MOTILAL DHANNALAL Vs. NATHU GANPATI KALAR

JUDGEMENT

(1.) THE facts of this case are simple, but the law point involved is one of some difficulty. One Surajkaran applied to be declared insolvent on 8th November 1931 and was so adjudicated on 23rd April 1934, a receiver, who is the present applicant, being appointed to manage his estate. On 7th August 1934 one of the creditors, the decree-holder Maroti, filed an application for execution, and in the course of it a house which had belonged to the judgment-debtor was sold on 21st March 1935. The Official Receiver then on 25th April 1935 filed the present application for setting aside the sale. It has now been found that the decree-holder and the auction-purchaser had no knowledge of the insolvency proceedings. The Insolvency Court decided that the decree-holder's execution, and so the sale proceedings started after the adjudication order, were null and void and that the official receiver's application was in time. Reversing this order, the Third Additional District Judge, Nagpur, found that the auction-purchaser was protected by Section 51(3), Provincial Insolvency Act, and that the receiver's application was time barred.

(2.) THE chief point then for decision is whether Section 51(3) applies to a case in which the purchase had taken place after the order of adjudication. For the applicant it is urged that a distinction is to be drawn between such sales and sales prior to the application in insolvency or after the application but before adjudication. To these last, the doctrine of relating back applies under Section 28(7), Provincial Insolvency Act, and it is conceded that Section 51(3) would apply to such cases. But, it is said, when the debtor has become an adjudicated insolvent his property has passed to the receiver. Section 51(3) reads: A person who in good faith purchases the property of a debtor under a sale in execution shall in all cases acquire a good title to it against the receiver.

(3.) HE then goes on to find that the word 'debtor' is inapplicable after adjudication. This Division Bench case of the Madras High Court is the latest on the point and is on all fours with the present case. Opposed to it is a Calcutta case, Dineshchandra Ray v. Jahanali Biswas ('35) 22 AIR 1935 Cal 503 which is also a decision by two Judges. They expressed themselves as follows: We are unable to hold that the sale in the present case was a nullity, and that Order 21, Rule 22, Civil P.C., controlled the provisions of Section 51, Sub-section (3), Provincial Insolvency Act, even in a case, in which the decree-holder, purchaser at the sale in execution of his decree, purchased the property of an insolvent at a sale in execution in good faith, after an order of adjudication has been passed by the insolvency Court, and after the property of the insolvent has vested in the receiver in insolvency.