Skip to content


Deva Dutta Serogi and Sons Vs. P.C. Mitter and Sons - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Reported inAIR1939Cal530
AppellantDeva Dutta Serogi and Sons
RespondentP.C. Mitter and Sons
Cases ReferredManilal v. Nanabhai
Excerpt:
- .....official receiver was not entitled to sell through an auctioneer and that they only knew of the sale officially on the morning of the 10th. i am satisfied on the affidavits that they were aware of the sale and had every opportunity to bid and that the sale was sufficiently advertised to justify it being held on 10th january. i am further of opinion that the official receiver was not only justified in selling through an auctioneer, but that such a course was desirable in the interest of the creditors.4. the following facts emerge with regard to the sale: after the order of 14th december, the official receiver called a meeting of the creditors on 22nd december at which the value of the stock for sale was estimated at rs. 5000 by two of the parties (the applicant and p. chatterji & co.).....
Judgment:
ORDER

McNair, J.

1. The plaintiff firm have taken out this summons for an order that the Official Receiver be directed to accept the prices offered by the Calcutta Metal Syndicate at the sale held by Messrs. Staynor & Co., on Tuesday, 10th January 1939 and that he do deliver the goods to the purchasers, and distribute the sale proceeds as directed by an order of this Court dated 14th December 1938. The defendant firm of P.C. Mitter & Sons was adjudicated insolvent on 11th January 1939, and the Official Assignee contends that there was no concluded sale on the previous day and that the goods, the subject-matter of the sale, vested in the Official Assignee for the benefit of the general body of creditors. The application is supported by Callenders Cable and Construction Co., and by the purchasers. Callenders Company brought Suit No. 1662 of 1938 against the debtors and a consent decree was passed on 25th August 1938, by which the Official Receiver was appointed Receiver of the business and stock-in-trade of the defendant firm, but was not to take possession unless there was default in payment of the decretal instalments.

2. The applicant brought the suit in which he now applies in October 1938 and had the Official Receiver appointed on 15th November. On 5th December he obtained a decree and on the following day the Official Receiver took possession of the defendant firm's stock of electrical equipment lying at 51, and 52 Ezra Street and 8 Karbala Tank Lane. On 12th December, the applicant applied for sale of the properties over which the Receiver had been appointed and an order was made for execution to be carried out in Callenders' suit: the Official Receiver was directed to sell the properties forthwith either by private treaty or by public auction and to distribute the sale proceeds rateably under Section 73, Civil P.C., between the two decree-holders. The Receiver was further directed to Act on counsel's endorsement. In view of the above order directing the Official Receiver to sell 'forthwith' and 'on counsel's endorsement' I consider that the Official Receiver was justified in expediting the sale to the best of his ability, and there is no force in the argument put forward on behalf of P. Chatterji & Co. that the sale was effected with indecent haste.

3. P. Chatterji & Co. sued the debtors on 19th December and got the Official Receiver appointed in his suit also, and a direction that in the event of sale the Official Receiver should hold the proceeds subject to the further orders of this Court. P. Chatterji & Co. eventually obtained a decree on 16th January 1939, after the adjudication order; they are therefore unsecured creditors and support the Official Assignee in opposing this application. They complain that the Official Receiver was not entitled to sell through an auctioneer and that they only knew of the sale officially on the morning of the 10th. I am satisfied on the affidavits that they were aware of the sale and had every opportunity to bid and that the sale was sufficiently advertised to justify it being held on 10th January. I am further of opinion that the Official Receiver was not only justified in selling through an auctioneer, but that such a course was desirable in the interest of the creditors.

4. The following facts emerge with regard to the sale: After the order of 14th December, the Official Receiver called a meeting of the creditors on 22nd December at which the value of the stock for sale was estimated at Rs. 5000 by two of the parties (the applicant and P. Chatterji & Co.) while in the stock sheets it was valued at Rs. 19,500. In the circumstances the Official Receiver decided that there could be no sale by private treaty, and immediately after the Christmas holidays the Official Receiver held another meeting on 4th January at which the draft notification and conditions of sale were settled. The date of sale was to be notified after consultation with the auctioneers and it was decided that the goods lying at the godown at Karbala Tank Lane should be removed from there to the showroom, and if necessary to the godown at 51, Ezra Street, where the goods could be sold after the stock-in-trade had been disposed of. It is noteworthy that in the minutes of the meeting reference is made to the goods ' at Karbala Tank Lane as distinguished from the 'stock-in-trade' at Ezra Street.

5. On 7th January the auctioneers, Staynor & Co., valued the stock-in-trade at Rupees 9000 to Rs. 10,000 on a sale by auction. They advised postponement of the sale but said that if urgent it could be held on the 10th. All the creditors must have realized by this time that the insolvency of the debtor was imminent, and the decree-holders write threatening the Official Receiver with dereliction of duty in not obeying the orders of the Court to sell forthwith, while the unsecured creditors make similar threats if the sale is unduly hurried. The sale notice of 7th January and the notification of sale refer to the stock-in-trade at Ezra Street. On 10th January Staynors suggest the reserve price should be as follows: Lot 1. Showroom Rs. 4000, Lot 2. Godown at Ezra Street Rs. 6000. To this the Official Receiver agreed.

6. A reference to the minutes of the meeting of 4th January, to which I have already referred, makes it quite clear that the 'show-room' was No. 52, Ezra Street, and the 'godown' 51, Ezra Steet, and that the reserve price referred solely to the goods in those two buildings. This is important in view of the facts which emerge later. On 10th January Staynors wrote to the Official Receiver reporting that the showroom and godown had been put up in separate lots and offers received of Rupees 2000 for the goods in the showroom and Rs. 5500 for those in the godown. The letter continues:

We have kept the offers pending your decision which ought to be received by me by 12 P.M. (presumably 12 noon) tomorrow 11th instant latest.

I We would recommend that the ofiers be accepted, as with the Karbala Tank godown and fittings and furniture, over Rs. 10,000 would be realized: vide our estimate in our letter of the 7th instant.

7. The Calcutta Metal Syndicate were the highest bidders and they gave the auctioneers a cheque for Rs. 7500 and received a katcha receipt stating that the cheque was 'to be held in deposit pending the Official Receiver's acceptance of the sale offers made to him.' It has been alleged that the Calcutta Metal Syndicate were benamidars of the present applicants but that allegation has not been pressed. In support of the application it is alleged that there was a further meeting between the purchasers and the Official Receiver on the afternoon of 10th January, at which the Official Receiver accepted a further offer of Rs. 2750 for the Karbala Tank Lane goods and confirmed the sale of all three properties. This story is set out in para. 9 of the affidavit of Jotindra Nath Mukherjee, a partner in the Calcutta Metal Syndicate and in para. 17 of the affidavit of Balabux Singhania, a partner in the firm of Devadutt Serowgi & Son.

8. Jatindra Nath Mukherjee says that he saw the Official Receiver in his office on the afternoon of the 10th and the Official Receiver said that as the reserve price had been fixed at Rs. 10,000 he could not accept the bids unless the purchasers were willing to buy the Karbala Tank goods also for Rs. 3000. After some discussion they offered to pay a further sum of Rs. 2750 for the Karbala Tank Lane goods; that this offer was accepted by the Official Receiver, who thereupon confirmed the sale and directed the purchasers to pay that sum to the auctioneers. Jatindra Nath Mukherjee says that he made the payment to Mr. Staynor at his house on the same evening and received a katcha receipt the next morning. The katcha receipt signed by Staynor & Co. acknowledges payment of Rs. 2750 'as deposit pending the Official Receiver's acceptance of their offer made through us on their behalf for the sale of the Karbala Tank godown contents to them.' This receipt contradicts the purchasers' story. It suggests that the purchasers had made an offer of Rs. 2750, that Staynors accepted that sum, but merely on deposit until they had communicated it to the Official Receiver and ascertained whether it was accepted or not.

9. Had there been a concluded contract with the Official Receiver on the previous evening and a payment at the same time to Mr. Staynor as alleged it is inconceivable that the receipt would state that the money was only received 'on deposit' and 'pending the Official Receiver's acceptance.' Again the reserve price of Rs. 10,000 had been fixed for lots 1 and 2 only without the Karbala Tank Lane goods and the inclusion of the latter would not mean that the reserve price had been reached. Counsel on behalf of the Official Receiver has tried to explain this away by saying that the Karbala Tank Lane goods were ' deemed to have been moved' from there to the showroom and that they were included in the valuation in arriving at the reserve price. It is clear from correspondence that this was not the case. Balabux in his affidavit says that the meeting with the Official Receiver took place on evening of 10th January and that his attorney and Callenders' attorney were also present.

10. Not one of the disinterested parties, such as the Official Receiver, the attorneys, nor Mr. Staynor, has sworn an affidavit in support of this story, but counsel on behalf of the Official Receiver has stated that the facts were as alleged in these affidavits. It was pointed out that the correspondence and the receipt suggest that this story is false, and counsel for the Official Assignee has commented strongly on the action of the Official Receiver in instructing his counsel to allege the truth of the story when he is unwilling to say so on affidavit. The allegation is that the interview was with the Official Receiver personally yet the only affidavit which the Official Receiver hus supplied is by a clerk who was not present at the interview and who makes no mention of it. After the affidavits of Jotindra Nath Mukherjee setting out the story of the interview had been filed the attorneys for the Official Assignee wrote to the Official Receiver asking what he had to say in the matter: 'it is only fair they write that your client should place all facts and make the position clear.' The reply was that 'it would be best for you to approaoh the party making the said affirmation.' A further letter asking what the Official Receiver had to say in regard to the allegation was ignored.

11. It is most unfortunate that attorneys advising an officer of the Court in the position of the Official Receiver should refuse to give information which was of vital importance to the Official Assignee, and that the Official Receiver should support by his counsel a shory which has every appearance of being false, while at the same time he is unwilling to support it on affidavit. It cannot be too strongly emphasized that it is the duty of a Receiver, and particularly of the Official Receiver, to be strictly impartial, and his refusal to give the attorneys for the Official Assignee and the other creditors any information regarding the alleged interview raises a suspicion that he was in this instance deliberately favouring the interests of the decree-holders and merits the severest censure.

12. The correspondence on and subsequent to 10th January is in my opinion conclusive that there was no sale on that day. On the 11th, Messrs. N.C. Bural & Pyne, the attorneys for unsecured creditors, inform the Official Receiver of the order of adjudication and call upon him to make over possession of the assets in his hands to the Official Assignee. On the same day, Staynors inform him of the offer of Rs. 2750 and ask him to accept it, along with the offers already submitted. Had the offer been accepted at the interview as alleged, it is inconceivable that the Official Receiver would not have said so. Instead he writes that having regard to the insolvency he cannot accept any offer now and the bid of Rs. 7500 cannot be considered either. The same day however he writes to Messrs. N.C. Bural & Pyne to say that the sale had been duly effected by Staynors and the Calcutta Metal Syndicate is 'the highest bidder and purchaser in respect of the stock-in-trade situate at 51, and 52 Ezra Street.' How could he possibly confine the purchase to Ezra Street if there had been an interview on the previous evening at which he refused to sell the Ezra Street goods unless the Karbala Tank Lane goods were taken as well, and if the meeting had taken place why should he conceal the fact? Finally on 12th January the plaintiff's solicitor writes that he will apply to the Court that the Official Receiver 'be directed to accept' the offers, and that is in fact the form of the present application. If the Official Receiver had already accepted the offer why was the summons couched in those terms?

13. The allegation that the Official Receiver accepted the purchaser's offers at the interview on 10th January and that there was a concluded sale on that evening is negatived by the subsequent correspondence and actions of the parties and I find that there was no such sale. I hold further that there was no concluded sale even on 11th January. The Official Receiver in his letter 1/341/39 of 11th January writes to Messrs. Bural & Pyne that the 'sale had been duly effected by the auctioneers,' but he makes no mention of the alleged meeting with him on the evening of the 10th and unless that meeting took place the auctioneers could not sell but could only register bids, which would constitute a sale only after acceptance and confirmation by the Official Receiver. This aspect of tne matter does not seem to be present to the mind of the Official Receiver at the time when the letter was written, for the letter confines the sale to the stock-in-trade at 51, and 52 Ezra Street. It is abundantly clear from the purchaser's own case that the stock-in-trade at Ezra Street did not include the Karbala Tank Lane goods, and their case again, which the Official Receiver supports, is that the Official Receiver refused to accept the offers made at the sale for the goods at Ezra Street because the reserve price had not been reached.

14. My finding that there was no concluded sale even on 11th January disposed of the contention based on Section 53(3), Presidency Towns Insolvency Act, that the purchaser would in any event get a good title ,as against the Official Assignee. It is next argued that the Official Receiver was appointed receiver in execution, and that the moment the assets or stock-in-trade came into his hands they were assets realized in the course of execution within the meaning of Section 53(1) of that Act and gave the decree, holder a prior right to that of the Official Assignee. It is suggested that the Receiver was not strictly a receiver in execution because there was no application in writing for his appointment as provided by Order 21, Rule 11(2), Civil P.C. The tabular statements to which reference has been made ask only for sale. But the Official Receiver was originally appointed under the terms of the consent decree of 25th August 1938 in Suit No. 1662 of 1938, and he took possession as therein directed on 6th December on failure by the judgment-debtor to pay the instalments ordered. He was appointed in this suit on 15th November 1938 and it was on an application in this suit that the order of 14th December was made directing execution to be carried out in suit No. 1662 of 1938 and the Official Receiver to sell the goods. The Official Receiver was in my opinion appointed in execution but no assets had been realized in the course of the execution before the date of the order of adjudication.

15. Much of the argument has been directed towards the meaning of the words 'assets realized in the course of the execution' and I have been referred to a number of cases in support of the argument that the word 'assets' is, or is not, restricted to the meaning 'money' or 'cash.' A further argument on behalf of the decree-holders raises the same question. They contend that inasmuch as the order of 14th December directed the Official Receiver to distribute the sale proceeds rateably between the decree-holders, the 'assets' in the hands of the Official Receiver, whether goods or money, became the property of the decree, holders in whose favour the order was made.

16. The words in Section 53, Presidency Towns Insolvency Act, 'assets realized in the course of execution by sale or otherwise' are the words which were used in Section 295, Civil P.C., 1882, which is the corresponding Section to Section 73 of the Code of 1908. Reference has been made to a number of decisions under Section 295 and the Courts have invariably so far as I can discover limited the meaning of the word 'assets' to money or cash which is capable of immediate distribution among the decree-holders. In Howatson v. Durrant (1900) 27 Cal. 351, a decree-holder obtained an order under Section 295 for payment out of the fund in Court representing realizations made in execution of decrees, and the Registrar was directed to report who were the creditors entitled to payment. Before the Registrar reported, the judgment-debtor was adjudicated insolvent. The fund in Court consisted of salary of the judgment-debtor. The Court held that the decree-holder was entitled to all sums representing the salary of the judgment-debtor which had accrued prior to the insolvency but that the Official. Assignee was entitled to administer all sums representing salary accrued after that event. In Haflz Mohamd Ali Khan v. Damodar pramanick (1891) 18 Cal. 242, the decree-holders had brought some of the judgment-debtors' property to sale in execution and the purchaser had deposited 25 per cent, of the purchase money. Another decree-holder applied for rateable distribution after the purchaser had paid in the deposit but before he had paid the balance of the purchase money, and the original decree-holders objected that the application was not in time. The objection was overruled on the ground that the purchase money had not been realized at the time of the application for rateable distribution. The Court held that the words 'whenever assets are (realized' in Section 295 mean 'whenever assets are 80 realized as to be available for distribution among the decree-holders.' Again in Manilal v. Nanabhai (1904) 28 Bom 264 Sir Lawrence Jenkins C.J. says at page 274.:

Prima facie the word 'realized' implies that property has been converted into or obtained in cash or some other form available for immediate distribution.

17. In no case that has been cited before me has there been any suggestion that the word 'assets' in either Section 295 or in the new Section 73 can be made applicable to anything other than money. Even if the word 'assets' has the wider meaning claimed, the assets had not been realized by sale or otherwise in the present instance within the meaning of Section 53, Presidency Towns Insolvency Act. They remained at the date of the insolvency assets which had not yet been realized by sale. It is argued that the changes introduced by Section 73 of the Code of 1908 which now reads, 'where assets are held by the Court, and more persons than one have before the receipt of such assets, made application to the Court for the execution of decrees.' have widened the scope of the Section, and that assets in the hands of the receiver are assets custodia legis and so assets 'held by the Court.' But this argument appears to me to beg the question which is what is the meaning of the word 'assets' and I can find no reported case in which the term has ever been applied otherwise than to money.

18. That this is the true meaning is further Substantiated by the provision that 'the assets after deducting the costs of realization shall be rateably distributed.' I have no doubt that the words 'assets held by a Court' must mean 'money held by a Court' for it is only money and not goods which fjan be the subject of rateable distribution. The order for rateable distribution no doubt operates so as to create title in the decree-holders to the subject-matter of the order, but money alone can be the subject-matter of the order and the order of 14th December specifically directs the Official Receiver to distribute not the goods but the sale proceeds. Rateable distribution only comes into operation after the sale has been held 'and the goods converted into money, when the sale proceeds would come into the hands of the receiver and could be said to be held by the Court. I hold that there was no concluded sale and I direct that the property in the hands of the Official Receiver be delivered to the Official Assignee, but the costs of the execution prior to this application will be a first charge on the property so delivered as provided by Section 54, Presidency Towns Insolvency Act.

19. The application is dismissed. The applicants have set up a story which has been disbelieved and they must pay the costs of the Official Assignee who had to appear and oppose the application in the interest of the other creditors. The other parties including the applicants must bear their own costs of this application. I have already commented on the lack of candour shown by the Official Receiver. I appreciate the difficulty of his position, but I can find no justification for his refusal to give any information to the Official Assignee regarding the alleged interview on the evening of 10th January. He has neglected to refer to it in the affidavit filed on his behalf, and he has instructed his counsel to support a story which I have found to be false. I direct that he be personally liable for his own costs of this application.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //