TIRUVENKATACHARIAR Vs. THANGAYIAMMAL

JUDGEMENT

(1.) The Official Receiver of Tanjore, in whom the property belonging to the insolvent vested under an adjudication order, issued a proclamation for the sale of the properties in dispute. In it he stated that the properties would be sold subject to two mortgages subsisting in favour of certain secured creditors. The sale was fixed for the 21st March 1914. On that day the Official Receiver noted in the sale-proclamation "intending bidders present say that the properties would fetch a better price if they are sold free of mortgage.... Under these circumstances in modification of the terms of the sale-proclamation, I propose to sell now the properties free of encumbrance." The properties were purchased by the, appellant for Rs. 22,000. This was on the 22nd March. On the 9fch of April an application was made to the District Court by the respondent, who is also one of the creditors of the insolvent, for setting aside the sale on the ground that the variation in the sale-proclamation was irregular, that if the properties had been advertised to be sold free of encumbrance, a larger number of bidders would have been present, that she was prejudiced by the action of the Official Receiver in directing the sale at the last moment free of encumbrance, and that there was an offer of Rs. 25,000 for the property. For the above reasons she prayed that the sale be set aside and that a fresh auction be held in respect of the properties. The District Judge was of opinion that the procedure adopted by the Official Receiver was irregular and that there was good ground for the allegation that the creditors were prejudiced by the variation in the proclamation of sale, and set aside the sale.

(2.) In appeal Mr. Rangachariyar raises three objections to the order of the District Judge. In the first, place he argues that the District Judge had no jurisdiction to set aside the sale held by the Official Receiver. He draws attention to Section 20 of the Provincial Insolvency Act which gives the Receiver full discretion to sell property and to grant receipts by Clauses (a) and (b), but which restricts the powers of the Official Receiver in regard to other matters in the subsequent Clauses by directing that he should obtain the sanction of the Court. Clauses (a) and (b) of Section 20 correspond in a general way to Section 56 of the Bankruptcy Act, whereas Clause (o) downwards have been adopted from Section 57. Both these sections are subject to the general power of supervision, retained by the Courts in England under Section 90 of the same Act. Section 22 of our Act has a similar provision. Whereas Clauses (a) and (b) of Section 20 contemplate the exercise of ordinary power which are incidental to the management of an insolvent s property, Clause (c) onwards refer to the dealings with the insolvent s property which are calculated to throw an onerous obligation on the estate itself. It is for that reason that the previous sanction of the Court is considered necessary before the Receiver is allowed to exercise those powers. In either case, whether a power is exercised without obtaining the sanction of the Court or after obtaining its sanction, the general superintendence possessed by the Court to correct irregularities committed by an officer of the Court is not affected. Mr. Rangachariyar contends that the decision of the Receiver acting under Clause (a) is not controllable by the Court. We are unable to agree with this contention. The first Clause of Section 20 says: "Subject to the provisions of the Act the Receiver" shall do certain things and when we come to Section 22 we see that liberty is given to " any person aggrieved by any act or decision of the Receiver to apply to the Court which may confirm, reverse or modify any act or decision complained of." It is true, as pointed out by Mr. Rangachariyar, that Section 31 of the Indian Insolvency Act of 1848 prior to its amendment and consolidation with the Presidency Towns Insolvency Act, 1909, was held by the Bombay High Court In re Bhukhandas (1905) 7 Bom. L.R. 954, not to enable the Court to interfere with a sale made by the Official Assignee. In that section the same unlimited power of interference which is given by Section 22 of the Provincial Insolvency Act is not to be found. But none the less it seems to us that even under Section 31 of the Indian Insolvency Act it was open to the Court to entertain applications against a sale held by the Official Assignee if it was irregular and unauthorized. In Woonwalla, and Co. v. Macleod (1906) I.L.R. 30 Bom. 515 the final decision is made to rest upon the ground that the Court is not bound to interfere because it is discretionary to do so. It may be open to question whether this decision should be followed in cases arising under the Presidency Towns Insolvency Act as it stood prior to its amendment. But we have no hesitation in holding that the language of Section 22 of the Provincial Insolvency Act is clear and unambiguous and gives unfettered discretion to the Court to set aside the order passed by the Official Receiver.

(3.) The second objection relates to the undesirability of overruling the Official Reciver in matters which are within his competency. The District Judge points out that the change in the conditions of the proclamation without giving sufficient notice of it had the effect of preventing intending bidders from coming forward. An affidavit was filed in the Court below by the respondent s agent which says that one Srinivasa Iyer had offered to purchase the property for Rs. 25,000 and that the said intending purchaser had already made a deposit of 25 per cent of the purchase money with the Receiver. Under these circumstances we cannot say that the District Judge on the materials before him did not exercise his discretion properly. In Ex parte Lloyds: Re Peters (1882) 47 L.T. 64 all that was held was that the discretion of a trustee will not be interfered with unless it is shown that he has acted "as no reasonable man would." It is not an authority for the proposition that where proper reasons are given by a Court for holding that the action of the Receiver was irregular and has prejudiced the general interests of the creditors, it should not set aside the order passed by the Receiver.