EDAMAKANTI PEDA HANUMA REDDY Vs. OFFICIAL RECEIVER

JUDGEMENT

(1.) The petitioners are the sons of E. Peri Reddy. He filed on October,"28, 1978, I.P. No. 32/78, under Section 10 of the Provincial Insolvency Act, 1920 (Act 5 of 1920, for short 'the Act') to adjudge him to be an insolvent in the Court of the Subordinate Judge, Ongoie, which was subsequently transferred to the Court of the Subordinate Judge at Markapur. on the point of jurisdiction and it was renumbered as I.P. No. 18/80. He was adjudged as an insolvent on June 7, 1982, as per Ex. A.I. Thereby, the asse's of the insolvent stand vested in the official receiver. Thereafter, the receiver filed A. No 739/82 under Sections 4 and 5 oF the Act for a direction to take possession of the properties including 3/4tb share of p titicners also. That application was resisted by the petitioners ontending inter alia that the debts contracted by the second respondent-father are 'avyavaharika' debtstainted with immorality. Therefore, they are not binding on the petitioners. It is also contended that an October 17, 1978, the petitioners laid O.S. No. 176/78 for partition of the joint family properties. A preliminary decree was granted on December 14, 1978, and final decree was ordered on July, 22 1970, and the decree has become final. So long as the decree is not set aside, there is a disruption in the joint family status as on October 17, 1978, and so long as the decree is not declared to be not binding on the general body of creditors under Section 53 of the Transfer of Property Act, the 3/4th share of the petitioners in the joint family property shall not vest in the official receiver. Both the contentions have been disallowed by the Court below. Thus, this revision.

(2.) Sri Hanumaiah, the learned counsel for the petitioner, reiterated all the contentions. He firstly contended that if the debt is an 'avyavaharika' debt, tainted with immorality, the joint family is not bound by the debts and the share of the petitioners also cannot be declared to be vested in the official receiver. He also seeks to support this contention with reference to the evidence adduced in that regard. I am unable to agree. The Court below has considered the entire material evidence placed on record and held that the debts are joint family debts They are not tainted with any illegality or immorality. They are not 'avyavaharika' debts. This is a finding of fact based on evidence. I accept the same. Therefore, the debts are binding on the joint family. The next question is whether the interest of the petitioners in the joint family is liable to vesting in the official receivsr and is liable to sale. By operation of sub-section (1) of Section 28, on the making of an order of adjudication, the insolvent shall aid to the utmost of his power in the realisation of his property and the distribution of the proceeds among his creditors. Under sub-section (2), 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. Section 28-A is relevant for the purpose of this case, which reads thus : "The property of the insolvent shall comprise and shall always be deemed to havs comprised also the capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the insolvent for his own benefit at the com ' encement of his insolvency or before his discharge." The two provisos are not necessary for the purpose of this case. Hence omitted. The power of the official receiver to sell the interest of the members of the Joint family and vesting thereof was considered by a full Bench of this Court in S. Jagaanonan Rao vs. U. Babu Rao Madhava Reddy, J., as he then was, speaking for the Full Bench held thus : "Upon a father, who is the Kartha of a joint family consisting of himself and his sons, being adjudged an insolvent, what vests in the official receiver under the Provincial Insolvency Act is his self- acquired property, his undivided share in the juint family property and his power of alienation over the interests of the sons in the joint family property provided the debt of the father are not tainted with illegality or immorality. The interest of the sons or their share as such in the joint family property does not vest in the official receiver. It is only the father's power to alienate this interest or share that vests in the official receiver. On such vesting the official receiver has three courses open to him with respect to the interests of the sons in the joint family property (1) to exercise the power of the insolvent father to dispose of by private sale (2) to apply to the insolvency court under Sections 4 and 5 of the Provincial Insolvency Act and (3) to apply under Section 52 for delivery of possession of the property and take proceedings for bringing the properties to sale. The power of the father to dispose of his son's share in the joint family properties by private sale., however, subsists only so long as there is no disruption of the joint family status That power comes to an end when that status is disturbed either by the institution of a suit for partition by the sons or by the attachment of the sons' interests in the joint family properties by a creditor. Just as the.. father's power to alienate the sons' interest is extinguished on the happening of any of the above mentioned contingencies, so also the power of the official receiver conies to an end, for the power of the official receiver in this behalf is co-extensive with that of the father. If before the exercise of this power by the official receiver any of the contingencies occur, i.e., the joint family status is disrupted by actual partition or by the institution of a suit for partition, or by the attachment of the sons' interest by any creditor, then the official receiver cannot proceed to dispose of the sons' interest by private sale." In view of this ratio, to which I am bound, the only question that arises for consideration is, whether the power under Section 28-A of the Act to sell the interest of the co-parceners in the joint family to discharge the joint family debt is not liable to be vested in the official Receiver take possession under Secs. 4 and 5 of the Act? As to what was vested in the Official Receiver on adjudication of the Second respondent as an insolvent is the power of the 2nd respondent to dispose of the interest of the co-parceners in the co- parcenery property to discharge the joint family debts. Now, by operation of sub-sec.(7) of S. 28, the order of adjudication shall relate back to, and take effect from, the date of the presentation of the petition for adjudication. No doubt, the suit O.S. No. 176/78 for partition of joint family property was instituted on October 17, 1978, and on that date the third petitioner was a minor Admittedly, there is no finding recorded in the suit that the partition is for the benefit of the minor-. In the absence of such a finding, the partition decree cannot be said to be a genuine one. It is abviously a collusive decree. So, the subsequent partition does not have the effect of disrupting the joint family status and consequently does not nullify the vesting of the power of the insolvent 'karta' under S, 28-A of the Act to dispose of the interest of the co parceners in the joint family property to discharge the pint family debts Thus, it would appear, the second-respondant insolvent made an ingenious attempt firstly by instigating his sons to file the suit for partition and secondly by filing his application for being adjudged as an insolvent so as to screen 3/4th share of the joint family properties from the reach of the creditors. None of the creditors have been impleaded as party-defendants to the suit for partition. They were kept under dark of the proceedings for partition. Had they been put on notice, obviously, they would have taken action under S. 53 of the Transfer of Property Act. Judicial process should not be a sanctuary for fraud or deception but a venue to redress just legal injury. It is true that a decree passed for partition would relate back to and take effect from the date of the presentation of the suit for partition. On the facts of the case, there is no disruption in the joint family status, particularly in the absence of a finding that the partition is for the benefit of the minorco-parcener, and in view of the conduct of the insolvent. The necessary conclusion, therefore, is that though the decree for partition was made, no disruption of the joint family status is caused and the proceedings were ingeniously taken out with a view to defeat the general body of creditors from relising their debts. Under those circumstances, I have no hesitation to agree with the Court below that there is no disruption in reality of the joint family status on the date when the application for adjudication was filed, namely, October 28, 1978. Therefore, the application filed by the Receiver under Sections 4 and 5 of the Act to take possession of the joint family properties, including the power of the insolvent to alienate the interest of his sons as such in the joint family property for discharge of the joint family debts and for distribution of the sale proceeds towards the application of the discharge of those debts was rightly ordered.

(3.) The Civil Revision petition is accordingly dismissed but in the circumstances without costs.