SORNAMMAL Vs. OFFICIAL ASSIGNEE

JUDGEMENT

(1.) In this case the South. Indian Export Company-I will refer to them hereafter as the company-applied to the Court for an older under Section 108 of the Insolvency Act that the estate of one Muruga Pillai deceased should be administered in insolvency. The application states that the deceased at the time of his death was indebted to the company in the sum of about Rs. 50,000. It also states that by three agreements the deceased had hypothecated skins and other things and also deposited with the company the title-deeds of certain properties to secure the repayment of the amount, due to the company, but that the company were informed that the value of the security held by them did not exceed Rs. 30,000 and they claimed to be unsecured creditors for the balance. An order was made on this application. The order was under Section 109; Section 109, Sub-section (1) provides : " Upon an order being made for the administration of a deceased debtor s estate under Section 108, the the property of the debtor shall vest in the Official Assignee of the Court, and it shall forthwith proceed to realize and distribute the same in accordance with the provisions of, this Act." Sub-section (2) provides: " With the modification hereinafter mentioned, all the provisions of Part III, relating to the administration of the property of an insolvent, shall, so far as the same are applicable, apply to the case of such administration order in like manner as to an order of adjudication under this Act. Shortly after the making of this order, a notice of motion was taken out by the Official Assignee. It was served on two parties; one of them is the widow of the deceased; the other is said to be the brother of the widow. We are not concerned to-day with the transaction in which the brother of the widow is said to have taken part. We are only concerned with the widow. The notice of motion is dated the 4th. December 1912 and it asks for an order as against the widow declaring that certain properties were purchased benami in her name and were in reality the property of the deceased and as such were vested in the Official Assignee. The notice of motion was made returnable on the 9th December 1912. There is appended to the notice of motion this note.-"This notice of motion was taken out by the Official Assignee and will be based on his report and oral testimony of witnesses." I do not propose to say anything with regard to the question as to how far the report of the Official Assignee is evidence. We have discussed this question in another case. It may, however, be pointed out that the notice of motion is returnable on the 9th December and the Report is dated the 14th. If the motion had come on for hearing on the day on which it was returnable, it is difficult to see how the widow could have had an opportunity of meeting the report. However we are told that as a matter of fact the notice of motion did not come on for hearing until February.

(2.) Mr. Chamier who appeared in support of the learned Judge s order contended before us that the application was made on behalf of, and in the interest of, the general body of creditors. The general body of creditors are no doubt interested in seeing that the company s security is upheld, because if the security is upheld, the amount which the company would be entitled to prove against the estate would be so much the less and the balance available to the general body of creditors if there are any assets at all, would be so much the more. That is the only interest, so far as I can see, which the general body of creditors had in the success of the application made by the Official Assignee. On the other hand it is obvious that the Compay had a very substantial interest in the order, which the Official Assignee asked for, being made, because their security was in jeopardy and the order made by the learned Judge was in effect an order that their security was good. The actual finding of the Judge in regard to this matter was. " I am of opinion that the evidence establishes that Sornammal (that is the widow) held the property benami for the insolvent." Therefore one cannot help thinking-we have no information one way or the other- that this application at any rate in the first instance, was not conceived as being, as Mr. Chamier suggests it was, in the interest of the creditors but was made for the purpose of establishing by an order of the court in insolvency that the security which the company held over the property of the deceased was a good security on which they could realise.

(3.) The state of things, as I understand it, when the notice of motion was launched was this. The Company held a mortgage over the property which constituted them, as they contended, secured creditors. The house property referred to in the notice of motion is included in the mortgage and the mortgage was executed by the deceased and by his widow. The title-deeds stand in the name of the widow. In that state of things I confess I do not understand why the company did not proceed under Section 12 of the Act and if they were not willing to relinquish their security give an estimate of the value of their security, and prove for the balance, and having done so, proceed to realize their security. The widow being a party to the mortgage, the fact the title-deeds stood in her name would not have been, as I understand the case, an obstacle in the way of the Company when they sought to realize the security. If the Company had sought to realize their security, it would no doubt have been open to the widow to set up a case that her signature to the mortgage was obtained by fraud; but until she was able to substantiate that the Company were in the position of ordinary secured creditors and were entitled to realize their security. However, that course was not taken. When the motion came on for hearing, Mr. Grant, who appeared for the widow, did not argue the case on merits; but he said there was no jurisdiction to make this order. So far as the notice of motion goes, it does not appear under what section of the Act the jurisdiction of the court was invoked. But I do not think it is contended that, as a matter of fact, the court was asked to make the order under any other section than Section 36. The learned Judge in his Judgment refers to that section. He says that under Section 36 the Official Assignee can apply to the court in a summary manner for an order that the property may be delivered to him. Then the learned Judge goes on to refer to Section 7.