Bansiram vs Firm Anandi Ram Mohan and others

Courtney-Terrell, C.J.—On 12th August 1931 a sale was held in execution of a decree which had been obtained by one Ramlochan Ram against a firm called Ramcharan Ram Kardhan Ram and a certain property of the judgment-debtors was put up for sale and sold. Later on the judgment-debtor was declared insolvent. The application for insolvency had been made on 13th June 1931, and the petition was admitted on 9th July 1931 an interim receiver being appointed on 5th August 1931 but not being clothed with power to take possession of any of the properties. The receiver took proceedings under S. 4, Insolvency Act, applying for possession of the properties which had in fact been sold on the ground that the sale had been effected without jurisdiction and asking that the sale be annulled. But on 3rd August 1934, the Judge in insolvency held that the sale was perfectly valid and refused the application. After the date of the sale which as I have said took place on 12th August 1931 power was_ given to the receiver to take possession of the insolvent''s property, the power being given by the order of the Judge in insolvency on 28th September 1931. On 28th November 1931 the order for adjudication was made. The Judge in the proceedings taken by the receiver under S. 4 dealt with the allegations by the receiver that the sale was attended with circumstances of fraud and he found that there had been no fraud in fact committed.

As to the point taken by the receiver that the sale had taken place in the executing Court without jurisdiction, it was contended on behalf of the receiver that under S. 52, Insolvency Act, inasmuch as the Court had notice of the insolvency petition, it should thereupon have stayed the proceedings for sale and should have directed that the property should have been delivered over to the receiver. The learned Judge expressly declined to deal with this part of the argument on behalf of the receiver and refused the application which was then made.

The present application, with the decision of which we are concerned, was made on 10th August 1934, some years after the sale had been confirmed; furthermore long after the receiver had taken course of being vested with the sale proceeds. It was made by the insolvent together with another creditor and they asked under S. 4 of the Act for a declaration that the very sale which had been the subject of the earlier decision by the Judge in insolvency on the application of the receiver, was invalid, and again raised the question of the jurisdiction of the Court under S. 52, Insolvency Act. The argument which was urged before the District Judge and which found favour with him was that the sale in execution was illegal and without jurisdiction.

Now the question of the proper construction of S. 52 is said to be attended with some difficulty inasmuch as different High Courts have taken different views and I do not propose to express any opinion on it. My reason for rejecting the application and for holding that the learned District Judge was wrong in his decision, in effect to set aside the sale in the execution proceedings, is that the matter had already been decided in the earlier application under S. 4. The proceedings in that earlier application were taken by the receiver. Under S. 41, Evidence Act, which deals amongst other things with judgments in insolvency proceedings, it is laid down that a final judgment, order or decree of a competent Court in such matters, as was in this case the judgment in the earlier case, has the effect of a judgment in rem and it cannot be disturbed by subsequent applications even if not between the same parties. Moreover, it is to be noticed that the receiver took no steps as he might have done to appeal from the order which was made against him in the earlier proceedings and that for some years the purchaser has been left in possession of the property, and in the earlier proceedings in 1931 there was an order that the interim receiver should take possession of the sale properties. It is not right having taken that definite attitude and taken advantage of that attitude that the auction-purchaser should be prejudiced either on behalf of the insolvent or on behalf of the creditors by an attempt to set aside the sale which took place so long ago and when a previous attempt to set aside this sale had failed.

The appeal will accordingly be allowed with costs in so far as the sale to the appellant is concerned. The order for costs will be against respondent 1 and the estate.

Agarwala, J.

I agree.