JAGANNATH FAKIRCHAND MARWADI Vs. BABURAO GANESH DESHMUKH

JUDGEMENT

(1.) The question arising for decision in this revision application is whether, when an order adjudicating a debtor insolvent has been annulled by the Insolvency Court under Section 43 of the Provincial Insolvency Act for the failure of the insolvent to apply for his discharge within the time allowed to him by the order of adjudication, the custodian of the property of the debtor appointed by the Insolvency Court under Section 37 of the Act could, continue an application which had been made by the receiver in insolvency under Secs.53 and 54 of the Act for setting aside a fraudulent alienation.

(2.) The facts are briefly as follows. The petitioner, Jagannath Fakirchand Marwadi, who was a creditor of one Ramkisan Khubchand, filed a darkhast against him to recover a certain amount due to him, and on May 28, 1934, the debtor Ramkisan executed in favour of the petitioner a mortgage-deed for Rs. 7,000 in respect of two houses. On June 11, 1934, another creditor of Ramkisan filed application No. 14 of 1934 for declaring Ramkisan an insolvent, and on June 8, 1936, Ramkisan was adjudicated an insolvent. The opponent in this application, Mr. Deshmukh, was appointed receiver of the insolvent's property. By the order of adjudication the insolvent was directed to apply for discharge within two years. In the course of the insolvency proceedings on December 22, 1936, the receiver in insolvency filed application No. 254 of 1936 against the petitioner, the mortgagee, under Secs.53 and 54 of the Provincial Insolvency Act, 1920, to set aside the mortgage in the petitioner's favour. The insolvent failed to apply for discharge within two years from the date of adjudication, and on August 3, 1940, the Insolvency Court annulled the order of adjudication under Section 43 of the Act. The Court also made an order under Section 37 vesting the property of the insolvent in a custodian. Mr. Deshmukh who had been the receiver in the insolvency was appointed the custodian. On the same day, on the petition of one of the creditors, the Court made an order that the application made by the receiver under Secs.53 and 54 of the Insolvency Act should be continued by the custodian. This order appears to have been made without hearing the mortgagee, the applicant before us, and he applied for a reconsideration of the order. His application was dismissed and the previous order directing the custodian to continue the proceedings under Secs.53 and 54 of the Act was confirmed. The applicant appealed to the District Court, and the learned Assistant Judge who heard the appeal confirmed the order made by the Insolvency Judge. It is against this order that the applicant has come in revision.

(3.) The contention urged on behalf of the applicant is that on the annulment of the adjudication under Section 37 the insolvency proceedings ipso facto terminated, that the powers of the receiver also terminated, and that the custodian of the property appointed under Section 37 could not continue proceedings under Secs.53 and 54 of the Provincial Insolvency Act which might have been commenced prior to the annulment of the adjudication. It is argued that to take any other view would amount to holding that in spite of the annulment of the adjudication the proceedings in insolvency could be continued in another form, and that the custodian appointed to deal with the property could do everything that the receiver in insolvency is empowered to do under the Act.