PARSOTAM DAS Vs. EVDAVID

JUDGEMENT

(1.) These two appeals Nos. 70 and 71 of 1915 arise out of the same insolvency proceedings. The facts are simple. One George Edwards has been adjudicated an insolvent on the 5th of January 1915 by the District Judge of Cawnpore on an application made by him himself on the 16th of November 1914. Parsotam Das, one of the appellants before us, claims to be a person whose circumstances fall within the terms of Section 31 of the Provincial Insolvency Act, and demands a right to certain money realised in execution of his decree against the insolvent by sale before the date of the order of adjudication. Beharilal, the other appellant, is a person who claims to be a secured creditor within the meaning of Section 31 of the Act in respect of the sum of Rs. 1,100. It appears that some two or three decrees had been obtained in the Court of the Munsif of Cawnpore against the insolvent early in the year 1914. Among these was that of Parsotam Das, the appellant, who obtained his decree on the 14th of January of that year.

(2.) He applied for attachment and sale of certain property in execution of his decree in the Court of the Munsif. There were other decrees obtained against the insolvent in the Court of Small Causes but we are not concerned with them. In June 1914, Beharilal brought a suit in the Court of the Additional Subordinate Judge against the insolvent and he applied for attachment before judgment of part of the property which Parsotam Das had already attached in execution of his decree. The Court ordered attachment as prayed and then on the 15th of July 1914, it gave a decree ex parte against the insolvent in favour of Beharilal. Beharilal then applied in the Court of the Subordinate Judge for execution of his decree. This was on the 24th of July 1914. He also applied to the Subordinate Judge pointing out that the property of the judgment-debtor had been attached in execution of the decrees in the Munsif s Court, and he asked the Subordinate fudge to take action under, Section 63 of the Code of Civil Procedure. It appears that all the decree-holders and certainly Beharilal, in order to save time and trouble, agreed that the Munsif should carry on the execution of the decrees of his Court, more especially the decree of Parsotam Das, that he should sell the property and remit the assets so obtained to the Subordinate Judge so as to enable the latter Court to distribute the sale-proceeds rateably among the decree- holders. Accordingly the property was actually sold in execution of the decree of Parsotam Das by the Munsif, and the sum of Rs. 3,961 was transferred on the 19th of August 1914 to the Court of the Subordinate Judge, to which all the other decrees were also transferred for satisfaction. On the 4th of August 1914, the judgment-debtor applied, in the suit brought by Beharilal, to have the ex parte decree set aside. Notice was issued, and on the 24th of October 1914, an order was passed in favour of the judgment debtor, setting aside the ex parte decree and granting a re-hearing of the suit. Upto that time the sale proceeds, Rs. 3,961, had not been rateably distributed among the various decree-holders. It was stated in the Court of the Subordinate Judge that the amount which would approximately fall to the share of Beharilal s decree out of the sum of Rs. 3,961, which was in Court, would be Rs. 1,100. Thereupon the Court passed an order on the 24th October 1914, as mentioned above, setting aside the ex parte decree. The grounds given in the order were, that the application was supported by an affidavit; that the sum of Rs. 1,100 was stated to be the approximate amount out of the Rs. 3,961 which on rateable distribution would fall to the lot of Beharilal, and as that sum was in Court as security and it was only deficient to the extent of Rs. 300 as compared with the claim of Beharilal, therefore, the application for re- hearing was granted. On the 11th of November 1 914 the Court passed another order on an application of Beharilal, which clearly shows the meaning of its order passed on the 24th of October 1914. In this order it distinctly states that the sum of Rs. 1,100 was security, and should remain as such security until the decision of the suit. We again note here that on the 27th of October 1914, Parsotam Das applied to the Munsif to have the sum which had been recovered by sale distributed among the other judgment-creditors other than Beharilal. The Munsif sent on the application to the Subordinate Judge, who stated that he would distribute the money himself and keep all the execution cases pending in his Court. On the 17th of November, the day after the application for insolvency had been made, the District Judge sent an order to the Subordinate Judge directing him to stay his hands and not to distribute the Rs. 3,961 among the creditors whose decrees were in process of execution. On the 17th of December 1914, Beharilal s suit was again decreed on a compromise, and on that very same date he applied for payment of the Rs. 1,100 which was deposited in Court. The Subordinate Judge sent on this application to the District Judge, who directed the Subordinate Judge not to pay the money.

(3.) These are the circumstances of the case, and the two points for decision are, first of all, whether the amount which Parsotam Das claims as payable to him himself is liable to distribution among the creditors or is money which falls within the meaning of Section 34 of the Insolvency Act. The second point is, whether Beharilal is or is not a secured creditor within the meaning of Section 31 in respect of the Rs. 1,100 mentioned above. The learned District Judge appears to have held that the sale of the property by the Munsif was not a sale legally held in execution of Parsotam Das s decree. He points out that under Section 63 of the Code of Civil Procedure it was only the Subordinate Judge who ought to have put these decrees into execution, and that, therefore, in his opinion the sale by the Munsif was either an invalid sale or was a sale carried out by the Additional Subordinate Judge himself through the Munsif. The actual fact is as we have already pointed out. The Munsif with the consent of all the decree-holders sold the property which had been attached in execution of Parsotam Das s decree, and the assets were realized in the execution of that decree. They were in deposit in Court. That sale clearly was neither illegal nor invalid. All the parties agreed to it, and moreover Clause 2 to Section 63 clearly shows that there was nothing invalid in that sale. The simple fact, therefore, remains that after the execution of Parsotam Das s decree against the property of the judgment-debtor, assets had been realized by sale of the property before the date of the order of adjudication. The Warned District Judge s order, therefore, in respect of Parsotam Das is clearly wrong and must be set aside, and we hold that Parsotam Das, when he proves his debt, is entitled to recover that debt out of the Rs. 3,961 which had been realized by sale in execution of his decree.