OFFICIAL RECEIVER Vs. SOUTH INDIAN MINING

JUDGEMENT

(1.) The revision petition arises in the matter of insolvency of a judgment-debtor whose property was brought to sale in execution at the instance of a decree-holder and assets were realised by the executing Court before the insolvency petition was filed. We are concerned in this revision petition largely with what effect Section 51 (1) of the Provincial Insolvency Act, hereinafter referred to as the Act will have on such assets.

(2.) On 28-10-1967 a creditors insolvency petition, No. 24 of 1967 was filed on the file of the Court of the Subordinate Judge, Kurnool, against one N.Ramachandra Reddy, who is the judgment-debtor in O.S. No. 68 of 1962 on the file of the same Court pending adjudication, the Official Receiver was appointed as Interim Receiver to his properties. The judgment-debtor was finally adjudicated insolvent on 11-7-1968. Even before the insolvency were brought to sale on 27th and 28/09/1967 and they were sold for a sum of Rs. 53,400.00 in E.P. No. 28 of 1966. On the date of the sale, 25 per cent of the sale was deposited and the balance 3/4th sale amount was deposited within 15 days therefrom, the time allowed as provided under Order 21, Rule 85 of the Code of Civil Procedure. Thus, the entire amount of Rs. 53,400.00 was realised in execution earlier than the filing of the insolvency petition. The sale warrant amount was only Rs. 8,808.75 Ps. Some decree-holders filed applications under Section 73 of the Code of Civil Procedure for ratable distribution among them of the assets realised. Before the executing Court passed any orders on those applications, the Official Receiver filed the present application, out of which this civil revision petition has arisen, on 21-9-1968 claiming the balance amount of Rupees 44,591.25 Ps., after deducting the sale warrant amount from the money realised in execution, for the benefit of the general body of creditors of the insolvent, which the court negatived.

(3.) The relevant provisions of the Constitution are Sections 28 and 51. It is provided under Section 28 (2) of the Act that on the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver and shall become divisible among the creditors, and therefore, except as provided by the Act, no creditor to whom the insolvent is indebted in respect of any debt payable shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt. It is provided under section 28 (7) of the Act that an order of adjudication shall relate back to and take effect from, the date of the presentation of the petition on which it is made. Therefore, the crucial date in this case is 28-10-1967 on which date the insolvency petition was filed though the adjudication order was passed subsequently on 11-7-1968, but that is subsequent to 13-10-1968, on or before which date the sale amount was deposited in the Court. In Section 51 (1) of the Act it is provided that where execution of a decree has issued against the property of a debtor, no person shall be entitled to the benefit of the execution against the Receiver except in respect of assets realised in the courts of the execution by sale or otherwise before the date of the admission of the petition. In the present case, as already mentioned above, the assets in question were realised in the course of execution by sale before the date of the filing of the insolvency petition. From a plain reading of Section 51 (1) of the Act it appears clear that in respect of assets realised in the course of execution by sale if they were realised before the date of filing of the insolvency petition, the ordinary law will take its course with regard to claims of persons on those assets. It means that in such a case the persons who will be entitled in law to the benefit of the assets realised in execution will not be affected by the subsequent adjudication of the judgment-debtor.