PUTTA RM RAMANATHA IYER Vs. T S RAMACHARI

JUDGEMENT

(1.) THIS revision arises under Section 75 of the Provincial Insolvency Act at the instance of an execution creditor. The petitioner obtained a money decree against one Srinivasa Iyer. In execution of his decree he attached certain property belonging to the debtor, obtained leave to bid and set off the sale proceeds against his dues under the decree and brought the properties to sale. The sale took place on 15-9-1952 and was confirmed on 21-10-1952, A few days before the sale, i. e. , on 6-9-1952 the debtor filed I. P. No. 26 of 1952 on the file of the Sub court, Madurai, to adjudicate himself an insolvent. Srinivasa Iyer was adjudicated an insolvent on 19-6-1953 and his properties vested in the Official Receiver. The Official Receiver was then moved to take steps to set aside the sale which took place in execution of the petitioncr's decree but the Receiver held that the court sale was valid but that the petitioner should deposit the sale amount into court. A creditor of the insolvent and the petitioner filed appeals to the Subordinate Judge in M. P. Nos. 13 and 16 of 1954 under section 68, the former seeking directions to have the court sale set aside, the latter objecting to the order directing him to bring into court the sale amount. The learned Subordinate Judge directed the Official Receiver to take steps to set aside the sale. In that view he set aside the order calling upon the petitioner to bring the sale proceeds. The petitioner thereupon filed an appeal to the District court against the order of the Subordinate Judge. The learned District Judge held that the court sale was valid and could not be set aside but that the petitioner could not set off the sale amount against his dues and should bring it into court for the benefit of the general body of the creditors. The petitioner has filed this revision against the order of the District Judge. It is not disputed that the petitioner was not aware of the institution of the insolvency proceedings at the time when he purchased the properties in the court auction and that he did so in good faith. The only question for decision is whether the petitioner is entitled to set off the sale price against 3iis decree.

(2.) THE effect of the adjudication of the debtor as insolvent is that under Section 28 (7) read with Section 28 (2) the properties of the insolvent would vest in the Offical receiver as from the date of presentation of the petition. Therefore all the property which the debtor had on the date of the insolvency petition would statutorily vest in the Official Receiver but Section 51 (3) protects the title of a bona fide purchaser in a court sale which takes place after the presentation of the insolvency petition.

(3.) UNDER Section 51 (11) the executing creditor will not be entitled to the benefit of execution as against the receiver in respect of assets receiver after the admission of the insolvency petition. Under Section 51 (3) the title of a purchaser in good faith in an execution sale would be protected as against the receiver notwithstanding the fact that the title to the property had vested in the latter anterior to the execution sale by virtue of the principle of relation back embodied in Section 28 (7 ). The combined effect of Section 51 (1) and (3) is that while a purchaser in good faith gets Rood title to the properties sold in court auction after the presentation of an insolvency petition, the decree holder cannot get any right to the proceeds which would vest in the Receiver.