Sivasami Odayar vs C.R. Subramania Aiyar

The appellant in this case is a person who took a lease of an insolvent''s land from an Official Receiver. The respondent purchased the land in

execution of a decree passed against the insolvent and his sons and he sued to recover the value of the crops removed from it by the appellant. The

facts and dates are these. The land was attached in execution and proclaimed for sale, the sale being fixed for 30th September, 1920. On 23rd the

insolvent applied to be adjudicated and on 28th the Official Receiver was appointed interim receiver. Two days later he moved the Court u/s 52 of

the Provincial Insolvency Act to adjourn the sale. He did not, in terms, ask for possession of the land to be delivered to him, but, as he wanted the

sale to be adjourned so that he himself might sell, such a request on his part may be implied. The Court refused the adjournment and the sale was

conducted. On 23rd October the Receiver asked the Court not to confirm the sale, but his prayer was again refused. On 15th December the

insolvent was adjudicated and the Official Receiver proceeded to lease his land to the appellant, after which the respondent obtained symbolical

delivery from the Court. The Official Receiver subsequently applied to have the sale set aside. His application was rejected by the executing Court,

but was allowed by the District Judge, whose order was, however, set aside by the High Court in a decision which is reported in Subramania

Aiyar v. The Official Receiver, Tanjore (1925) 50 M.L.J. 665. The Court held that the Receiver referred to in Section 52 of the Provincial

Insolvency Act was the Receiver appointed after adjudication and that no application under that section on the part of an interim receiver would lie.

With great respect, we must express our dissent from this view. Section 52, as now amended, contemplates the presentation of an application, not,

as it used to do, after adjudication, but at an earlier stage--that is to say, after an insolvency petition has been admitted. At that stage, the only

Receiver that can be in existence for the purpose of applying is an interim receiver. In a case reported in Mahasukh v. Valibhai (1927) 30 Bom.

L.R. 455 an application had been presented u/s 52 by an interim receiver and no one seems even to have argued that it was not maintainable for

the reason that no interim receiver could apply. The truth is that Section 52, in its present form, is entirely out of place under the heading ""Effect of

insolvency (in other words, of adjudication) on antecedent transactions."" Before amendment, it came properly under that heading. Now it is

concerned with applications presented at an earlier stage. Mr. Sitarama Rao seeks to support the High Court''s order on another ground that

Section 52 does not apply to immovable property, which cannot be said to be ""in the possession of the Court1."" Were the matter res integra, we

should be inclined to accept his argument. In India, land is attached not by seizure but by means of a prohibitory order and it is difficult to

understand how, while it remains in the physical possession of the judgment-debtor or of a third party, it can be said also to be in the possession of

the Court. There is, however, plenty of authority--for example, Haranchandra Chakravarti v. Jay Chand ILR (1929) C. 122 for the view that the

section applies to all kinds of property under attachment by a Court and we do not propose to dissent, from it. The result, then, is that, on the

application of the interim receiver, the executing Court should at once have stayed the sale and directed delivery of possession to him, the section

being peremptory in its terms. The sale has, however, been confirmed by a Bench of this Court and, even if it could be set aside, no one is asking

for it to be set aside. But it is important to define the true legal position which has some bearing on the appellant''s plea of bona fides. It is not

disputed that he paid rent to the Official Receiver or that he deposited part of it in Court under Order 21, Rule 46. Under the circumstances, we

do not consider that he should be asked to pay twice, over. His payments to the Official Receiver seem to have been made bona fide and to be

valid u/s 50 of the Transfer of Property Act. The Official Receiver was quite justified in declining to recognise the title of the auction-purchaser

under a sale that should not have taken place or been confirmed by a Court, which was required peremptorily by the statute to stay its hand and to

transfer the attached property to the Receiver. As regards the deposit under Order 21, Rule 46, the law allowed it and it can hardly be described

as mala fide. The final argument is that the Receiver was not entitled to possession of the sons'' shares and that the plea of bona fides could not be

sustained in regard to them. As to that, the law at that time was not settled and there was some doubt whether the sons'' shares also did not vest in

the Receiver. Apart from that, it is clear that the auction-purchaser himself was not entitled to anything but symbolical possession. If he has a legal

grievance at all, it is against the Official Receiver, who has received payment from his lessee.

We allow the second appeal and dismiss the suit with costs throughout.