FIRM OF BHIMAJI MOTIJI Vs. OFFICIAL RECEIVER

JUDGEMENT

(1.) The subject-matter of this appeal is a claim by the Official Receiver under Section 51 of the Provincial Insolvency Act for the payment to him of the amount of the bid of the decree-holder in execution of his decree against the judgment- debtor who was adjudicated insolvent. The learned District Judge of Bellary has passed an order calling upon the decree-holder to pay him the amount of his bid less the costs of the execution, and the decree-holder now appeals.

(2.) It is not seriously disputed at the bearing before us that Section 51 of the Provincial Insolvency Act must govern the decision of this appeal. Nor does the appellant seriously dispute that on the question of the date of the insolvency of the judgment-debtor his rights must give way before those of the Official Receiver. What he does say, however, is that the benefit of the execution does not consist in the bid which he made but consists in his ownership of the property which he purchased, and therefore he is prepared not to pay to the Official Receiver the amount which he offered for the land but to restore the land itself to the Official Receiver. The learned District Judge holds that such a solution of the rights of the parties may be equitable but that there is no provision in the Act for carrying it into effect. We were at first much attracted by the argument in favour of the appellant that if the land, which he has purchased, and for which he did not need actually to pay any money into Court as he was permitted to set-off the purchase against his claim in execution, is restored to the Official Receiver, then the appellant derives no benefit from the execution and therefore the purposes of Section 51 have been fulfilled. On the other hand, it appears upon further reflection that such a procedure would in effect nullify Section 51. What is the practical result of permitting the appellant to convey the land which he purchased to the Official Receiver? It is this, that the whole execution proceedings are as if they were cancelled. The judgment-creditor is in the same position as he was before the execution proceedings began with the same claim against the insolvent. The insolvent is in the same position with his debt still unsatisfied to the same extent. The Official Receiver is in the same position because if there had not been this execution, he would have been entitled to take possession of the property which had vested in him, and that is what it is now proposed by the appellant that he should be allowed to do. All the parties therefore occupy precisely the same position as if there had been no execution at all. That being so, it would appear that the "effect of the insolvency on antecedent transactions", to quote from the heading in the Act just before Section 51, would be that if the decree-holder purchases any property, the antecedent transaction is cancelled. That seems to us to be a matter which is simple enough to have been stated in simple language in the Act itself. There is on the other hand an indication in Section 51 that the intervention of insolvency in circumstances like these can never bring about a practical cancellation of the execution proceedings because Sub-section 3 says that 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. The language of this section is very wide. "A person" will include a decree-holder purchaser and a stranger purchaser and, there is the expression "in all cases". We think accordingly that the only logical way of interpreting Section 51 is in this way, that the benefit of the execution represents the bids made at a sale or the assets realised otherwise in the course of execution. It refers in other words to money and Section 51 decides that money which is so realised shall in certain circumstances be paid to the decree-holder, and in certain other circumstances be paid to the Official Receiver. There does not seem to us to be any scope under Section 51 for the passing of an order directing a decree-holder to restore to an Official Receiver properly which he has purchased at an execution sale.

(3.) This matter has to be decided without very much assistance from the authorities. We have been referred only to two cases. In Henry Merieu V/s. Official Receiver, Madras Pandrang Row, J., had to deal with a case in which the point at issue was whether money should be paid by the decree-holder purchaser to the Official Receiver under Section 51. Pandrang Row, J., decided that it should not be paid for two reasons, the first being that the execution sale itself was a nullity and therefore had to be set aside. The second reason, which we may say, with respect, was hardly necessary to be put forward in order to dispose of the case, was that when a Court has granted permission to a decree-holder to bid without actually depositing the money in Court, it is a breach of faith on the part of that Court to call upon the decree-holder later at the instance of the Official Receiver to pay money to the Official Receiver in cash. There is no attempt by Pandrang Row, J., to analyse Section 51 and, with respect, although the situation may be an unfortunate one from the point of view of the decree-holder, we do not think that the good faith of the Court is at all involved in an interpretation of Section 51, which interpretation it is obligatory upon us to attempt. The other decision is one of Venkataramana Rao, J., in Venkata Sivayya V/s. Suryanarayana (1938) M.W.N. 841 There the learned Judge observes that having regard to the language of Section 51, Sub-section (3) no difference ought to be made between a decree- holder purchaser and a stranger purchaser. If the decree-holder has purchased property in good faith, the purchase by him should be upheld. The fact that he had notice of the insolvency would not indicate an absence of good faith on his part. In that case Venkataramana Rao, J., upheld the claim of the decree-holder purchaser under Section 51 (3) to retain the property which he had purchased. We do not think it possible that in the practical working of ii single section like Section 51 the decree-holder should be permitted to decide whether he should pay to the Official Receiver the money which he paid for the property or restore the property itself. As Venkataramana Rao, J., has said, the only disability under which the decree- holder purchaser lies is that he will not be entitled to the benefit of the execution, that is, he cannot set-off the amount of the decree debt against the purchase price but he is bound to pay the amount of the purchase money into Court just like any other stranger purchaser. We with respect prefer to follow this second and later decision and in our opinion the learned District Judge's order is right. This appeal must fail and is dismissed with costs.