PADMANABHA PILLAI Vs. ANNAMMA

JUDGEMENT

(1.) This appeal arises out of an order passed by the lower court in Insolvency proceedings in I. P. 2/1107. It was a debtor's petition and the order adjudicating him an insolvent was passed on 18-11-1107. The result of that order was that all his assets vested in the Official Receiver. His immovable properties were included in the B schedule appended to his petition. Item 1 in that schedule was sold by the Receiver and the proceeds distributed among the creditors. The present controversy relates to items 2, 3 and 4 of the B schedule. The Official Receiver does not appear to have taken any steps to take possession of these items and to sell them. He seems to have slept over the matter or to have colluded with the insolvent or others interested in him. Nothing was done for a long interval of about 20 years. In the meanwhile, creditors 1, 2, 3 and 6 assigned their rights to the present appellant and he filed a petition C. M. P. 3936 on 31-8-1951 drawing the attention of the Insolvency Court to the fact that the Receiver has not taken any steps regarding items 2 to 4. It was also prayed that orders may be passed for taking the steps necessary to make these items available for satisfaction of the claims of the creditors. On this petition the court called for a report from the Official Receiver. He filed two reports, one on 6-3-1952 and the other on 20-3-1952. The purport of the reports was that these items are in the possession of strangers who are claiming title in themselves and that until the matter is settled, it is difficult to take possession of the properties. After ascertaining the nature of the claims advanced by these claimants, the court passed an order on 22-3-1952 directing the Receiver to take possession of items 2 to 4. Before the Receiver could take possession, the present 1st respondent filed a claim petition, C. M. P. 1722 on 29-3-1952 praying that the order dated 22-3-1952 directing the Receiver to take possession of the properties may be cancelled and the claimant's title to items 2 to 4 upheld. It may be stated here that the 2nd respondent to that petition is the present appellant, while the 3rd respondent is the Official Receiver. The court ordered notice on that petition and then started enquiring into the merits of the claim. Such inquiry dragged on for a fairly long period from 1952 to 1958. The claimant and 9 witnesses on her side were examined. Several documents have also been filed. When the matter came up for final hearing, the claimant herself raised a preliminary objection that the present inquiry is defective because it was not initiated by the Official Receiver under S.4 of the Insolvency Act and that the entire proceedings have to be dropped. This objection was accepted by the lower court by passing the order under appeal, dismissing the claim petition. The appeal is against that order.

(2.) On hearing both sides, we are satisfied that the lower court's order is unsupportable. There is no magic in the claim to title to the properties in dispute, being initiated by the Receiver himself under S.4 of the Insolvency Act. All that the section contemplates is that in cases of such disputes, there should be an inquiry in proper proceedings to which the Receiver and the claimant are parties. If the Receiver neglects to take action, the creditors can move the Insolvency Court for appropriate reliefs and it will be open to the court to permit the creditors to start proceedings to have the claim settled. In this case, the Receiver was undoubtedly negligent and indifferent, if not something more. In fact, it is a case where the court should have taken the necessary steps against the Receiver. However, the negligence of the Receiver was brought to the notice of the court when the appellant creditor filed C. M. P. 3936 on 31-8-1951. The Receiver reports on that petition indicated that steps have to be taken to have an adjudication on the rights put forward by the claimants. The report to that effect can be accepted as the basis for an inquiry under S.4 at the instance of the Official Receiver. This initiative was followed up when the claimant herself came up with her petition C. M. P. 1722/1952. To that petition the Receiver is made a party as the 3rd respondent. Thus the inquiry which followed is a proper inquiry within the scope of S.4 and the claimant and the Receiver and the creditor are all parties to the same. It is surprising to note that the lower court overlooked these significant facts and was too ready to uphold the preliminary objection raised by the claimant herself. It is obvious that the objection was utterly devoid of all good faith and substance. The inquiry was conducted at her instance and for a final adjudication on the merits of her claim. The inquiry dragged on for several years and it came to the stage of final hearing. The preliminary objection should not have been entertained at that stage. The defects alleged to exist in the present inquiry are imaginary and unreal. The lower court should have heard all the parties on the merits of the claim in the light of the evidence already adduced and to have given a decision at least at this late stage. If the present Receiver is also negligent or indifferent the lower court must make the Receiver realise his duties and to participate in the proceedings.

(3.) In the result, this appeal is allowed with costs and the order of the lower court is set aside. The case is sent back for a disposal of the claim on its merits in accordance with law and in the light of the observations made above.