HIRALAL CHAMPA LAL MARWADI Vs. FATTEHCHAND PARMANAND

JUDGEMENT

(1.) 1. This appal arises from a suit filed by the appellant as a creditor to seek a declaration Under Section 53, T.P. Act, that the sale-deed dated 3rd June 1926 in so far as it affected the shares of defendants 2 and 3, Badri and Radhakisan, was nogus and fraudulent intended to defeat and delay his claim. The defendants raised a preliminary objection that having regard to the provisions of Section 28, Provincial Insolvency Act, the suit was not maintainable. This plea prevailed in both the Courts below with the result that the suit has been dismissed. The plaintiff has therefore preferred this appeal. At the background of the suit there are certain facts which must be stated for the proper appreciation of the point at issue. Badri and Radhakisan with their father Onkar formed a Hindu joint family. Onkar having run into debts beyond his capacity to pay, was dragged by his creditors, into the Insolvency Court and was adjudged an insolvent. It was discovered that on 3rd June 1926 he had in conjunction with his two sons transferred the joint family property to Fatehchand, defend ant-respondent 1, and the receiver got the sale annulled Under Section 53, Provincial Insolvency Act, so far as the one third share of the insolvent was concerned. The sons not having been adjudicated insolvents the sale in respect of their two-thirds share was left intact. It is for the purpose of annulling, the sale in respect of the shares of Badri and Radhakisan that the present action, is brought by the creditor.

(2.) THE question for determination is whether the sale of the two-thirds share of the sons could be annulled only by the receiver under any provision of the Insolvency Act or it is open to the creditors to set it aside Under Section 53, T.P. Act,. in an ordinary civil Court. In other words, whether the Insolvency Court has exclusive jurisdiction in this matter. It is urged on behalf of the appellant that having regard to the law enunciated in Sat Narain v. Behari 925 P.C 18 and followed in Kanhaiyalal v. Dablia 1933 Nag 150, the insolvency of the father does not result in vesting the property of the members of the joint family in the receiver, and that in so far as the father's right to dispose of his sons' shares for his just debts vested in the receiver that power can no longer be exercised as the shares were already sold. On this ground it is contended that the creditors alone had the right to bring a suit for setting aside the sale Under Section 53, T.P. Act. It appears to me immaterial, while judging as to the extent of property that vests in the receiver, whether the property is owned and possessed by the insolvent at the time of adjudication or ostensibly transferred to others.

(3.) THE Insolvency Court has to give relief to the creditors of the father and in doing so it has necessarily to determine the character of the debts in order to decide whether the sons' shares in the joint family property are liable to be sold or not. If the debts are held to be binding on the sons, then although the sons' shares may not actually vest in the receiver, he would be entitled to exercise his power to dispose of the sons' shares, and thus collect all the available assets of the insolvent for the purpose of liquidating his debts. The sons' shares are liable to be treated as forming part of the assets available for distribution among the creditors subject to the condition that the father's debts are proved to be binding on the sons. It will thus appear that while the father's share in the property, directly vests in the receiver, the vesting for the purpose of disposal of the sons' shares is contingent upon proof of the debts incurred by the father being free from the taint of illegality and immorality. In either case it is the receiver alone who can under the law deal with the entire joint family property. Section 28(2), Provincial Insolvency Act, vests the insolvent's property in the Court or a receiver and the creditors are debarred from commencing any suit to recover any debt provable under the Act, or to seek any remedy against the property in respect of such a debt.