SANKARALINGA MUDALIAR (DEAD) Vs. OFFICIAL RECEIVER OF TINNEVELLY

JUDGEMENT

(1.) This is an appeal against the order of the District Judge of Tinnevelly in C.M.P. No. 566 of 1918 on his file in which the Official Receiver of Tinnevelly was the petitioner. The appellants, who were respondents 1 to 3 in the Lower Court, had brought a suit, O.S. No. 106 of 1913, in the District Munsif's Court of Ambasamudram against seven defendants, all members of a joint Hindu family. Pending the suit they applied for and got an attachment before judgment of the joint family properties. The suit was compromised and a razi decree, Ex. I, was passed on the 23 of September, 1914, which provided that the defendants therein should pay into Court Rs. 2,100 with interest within the 15 of April, 1915, and that, in default, the attached properties might be sold and the amount realised. It also provided that the attachment before judgment which had already been made would continue until the amount fixed by the decree was paid. Defendants 1 and 7 in that suit died subsequent to the decree. After their deaths an execution application was filed in the District Munsif's Court by the decree- holders, the present appellants, and an order for sale of the attached properties was made. Defendants 2 to 6 in the suit were also ordered as the legal representatives of the deceased defendants 1 and 7. A petition for adjudicating defendants 2 to 6 as insolvents was presented to the District Court of Tinnevelly on the 31 of January, 1917, and they were adjudged insolvents by order of that Court dated the 23 of March, 1917. The attached properties wore sold in Court auction on the 28 of June, 1918, in pursuance of the orders of the District Munsif and were purchased by the 4 respondent in the Lower Court. The Official Receiver, who was not a party to the sale proceedings, filed the petition out of which this appeal arises, saying that, as the insolvent's assets had vested in him on the order of adjudication, the subsequent sale is not valid and binding on him and that the sale should, therefore, be set aside. There was also an alternative prayer to the effect that, if for any reason the sale could not be set aside, the decree-holders should be compelled to refund to him the amount they realised in execution.

(2.) The District Judge on the first occasion held that he, sitting as a Judge exercising insolvency jurisdiction, had no power to examine the validity or otherwise of an execution sale held by another Court and, therefore, dismissed the petition. On appeal, however, by the Official Receiver to this Court (C.M. A. No. 128 of 1919), this decision was set aside and the petition was remanded to the Lower Court for fresh disposal. The District Judge has now held that the sale itself could not be set aside as the auction purchaser, 4 respondent in the Lower Court, purchased the property bona fide and was, therefore, entitled to the protection given to bona fide purchasers by Section 34(3) of the Provincial Insolvency Act (III of 1907), but he has granted the alternative prayer referred to above, i.e., he directed the decree-holders, the present appellants, to refund to the Official Receiver, the respondent before us, for the benefit of the whole body of creditors the sum of Rs. 3,153-2-0 realised by them in execution. He also gave them leave to rank as unsecured creditors in the subsequent insolvency proceedings before the Official Receiver. Against this order of the District Judge the decree-holders have filed the present appeal; the Official Receiver has filed a memorandum of objections stating that the sale should also have been set aside as the auction-purchaser could not in the circumstances of this case be considered to be a bona fide purchaser.

(3.) Two points have been urged before us by Mr. S.T. Srinivasa Gopalachariar, the learned Counsel for the appellants, viz., (1) that on a proper construction of Ex. I, the razi decree, a charge has been created on the attached properties in his clients favour and that, therefore, the properties vest in the Official Receiver only subject to his clients rights under the decree, and (2) that even if there is no such charge, inasmuch as two out of seven judgment-debtors had died after the attachment before judgment and also after the decree, such prior attachment followed by the decree prevents the shares of the two deceased co-parceners from surviving to the rest and that, therefore, those shares do not vest in the Official Receiver on the insolvency of the remaining co-parceners as they had never vested in the insolvents themselves. He urges, therefore, that the Official Receiver had not rights at least as regards two-sevenths of the properties sold and that his clients were entitled to retain at least two-sevenths of the purchase-money realised.