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Jubilee Bank Ltd. Vs. Sm. Santimoyee Debi and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Case NumberA.F.A.D. No. 125 of 1949
Judge
Reported inAIR1950Cal487
ActsProvincial Insolvency Act 1920 - Sections 2(1), 28 and 44(2); ;Code of Civil Procedure (CPC) - Section 60(1)
AppellantJubilee Bank Ltd.
RespondentSm. Santimoyee Debi and ors.
Appellant AdvocateC.S. Sen, ;Biswanath Naskar and ;Rabindra Nath Mitra, Advs.
Respondent AdvocateS.C. Janah and ;Bhabesh Ch. Mitra, Advs.
DispositionAppeal dismissed
Cases ReferredJakeman v. Cook
Excerpt:
- .....saleable one. further, the plaintiffs were not entitled to be maintained out of the income of the suit properties and that had no locus standi to maintain the present suit which was accordingly dismissed. 5. on an appeal by the plaintiffs, the learned subordinate judge held that defendant 3 had not an interest which was a saleable one and the transfer by the official receiver was neither legal nor valid. the direction contained in the deed about the maintenance and for the residence of some of the relations was not of a recommendatory nature and that thereby a charge had been created over the properties in suit in favour of those persons. he also accepted a further contention on behalf of the plaintiffs that after an absolute discharge of the insolvent defendant 3, the official receiver.....
Judgment:

R.P. Mookerjee, J.

1. This is an appeal on behalf of defendant 2 directed against the decision of the Subordinate Judge decreeing the plaintiff's claim that the properties in suit are trust properties and that Defendant Bank be restrained from getting possession thereof or from interfering with the plaintiff's possession in any way and granting further consequential reliefs.

2. The plaintiff's case is that premises No. 21/A/1 and 21/A/2, Satis Mukherjee Road, Calcutta, belonged to the estate of Upendra Lal Banerjee who had during his life-time executed a Deed of Family Settlement in May 1933. It is alleged that under that deed the properties in suit vested in the third son of the settlor, Dhirendranath Banerjee who is defendant 3 in the present suit and for his life only. The property had so vested subject to the rights of maintenance and residence of the settlor's surviving daughters and their children. Plaintiff 1 is the wife of defendant 3 and plaintiffs 2-11 are either the minor sons and daughters or the daughters and daughters' sons of the settlor. The plaintiffs allege that they have come to know that defendant 3 had been adjudged an insolvent and that defendant 1 the Official Receiver, 24-Parganas was about to sell the interest of defendant 3 in the properties in suit to defendant 2, Jubilee Bank Limited, which is the appellant before this Court. It was inter alia maintained that defendant 3 was merely a trustee, had no saleable interest in the properties and the plaintiffs having the right of beneficial enjoyment thereof defendants 1 and 2 should be restrained from so (sic). There had been a further prayer for the issue of a perpetual injunction to restrain defendant 1 from completing the same. But after the filing of the suit and when the temporary injunction was not in force the conveyance evidencing the sale was executed by defendant 1 in favour of defendant 2 on 9th June 1945.

3. Defendant 2 alleged that the suit was a collusive one, defendant 3 was not a trustee but a full owner of the properties. The plaintiffs were not entitled in law to be maintained out of the income of the properties and that the Defendant Bank was a bona fide purchaser for value and entitled to possession. Defendant 3 supported the plaintiff company (sic).

4. On an interpretation of the deed of Family Settlement the Munsif came to the conclusion that the settlor had intended the trust to come to an end on his death. Defendant 3 was found to have a life interest and the same was a saleable one. Further, the plaintiffs were not entitled to be maintained out of the income of the suit properties and that had no locus standi to maintain the present suit which was accordingly dismissed.

5. On an appeal by the plaintiffs, the learned Subordinate Judge held that defendant 3 had not an interest which was a saleable one and the transfer by the Official Receiver was neither legal nor valid. The direction contained in the deed about the maintenance and for the residence of some of the relations was not of a recommendatory nature and that thereby a charge had been created over the properties in suit in favour of those persons. He also accepted a further contention on behalf of the plaintiffs that after an absolute discharge of the insolvent defendant 3, the Official Receiver had no jurisdiction to effect the sale. This specific point though not raised in the trial Court was allowed to be agitated at the appellate stage. The Court found that the order of absolute discharge had the effect of giving a full release to the insolvent from all debts and liabilities and the authority of the Official Receiver ceased from the time of the discharge. A transfer, if any, purported to have been made after the discharge of the insolvent was without jurisdiction. The plaintiffs were found to have locus standi to maintain the suit. The suit was decreed against the Bank defendant 2, it being restrained from getting possession of the premises or from interfering with the plaintiff's possession. Defendants 4 and 5, who are tenants in a portion of the premises were restrained from paying rents to defendant 2. Hence this second appeal to this Court by the Bank, defendant 2.

6. The arguments advanced on behalf of the purchaser Bank may be broadly divided under two heads: First, that the authority of the Official Receiver to sell the premises in question did not come to an end on the insolvent being discharged by the Court. Secondly, on an interpretation of the deed of family Settlement it ought to be held that the plaintiffs had no interest in the properties and defendant 3, had a saleable interest in those properties.

7. Defendant 3, had been adjudicated insolvent on his own petition. Under Section 28(2), Provincial Insolvency Act the whole of the property of the insolvent vested in the Court or in the Receiver when appointed and was divisible amongst the creditors. Under Sub-section (4) of the same section, all other properties which might devolve upon the insolvent or be subsequently acquired by him after the date of the order of adjudication and before the discharge, also vested in the Court or Receiver for the same purpose as in respect of properties which the insolvent was possessed of at the time of the application for adjudication. The order of adjudication relates back to and taken effect from the date of the presentation of the application on which the adjudication is made. It is therefore, clear that the properties which defendant 3 was possessed of at the time when the petition for adjudication was filed vested in the Court for distribution amongst the creditors.

8. 'Property' is defined for the purposes of this Act under Section 2(1)(d) in the following terms :

'Property includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit'.

This definition appears to be modelled on Section 60(1), Civil P. C. Unless the insolvent has got a present disposing power, which he may exercise for his own benefit over a property it will not be considered to be one coming within this definition. As to whether the properties in suit come within the definition will be considered when we take up the second point dependent on the interpretation of the terms of the deed of Family Settlement. We proceed to consider now whether the Official Receiver was competent in law to sell, whatever interest the insolvent had after the order for final discharge.

9. For considering the question whether the sale on 3rd March 1945 by the Official Receiver was or was not valid we shall have to refer to certain other admitted facts. On an application filed by the defendant 3 on 6th February 1941 he was finally adjudicated an insolvent on 25th April 1941 on which date the Official Receiver, 24 Parganas, was also directed to take charge of the properties as under the Provincial Insolvency Act. On 21st July 1941, a report was submitted by the Official Receiver stating that the properties now in suit were practically valueless and on the next day the insolvent defendant 3 was allowed by the Court to realise directly the rents which were being paid by the tenants from a portion of the said properties. On 13th September 1941 the insolvent made an application for discharge under Section 41 of the Act. This application was not disposed of till about one year later. In the meantime, on 5th December 1941, the learned Judge held that the insolvent had no saleable interest in the properties now in suit. Creditor No. 3 having later on made an offer to purchase whatever rights the insolvent had in that property the learned Judge directed the Official Receiver to put up the properties to sale. Against this order an appeal was taken by the insolvent to the Court of the District Judge and on 13th May 1942 the order for sale was discharged on a finding that the insolvent had no saleable interest in those properties.

10. The petition for discharge which had been pending from September 1941 came up for hearing in July 1942, after the Official Receiver had filed an objection to the prayer for discharge and had also submitted a further report on 13th June 1942 that the insolvent had no assets except certain properties situate at Modhupur and Gobrapur. On a consideration of the objections raised a conditional order for discharge was passed by the learned Judge on 10th July 1912. The conditions imposed were about sales of the properties at Modhupur and Gobrapur. It was anticipated that the sales of the properties at Madhupur and Gobrapur would be completed before 11th August 1912 and on this latter date an order for absolute discharge was passed. The Official Receiver, however, was directed to continue in respect of the properties of the two places mentioned above. After the order for discharge had been made an appeal was preferred by creditor No. 3 Jubilee Bank Ltd., to the High Court being S. M. A. 266 of 1943 against the order by the learned District Judge holding that the insolvent had no saleable interest in the two houses now in suit. This appeal was disposed of by a judgment delivered on 13th July 1944. It was held that the appeal which had been preferred by the debtor before the District Judge was an incompetent one as the insolvent cannot be aggrieved by the order directing the sale of his interest in the property:

'It appears that he claims to be a trustee on behalf of certain other persons and as such has an interest in the house. His appeal was filed not as an insolvent but in an outside capacity. In that capacity he is not aggrieved by the order because it is only his personal right as insolvent that will be sold. The order of the lower appellate Court is set aside and that of the Subordinate Judge restored with this modification that the words 'the interest of the insolvent in' will be inserted between the words 'sell' and 'these'.'

11. There was no adjudication as to whether the insolvent had any saleable interest and also whether the present plaintiffs, who were not parties to those proceedings, or any other person or persons had any present right in those properties. After the passing of this order, the Official Receiver reported to the insolvency Court that he had agreed to sell to defendant 2 creditor No. 3 the interest of the insolvent in the properties now in suit for Rs. 8,050. The present suit was filed on 19th March 1945 on which date a temporary injunction restraining further steps proposed to be taken by the Official Receiver were stayed (sic). The plaintiffs' prayer for time during the hearing of the injunction matter being refused on 18th April 1945 the order issuing temporary injunction was withdrawn. The Kobala by the Official Receiver in favour of defendant 2 was executed on 9th June 1945. The order for injunction was restored on 19th June 1945.

12. It is argued on behalf of the plaintiff respondent that under Sub-section (2) of Section 44, Provincial Insolvency Act the order for absolute discharge passed on 11th August 1942 had, subject to the provisions of Sub-section (1) of Section 44, the effect of releasing 'the insolvent from all debts provable under this Act.' It is contended that the Official Receiver cannot function after such an order of discharge. This argument ignores the principles underlying the Bankruptcy Legislation and the purpose for which the Court takes charge of the properties of an insolvent. On a reading of the provisions of the Provincial Insolvency or for the matter of that of similar other bankruptcy statutes all the properties which come under the definition of Section 2(1)(d), Provincial Insolvency Act come into the hands of the Court and are subject to any order that the said assets be administered and such of the creditors whose debts can be proved in the insolvency proceedings may get payments pro rata from those assets. The Court takes charge of those properties but a person being adjudicated an insolvent is also given a chance after he has placed in Court his entire assets for the benefit of his creditors, to start life anew. A person who acts in that manner is allowed an absolute discharge. He is given an opportunity to begin his career without any handicap or impediment. The order of discharge is made without any direction being given about the divesting of the properties which had, under Section 28, Provincial Insolvency Act, vested in the Court or the Receiver for distribution amongst the creditors.

13. If the interpretation attempted to be placed on Section 44(2) of the Act be accepted, we have to hold, considered with that view that the assets which had already vested in Court for distribution are also all released or alternatively that until such assets are distributed amongst the creditors no application for discharge ought to be entertained. If as a result of the order for discharge the properties previously belonging to the insolvent revert back to the latter that would not only be most inequitable but would be against the spirit of the statute.

14. I do not think that the effect of Section 44(2) extinguishes the debts of the insolvent. The only limitation, imposed is that the creditors who have got debts provable under the Act can, after the order of discharge, look only to those particular assets which the insolvent was possessed of and had accordingly vested in the Court or the Receiver on the date of the filing of the application for adjudication. The claims of the creditors cannot be directed against any other property which may be acquired by the insolvent after an order of discharge is made.

15. It has been held consistently in a long series of decisions that if at the time when the order for discharge is issued the Court or the Official Receiver has got funds realised from the properties belonging to the insolvent which had vested in the Court or Receiver after adjudication such assets are to be distributed amongst the creditors even after the order for discharge. (Rowe & Co. Ltd. v. Tan Theon Taik, 2 Rang. 643: (A. I. R. (12) 1925 Rang. 105), K. P. S. P. P. Firm v. G. A. P. C. Firm 7 Rang. 126 : (A. I. R. (16) 1929 Rang. 168). Arjundas Kundu v. Marchia Telini : AIR1936Cal434 , Kriparam v. Sawana Ram, A. I. R. (26) 1939 Lah. 300 : (184 I. C. 472). In Bishanchand Jagannath v. Kishonlal Sheo Singh, I. L. R. (1939) Nag 478 : (A. I. R.(26) 1939 Nag. 103). It was not only held that the insolvency proceedings do not terminate with the order of discharge of the insolvent but a decree-holder creditor even if he had not notice of the insolvency proceedings and was not represented in them must seek his relief for recovering his debts from the insolvency Court and out of the assets which are still in the hands of the Court or of the Receiver.

16. The Courts have gone farther and have held that it is not only competent for the Court and the Receiver to distribute the assets which were held by the Receiver or by the Court but the latter can direct the sale of properties which were still held by the Court or by the Official Receiver if there were any other provable debts still remaining to be paid. Sukea v. Ramchandra Sankar I. L. R. (1937) Nag. 380: (A. I. R. (24) 1937 Nag. 171), Mahangelal v. Firm Suraj Prosad Chandulal : AIR1939All114 , Kanshiram v. Hariram 17 Lah. 775,* Parsu Vithoba Patil v. Balaji Vishwanath Rao, I. L. R. 1944 Nag. 14: (A.I.R. (31) 1944 Nag. 28). In a recent decision in Madras High Court, Soma Sundaram Pillai v. Official Receiver, South Arcot A. I. R. (34) 1947 Mad. 95 : (230 I. C. 213) an insolvent had been discharged and subsequently the insolvent made an application in respect of debts not yet satisfied for relief under the Provincial Debt Relief Act. The Court indicated that even after a discharge order the debts then outstanding as also the properties previously vested under the Insolvency Act continue to remain under the control of the bankruptcy Court. The debts are not payable personally by such an insolvent and the properties also cannot be deemed to be properties belonging to the insolvent. Such an insolvent could not be regarded as a debtor entitled to invoke the aid of the Debt Relief Act for such debts.

17. The provisions contained in Sub-section (2) of Section 44 is in terms almost similar to Section 28(2), English Bankruptcy Act of 1944. It has been held that under this Act an order of discharge releases the bankrupt from certain debts provable in bankruptcy but its effect is not to destroy the debt as though it had never been. See in this connection In re: Ainsworth; Millington v. Ainsivorth, (1922) 1 Ch. 22: (91 L. J. Ch. 51). The object of the Bankruptcy Acts has thus been explained in Jakeman v. Cook (1878) 4 EX. D. 26: (48 L. J. Ex. 165):

'One object of the Bankruptcy Act was to enable the debtor who has given all his property for the benefit of his creditor to obtain his discharge was that he might begin the world freed from all his obligation and protected from oppression of creditors. Another object is to prevent fraud by the debtor in giving an undue preference between creditor and creditor and promising to pay after the discharge to the prejudice of the general body of creditors.'

18. The extreme contention as urged on behalf of the plaintiff that after an order for discharge under Sub-section (2) of Section 44, Provincial Insolvency Act, the Receiver in Insolvency becomes functus officio, must be overruled. It is, however, further contended that in view of the special circumstances of this case the Receiver had no jurisdiction to sell the property after the order of discharge. It is pointed out that or 21st July 1941, the Official Receiver submitted a report to Court that the properties now in suit were practically valueless and on 5th December 1941, the Court came to the conclusion that the insolvent had no saleable interest in the properties. Immediately thereafter creditor No. 3 offered to purchase whatever rights the insolvent had in this property and the trial Court directed accordingly. On appeal to the Court of District Judge, it was held on 13th May 1942, that the insolvent had no saleable interest When this order by the District Judge was in force the order for discharge of the insolvent was passed on 10th August 1942.

19. It is contended that on the date the discharge order was passed it was on the basis that the insolvent bad no saleable interest in the properties. The conditional order for discharge which had been passed was for the purpose of collecting the proceedings of two other properties. An appeal had, thereafter, been taken to this Court against the order passed by the District Judge declaring that the insolvent had no saleable interest. Henderson J. set aside the order of the District Judge and restored the direction for sale previously given by the Sub-Judge with the modification that the sale will be of the interest of the insolvent in the properties in question. After this order of the High Court had reached the lower Court, the sale was arranged for on 3rd March 1945. The present suit was filed on 19th March and a temporary injunction was issued restraining the Official Receiver from executing the conveyance or to complete the transaction. This, temporary injunction was withdrawn on 18th April and before it was restored on 19th June, the kobala had been executed by the Official Receiver or 9th Jane.

20. In my view the order passed by this Court had the effect of reviving the authority of the Official Receiver to apply the proceedings of this property also for the benefit of the general body of creditors.

21. The next question for consideration is whether the insolvent had any saleable interest or not, and even if he had a saleable interest whether the sale by the Official Receiver binds or affects the plaintiffs. Exhibit 1, the Deed of Family Settlement, requires a closer examination. The relevant terms are as follows:

'4th......That after the death of the settlor the Trust Estate more fully described and mentioned in the Schedules 'A', 'B', 'C', 'D' and 'E' hereunder shall vest unto his wife and sons and their respective heirs in the manner and subject to the conditions, charges and uses, hereinafter stated:

* * * *(d) ......The South Eastern portion of the premises No. 60A (1), Satish Mukherjea Road, Sahebbagan, Kalighat consisting of three rooms on the First floor and three rooms on the ground floor together with privies and kitchens as well as the North Eastern Block of P60A (2), Satish Mukherjee Road, Sahebbagan Kalighat consisting of three rooms on the first floor and three rooms on the ground floor together with privies and kitchess hereinafter described in the Schedule 'D' shall vast in the third son of the settlor named Dhirendra Nath Banerjee an insurance agent having not much income to be held and enjoyed by him during his natural life and on his demise during the lifetime of the settlor or thereafter the same premises shall vest in the legal heirs of the said Dhirendra Nath Banerjee absolutely for ever. He may have the option of temporarily residing in the family dwelling house No. 15, Vidyasagar Street with the Settlor's second son Debendra Nath Banerjee on his contributing the income of the property allotted to him for family expenses.

(e) ......The family dwelling house and premises No. 15, Vidyasagar Street in Calcutta hereinafter described in the Schedule 'E' shall subject to the following rights of residence and charges vest in the second son of the settlor named Debendra Nath Banerjee who is a Medical Practitioner having practice in that locality with a dispensary in the building to be held and enjoyed by him during his natural life and on his demise either during the life time of the settlor or thereafter the said premises shall vest in the legal heirs of the said Debendra Nath Banerjee absolutely and for ever. And it is hereby declared and expressed by the settlor with the consent of the said Debendra Nath Banerjee. * * * *

5th ......That after the death of the settlor his wife Sreemati Sushila Debi and his four sons Jitendra Nath Banerjee, Debendra Nath Banerjee, Dhirendra Nath Banerjee and Nirendra Nath Banerjee shall support the settlor's surviving daughters and their children who may be dependant on him who may be in helpless and indigent circumstances out of the income of the properties allotted to them respectively and shall provide accommodation for them in their houses, if necessary. They shall have no claim on the properties of the settlor.'

Clause 6 is the vesting clause after the death of the settlor. Such vesting is subject to certain conditions.

22. It is quite clear from the terms of the Deed of Family Settlement that defendant 3 had a limited interest in the property in suit, subject no doubt to the rights of certain other persons. Such interest even if sold cannot affect the rights of the beneficiaries. The question whether on the facts proved the plaintiffs are dependants in helpless condition and whether they are staying in the house have been answered by the learned Subordinate Judge in favour of the plaintiffs. I do not see any reason to disturb that finding.

23. Although I hold that the interest of Defendant 3, was saleable the plaintiffs are entitled to the declaration that their interest is not affected by the sale. The defendant bank has rightly been restrained from interfering with the plaintiff's possession of the premises in suit.

24. The appeal is accordingly dismissed. Each party to bear its costs in this Court, Leave to appeal under Clause 15, Letters Patent has been asked for and is refused.


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