K.L. Venkataram and Another vs N.S. Chockkier

Ramesam, J.—These Civil Miscellaneous Appeals arise out of insolvency proceedings under the Provincial Insolvency Act. Two brothers,

K.L. Venkataram and K.L. Gopal, were declared insolvents and their property vested in the Official Receiver of Madura. The Official. Receiver

executed sale-deeds of separate items of their properties to various vendees who are the respondents before us. The sale-deeds purport to have

conveyed the whole properties and not the shares of the insolvents themselves. The purchasers applied for delivery of possession of the properties

and complained of obstruction. The obstruction was based upon a deed of trust, dated 6th January, 1926, under which the shares of the sons were

settled for the conduct of a charity. Under this trust deed the insolvents themselves were appointed trustees and they objected to the taking of

possession by the purchasers relying on this trust deed. It is unnecessary to consider the nature (bona fide or otherwise) of the trust deed.

Whatever its effect may be as a deed of trust, it certainly relates to the sons'' shares of the properties and the question arises whether the

purchasers from the Official Receiver can obtain delivery of possession of the shares of the sons of the insolvents u/s 4 of the Provincial Insolvency

Act. The petitions were originally filed u/s 56 of the Act, but one of them was afterwards amended by adding Section 4 also. The District Judge

considered all of them as applications u/s 4. Section 4 of the Provincial Insolvency Act corresponds to Section 7 of the Presidency Towns

Insolvency Act and Section 105(1) of the English Bankruptcy Act. It gives very wide powers to the Insolvency Court to settle questions of priority

or title arising in the course of the insolvency for the purpose of doing justice to the parties and for the proper distribution of the insolvent''s estate.

It has been construed in Abdul Khader v. The Official Assignee of Madras ILR (1916) Mad. 810 as giving jurisdiction to the Insolvency Court to

deal with the claims of the insolvent as against properties and persons beyond the ordinary jurisdiction of the Court which has got the insolvency

jurisdiction. This decision has been recently affirmed by a Full Bench decision of this Court but it is doubtful whether Section 4 covers a case of

this kind that we have got before us now.

It will be convenient here to take a short survey of the decisions relating to the position of the Official Receiver in relation to the shares of the

sons of the insolvent. In The Official Assignee of Madras v. Ramachandra Aiyar ILR (1922) Mad. 54 Schwabe, C.J. and Coutts-Trotter, J. (as he

then was) held that the interest of the sons does not vest in the Official Assignee by reason of an adjudication and that the Official Assignee as

representing the managing member is entitled to joint possession along with the sons of the family property. In Sat Narain v. Behari Lal (1924)

L.R. 52 IndAp 22 : I.L.R 6 Lah. 1 : 47 M.L.J. 857 the Judicial Committee also came to the same conclusion that the property of the sons does

not vest in the Official Receiver by reason of the adjudication, but they observe that the Official Receiver can deal with the son''s share by reason

of the power of the father which may vest in the Official Receiver by reason of the insolvency. Relying on this observation of the Privy Council it

was decided by a Full Bench, T.S. Balavenkataseetharama Chettiar and Another Vs. The Official Receiver and Others, , that the Official Receiver

can sell the son''s share also and another Full Bench in Pinnamameni Basava Sankaram by mother and guardian Rattamma Vs. Garapati

Narasimhulu and Others, has held that where the Official Receiver sells the son''s share at a time when there is no vesting order the purchaser can

take advantage of Section 43 of the Transfer of Property Act. The law, therefore, as it now stands, shows that the Official Receiver can sell the

son''s share also to a stranger. The Official Receiver himself can apply u/s 4 for possession of the insolvent''s share of the estate, but does it follow

from these two positions that the purchaser from the Official Receiver can apply u/s 4? Once the Official Receiver has sold the property to a

stranger and converted the insolvent''s estate into money, his business is to distribute this money among the creditors and it cannot be said that

delivery of possession is a necessary part in the work of distributing the assets of the insolvent among the creditors. Where a claim is made against

the insolvent himself in respect of his share only or against a rival purchaser of the insolvents property itself the matter may be different. One of the

objects of the Insolvency Act is to adjudicate upon the validity of such claims. Sections 53 and 54 of the Provincial Insolvency Act show that one

of the primary duties of the Insolvency Court is to decide whether the alienations of the insolvent should be set aside as having been made in fraud

of creditors or having been in fraudulent preference of one creditor against another; but where we have got to deal with the son''s share the matter

is entirely different and the decisionin Ex parte Anderson ILR (1870) Ch. App. 473 relied on by Mr. Krishnaswami Aiyar, the learned Vakil for

the respondents, cannot, therefore, help him. On the other hand it has been held by this Court in Official Receiver of South Arcot v. Perumal Pillai

(1923) 18 L.W. 884 and Chittammal v. Ponnuswami Naicker ILR (1925) Mad. 762 : 1925 50 M.L.J. 180 that an application of this kind is not

sustainable in an Insolvency Court. Mr. Krishnaswami Aiyar, on the other hand, relies upon Ramaswami Chettiar v. Ramaswami Aiyangar ILR

(1921) Mad. 434 : 1921 42 M.L.J. 185. That decision was before the series of cases which I referred to above and which place the position of

the sons on a different footing from that of the father. In the case in Ramaswami Chettiar v. Ramaswami Aiyangar ILR (1921) Mad. 434 : 1921 42

M.L.J. 185 the obstruction was by the sons not only in respect of their own shares but also in respect of the whole of the estate of the insolvent on

the ground that the purchase was benami and no distinction was made between the father''s share and son''s share. It was really an obstruction to

the Receiver taking possession of what was then considered as the insolvent''s property. It was held that such a question can be considered by the

Insolvency Court. But the position of the sons has been distinguished from the position of the father by the later cases and the decision in

Ramaswami Chettiar v. Ramaswami Aiyangar ILR (1921) Mad. 434 : 1921 42 M.L.J. 185 cannot be considered as covering the case of a son

objecting in respect of his own share or of any objection raised by another person as guardian on behalf of a minor son or of any other person

claiming any interest in respect of the son''s share only.

The result is that we must hold that in so far as the sons'' shares are concerned, the purchaser from the Official Receiver is not entitled to apply

for delivery of possession u/s 4 of the Provincial Insolvency Act. His remedy would be by going to the ordinary Courts and by filing regular suits

for possession.

Mr. Krishnaswami Aiyar pointed out that in this case one son of each of the insolvents was born after the adjudication and their interests cannot

be separated from those of the father. Whether this is so or not depends upon when the vesting order was made. We have no materials here and if

it is necessary the question can be gone into by the Courts below; but as the appellant has got to go to a Civil Court anyhow there is no purpose in

deciding this point now.

A third question was raised whether the purchaser can get joint possession of the insolvent''s share. In The Official Assignee of Madras Vs. Allu

N. Ramachandra Aiyar and Others by mother and guardian Swornambal, there is an observation at page 58:

It is no doubt true that a stranger cannot by reason of having purchased a share in the joint property insist on having joint possession.

It is not clear whether this observation was made with reference to Section 4 of the Insolvency Act or with reference to the general ""Hindu

Law"". In the present case it is not that the purchaser purchased the share of the insolvent only or of any member only but purchased the whole

property. In such a case his rights are not strictly governed by mere considerations of equity. But apart from any question of procedure, he has

purchased the whole interest in the property and, assuming there is no question of immorality or illegality of the debts, he is strictly entitled to the

whole property. In such a case we do not see why he ought not to be given joint possession of the insolvent''s share only, whatever doubts there

may be as to the sons'' shares. It may be that there is not much to obtain by joint possession but it makes a difference in the Court-fees which the

purchaser has to pay in the regular suit he has to bring, but that at least is a substantial benefit to him.

We understand that meanwhile petitions have been filed by the Official Receiver himself for obtaining possession. Any objection to the delivery

of the insolvents'' shares may be considered in the disposal of those petitions and the joint possession of the insolvents'' shares may be ordered

after those petitions and the present petitions are all heard., should the Court think it fit to do so. In the disposal of the Civil Miscellaneous Appeals

before us it is merely enough to say that the sons'' shares cannot be delivered in these proceedings to the purchaser. We are not to be understood

as having decided anything against the rights of the purchaser and the Official Receiver in respect of the shares of the sons who were born after the

order of adjudication. We leave the point open and merely allow an order now to be passed in respect of the joint possession dealing with the

shares of the insolvents only, if the Court below thinks fit to do so after hearing all the petitions. Each party will bear their own costs. Subject to

these observations, the order of remand to the Court of First Instance will stand. The petitions may be disposed of as early as possible. This order

also disposes of the two Memoranda of Objections.