Sakuntala Ammal and Another vs Seetharama Reddiar and Others

P. Venugopal, J.—The petitioner in I.A. No. 617 of 1975 filed the petition under sections 4 and 5 of the Provincial Insolvency Act, to

release four items of properties from the custody of the Official Receiver on the ground that his step-mother had purchased those four items from

the insolvent. The insolvent and the Official Receiver were impleaded as respondents in that petition. The insolvent remained ex parte. The Official

Receiver issued notice to all the creditors and having no response from the creditors, filed a counter stating that the creditors have not taken any

interest. Thereafter, three of the creditors filed I.A. No. 687 of 1975 to implead themselves as parties in I.A. No. 617 of 1975. In view of Section

28(2) of the Provincial Insolvency Act and the absence of any material to show that) the Official Receiver was not acting properly in the interest of

the estate, the trial Court dismissed the application filed by the creditors for impleading themselves as parties in I.A. No. 617 of 1975. This order

of the trial Court was confirmed in appeal by the lower appellate Court. Hence the present civil revisi.on petition before this Court.

The learned Counsel for the civil revision petitioner contended that Section 28(2) of the Provincial Insolvency Act has no application to the

proceedings sought to be instituted by the three creditors and the Courts below were not justified in passing an order refusing the three creditors to

be impleaded in the claim petition filed in I.A. No. 617 of 1975.

In Kishan Dass Talwar and Another Vs. Adeshwar Lal Jain and Others, , it was held that a suit for a declaration that a partition decree obtained

by the insolvent was a fraudulent one to defraud the creditors is not barred by Section 28 of the Provincial Insolvency Act, and no leave of the

insolvency Court was required for filing it. In Harnam Chandar Vs. Rup Chand and Others, , it was held that a declaratory decree that certain

property was not attachable or saleable in execution of the decree against the insolvent is not hit by the bar u/s 28(2) as a suit was not a remedy

against the property of the insolvent. In the decision reported in Donepudi Subramanyam Vs. Nune Narasimham and Others, , a Division Bench of

this Court held that leave of the Insolvency Court u/s 12(2)(b) of the Provincial Insolvency Act of 1907 is not necessary for the commencement of

a suit by the attaching creditor to contest the order passed in favour of a claimant allowing his claim to the properties attached by the creditor even

though the judgment-debtor was adjudicated as insolvent. In the. present case, the proceeding initiated by the civil revision petitioners is directed

against the transferee of the insolvent and is intended to remove the hurdle created by the insolvent and calculated to bring the property into the

common hotchpot for the benefit of all the creditors. Such a suit does not have the effect of dismissing the insolvent estate or prejudicially affecting

the general body of creditors of the insolvency proceedings. As the petition by the civil revision petitioners is not for a remedy for realising the

debts and recovering the same by ignoring the insolvency proceedings and will benefit all the creditors by augmenting the insolvency pool, Section

28(2) of the Provincial Insolvency Act is not attracted and leave of Court is not necessary to commence the proceedings. Hence, there is no legal

bar for allowing the civil revision petitioners to be impleaded as parties in the claim petition, I.A. No. 617 of 1975.

In the result, the civil revision petition is allowed and the civil revision petitioners are permitted to be impleaded as parties to the claim petition in

I.A. No. 617 of 1975 and the claim petition should be disposed of after hearing the newly impleaded parties. Parties to bear their own costs.