AI Structured Summary
Not yet generated for this judgment
Judgment
This is an appeal from the Judgment and the decree of the Civil Judge, Sr. Dn., Jamnagar, dismissing the suit of the appellant plaintiff for possession of an immovable property at Jamnagar and for rent. The original plaintiff Ibrahim Haji Issac since deceased and the original defendant Mahomed Haji Issac also since deceased were brOrs. who along with their third brother Ahmad Haji Issac carried on business in partnership at Rangoon in the name of Haji Essa Jamal and Co. By a deed dated 27-4-1921, Ex. 7 in the case, the 3 brOrs. purported to dissolve the partnership; it was further stated in the deed that in consideration of a sum of Rs. 80,000/- which was alleged to be due to Ibrahim, the two other brOrs. Mohamed and Ahmad made over their shares in an immovable property at Jamnagar to him. This is the property in respect of which the suit has been filed. The deed directed that this property was of the three brOrs. each having 1/3 share. The deed further provided that Ibrahim ceased to be responsible for the liabilities of the firm which were taken over by the other two brOrs. . Some time after this document was executed, the other two brOrs. Ahmad and Mohamed filed a petition for insolvency in the Rangoon High Court and on their petition the firm as well as they as partners thereof were adjudicated insolvents. It seems that the Official Assignee came to know about this alleged deed of dissolution and the transfer of the insolvents share in the immovable property to Ibrahim and he moved the Rangoon High Court for adjudication of Ibrahim as a partner.
By order dated 26-6-1927 the Rangoon High Court held that Ibrahim was and continued to toe a partner in the insolvent firm and held that by the adjudication of the insolvent firm, Ibrahim was also adjudicated and the Official Assignee was directed to take possession of all his properties whether they were in the name of Ibrahim personally or in the name of Abdul Wahid and Co. which was admitted by Ibrahim to be his business. On 12-6-1947 the Rangoon High Court while considering the application for discharge of the insolvents and on the report of the Official Assignee thereon recommending action to be taken against the insolvents ''inter alia'' for fraudulently transferring the Jamnagar property to Ibrahim, sanctioned prosecution of the insolvents. In the order the learned Judge observed:
As regards the properties standing either in the name of Ibrahim Haji Essae Adamji, or in the name of the firm of Abdul Wahid Ahmed Company, it is unnecessary to say anything. As I have held that Ebrahim was also adjudicated by the adjudication of the arm, all these properties have passed to the Official Assignee, and the attempt to secret the properties by putting them in the name of Ebrahim has failed. In the order I passed I have held, that Ebrahim continued to be a partner in the firm to the end. This finding involves Anr. finding that the alleged dissolution is not genuine, My findings and conclusions however were for that specific purpose and the Magistrate should not allow himself to be influenced by these, but must consider the arguments and evidence in the present case independently to see whether the guilt of the insolvent is established.... The transfer of the Jamnagr property to Ebrahim would also on these allegations, be part of the fraud.
On 18 5-1929 Ahmad and Ibrahim submitted a scheme for composition to the Court whereby they agreed to pay 5 annas in the rupee to the creditors. It is admitted by the parties that this scheme of composition was sanctioned by the Court and carried out. The adjudication of the insolvents mast, by operation of law, have been annulled and their properties revested in them u/s 23, Presidency Towns Insolvency Act.
The present suit for possession was tiled by the plaintiff Ibrahim on the basis of the deed Ex. 7, dated 27-4-1921 whereby other two brOrs. transferred their shares in the Jamnagar property to Ibrahim. The defendants who ate in possession of the property raised the contention that this deed was sham and fraudulent transaction without consideration with the intention of secreting the property from the creditors and was never intended to be operative as between the brOrs. inter se. Consequently, the suit for possession was not competent. They also contended that the decision of the Rangoon High Court holding that Ibrahim continued to be a partner necessarily involved the finding that the dissolution deed Ex. 7 was a fraudulent and void document. This finding was binding on the partner in the present case. The defendant also relied upon Section 41, Evidence Act, contending that the decision of the Rangoon High Court adjudicating Ibrahim as a partner in the insolvent firm was a judgment in rem and, therefore, binding on everybody for all time and as this decision included by necessary implication the decision about the fraudulent nature of the deed of dissolution) the plaintiff''s suit was barred. The learned Judge of the trial Court accepted this contention and dismissed the suit without going into question about the nature of the deed. The plaintiff has now come in appeal.
Mr. D.N. Vakil, the learned advocate for the appellant, has argued that the decision of the Rangoon High Court was not a bar to the plaintiffs case and, therefore, the case should be remanded back to the trial Court for going into other issues involved in the case. We have heard the learned advocates of the parties at length and are of the opinion that the decision of the Rangoon High Court does not constitute a bar to the plaintiffs'' case and, therefore, this case must be remanded back to the lower Court for determining the other issues principally about the validity of the deed Ex. 7 so far as the transfer of the chares of Mohamed, Ahmed and Ibrahim are concerned, either on the ground that it was a fraudulent or sham transaction or whether it was void for want of consideration or for any other reason.
In the first place it is not clear whether the property in question was of partnership or of the three brOrs. as tenants in common. The lower Court has not gone into this question as yet. It was not necessary for the Rangoon High Court to decide this question as even the separate property of partners in the insolvent firm would vest in the Official Assignee. The deed EX. 7 proceeds on the basis as if the property was held as tenants-in-common by the three brOrs. . If this was incorrect, Ex. 7 would be something more than a mere deed of dissolution. It would in addition be a deed of conveyance transferring property other than partnership property although for a consideration which arises out of the alleged dissolution of the partnership. The Rangoon High Court has not decided anything about the validity of this transfer incorporated in the deed it was not necessary for it to do so as stated above. On the other hand, if the property was in fact an item of partnership property it might be contended that by the adjudication of Ibrahim as a partner in the firm the Rangoon High Court should be deemed to have decided the fraudulent nature of the deed and this decision should be binding in the present litigation. This is indeed the main argument of the learned advocate of the respondents who has further argued that the decision of the Rangoon High Court adjudicating Ibrahim as a partner in the insolvent firm was a judgment in rem u/s 41, Evidence Act, and its necessary implication on the question of the validity of Ex. 7 was equally a judgment binding on all parties. We have given our anxious consideration to the arguments of the learned advocate for the respondents and we are unable to accept them. The Rangoon High Court was a foreign Court and even assuming that the decision in the insolvency proceedings would be construed as being inter partes, the question of the validity of the transfer was not directly adjudicated to attract the applicability of Section 13, Civil P.C.
The next contention of the learned advocate of the respondents that the decision of the Court adjudicating Ibrahim a partner in the insolvent firm was a judgment in rem and conclusive u/s 41, Evidence Act, is also not tenable.
Section 41, Evidence Act, provides that a final judgment or decree by a competent Court in the exercise of probate, matrimonial, admiralty or insolvency jurisdiction, which confers or takes away from any person any legal character or which declares any person to be entitled to any such character or to be entitled to any specific thing, not as against any specified person but absolutely, is relevant when the existence of any such legal character or the title of any such person to any such thing is relevant Such judgment or order or decree will consequently constitute conclusive proof of the legal character or declaration of the title to the property.
We find that the nature of a decision of an insolvency Court whether a person is a partner or not of an insolvent firm has been considered by at least three High Courts. In the case of the Official Assignee, Madras v. Official Assignee, Rangoon in AIR 1924 Mad. 662, it was held that
an order made by Insolvency Court declaring that a particular person was never a partner of a firm and that he was never adjudged an insolvent by that Court is not a judgment in rem and does not confer or take away any legal character within the meaning of Section 41.
The learned Chief Justice observed in that case as under:
It was contended on behalf of Annamalai Chetty and on behalf of the official assignee, Bangoon, that the order of the Rangoon Court refusing to adjudicate Annamalai Chetty a bankrupt on the ground that he was not a member of the firm which had been declared insolvent in Bangoon was a final order u/s 41, Evidence Act, which conferred upon, or took away from, Annamalai Chetty, a legal character and therefore being made by the Insolvency Court, it was a judgment in rem binding on all the world, whether the parties in subsequent proceedings were represented before the Court or not. In my judgment this is not an order conferring upon Annamalai Chetty or taking away from him any legal character. It did decide and decide finally that as far as the Rangoon Insolvency was concerned Annamalai was not an insolvent. It is true that it based that finding on the view that he was not a partner; but I do not think that being a partner in a firm is a legal character within the of Section 41.
This case was referred to in a case which came before a Special Bench of the same Court and reported in In re Venkataramanayya AIR (18) 1931 Mad. 441 at p. 481. The learned Judges observed as under:
The legal character assigned to a person announced to all the world what the legal status of the person in question is. The meaning of ''legal character'' must be narrowly construed for it must be remembered that an action in rem is not an action against a thing but an action availing against all world. One must be cautious lest litigation between A and B allowed unduly to affect the rights of C. The sort of danger is clearly shown in The Official Assignee of Madras. Vs. O.R.M.O.R. S. Firm, . The point there taken was similar to the point here taken and it failed. In Official Assignee, Madras v. Official Assignee, Rangoon AIR 1924 Mad. 662) at p. 587 (of 46 M.L.J.) it was held that a declaration that A is a partner in a firm is not a declaration of legal character.
The Calcutta High Court in a ruling reported in Punjab National Bank Vs. Balikram Kissenchand and Others, similarly held that
the word character moans status; it is something more than a mere right. The declaration of a person''s right operates as against a particular person or group of persona against whom the right is claimed, whereas a man''s statue is something which defines his position not in relation to any particular person or group of persons but in relation to the rest of the world; his status distinguishes him from the rest of the world. To say that a person is not a partner of a firm is not to declare his statue or legal character; it is merely to declare his position with respect to the particular firm. Hence an order of an Insolvency Court refusing to adjudicate a person insolvent, on the ground that he was not a member of a firm which had been declared insolvent is not a final order which conferred upon or took away from him any legal character within the meaning of Section 41 and hence is not a judgment in rem. The Calcutta case relied on both the Madras cases referred to above.
A Bench of the Court Judicial of Commissioner in Sind in the case of Radhakishin v. Mt. Gangabai AIR 1928 Sind 181 held that
an order adjudicating a person as an insolvent and vesting his property in the Official Receiver no doubt operates as a judgment in rem but the ground on which the order is based has no such effect. There is a broad distinction between the effect of a judgment in rent and a judgment in personam. The point adjudicated upon in a judgment in rem is always as to the status of the res and is conclusive against the world as to that status, whereas, in a judgment in personam the point whatever it may be which is adjudicated upon (it being as to the status of the res) is conclusive only between parties or privies.
That case was also one where a person was declared not; to be a partner in the insolvent firm by the Insolvency Court and it was held that such a judgment did not come within the meaning of Section 41. At p. 124 it was observed that even if the person (who was alleged to be a partner) had been adjudicated an insolvent the fact that in order to arrive at that conclusion the Court had to determine that that person was partner in the insolvent firm would hardly have operated as a judgment in ram in all other proceedings.
Following these rulings we hold that the decision of the Rangoon High Court declaring Ebrahim an insolvent would operate as a judgment in rem u/s 41 but the decision that Ebrahim was a partner of the insolvent firm would not operate as a judgment u/s 41, Evidence Act. A fortiori, the implied decision about the nature of the deed of dissolution could not be conclusive as a judgment in rem u/s 41 about which moreover there is no direct adjudication.
The insolvency proceedings have terminated by satisfaction of the debts of the creditors under the composition deed and the property has become revested in those persons who were originally entitled to it. What the rights of the respective parties were to this property and how they were affected by the deed of dissolution and transfer and the question of the validity of the same are matters which will have to be decided by the lower Court.
We consequently set aside the judgment and the decree of the lower Court and remand the case to it to be disposed of in accordance with law. The costs to be costs in the cause.