JAYAMUTHU NATAN Vs. PONNUMUTHU NATAN

JUDGEMENT

(1.) The sole and short question that arises in these second appeals is: when an adjudication is anulled under S. 43 of the Travancore Insolvency Act, 1108, corresponding to S. 43 of the Provincial Insolvency Act, and an order vesting the property of the debtor in the Official Receiver is made under S.37(1) of the Travancore Act corresponding to the same section of the Provincial Insolvency Act and thereafter the quondam insolvent as also the Official Receiver assigned the equity of redemption of property outstanding with a mortgagee and both the assignees filed suits for redemption of the mortgage, who, if either, is entitled to judgment.

(2.) The facts are brief. Perumal Nadar Malan was adjudicated insolvent on his own application in I.P. No. 2 of 1106 on the file of the District Court of Nagercoil in the year 1106 and the Official Receiver of that court was appointed Receiver. The court fixed a time for the insolvent to apply for his discharge. That application not having been made the adjudication was annulled in the year 1116 under S. 43 of the Travancore Insolvency Act (corresponding to the same section of the Provincial Insolvency Act) and along with that annulment an order vesting the property of the debtor in the Official Receiver under S.37(1) of the Travancore Insolvency Act (corresponding to S.37(1) of the Provincial Insolvency Act) was also passed. Two years afterwards, i.e., in the year 1118, the debtor assigned the equity of redemption of certain property outstanding on mortgage directing the vendee to recover possession from the mortgagee on redeeming the mortgage. Next year, i.e., in the year 1119, the Official Receiver in whom the property vested under the aforesaid order of court assigned the same equity of redemption with a similar direction to the vendee in the matter of redemption of and securing possession from the mortgagee. The Receivers assignee accordingly filed O.S. 569 of 1119 on the file of the Kuzhithurai Munsiffs Court for redemption. The assignee from Perumal Nadar Mallan, the quondam insolvent, filed O.S. 1465 of 1119 of the same court for the same purpose. The plaintiff in each of the suits was a defendant in the other and the other parties to both suits were the same. The two suits however were not consolidated as they should have been but were separately tried and were disposed of by the court on the same date, i.e., 26.4.1123, decreeing O.S. 569 and dismissing O.S. 1465 as the Munsiff was of the view that the assignment granted by the quondam insolvent was ineffective as the property vested in the Official Receiver and he alone was competent to convey title to his assignee. A.S. Nos. 257 and 263 of 1123 were presented in the District Court of Nagercoil against the decrees in the said two suits respectively and the learned Second Judge who heard both the appeals together in a common judgment dismissed A.S.257 on the ground that the Official Receiver was not competent to execute any sale deed after the order of annulment was made and the sale deed executed by him in favour of the plaintiff in O.S. 569 of 1119 is invalid and liable to be set aside. The learned Judge dismissed A.S. 263/1123 as well observing in the absence of discharge order I think the sale deed executed by the debtor also is not enforcible at present though it is not absolutely void. Status quo ante is to be maintained, i.e., the properties as per the order made under sub-s. 2 of S. 41 (sic) shall continue to vest in the Official Receiver until the debtor obtains complete discharge. The respective plaintiffs in the two suits have, therefore, come up to this court with the above second appeals, Nos. 533 and 628 of 1951.

(3.) There is conflict of judicial opinion as regards the scope and effect of an order vesting property in the Receiver or other person under S.37(1) of the Provincial Insolvency Act. The Cochin and Travancore Insolvency Acts contain provisions similar to those in the Provincial Insolvency Act. The High Courts of Calcutta, Cochin, Lahore, Madras, Orissa, Patna and Travancore take the view that a Receiver or an appointee in whom the property vests as per an order under S.37(1) is entitled to realise and distribute the assets as the Receiver appointed on an order of adjudication under S. 28 of the Act could. (See AIR 1933 Calcutta 286, 1936 Calcutta 573, 1943 Calcutta 133, 23 Cochin 548, 28 Cochin 759, AIR 1928 Lahore 453, 1934 Lahore 394, 1939 Lahore 536, 1941 Lah. 316, 1930 Mad. 278, 520, 1935 Mad. 931, 1941 Madras 588, 1943 Madras 266, 592, 644, 1944 Madras 318, 1949 Madras 19, 1950 Orissa 233, 1933 Patna 84, 1947 Patna 239 and 26 TLJ 1272). The High Courts of Allahabad, Nagpur and Rangoon, on the other hand, take the view that insolvency is at an end when adjudication is annulled under S. 43 and that the person in whom the property vests per an order under S.37(1) is only a custodian of the property awaiting its being proceeded against by creditors in the ordinary way and has no power to distribute the assets among the creditors. (See AIR 1931 Allahabad 71, 1938 Nagpur 312, 1949 Nagpur 39, 1933 Rangoon 223 and 1936 Rangoon 284). There is agreement among all the High Courts that an order under S.37(1) vesting property in the Receiver or other person can be passed along with the annulment of the adjudication under S. 43, that the effect of that order would be to vest the property in the appointee who will have all the rights that inhere in a person in whom property vests. There is divergence of view with regard to what the appointee could do with the property that vests in him, whether he could distribute the assets among the creditors or whether he can be only their custodian awaiting proceedings against them by the quondam insolvents creditors. These and other points in controversy between the High Courts do not call for determination in this case because, as already stated, the question here is short and is confined to considering whether where there is an order vesting the property in an appointee under S.37(1) the debtor, i.e., the quondam insolvent or appointee can assign it. The answer is clearly in the negative as regards the debtor and no court has taken the view that he can deal with the property in antagonism to the appointee, because if he could the vesting order would be otiose. The question whether the appointee can assign the property, does not appear to have arisen for determination in this precise form. Even the decisions of the Allahabad, Nagpur and Rangoon High Courts recognise the competency of the appointee to exercise such rights as inhere in a person in whom property vests. In our view, the right to assign is inherent in a person in whom property vests. A question may arise as regards the validity of a particular assignment having regard to the purpose of the vesting and the purpose for which the assignment is made. If, for instance, the property is vested in a trustee his right to assign will only be for purposes of the trust. If, however, an alienation is effected otherwise than for justifying purposes the deed may not be void but only voidable at the instance of the party competent to challenge it. So far as strangers are concerned the assignment albeit liable to be avoided by another has to be taken to be good until it is so avoided. In this case the Official Receiver in whom the property vested was competent to convey the equity of redemption and authorise the vendee to redeem the mortgage. Indeed, it was not contended that the conveyance by the Receiver was beyond his competence. The contention was only that an order of court was necessary to support it. Even if an order of court should have been obtained, its absence will not render the transaction void. The assignee from the Receiver is, therefore, entitled to redeem the mortgage. The result is that S.A. No. 533 of 1951 should be allowed and S.A. No. 628 of 1951 dismissed with costs here and in both the courts below.