S. JANABAI AMMAL Vs. NARASIMHALU NAIDU AND ORS.

JUDGEMENT

(1.) THIS appeal arises in a suit for partition instituted by the plaintiff -appellant for a one -eighth share in the suit properties. We are now concerned in this second appeal with only items 11 to 14 of the plaint schedule and not with the other properties concerned in the suit. The first defendant is the undivided lather, and defendants 2 to 7 are the undivided brothers, of the plaintiff. The first defendant was adjudicated an insolvent in I.P. No. 22 of 1929. The properties in dispute were sold by the first defendant under Exhibit B -12, dated 9th May, 1929, prior to his adjudication to Gopala Mudaliar, the father of the tenth defendant. But this sale was set aside at the instance of the Official Receiver as offending the provisions of the Provincial Insolvency Act. The properties were taken possession of by the Official Receiver and leased back to Gopala Mudaliar, the father of the tenth defendant. They were also put up for sale along with the other properties of the insolvent and from the certified copy of the bidders' list, Exhibit B -24 dated 16th April, 1924, it is seen that Deivasigamani Mudaliar, who is a cousin of Gopala Mudaliar, purchased them on behalf of Gopala Mudaliar. The sale was for a sum of RS. 101; but excepting that Deivasigamani Mudaliar was declared to be the purchaser for a sum of RS. 101 as is seen from the bidders' list, it is not the case that the sale become really effective. It is common ground that no sale deed was executed in favour of Deivasigamani Mudaliar and there is also no evidence excepting the statement of the tenth defendant's mother, that money was paid in fact by Gopala Mudaliar, her husband as it was stated, that the sale was obtained by Deivasigamani Mudaliar on behalf of Gopala Mudaliar and he purchased these items for his benefit. The result, however, is that the properties except for the fact that they were put up for sale, were not effectively sold by the Official Receiver. The adjudication was eventually annulled by an order of Court. The plaintiff is now seeking to recover his share of the suit properties and the question for determination is what is the effect of the annulment of the adjudication.

(2.) SECTION 37 of the Provincial Insolvency Act provides:

(3.) THE effect of an annulment has been recently considered by a Full Bench of this Court in Subbiah v. Ramaswami : (1953)2MLJ766 , and it was held that once the adjudication was annulled without imposing any conditions, it must he taken that there was no insolvency at all, and by reverter under Section 37 of the Act, the prior state of things was restored and the property vested in the insolvent with retrospective effect. The effect of annulling the insolvency was to wipe out the effects of insolvency altogether, and to vest the property in the insolvent debtor, subject however to the exceptions provided in Section 37. There is no question here of any property which was in the possession of the insolvent and which had by reason of his adjudication vested in the Official Receiver which could by virtue of Section 37 of the Act be considered to revest in the debtor. The properties in question had already prior to the adjudication been alienated by the insolvent for himself and on behalf of his minor sons to the tenth defendant's father, Gopala Mudaliar, for valuable consideration; and it is the finding of both the Courts that the alienation, Exhibit B -12, could not be attacked on the ground that it was for illegal or immoral purposes, as it is found that the consideration for the sale was for discharge of antecedent debts. Ordinarily therefore, but for the order setting aside the alienation which was passed in the insolvency, the alienation would be binding on the minor sons and the question therefore is whether the order setting aside the alienation continues to be effective in spite of the annulment of adjudication. The judgment of King, J., in Dharmasamarajayya v. Sankamma : AIR1943Mad453 , is in point. In that case the appellant was a lessee of certain properties under a permanent lease from the first defendant, the appellant being the third defendant. The first defendant was the widow of one Nagaraja Shetty. In 1926 Nagaraja Shetty made a gift in favour of his wife, the first defendant, of the suit properties. In October, 1926, Nagarja Shetty was adjudicated an insolvent and in March, 1927, the gift was set aside. In March, 1928, the adjudication was annulled. Although the gift deed had been set aside, it had not been necessary for the Official Receiver to dispose of the property which was dealt with by the gift deed. In the meantime Nagaraja Shetty executed a will on the assumption that as the gift deed had been set aside the property had reverted to himself and he could dispose of it, by giving the property not only to his wife but also to his daughter, with a life interest reserved to the wife and the remainder to the daughters. The contention of the daughters was that the permanent lease given by the first defendant to the third defendant was not valid beyond the life -time of the first defendant. Both the Lower Courts upheld the contention but in the appeal it was held that though the gift deed was set aside in 1929, it was set aside not in the interests of the insolvent but in the interests of the insolvent's creditors and that the effect of setting aside the gift should, therefore, automatically be considered to disappear in the insolvency proceedings and following the principle of law laid down in In re Parry (2),, L.R. (1904) 1 K.B. 129 the learned Judge held that the annulment of an alienation of this kind is solely in the interests of an insolvent's creditors, and to the extent that those interests do not require the annulment, the annulment is automatically cancelled. The view taken by the learned Judge was that from the date of the annulment of the adjudication of Nagaraja Shetty in March, 1928, the rights which had accrued under the gift deed automatically became restored and the learned Judge then proceeded to discuss the other points raised in that case on the assumption that the gift deed continued and the annulment will not have any effect. This decision of King, J., was cited with approval by a Bench of this Court in Muhammad Hussain Sahib v. Karutha Syed Mohammad Rowther, (1952) 2 M.L.J. 823, consisting of Govinda Menon and Mack, JJ. I am in respectful agreement with the view taken by King, J., in the case referred to, Dharmasamarajayya v. Sankamma : AIR1943Mad453 , that the object of setting aside the alienation as offending the provisions of the Insolvency law was for the benefit of the insolvent's creditors and since no provision is required to be made from and out of the property so far as the insolvent's creditors are concerned and by reason of the adjudication having become annulled, the limited purpose for which the benefit of such an order of setting aside was intended having disappeared, the alienation in question must, therefore, be deemed to have been left untouched but restored as observed by King, J., in the case of the gift in that case.