OFFICIAL RECEIVER ANANTAPUR Vs. KONDETI SURAYANARAYANA

JUDGEMENT

(1.) The Official Receiver is the appellant, Respondents 1 and 2 are the sons of the 3rd respondent. The 3rd respondent was adjudged insolvent on 7-12-1960 on a creditors insolvency petition I. P. No. 22 of 1960. His sons had already instituted a suit, O. S. No. 46/60, for partition and allotment of 2/3rd share before the Subordinate Judges Court, Anantapur. On 13-9-60 an ex parte preliminary decree was passed therein, which is marked as Ex. A-3. On an application, I. A. No. 223/61 filed on behalf of the plaintiffs in that suit, the Official Receiver was impleaded as a party to the final decree proceedings. As soon as he was brought on record, the Official Receiver was impleaded as a party to the final decree proceedings. As soon as he was brought on record, the Official Receiver put forth his plea that there are debts due to the creditors and that all these debts are the pre-partition debts and that provision ought to be made in the decree for the payment of the same as they were not tainted debts. The learned Subordinate Judge directed the Official Receiver to resort to appropriate remedy in that behalf and passed a final decree on 26-6-1961. As a result, the Official Receiver moved the Insolvency Court by filing an application, I. A. No. 703/61 under Section 4, 53 and 54 of the Provincial Insolvency Act for a declaration that the debts due from the father are binding on the sons to the extent of their shares in the joint family property and that the said shares are liable to be sold for discharge of the debts. This petition was resisted on the ground that a final for partition has already been passed and the sons being third persons, they are not amenable to the jurisdiction of the Insolvency Court and that the petition should be dismissed in limine. They denied the truth and binding nature of the debts and urged that the debts are sham and fictitious. The 3rd respondent, the father disputed the genuineness of the debts and stated that the promissory of the debts and stated that the promissory notes were not supported by consideration. The ground taken by the sons that the Insolvency Court has no jurisdiction to decide under Section 4 the disputes between the creditors and the sons of the insolvent was negatived by the Court of first instance. On appeal however, the learned District Judge allowed the claim set up by the sons as to the jurisdiction of the Insolvency Court to go into the matter on the basis that the principle laid down in Ramachandra Aiyer v. The Official Assignee of Madras, 61 Mad LJ 66 = (AIR 1931 Mad 317), was not followed in the later decisions of the Madras High Court in Official Receiver v. Devarayan Chettiar, Air 1949 Mad 216 and Thirumaleswara v. Govinda. AIR 1952 Mad 776, and that on the other hand in C. Sriramamurthi v. Official Receiver, Air 1957 Andh Pra 692, the principle was clearly laid down that, if a decision were effected between the insolvent and his sons before the Official Receiver exercised the power of the sale, the insolvent leaving the creditors to pursue their remedies, against the sons shares by means of suits instituted against them invoking pious obligation of the sons to discharge their fathers untainted debts. In the opinion of the learned District Judge, these observations went against the decision in 61 Mad LJ 66 = (AIR 1931 Mad 317)and hence the decision of the Madras High Court is no longer binding on this Court. On this basis, he held that the petition filed by the Official Receiver invoking the jurisdiction under Section 4 is not maintainable and that the remedy of the Official Receiver is to file a separate suit against the sons of the insolvent. Consequently, the order of the learned Subordinate Judge was set aside. Hence the Official Receiver has come up in appeal to this Court.

(2.) The learned Counsel, Mr. Bhujanga Rao appearing for the appellant contends firstly that the observations in Air 1957 Andh Pra 692 were in no way inconsistent with the principle laid down in 61 Mad LJ 66 = (AIR 1931 Mad 317), secondly that the Court had power to entertain the application under Section 4, and that the judgment in appeal is, therefore, liable to be set aside. As provided under Section 28 of the Provincial Insolvency Act, on the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court in a receiver and shall become divisible among the creditors. Section 28-A, which was introduced by reason of the Amendment Act 25 of 1948, provides that the property of the insolvent shall comprise and shall always be deemed to have compromised 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 commencement of his insolvency or before his discharge. We are concerned with the two provisions to this section. Of course, by reason of adjudication of the father of a joint Hindu family governed by the Mitakshara Law as insolvent, there vests in the Official Receiver, 61 Mad LJ 66 the separate property of the insolvent father; and (2) also the power which the father of a joint family has to alienate the joint family property, including his sons share in the joint family property for paying his antecedent debts not contracted for an immoral purpose. The fathers power of disposition over ancestral property including his sons share for the discharge of his untainted debts vested in the Official Receiver, however, could be exercised by him only so long as there was no partition between the father and sons. The result is that on a division between them, the fathers power and consequently the power of the Official Receiver, to sell the shares of the sons would come to an end. In this premises, the Official Receiver who was entitled in law to sell the shares of the sons as well for the untainted debts of his father in exercise of the fathers power of disposition over ancestral property, had no such power in this case by reason of partition. In other words, he had no power to sell himself the share of the sons of the insolvent in the hitherto undivided joint family property. That does not mean private measures to make the shares of the sons available for the benefit of the creditors for pre-partition debts, the liability of which would continue as ever on the shares of the sons obtained under partition. What is lost to him by reason of partition is only power of himself selling the share and not his right to bring it to sale through the intervention of the Court. The Official Receiver represents the general body of creditors also and as such, he has to protect their interests as well. In the present proceedings, indeed, the sons had brought their action for partition of joint family property even before the insolvency proceedings were started and obtained a preliminary decree long before the father was adjudged insolvent on 7-12-1960. The Official Receiver was brought on record in the partition action later and that at the instance of the plaintiffs and he had in fact moved the Court to make provision for payment of pre-partition debts in the final decree to be passed. he was however directed to resort to appropriate remedy. It is in consequence thereof that he has filed this petition under Section 4.

(3.) The contention of the learned Counsel for the respondents, Mr. Balaiah is that, since the sons the third persons, their share cannot be brought up for consideration in the insolvency proceedings and that they themselves are not, amenable to the jurisdiction of the Insolvency Court. To appreciate the argument, it is necessary here to read the provisions of Section 4 to the extent relevant for our purpose: -