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ishu Prokash Ganguly Vs. A.K. Basu, Receiver to Estate of Insolvent, Jamini Prakash Ganguly - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Reported inAIR1943Cal555
Appellantishu Prokash Ganguly
RespondentA.K. Basu, Receiver to Estate of Insolvent, Jamini Prakash Ganguly
Cases ReferredChowthmull v. Calcultta Wheat and Seeds Association
Excerpt:
- .....or otherwise, before the date of the admission of the petition. the question may arise whether money paid into court under order 21, rule 89, civil p.c., comes within the description of assets realised in course of execution by sale or otherwise as given in section 51(1), provincial insolvency act. these words were taken from section 295 of the old civil p.c., though section 73 of the present code, which embodies the same provision is more generally worded. it was held in several cases coming under section 295 of the old code that money deposited in court under section 310(a) which corresponded to order 21, rule 89 of the present code, could not be rateably distributed as they could not be regarded as assets realised in course of execution by sale or otherwise. the terms of section.....
Judgment:

1. This appeal is directed against an order of the District Judge, 24-Parganas, dated 9th September 1940, made in exercise of insolvency jurisdiction, in insolvency Case No. 46 of 1989. The facts material for our present purposes may be shortly stated as follows : The debtor Jamini Prokash Ganguly was adjudicated insolvent on his own application on 25th June 1940, and Mr. A.K. Basu the respondent in the appeal before us was appointed receiver in insolvency. The application for insolvency was presented by the debtor on 17th November 1939, and it was admitted on 23rd November following, when notices were issued to the creditors. Isha Prokash Ganguly, the appellant before us, is a relative and a creditor of the insolvent, and he got a decree against Jamini for a sum of about Rs. 4000 in the original side of this Court on 28th July 1939, just a few months before the latter applied for insolvency. This decree was transferred for execution to the Court of the Subordinate Judge at Noakhali, and Isha Prokash started an execution case in that Court (being Execution Case No. 140 of 1989) in course of which a 6 annas share of a certain revenue paying estate belonging to the debtor was attached. This property was already subject to a mortgage in favour of Isha Prokash to secure another debt of Rs.8600. On 13th May 1940, the attached share in the touzi was sold, subject to the existing mortgage, and it was purchased by the decree-holder himself for Rs. 4890. Upon this, it is said, Jamini borrowed a sum of Rs. 5500 from Mr. A.K. Basu, who is related to him by marriage, and who later on was appointed receiver to his properties by the insolvency Court, and, out of this amount, deposited a sum of Rs. 5250 in the Noakhali Court on 12th June 1940, for having the sale set aside under Order 21, Rule 89, C.P.C. On 14th June 1940, Jamini filed an application before the insolvency Court praying that the Subordinate Judge, Noakhali, might be requested to with hold payment of the money to the decree, holder auction purchaser and an ex parte order was passed to that effect on the same' day. As has been said already, Jamini was adjudicated insolvent on 25th June 1940, and on 28th July 1940, Isha Prokash applied to the insolvency Court for setting aside the ex parte order made on 14th June 1940. This was contested by the receiver who filed a substantive petition on 13th August 1940, praying for an order restraining the decree-holder from withdrawing the money. The District Judge by his order dated 9th September 1940, rejected the application of Isha Prokash and thereby confirmed the previous order made on 14th June 1940, withholding payment of the money to the decree-holder. It is against the order that the decree-holder e has come up on appeal to this Court.

2. The sole point for our consideration in this appeal is whether the sum of Rs. 5250 deposited by the debtor under Order 21, Rule 89, Civil P.C., vested in the receiver, on the debtor being adjudicated insolvent, or the decree, holder creditor was entitled to the benefit of it.

3. Now under Section 28, Provincial Insolvency Act, as soon as an adjudication order is made, all the properties of the debtor vest in the receiver, and the title of the latter relates back to and commences from the date of the presentation of the insolvency petition. If money belonging to the debtor was paid to any of his creditors, after the insolvency petition was filed and before the order of the adjudication was made, it would vest in the receiver, under the doctrine of relation back and the receiver would be entitled to have a refund of it from the payee unless the latter could claim protection under Section 55, Provincial Insolvency Act. Section 56(1), Provincial Insolvency Act, protects such payment, if the payee at the time of receiving payment had no notice of the insolvency petition. If the money which was paid into Court by the debtor under Order 21, Rule 89, C.P.C., in the present case be regarded as 9 payment to the decree-holder auction purchaser even then, it is conceded by Mr. Ghosh that his client could not claim the benefit of Section 55 as the latter admittedly was aware of the insolvency proceedings at the time when the deposit was made. The argument put forward by Mr. Ghosh in support of his client's case, is of a three-fold character. He has argued in the first place that the money deposited under Order 21, Rule 89, Civil P.C., cannot be regarded as benefit of execution within the meaning of Section 51, Provincial Insolvency Act, and consequently the receiver is not entitled to lay any claim to it. The second contention of Mr. Ghosh is that the money that was paid into Court was not the insolvent's money at all; it was advanced by a third party for a specific purpose and was impressed with a trust for that purpose: and hence it did not vest in the receiver under Section 28, Provincial Insolvency Act. The third point taken is that the appellant was entitled to rank as a secured creditor in respect to the money thus paid into Court.

4. As regards the first point raised by Mr. Ghosh, it is difficult to see how Section 51, Provincial Insolvency Act, is of any assistance to his client. Sub-section (1) of Section 51, Provincial Insolvency Act, lays down that when execution of a decree has issued against the property of a debtor, no person shall be entitled to benefit of the execution against the receiver, except in respect of assets realised in course of the execution by sale or otherwise, before the date of the admission of the petition. The question may arise whether money paid into Court under Order 21, Rule 89, Civil P.C., comes within the description of assets realised in course of execution by sale or otherwise as given in Section 51(1), Provincial Insolvency Act. These words were taken from Section 295 of the old Civil P.C., though Section 73 of the present Code, which embodies the same provision is more generally worded. It was held in several cases coming under Section 295 of the old Code that money deposited in Court under Section 310(A) which corresponded to Order 21, Rule 89 of the present Code, could not be rateably distributed as they could not be regarded as assets realised in course of execution by sale or otherwise. The terms of Section 310(A), it was said, were too precise to admit of the application of Section 295: vide Roshum Lall v. Ram Lall ('03) 30 Cal. 262, following Harisundari v. Sashi Bala ('97) 1 C.W.N. 195 and Bihari Lal Paul v. Gopal Lall Seal ('97) 1 C.W.N. 695.

5. In Hari Saha v. Faizalar Rahman ('15) 2 A.I.R. 1915 Cal. 838 it was held that the law remained the same in spite of the change of the wording in Section 78 of the present Civil P.C. Doubts have indeed been thrown upon the view in subsequent cases and it has been held by the Patna High Court in Bhattoo v. Raghu Nandan ('33) 20 A.I.R. 1933 Pat. 303, following the observation of Sir George Rankin in Noor Mahamad v. Bilasiram ('20) 7 A.I.R. 1920 Cal. 785 that money paid into Court under Order 21, Rule 89, Civil P.C., becomes assets in the hands of the Court within the meaning of Section 73, Civil P.C. It is, however, altogether unnecessary for purposes of the present case to pursue this line of discussion. If it is the contention of Mr. Ghosh that money paid by the debtor under Order 21, Rule 89, Civil P.C., were assets realised in course of execution by sale or otherwise within the meaning of Section 51(1), Provincial Insolvency Act, that would give no comfort to his client, as it is not disputed that the money was paid after the admission of the insolvency petition, and not before that. But, if we have understood Mr. Ghosh aright, he accepts the position that this money did not rank as assets realised in course of execution and his argument is that for precisely the same reason it could not be regarded as 'benefit of execution' as contemplated by Section 51(1), Provincial Insolvency Act, and the receiver could not therefore set up that section as a bar to the claim of the creditor. But even if Section 51(1) does not help the receiver it does not help the creditor either. It is not necessary for the receiver to invoke the provision of Section 51 in his favour, for if the money belonged to the insolvent, at the date of the presentation of the insolvency petition, it would vest in the receiver, and it would be for the creditor to show how he could lay claim to it as against the receiver. It is not necessary for us therefore to discuss what is the exact meaning of the expression 'benefit of execution' in Section 51(1), Provincial Insolvency Act, as according to Mr. Ghosh himself, this section affords no protection to his client. We therefore pass on to the other two points raised by Mr. Ghosh upon which he founds his claim to the deposit money as against the receiver.

6. The second point put forward by Mr. Ghosh in substance is, that the money which was paid into Court by the debtor under Order 21, Rule 89, Civil P.C., never formed part of his general assets. The money was advanced by a third party to be spent only for a specified purpose, viz., paying off the decretal dues of the appellant, and thereby setting aside the sale. In these circumstances it was impressed with a trust, and as the debtor never got any free disposing power over this sum of money, it was not his property and did not vest in the receiver on his adjudication. In support of this contention Mr. Ghosh has relied upon several decisions of English Courts.

7. The leading case on this point is the case in In re Rogers; Ex parte Holland and Hannen (1891) 8 Morrell 243. In that case, after an act of bankruptcy had been committed by the debtor, his solicitor called upon the solicitor for the appellants who were creditors having knowledge of the act of bankruptcy and informed him that a sum of money had been provided by a third party to be paid to the debtor's pressing creditors. An arrangement was then entered into under which a sum of 270 was paid to the appellants on certain terms. The debtor was subsequently adjudicated bankrupt, and the trustee claimed repayment of the money. It was held by the Court of appeal that as the money in question was advanced to the bankrupt for the specific purpose of enabling his pressing creditors to be paid, it was impressed with a trust for that purpose and never became the bankrupt's property, and the trustee was therefore not entitled to demand repayment. It appears from the judgment of Lindley L.J., that the judgment of the Court of appeal really proceeded on two grounds: In the first place it was said that as the money was advanced not as a loan to the debtor to be spent in any way he liked but was earmarked for a specific purpose it never came under the control of the debtor and did not become his money in a proper sense. The second ground put forward was that it was really payment by a third party and not by the bankrupt, and the bankrupt merely acted as a transmitting agent.

8. This decision in In re Rogers; Ex parte Holland and Hannen (1891) 8 Morrell 243 was followed by Wright J., in In re Drucker; Ex parte Basden (No. 1) (1902) 2 K.B. 55. In this case, after the presentation of a bankruptcy petition against a debtor, the solicitor of the debtor paid the solicitor of the petitioning creditor a sum of 300 on condition that the petition should be dismissed, and it was dismissed accordingly. This sum was advanced by the debtor's solicitor and the debtor gave him a security for it. The debtor was afterwards adjudged a bankrupt on the petition of another creditor, and the trustee in the bankruptcy applied for an order of refund of this sum of 300 from the creditor to whom it was paid. Wright J., held on evidence that the sum of 300 was impressed with a trust and did not vest in the trustee in bankruptcy. 'I cannot hold thinking,' thus observes the learned Judge,

that the money was never free and never became part of the general assets of the debtor at all. He never had any right to receive it or use it or apply it to any purpose except this one particular purpose. Under these circumstances it seems to me it was impressed with a trust - not in the strict sense of the word - but in substance with a quasi trust that it should be applied by Beyfua and Beyfus out of their own money for the discharge pro tanto of the claim of the bank.

9. The decision of Wright J., was affirmed by the Court of appeal: vide the appellate judgment in In re Drucker; Ex parte Basden (No. 1) (1902) 2 K.B. 237. The two other decisions referred to by Mr. Ghosh are In re Watson; Ex parte Schipper (1912) 107 L.T. 783 and In re Hooley (1915) 84 L.J.K.B. 1415, and both of them followed the principle laid down in the two cases referred to above. In order e to bring a case within the purview of these decisions, it is necessary to show that the advance of money was made by a third party with a condition attached that it should be spent only for a particular purpose and no other, and the debtor should have no manner of control over it. In fact the position must be that the person advancing the money must have the legal authority to restrain the bankrupt from using the money for any other purpose. There is absolutely no evidence to show that such was the state of affairs in the present case. Mr. Basu who advanced the money has not been examined in the case. The only material on the record upon which Mr. Ghosh bases his contention is a statement in the petition of the debtor which was presented to the insolvency Court on 14th June 1940, and the statement stands as follows:

That your petitioner had no other means than to save his property by deposit of money under Order 21 Rule 89, Civil P.C., and accordingly he approached Mr. A.K. Basu, Barrister-at-law, Government Counsel of Calcutta High Court who has married your petitioner's niece, and persuaded him to advance Rs. 5500 for the purpose, and thereby save the property for the benefit of the creditors and of your petitioner as well in case of surplus.

10. Mr. Basu advanced the money as a relation by marriage of the debtor, and his object was undoubtedly to help his relative; but there is nothing in the record to suggest that when Mr. Basu advanced the money to the debtor it was earmarked for a specific purpose and that a condition was attached that it should be spent only for that purpose and nothing else. The arrangement was one entirely between the debtor and his relative, and the creditor was not a party to it. The circumstances go to show that the advance was made by way of gift, to help a relative out of his distress, and the debtor had full control and unfettered discretion as regards the use of this money. The protection of the property of the debtor might be the motive which impelled his relative to make the advance, but it was left entirely to the debtor, as to how the money should be spent. We cannot say, to use the language of Wright J., in the case above cited, that the bankrupt in this case had no right to receive the money, or to use it, or to apply it to any purpose, except that of paying off the dues of the appellant, and that the money was impressed with a trust that it should be applied as the money of Mr. A.K. Basu solely for the purpose of liquidating the decretal dues of the appellant. The second contention of Mr. Ghosh must therefore fail.

11. The third point raised by Mr. Ghosh is that with regard to the money paid into Court, his client was in the position of a secured creditor. It is perfectly true as was observed by James Ex. parte Banner; In re Keyworth (1874) 9 Ch. 379 that 'the money which was paid into Court belonged to the party who might be eventually entitled to the same' and, we can take it that the money deposited in Court by the debtor under Order 21, Rule 89 was in reality money paid to the appellant as he was the person entitled to it under law but that by itself, as we have said at the beginning of our judgment, does not help the appellant. In the case referred to by Mr. Ghosh on this point, viz., Chowthmull v. Calcultta Wheat and Seeds Association : AIR1925Cal416 , a stay of execution was granted by the appellate Court under Order 41, Rule 5, Civil P.C., on the appellant depositing in Court to the credit of the suit the decretal amount. The appellant was adjudged insolvent before the hearing of the appeal and the appeal was subsequently dismissed. It was held that the money was payable to the decree-holder and not to the Official Receiver. But the deposit was made there before the commencement of the insolvency otherwise it could be protected only if it fulfilled the conditions of Section 55, Provincial Insolvency Act. As we have said already the appellant cannot, in this case, claim the benefit of Section 55, Provincial Insolvency Act. The result is that the appeal fails and is dismissed with costs - hearing fee being assessed at three gold mohurs.


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