TEJMAL MARWARI Vs. JOKIRAM SURAJMAL

JUDGEMENT

(1.) The facts of the case, so far as they are relevant to this appeal, are these: On 24 February 1926, one Chouthmal Bhagirath applied that one Gurdat Singh be adjudged an insolvent. An ad interim Receiver was appointed by the Court during the pendency of the insolvency proceeding, but later on the application was refused on 20 February 1927. Chouthmal Bhagirath preferred an appeal to this Court, and on 25 May 1927 an ad interim receiver was again appointed. Ultimately, this Court on 8 November 1927, adjudged Gurdat Singh to be an insolvent. In between these two dates, namely the refusal of the application by the District Judge on 20 February 1927, and the order of adjudication by this Court on 8 November 1927 the respondents, who were creditors Nos. 2 and 3, brought to sale certain unliquidated debt due to the insolvent from the Bengal Nagpur Railway Company and realised Rs. 5,750 as its sale proceeds. Later on, the order of adjudication was annulled. Thereafter the appellant, who is one of the creditors, applied to the District Judge for an order that the amount of Rs. 5,750 which was taken by the creditors Nos. 2 and 3 towards the satisfaction of their decrees during the pendency of the insolvency proceedings be realised from them and be rateably distributed among all the creditors of the insolvent. The learned District Judge being of opinion that after the order of annulment of adjudication there was no insolvency proceeding before him, refused this application. The appellant came up in appeal. (Miscellaneous Appeal No. 217 of 1930). This Court held that the insolvency proceeding had not come to an end by the annulment of adjudication and that it was open to the Court to continue to administer the estate of the insolvent for the benefit of his creditors. The effective part of the order was that the learned District Judge was directed to proceed with the application of the appellant and dispose of it according to law. It was further ordered that the learned District Judge should take steps to realise the assets of Gurdat Singh vested in the Receiver, wherever they may be found, and which may be lawfully realisable and to take such legal steps for their realisation as the parties may ask him to take. When the case went back to the learned District Judge, the appellant asked him for calling upon the respondents, the creditors Nos. 2 and 3, to refund the amount of Rs. 5,750 for the purpose of rateable distribution. The learned District Judge again refused this request and hence this appeal.

(2.) In my opinion the learned District Judge's order cannot be upheld. His reason for refusing the prayer of the appellant seems to be that creditors Nos. 2 and 3 brought the insolvent's property to sale and appropriated its sale proceeds towards the satisfaction of their decrees at a time when there was no Receiver of the insolvent's estate and that the debt due from the Bengal Nagpur Railway Company, which was sold, was never vested in any Receiver and therefore the sale proceeds of that property could not be rateably distributed. In my opinion, the learned District Judge has misconstrued Section 51 which has been referred to by him and obviously ignored Section 28, Insolvency Act. Section 28, Clause (2) says: On the making of an order of adjudication the whole of the property of the insolvent shall vest in the Court or in a Receiver as hereinafter provided, and shall become divisible among the creditors, and thereafter, except as provided by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable under this Act shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceeding, except with the leave of the Court on such terms as the Court may impose.

(3.) Clause (7) of this section provides: An order of adjudication shall relate back to and take effect from, the date of the presentation of the petition on which it is made.