that she purchased it with her own stridhana money, but that will not necessarily raise any presumption about the benami nature of the transaction. By the sale deed, she has acquired title to the disputed property and in the absence of positive evidence, it cannot be held that the purchase made by her was benami. The onus lay on the appellant and he has not been able to discharge the same.

13. For the reasons aforesaid, the judgment and decree of the learned Subordinate Judge are affirmed and this appeal is dismissed. In view, however, of the facts and circumstances of the case, there will be no order for costs in this appeal.

Sharma, J.

14. I agree.


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