Official Assignee of Madras vs R. Munuswamy Naidu and Others

Krishnaswami Nayudu, J.—The Official Assignee of Madras as assignee of the Estate of T. R. Tawker and Sons, insolvents herein, asks for

an order that the respondents may be directed to hand over certain diamonds or pay the value thereof.

T. Bhavani Shanker Tawker, one of the insolvents, was adjudicated on 17th January 1925, He obtained permission of the Insolvency Court

which was granted to him by order dated 5th Octo-ber 1937, to do business as a jewel-valuer and broker on certain conditions as to keeping of

proper accounts and paying monthly allocations to the Official Assignee. The Official Assignee was informed by a letter written on behalf of the

first respondent, dated 30th June 1950, that T. Bhavani Shankar Tawker, who will be referred to as insolvent, instituted O. S. No. 1219 of 1948

on the file of the City Civil Court, Madras, against the first respondent for recovery of a sum of Rs. 7,965-1-0 being the value of diamonds

entrusted by him to the first respondent. The Official Assignee, after obtaining directions of the Insolvency Court, applied to the City Civil Court to

be added as a party plaintiff to the said suit, but that application was dismissed. The suit instituted by the insolvent was eventually dismissed on the

ground that being an undischarged insolvent, he was not entitled to maintain the suit and that the business transacted by him with reference to the

diamonds which was the subject matter of the suit did not come within the purview of the permission granted by this Court for doing business.

The present application has been filed by the Official Assignee for recovery of this property, it being the insolvent''s after-acquired property. The

Official Assignee''s case is that he was kept out of knowledge of the existence of this asset both by the insolvent and the respondents and that it

was only by a letter dated 30th June 1950 that the Official Assignee was, for the first time, intimated of the existence of this asset. He therefore has

taken out the present application for the benefit of the general body of creditors and he is seeking to cover the diamonds or their value.

When the application came up for hearing, an objection was raised on behalf of the first respondent that this matter cannot be dealt with by the

Insolvency Court u/s 7 of the Presidency Towns Insolvency Act and that the Official Assignee may be directed to file a suit. I considered the

objection and by order dated 29th January 1951 I held that this application can be proceeded with in this Court, but I directed that two others,

who appear to have handled these diamonds, should be added as respondents 2 and 3. They have accor-ingly been added as parties and notices

of this application have also been given to them. The first respondent in his statement of objections raised certain pleas, but confined his objections

only on two grounds, namely, that these diamonds were not the after acquired property of the insolvent and secondly that the claim of the Official

Assignee was barred by limitation. The first respondent relief upon a custom pleaded in his statement of objections'' but he did not press it at the

time of the trial. The second respondent states that 89 diamonds were entrusted to him by the first respondent for finding out a purchaser, but as he

was unable to find a purchaser he handed over the same to the third respondent with the consent and in the presence of the first respondent and

that he is not therefore liable.

(His Lordship discussed the evidence, oral and documentary, in the case and held that the diamonds were the after-acquired property of the

insolvent and that the first and third respondents alone were liable, the former for having received the diamonds and the latter as being in

possession of them and on the question of limitation, continued :)

The entrustments were in December 1945 and January 1946 and this notice of motion was filed on 6th September 1950. If it is a case of goods

or money had and received, the claim is obviously barred by limitation. But in this case, the en-trustment was not by the Official Assignee and it

being the after-acquired property the insolvent is not entitled to it. He must hold it only for the benefit of the general body of creditors represented

by the Official Assignee. The insolvent has therefore no beneficial interest in the property and he could therefore only hold it on behalf of the

Official Assignee. The Official Assignee as representing the general body of creditors is benefically entitled to the property and in this case where

such a property is in the hands of third parties, the Official Assignee is entitled to follow the same and recover it. The Official Assignee has an

equitable claim to recover the amount. Neither the insolvent nor the respondents have any beneficial interest in the property and it is the Official

Assignee alone that is entitled to it. The present| application is therefore a proceeding to enforce an I equitable claim and follow the property in the

hands of the respondents and the Articles of Limi-tation Act which could properly be held to be applicable to this case is Article 120 which relates

to a suit for which no period of limitation is provided elsewhere in the First Schedule. The time from which period begins to run, under this Article,

is stated to commence when the right to sue accrues, that is, when the person entitled to sue becomes aware of his rights, which, in this case, is

30th June 1950. That article 120 of the Limitation Act is the relevant Article which could be made applicable for enforcing equitable claims has

been laid down in a decision reported in Crown Prosecutor Vs. Abdul Wahab and Another, in which case decisions relevant to the subject have

been referred to. The application is therefore in time.

There will therefore be an order directing the first and third respondents to deliver to the applicant the diamonds referred to in the report of the

Official Assignee filed in support of this application or pay their value, Rs. 7,333-9-0 within two weeks from this date. Costs of this application will

be paid by the first and the third respondents.