AI Structured Summary
Not yet generated for this judgment
Judgment
Appeal against Order No. 212 of 1926 is from an order of the District Judge of Ganjam dismissing a petition E.P. No. 16 of 1924 by the
appellant as holder of a power-of-attorney from one Durga Madhava Deo to execute the decree in O.S. No. 7 of 1887 obtained by Durga
Madhava Deo against the zemindar of Bhodokimidi, the appellant in A.A.O. No. 374 of 1926 whereby the decree-holder became entitled to a
family allowance of Rs. 173 per month from the zemindar. The decree-holder became heavily indebted to several persons of whom the appellant in
A.A.O. No. 212 is one and the Vuna family was a previous creditor. To pay off the appellant''s debt he executed to the appellant on 22nd July,
1920, a transfer of the arrears of the allowance till then due and also a power-of-attorney of even date empowering the appellant to execute the
decree and retain one-half of the sums realised towards his debt and pay over the balance to the transferor. The Vuna lender had obtained a
somewhat similar right under an instrument of 1916. On a contest between the Vuna lender and the present appellant it was held by this Court in
January, 1924, in C.M.A. Nos. 324 and 325 of 1922 that the appellant is entitled to execute the decree but it was left to the lower Court to
decide what rights the former lender (Vuna) would be entitled to out of the sums realised. Durga Madhava Deo was adjudged insolvent on 19th
March, 1923, during the pendency of those appeals. When the appellant again applied in March, 1924, to execute the decree and realise the
allowance due till then, he was again met by the objection raised by the Receiver and by the Court of Wards, representing the zemindar, that he is
not entitled to execute the decree after the date of the insolvency of Durga Madhava Deo and by reason of it. The learned District Judge upheld
this objection and dismissed the appellant''s petition.
The matter in dispute in this appeal has been settled by arrangement. It is agreed that the appellant, Konchada, is entitled to execute the decree
and realise the balance of the allowance due under the decree from 15th Jauuary, 1918, to 15th March, 1923, just before the insolvency. The
mutual rights of the appellant and the Vuna lender, who is not a party to these appeals, to this sum must be determined by the lower court after
notice to him. The order of the lower court dismissing the execution petition is, therefore, set aside and the lower court will proceed with and
dispose of it in accordance with the above direction. The question of set off raised by the zemindar but which has not been gone into will also be
dealt with by that court. There will be no other order as to costs except that the Receiver will have his costs out of the estate.
The appeal, A.A.O. No. 374, is from an order of the District Judge allowing execution of the same decree by the Receiver in E.P. No. 6 of
1926, in respect of sums which accrued due from 15th March, 1923 to 15th February, 1926, and disallowing the objection of the Court of Wards
on behalf of the zemindar that he ought to get credit for certain payments made to Durga Madhava Deo from 14th April, 1823, to 7th April, 1925,
The court allowed only the two payments into court, i.e., Rs. 166-2-0 on 16th January, 1924 and Rs. 1,211 on 12th April, 1926.
The ground on which the other payments which were made direct to the decree-holder were disallowed by the learned District Judge was that
the Court of Wards was informed by the order of Mr. Reilly, then District Judge, dated 9th August, 1923, that Durga Madhava Deo having been
adjudged insolvent, he was not authorised to receive any payments under the decree and that the Court of Wards should not make such payments
to him. It is argued for the appellant zemindar that four of the payments amounting in all to Rs. 674 were made before the said order in good faith
to the decree-holder and that even as to the 20 subsequent payments amounting in all to Rs. 3,370 the appellant made them bona fide as the
petition I.A. No. 204 of 1923 in which the above observations were made was formally dismissed on the ground that the Court of Wards was not
a party in the insolvency proceedings. It is argued that the monthly allowance which accrued due after the insolvency is after-acquired property of
the insolvent and that as to such property bona fide payment to the debtor made before the Receiver intervenes are protected. A large number of
decisions of the English and Indian Courts on this topic have been cited.
All these payments made to the decree-holder on behalf of the zemindar--judgment debtor--are payments in satisfaction of the decree which
were not as far as the records show certified to the court executing the decree as they should have been under Order XXI, Rule 2. The
consequence of this is that they cannot be recognised by the court executing the decree--Order XXI, Rule 2(3). The decree having become vested
in the Receiver as from the date of adjudication, 19th March, 1923, and all the payments now relied on being on and after 14th April, 1923, none
of them can be recognised as against the Receiver if for no other reason than that none of them was certified to the court. As this point though lost
sight of in the argument, is conclusive of the appeal, if correct, the question whether the payments can be supported as bona fide dealings by the
insolvent with his after-acquired property before the intervention of the Receiver does not arise.
Another point is that sums periodically falling due under a right already acquired, such as an annuity or allowance, or instalments due on an
instalment bond or decree can hardly be treated as after-acquired property in respect of instalments falling due after the insolvency. The correct
view appears to us to be that the right under which the payments are claimed was acquired before the insolvency though some of the instalments
fall due after it. If it were otherwise, every insolvent would be able to collect and appropriate all his debts that had not fallen due before the
insolvency.
But as the question 1ms been strenuously argued, we must point out that 20 out of the 24 payments, i.e., those made after Mr. Reilly''s order
cannot in any view claim any protection as in the circumstances they cannot be said to have been made bona fide. That order was made on a
petition by the appellant in A.A.O. No. 212, one of the creditors in the insolvency who had in addition by reason of the power-of-attorney a direct
interest in the proceeds of the decree, praying for an order against the zemindar represented by the Court of Wards directing him not to pay the
allowance to the insolvent. The reason why the petition was dismissed was a formal one, i.e., that the zemindar was not a party to the insolvency
proceedings. He was only a judgment-debtor of the insolvent. But the learned Judge made his meaning perfectly clear when he said that it may be
presumed that the Court of Wards will not fail in its duty to the minor zemindar and that if any instalment of the allowance is paid to the insolvent
instead of to the Receiver or into court, the zemindar will not be discharged from his liability for it. He added that the insolvent will make himself
liable to punishment under the Provincial Insolvency Act if he collects and appropriates any instalment of the allowance. It is idle to contend that
after this clear intimation by the court, any one could have thought that he could validly pay the allowance to the insolvent and if such payment was
made it certainly cannot claim to have been made bona fide, This applies as already stated to 20 payments aggregating to Rs. 3,370. It is only with
regard to the first four payments made between 14th April, 1973, and 3rd July, 1923, that any question of bona fide can arise. Even these
payments-were made during the pendency of C.M. As Nos. 324 and 325 of 1922 in which the two creditors of the insolvent were contending for
the right to execute the decree and to which the zemindar through the Court of Wards was a party. It is difficult to resist the inference that
payments made after the insolvency in the above circumstances were made to defeat the creditors.
There are several decisions under the Indian Insolvency Act. 1848 which apply to Section 7 of the Act the doctrine enunciated, in Herbert v.
Sayer (1844) 5 Q.B.965 : 2 D. & L. 49 : 13 L.J.Q.B. 209 : 8 Jur. 812, and Cohen v. Mitchell (1890) 25 Q.B.D 262 : 59 L.J.Q.B. 409 : 63 L.T.
206 : 38 W.R. 551 : 7 Morrell 207, Kerokoose v. Brooks 8 M.I.A. 339 : 4 W.R. 61 : 1 Suth P.C.J. 426 : 3 L.T. 712 : 14 Moo. P.C. 452 : 1
Sar. P.C.J. 778 : 15 B.R. 376 [Alimahmad Abdul Hussein v. Vadilal Deschand Parekh 53 Ind. Cas. 197 : 43 B 890, Damrathy Sinha v.
Monamulya Ash 60 Ind. Cas. 977 : 47 C. 961, Chhote Lal v. Kedar Nath 84 Ind. Cas. 289 : 46 A 565 : 22 A.L.J. 455 : AIR 1924 All. 703 :
L.R. 5 A. 329 Civ]. and extend it to immovable property [ Kristocomul Mitter v. Puresh Chunder Deb 8 C. 566 : 12 C.L.R. 253 Sriramulu Naidu
v. Andalammal 30 M. 145 : 17 M.L.J. 14, Alimahmad Abdul Hussen v. Vadilal Devchand Parekh 10. The matter is now governed in England by
Section 47(1) of the Bankruptcy Act, 1914. There is also a considerable body of judicial opinion, not without dissent, that the same extended
doctrine holds good under the Provincial Insolvency Act. Both under the old Act of 1907 and under the present Act of 1920 [Section 28(4) after
acquired property of an insolvent vests ''forthwith'' in the court or Receiver. There is no similar expression in the corresponding Sections 17 and 52
(h)(a) of the Presidency Towns Insolvency Act of 1909 which deals with the vesting of after-acquired property. In neither Indian Act is there
anything corresponding to Section 47 of the English Act of 1914, Several decisions have however held the doctrine of Cohen v. Mitchell (1890)
25 Q.B.D 262 : 59 L.J.Q.B. 409 : 63 L.T. 206 : 38 W.R. 551 : 7 Morrell 207 applicable under the Provincial Insolvency Act also. [Nagindas
Bhukandas v. Ghelabhai Gulabas 56 Ind. Cas. 449 : 44 B. 673 : 22 Bom. L.R. 352, Jagdish Narain Singh v. Ram Sakal Kuer 114 Ind. Cas. 465 :
8 Pat. 478 : 9 P.L.T. 969 : AIR 1929 Pat. 97,Ramanadha Iyer v. Nagendralyer 76 Ind. Cas. 805 : 18 L.W. 868 : 45 M.L.J. 827 : 23 M.L.T.
205 : AIR 1924 Mad. 223]. The Rangoon High Court takes a contrary view. [Ma Phaw v. Maung Ba Thaw 97 Ind. Cas. 220 : 4 R. 125 : 5 Bur.
L.J. 98 : A.L.R. 1926 Rang. 179]. In this Court there appears to be some difference of opinion [Rowlandson v. Champion 17 M. 21, Abdul
Kareem Sahib v. Official Assignee of Madras 28 M. 168, Ratna Bai v. The Official Assignee of Madras 29 Ind. Cas. 168; 17 M.L.T. 347] Were
it necessary to decide the question we would have preferred to send the matter to a Fall Beach. But we do not think it necessary to pronounce any
opinion on the questions argued.
It is agreed that in addition to the sums allowed by the lower Court, this appellant should have credit for Rs. 135 being Income Tax paid by him
to Government.
With the above modification, Appeal A.A.O. No. 374 mast be dismissed with costs.