SEETARAMAYYA Vs. RAMACHANDRUDU

JUDGEMENT

(1.) When a judgment-debtor is declared an Insolvent under Section 351, Civil Procedure Code, after an enquiry under Section 350, Civil Procedure Code, he is entitled to be discharged from jail and cannot again be arrested under the decree in execution of which he was imprisoned ( Section 341, Civil Procedure Code).

(2.) With the declaration of insolvency, the Court may also discharge the insolvent under Section 851, Civil Procedure Code, or if a Receiver is appointed by the Court he may be discharged under Section 356, Civil Procedure Code, after a certificate from the Receiver that the insolvent has placed him in possession of all his property or has done everything in his power for that purpose. After he has obtained his discharge as above under Section 351 or 355, Civil Procedure Code, he cannot again be arrested or imprisoned on account of any of the scheduled debts ( Section 357, Civil Procedure Code). In the case before us, a Receiver has been appointed, and the question for decision is whether an insolvent who has not been discharged under Section 355, Civil Procedure Code, can be arrested by a scheduled creditor. We are of opinion that he cannot be arrested. Under Section 352, Civil Procedure Code, a schedule has to be framed of the creditors and their debts which they have to prove and the declaration of insolvency under Section 351, Civil Procedure Code, after an enquiry to which they are parties, is to be treated as a decree in their favour for the scheduled debts. This schedule may be altered by the addition of the names of new creditors or striking out any names already in the schedule and also as regards the amount or nature of any debt The Receiver in whom all the insolvent's property is vested by the Act is bound to possess himself of all his property, and under the direction of the Court discharge the secured debts and make a rateable distribution of the balance among the scheduled creditors, Section 856 Civil Procedure Code. The intention obviously is to relieve the judgment-debtor by protecting him from being harassed by creditors and at the same time to pay the creditors as stated above.

(3.) That intention will obviously be defeated by allowing each scheduled decree- holder to pursue his remedy by arrest and imprisonment or by realizing his debt otherwise than through the Receiver, see Gauri Dat V/s. Shanhar Lal I.L.R., 14 A. 358. It is clear that no scheduled creditor can proceed against the property to realize his debt as all the judgment-debtor's property is vested in the Receiver by the declaration of insolvency. The arrest and imprisonment of the judgment-debtor is only a mode of executing the decree ( Section 235, Civil Procedure Code) and is intended to compel him to pay his debt. But he cannot pay it when the law vests all his property in a Receiver and he is deprived of all control over his property, and it must be presumed to be the intention of the legislature when so vesting his property by the order under Section 351, Civil Procedure Code, to which the decree-holder was a party, that he must look from that date to the Receiver and not to the judgment-debtor for payment of his debts If any scheduled creditor is entitled, and therefore allowed, to execute his decree by arrest and imprisonment he will be in a more favourable position than the decree-holder who first arrested the judgment-debtor and who is prohibited by Section 3.41, Civil Procedure Code, from again arresting him--a preference for which it is difficult to find any reason at any rate while the process of realization and distribution is going on.