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Sm. Kamala Bala Dasi Vs. Surendra Nath Ganguly and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Reported inAIR1937Cal517
AppellantSm. Kamala Bala Dasi
RespondentSurendra Nath Ganguly and ors.
Cases ReferredBalavenkata Seetharama Chettiar v. Official Receiver
Excerpt:
- .....lakshmi narayan is described in the insolvency proceedings as the managing member of a joint hindu family firm which was known by the name and style of and carried on business as messrs ganguly brothers. it appears that there are in all 15 members in that family firm of which 14 are of full age, and one is a minor whose interests are in the hands of the learned advocate who represents the deputy registrar of the court. mr. ghose's clients are three ladies, each one of whom had lent money to messrs. ganguly brothers and who in regard to their respective loans had obtained three separate decrees against this family firm. they, therefore, are in the position of being decree-holders, but that does not in any sense constitute them secured creditors in the insolvency. they have however this.....
Judgment:

Costello, Ag. C.J.

1. The only one of these connected appeals which has been argued before us at any length is that which is numbered 456 of 1935 and is entitled Sm. Indu Bala Dasi and Ors. v. Bakkeswar Banerjee (receiver). It is quite clear that the view taken by us in this appeal will have the effect of determining all rights of the parties in the other appeals also, particularly having regard to the fact that Mr. Ghose appearing on behalf of certain decree-holders does not desire to contest the correctness of the adjudication in insolvency of Lakshmi Narayan Ganguly. Lakshmi Narayan is described in the insolvency proceedings as the managing member of a joint Hindu family firm which was known by the name and style of and carried on business as Messrs Ganguly Brothers. It appears that there are in all 15 members in that family firm of which 14 are of full age, and one is a minor whose interests are in the hands of the learned advocate who represents the Deputy Registrar of the Court. Mr. Ghose's clients are three ladies, each one of whom had lent money to Messrs. Ganguly Brothers and who in regard to their respective loans had obtained three separate decrees against this family firm. They, therefore, are in the position of being decree-holders, but that does not in any sense constitute them secured creditors in the insolvency. They have however this advantage that they managed to secure an attachment of certain properties belonging to Messrs. Ganguly Brothers before their three suits came to trial and, therefore, of course before they obtained decrees in those suits. Thus, directly decrees had been made in their favour, they were in a position to endeavour to obtain their rights under those decrees by appropriate proceedings in execution against the properties which had already been attached. Unfortunately for them, however, they were not the only creditors of Messrs. Ganguly Brothers. There were other, and we gather a considerable number of other creditors most of whom at any rate were desirous of enforcing their rights against the family firm. One of these creditors is one Kali Das Bakshi-and he acting solely or at any rate primarily in his own interest-instituted proceedings in insolvency in the Court of the District Judge of Nadia as an outcome of which an adjudication order was made, and a receiver was appointed, in whom the property of the insolvent became vested by virtue of the provisions of the Provincial Insolvency Act.

2. The question we have to decide comes to this: what is it that can rightly be described as the property of the insolvent for the purposes of this particular insolvency. It appears to have been suggested that because the insolvency proceedings were instituted against Lakshmi Narayan as the manager or karta of the joint Hindu family firm, therefore the whole of the assets, at any rate the business assets of that firm became vested in the receiver who had been appointed in the insolvency proceedings and so the whole of the properties of the fifteen persons who constituted the firm ought to be available for distribution amongst the creditors. That is a proposition we cannot accept. We are quite clearly of opinion and indeed I think it is now conceded at the Bar, that the utmost that could have vested in the receiver was Lakshmi Narayan's own share in the family business together with such right as he might have had to dispose of property belonging to the other members of the firm for the purpose of discharging business obligations. That is what has bean put forward by Mr. Bagchi and Mr. Lahiri on behalf of the joint creditors of this family firm. Mr. Ghose on the other hand who has been supported by the learned advocate who appeared for the Gangulis other than the insolvent and the minor Ganguly family, says that the attachment to which I have already referred must be taken into account and that although as regards the ordinary property and assets of the insolvent the attachment is inoperative and ineffective as against the receiver, it is of consequence as regards the alleged right which Lakshmi Narayan is said to have had as the manager of the joint family to deal with the assets belonging to himself and the other members of the family for the purpose of liquidating the family debts.

3. The actual judgment with which we are concerned appears in the order sheet of the insolvency proceedings (Insolvency Case No. 20 of 1935) under the Serial No. 30 and dated 19th August 1935. The learned District Judge points out first of all that on the application of one of the creditors of the family firm of Kali Das Bakshi, Lakshmi Narayan was adjudicated insolvent on 16th July 1935. Then he refers to the three decrees which had been obtained by Mr. Ghose's clients, all of them in the Court of the Additional Subordinate Judge of Nadia. Then he says:

an objection to the receiver taking possession of all the joint properties of the firm on the ground that the properties of the other judgment debtors, one of whom is a minor, did not vest in the receiver appointed by this Court,

was put forward by some of the other creditors (he was of course referring to the decree-holders). Then he refers to the attachment. The learned Judge no doubt took the view that it was only the share of Lakami Narayan that vested in the receiver, but he adds this:

As to the second contention whether on the previous attachment of the joint family property by some of the creditors, the powers of the receiver to bring the property to sale has ceased to exist, there appears to be not much force in the above contention as the attachment does not create any title in favour of the attaching creditor. It merely prevents private alienation. The mere fact of attachment cannot place him in the category of a secured creditor.

4. The learned Judge, therefore, was of opinion that there did pass to the receiver some right which was supposed to have been vested in the insolvent as the karta of the joint family firm, a right to bring to sale their property for the benefit of the firm's creditors-that despite the attachment that right became vested in the receiver. Were it not for the large number of authorities many of which have been cited before us, I should have been disposed to take the view that as there is a very definite difference in the provisions of Section 52, Presidency Towns Insolvency Act, as compared with Section 28, Provincial Insolvency Act, it can scarcely be accurate to describe the karta or managing member's rights as regards incurring liabilities and discharging liabilities on behalf of a joint Hindu family business, as an item of property at all. But it seems quite clear on the authorities that some such right is recognized and that it is to be deemed to be a species of property available for creditors.

5. It has been pointed out to us by the learned advocate for the Gangulis, that there does not seem to be any reported decision regarding a Dayabhaga family in this connexion. We will however for the purpose of deciding this appeal assume that a karta's right to dispose of or at any rate to affect with liability joint property in the case of joint Hindu family firm is to be regarded as a piece of property which ordinarily would pass to and become vested in a receiver upon the insolvency of the karta or managing member, in such a way as to afford some advantage to the creditors of the joint family firm. We will assume that is the position in normal circumstances. But here as Mr. Ghose has emphasized, there was an attachment and an attachment before judgment in the three suits brought by Mr. Ghose's clients, an attachment which subsisted after judgment, and after this had respectively obtained decrees in the Court of the Additional Subordinate Judge of Nadia. I have already said that the existence of an attachment in favour of a creditor does not constitute that creditor a secured creditor; but an attachment does mean this: that the property in respect of which it is made is not free, at any rate, to this extent, that it cannot be made the subject of a private sale. Edgley, J. in the course of the argument used an expression which seemed to me to be very apt in the circumstances, the property is not free but frozen i.e., for the time being it is not available for selling. I suggested to Mr. Lahiri at the early stage of the argument that it is very difficult to see how the receiver could have acquired any higher right than the insolvent himself possessed and therefore we are of opinion that the position must be taken to be this: that the right of Lakshmi Narayan as the karta or manager of the family firm of Messrs. Ganguli Brothers was normally a right to incur debts for business purposes and equally to discharge those debts by having recourse to the assets of the family. This right at the time of the insolvency had been put an end to or at any rate suspended owing to the existence of the attachment. Therefore even assuming that such right passed to the Receiver it must have passed to the Receiver with the clog upon it in which the attachment had created.

6. We think therefore that the learned Judge was not right in coming to the conclusion that the receiver obtained-what I may perhaps describe as-an unfettered karta's right to have recourse to the property of the other co-parceners, the other members of the joint Hindu family firm for the purpose of satisfying the claims of the creditors of that firm. We are led to that view of the matter upon a consideration of a case to which our attention was drawn by Mr. Ghose, namely the case in A. Gopalkrishnayya v. P. Gopalan AIR 1928 Mad 479. The judgment is that of Ramesam, J. and Devadoss, J. It is very short and it appears at p. 343. The learned Judges said: 'Only the power of the father to sell the shares of the sons passed to the Official Receiver.' They referred to the well-known case in Sat Naraian v. Behari Lal, . The learned Judges continue: 'The power is subject to the same qualification as it is in the father's hands.' In support of that they referred to the case in Allahabad Bank Ltd. v. Bhagwan Das Johari : AIR1926All262 and to the case in Balavenkata Seetharama Chettiar v. Official Receiver, Tanjore AIR 1926 Mad 994. They proceed thus:

In this case the sons' shares have been attached and after such attachment the Official Receiver cannot exercise the power of sale. It is true that in respect of such properties which were sold by the Official Receiver prior to the attachment of the son's share by the decree-holder, the above observations do not apply.

7. The important part of that judgment is the statement that the power of the Official Receiver is subject to the same qualification as if it was in the hands of the father, that is to say the head of the joint family. We are of opinion that this appeal No. 456 of 1935 must be allowed with the consequential results to the other appeals Nos. 407, 410 and 129. The orders appealed against are set aside and the execution will proceed. As regards Appeal No. 589 against the order of adjudication which is not now challenged, it is dismissed. I ought perhaps to add that two preliminary objections of a formal kind were raised by Mr. Lahiri and afterwards elaborated by Mr. Bagchi. The first of them was that no appeal lay against the order or decision of the District Judge of Nadia dated 19th August 1935 because it was not one of the matters in respect of which an appeal was permitted without the leave either of the District Judge or of the High Court. 'We have however come to the conclusion that this was an insolvency matter and the order of 19th August 1935 was made in that connexion and that it was an order of such a nature that it would fall for the decision of the Court under Section 4. It was, in effect, an order either deciding rights or at any rate deciding priority. The order was therefore appealable without leave.

8. The other point, an equally technical one, was that the proceedings were not properly constituted, because the petitioning creditor Kali Das Bakshi had not been made a party to the appeal. We are however of opinion that the presence of Kali Das is not necessary because the Receiver is a party to the appeal and he represents the creditors and certainly the petitioning creditor. The preliminary objections taken by Mr. Lahiri therefore have no substance. The appellants in Appeal No. 456 of 1935 are entitled to get their costs here and below from the Receiver respondent out of the Insolvent's estate There will be no order as to costs in the other appeals.

Edgley, J.

9. I agree.


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