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Nagendra Nath Shah Vs. Ranjit Kumar Ganguli and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 62 of 1962
Judge
Reported inAIR1963Cal587
ActsProvincial Insolvency Act, 1920 - Section 4
AppellantNagendra Nath Shah
RespondentRanjit Kumar Ganguli and anr.
Appellant AdvocatePanchanal Pal, ;Nimai Chand Kumar and ;Madhusudan Roy, Advs.
Respondent AdvocateChandidas Roy Choudhury, Adv. for Respondent (No. 1), ;J.K. Sen Gupta and ;Mirtunjoy Palit, Advs. for Respondent No. 2
DispositionAppeal allowed
Cases Referred and Abdul Latif v. J.R. Percival
Excerpt:
- .....scott lane, calcutta in order that the sale proceeds could be distributed among the creditors. the learned judge gave certain directions regarding advertisement of the auction sale and empowered the official receiver to take all necessary steps in the matter of bringing the properties to sale. there was also a direction that a copy of the order shall be served on the insolvent for his information and the sale was to take place at the court sale room. the properties were put to saia on 14th june, 1951 and the highest bidder was one anil kumar de who made a bid for rs. 40,000/11/-, the learned judge declared this bid as adequate and accepted it; on 28th june, 1951, the debtor who is the appellant in this appeal filed a petition under section 4 of the provincial insolvency act before the.....
Judgment:

A.K. Mukherjea, J.

1. This is an appeal from an order dated 9th January, 1962 of the Additional District Judge, Alipore, 24-Parganes arising out of certain insolvency proceedings. The short facts of the case are as follows :

2. On or about 12th March, 1951 one Nagendra Nath Saha (hereinafter referred to as the debtor) was adjudged insolvent on his own application. Subsequently, on 16th June, 1955, the order of adjudication was annulled and by a further order dated 29th July, 1955 made under Section 37 of the Provincial insolvency Act the properties of the debtor were ordered to be vested in the Official Receiver. Subsequently upon an application of the Official Receiver the learned Additional District Judge authorised him to sell premises Nos. 41 and 42, Scott Lane, Calcutta in order that the sale proceeds could be distributed among the creditors. The learned Judge gave certain directions regarding advertisement of the auction sale and empowered the Official Receiver to take all necessary steps in the matter of bringing the properties to sale. There was also a direction that a copy of the order shall be served on the insolvent for his information and the sale was to take place at the court sale room. The properties were put to saia on 14th June, 1951 and the highest bidder was one Anil Kumar De who made a bid for Rs. 40,000/11/-, The learned Judge declared this bid as adequate and accepted it; On 28th June, 1951, the debtor who is the appellant in this appeal filed a petition under Section 4 of the Provincial Insolvency Act before the learned Judge praying that the sale held on 14th June, 1961 should be set aside. The application was heard upon notice to the Official Receiver as well as to the auction purchaser. On 9th January, 1962 the learned Judge passed an order dismissing the application of the petitioner appellant and also, at the same time, confirming the sale. The present appeal is against this order of the learned Judge. The appellant's main contention is that the finding of the learned Judge who did not deal with the application upon the merits of the case and dismissed it on the preliminary ground, that the application was not maintainable under Section 4 of the Provincial Insolvency Act is wrong. It is clear from the order of the learned Judge that he was of the opinion that since the properties of the debtor had vested in the Official Receiver the debtor had no subsisting interest in the property and could not be a person aggrieved by the sale of the same.

3. I have no doubt that the learned Judge is manifestly wrong in his finding as to the legal position of an insolvent after the order of adjudication has been annulled and the properties of the insolvent vested either in the Official Receiver or in some other person. The learned Judge relies upon the case of Ahmed Mohammad Paruk v. Issur Mohan Gopal Jew, 44 Cal WN 665 but overlooks the fact that in the same decision there are passages which | indicate in unmistakable terms that even though the property is vested in the Official Receiver or in a trustee the insolvent has a subsisting interest in the property. The vesting order is usually passed in order that the properties or the debtor may become available for the satisfaction of the debts of the creditors. But after the assets have been realised and applied in liquidation of the debts if any surplus remains outstanding that surplus will certainly revert to the debtor. In fact, the debtor's interest in the surplus is so substantial that he can dispose of or assign his interest in the surplus either by will or by deed. Therefore, if the properties of a debtor which are vested in a trustee by an order of insolvency court are sold out at an undervaluation the debtor is unquestionably aggrieved by such an act. It is, therefore, not correct to say that he is not a person who can be aggrieved by an act of the trustee. This, in fact, is the real ratio of the decision reported in 44 Cal WN 365 to which I have just referred. But though the debtor has interest in the properties, his interest does not permit him to meddle with the administration of the same. He cannot be heard to say that the properties would have been administered better by the Official Receiver or trustee or that the properties, if sold in a different manner, would have fetched a higher price. All these are matters of administration regarding which he has no locus standi at all. But the debtor can certainly complain if in selling the properties or in collecting the assets the Official Receiver or Trustee acts fraudulently or illegally or in excess of the authority given to the Trustee by the Insolvency Court. Subject to this limitation the Trustee's discretion is unfettered and the debtor has no right either to interfere or to complain against the costs of the Trustee.

4. In the present case the debtor in his petition before the learned Judge made specific allegations of fraud against the Official Receiver. The petitioner complains, though indirectly, that the sale was held without his knowledge in spite of a specific order of the Court that he should be informed. This, if true, would be certainly a violation of the Court's order and, at the same time, an unjust act. The petitioner then makes certain other allegations of fraud against the Official Receiver which are more substantial and definite in nature. There are also allegations of collusion between the Official Receiver and the auction purchaser. We are naturally not in a position here to say anything on the merits of these allegations. It was for the learned Judge to have gone into these allegations and to have recorded a finding regarding the truth or falsity of the allegations. The learned Judge, however, has refused to go into the merits of these allegations by dismissing the application in limine on the ground that the debtor had no locus standi to make the application.

5. Section 4 of the Provincial Insolvency Act gives wide powers to the Court to decide all questions arising in insolvency. I set out hereunder the relevant provisions :

Section 4(1): 'Subject to the provision of this Act, the court shall have full power to decide all questions whether of title or of priority or of any nature whatsoever, and whether involving matters of law or of fact, which may arise in any case of insolvency coming within cognizance of the court, or which the court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case.'

6. It is apparent that the court has jurisdiction to intervene whenever the court thinks it necessary 'for the purpose of doing complete justice'. In the instant case where there are allegations of fraud the court has ample powers under Section 4 to look into the allegations. As to the competence of the debtor to bring a question before the court for decision I have already shown that he being interested in the disposable surplus after the claims of the creditors have been met has certainly the locus standi to do so. In this view of the matter I have no doubt thatthe learned Additional District Judge was wrong in dismissing the application on the preliminary ground that the application was not maintainable because the petitioner had no locus standi to make the application.

7. At this stage, I would like to deal with some of the arguments made by Mr. Sen Gupta appearing on behalf of respondent No. 2. Mr. Sen Gupta's first contention was that Section 4 of the Provincial Insolvency Act has no application in the present case since the order of adjudication had already been annulled and the debtor could no longer be regarded as an 'insolvent'. This argument, to my mind, has no substance at all. It is clear that upon an annulment of the order of adjudication, the insolvency proceedings are not automatically terminated. In fact almost simultaneously with an order of annulment the court usually passes an order vesting the properties of the debtor in a trustee who holds the properties in trust for the benefit of the creditors unless of course the court thinks that the order of adjudication was unjustified and should be completely set aside. The assets and properties of the debtor have to be realised and applied towards liquidation of the claims of the creditor by the trustee. This administration of the debtor's property is done by the trustee under the supervision of the court. Therefore, whenever there is a vesting order following an order of annulment insolvency proceedings do in fact continue. This is clear from the very nature of the proceedings provided for in the Provincial Insolvency Act. But if any authority were needed for this proposition references may be made to the case reported in Baikuntha Nath v. Kishori Mohan, 47 Cal WN 74 and Abdul Latif v. J.R. Percival : AIR1936Cal573 .

8. Mr. Sen Gupta also contended that in fact the learned Additional District Judge had dealt with the appellant's application on the merits and when the learned Judge said that the application was not maintainable under Section 4, he merely meant that on the facts and circumstances of the case it was not one in which the Judge could interfere under Section 4 of the Provincial Insolvency Act. I am afraid I cannot persuade myself to accept this suggestion when I find that the only issue specifically framed for determination was as to the maintainability of the application and when the issue itself is described by the learned Additional District Judge as 'preliminary'. After all we are not hearing an application under Section 151 of the Civil Procedure Code. We are hearing an appeal against a final order. That order has been passed by the learned Judge only on one specific preliminary issue and the Judge's finding on that issue is wrong. I do not see how in these circumstances we can possibly avoid setting aside the order as bad.

9. It is true that in some portions of his order the learned Additional District Judge in a half-hearted manner refers to the merits of the case. But since he was dealing with the preliminary point he was not called upon to deal with the merits at all. Besides, in my opinion, the learned Judge did not have ail the materials before him on which he could adequately deal with the merits of the application. The appellant had not been called upon to adduce evidence in support of the various allegations made by him in his petition and I do not understand how the matter can be dealt with without evidence being adduced or gone into.

10. In the circumstances of the case the appeal must be allowed and the order of the learned Additional District Judge set aside. The papers must now go back to the learned Additional District Judge for hearing of the appellant's application dated 28th June, 1961 on its merits. In sending back the case, however, I think it proper to direct that the learned Additional District judge should confine the scope of his enquiry to the question whether the Official Receiver in putting the properties to sale acted illegally or fraudulently or in excess of his jurisdiction. As I have already said, the appellant debtor has got no locus standi either to complain against or to interfere with the manner of administration or even with the manner of sale of the properties so long as the Trustee or Receiver acted in a manner which was neither illegal nor fraudulent I make no order as to costs.

Chatterjee, J.

11. I agree.


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