DAMODAR CHAUBE AND CO Vs. MADAN MAKUND PRASAD

JUDGEMENT

(1.) THIS is an appeal by one of the creditors against an order of the Insolvency Court, dated 18 January 1944, in insolvency, case No. 47 of 1930, and the main question for consideration is if the insolvents had any such right of property in certain Government Promissory Notes of the face value of us. 1,16,500 as would vest in the Official Receiver under Section 28(2), Provincial Insolvency Act. The facts leading up to the appeal are shortly stated below. One Lachhmi Prasad, to whom the estate belonged, died on 2 October, 1910. He left behind his widow Mt. Rajwanti Kuer, a son Gupteshwar Prasad by her and two more sons, Debendra Prasad and Madan Makund Prasad, by a pre-deceased wife. For sometime after the death of Lachhmi Prasad, Mt. Rajwanti Kuer remained the guardian of the three minor sons, under the orders of the District Judge of Shahabad. Thereafter, one Major Wilson was, appointed guardian of the property of the minors, and Mt. Rajwanti Kuer continued to be the guardian of their person. Debendra Prasad attained majority on 9 August 1921. On 20 August 1921, Devendra Prasad applied to the District Judge of Shahabad praying for the release of the estate from guardianship. THIS was objected to by Mt. Rajwanti Kuer. By an order, dated 24 August 1921, the District Judge released the estate from guardianship, and directed that it is delivered over to Debendra Prasad. Debendra Prasad received change of the estate from Major Wilson on 24 September 1921. Musammat Rajwanti Kuer then filed an appeal to the High Court against the order of the District Judge ordering the release of the estate. During the pendency of this appeal in the High Court (Misc. A. No. 176 of 1921), the parties entered into an agreement--Musammat Rajwanti Kuer for self and as guardian of her minor son Gupteshwar Prasad on one side and Debendra Prasad for self and as guardian of his minor brother Madan Makund Prasad on the other. It appears that by the aforesaid agreement, the estate, with the exception of the Government Promissory Notes, was divided into three equal shares, one share each being allotted to Debendra Prasad, Madan Makund Prasad and Gupteshwar Prasad. As to the Government Promissory Notes, I am quoting below in extenso the terms of the agreement, because arguments advanced before us on behalf of the parties have reference to those terms. Clauses III, IV and V of the agreement read as follows: "III. That the annual interest of the Government Promissory Notes of the face value of Rs. 1,16,500 (One Lakh sixteen thousand and five hundred), details of which are given below and which stand in the names of the aforesaid Babu Devendra Prasad, Babu Madan Makund Prasad and Babu Gupteshwar Prasad is hereby assigned to Mt. Rajwanti Kuer for and in satisfaction of her claim for her maintenance and support during her lifetime or to any share in the joint properties which she may claim at the time of partition. [IV] That the aforesaid Government Promissory Notes of the face value of Rs. 1,16,500 will remain as at present in the safe custody of the Imperial Bank of India Ltd., Calcutta, and that the names of the aforesaid three proprietors will remain endorsed as owners of the aforesaid notes and that an order be issued upon the aforesaid Imperial Bank of India Ltd., Calcutta, to realise and pay the interest regularly to Mt. Rajwanti Kuer during her lifetime and not to hand over or endorse the aforesaid Promissory Notes to Mt. Rajwanti Kuer or to the aforesaid three proprietors Babu Devendra Prasad, Babu Madan Makund Prasad and B. Gupteshwar Prasad or to any third person during the lifetime of the aforesaid Mt. Rajwanti Kuer. [V] That after demise of the aforesaid Mt. Rajwanti Kuer the aforesaid three proprietors Babu Devendra Prasad, Babu Madan Makund Prasad and Babu Gupteshwar Prasad will be entitled to take away the aforesaid Government Promissory Notes details of which are given below from the aforesaid Imperial Bank of India Ltd., and to deal with the same in any way they like and to divide the same amongst themselves in equal shares." 3. THIS agreement received the sanction of the Court on 12 January 1922, on which date the appeal was ordered to be decreed to terms of the compromise including a direction to the Imperial Bank of India, Calcutta, to pay the interest of the Government Promissory Notes to Mt. Rajwanti Kuer during: her lifetime. It may be stated here that Mt. Rajwanti Kuer is still alive. 4. Subsequent to this, in 1929, the sons of Debendra Prasad brought a suit for partition against him, and the sons of Madan Makund Prasad also brought another suit for partition against him in the Benares Court; both suits were decreed after being referred to arbitration, and final decrees for partition were passed on 24 August 1929. It is to be noted that the Government Promissory Notes aforesaid were not the subject of partition in those suits. Then, on 13 November 1930, certain creditors applied before the District Judge of Shahabad for adjudicating Debendra Prasad and Madan Makund Prasad as insolvents. It was on the basis of this application that the insolvency proceedings started, and on 17 August 1932, both of them were adjudicated insolvents. A Receiver having been appointed, he filed an application on 1 December 1933, stating that the two insolvents Debendra Prasad and Madan Makund Prasad had two- third share in the aforesaid Government Promissory Notes, and that the property of the insolvents in the said Government Promissory Notes had vested in the Receiver; and the Receiver wanted a direction to the Imperial Bank of India, Calcutta, so that the Receiver's name might be substituted in place of the two insolvents in respect of the Government Promissory Notes in question. THIS application came to be disposed of finally on 18 January, 1944, by an order of the learned Additional District Judge of Shahabad, against which order the present appeal is directed. In the meantime, Debendra Prasad had died sometime in April 1940. The application of the Receiver was supported by the creditors, but was opposed by Madan Mukund Prasad, his sons and the sons of Debendra Prasad. 5. Two questions arose for determination by the learned Additional District Judge. One was if the interest of the sons of the insolvents in the Government Promissory Notes vested in the Receiver. In view of the severance of the joint status followed by final partition decrees in 1929 the learned Additional District Judge had no difficulty in answering this question in the negative. The second question was if the interest of the insolvents in the Government Promissory Notes, whatever be its extent, vested in the Receiver. The learned Additional District Judge held that the interest of the insolvents in the Government Promissory Notes was not a mere chance of succession as contemplated in Section 6(a), T.P. Act, but a vested interest. He further held that in view of the terms of the agreement, the Government Promissory Notes could not be assigned to the Receiver or to any other person, so as to be available for distribution amongst the creditors, as long as Mt. Rajwanti Kuer was alive. In this view of the matter, he dismissed the application of the Receiver. As stated above, one of the creditors has come up in appeal against this order. 6. On behalf of the appellant reliance has been placed on the provisions of Section 28(2), Provincial Insolvency Act, which lays down that 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 and shall become divisible among the creditors. It is contended that on a true construction of the terms of compromise in Misc. Appeal No. 176 of 1921, the insolvents had a vested right of property in the Government Promissory Notes, the enjoyment of the interest being only postponed to a future date, that is, till the death of their stepmother, Mt. Rajwanti Kuer. Learned Counsel for the appellant has placed great reliance on the case in Hira Lal V/s. Sankar Lal It is necessary to state, briefly the facts of that case. There was a suit for partition in respect of the estate of one Kritti Bash. Kritti Bash died in 1918, and was survived by his widow Nistarini i and by his two sons, the plaintiff Hira Lal and Chuni Lal. Chuni Lal died in 1933 leaving a widow and three sons. After the death of Kritti Bash, the plaintiff instituted partition proceedings against his brother Chuni Lal and his mother Nistarini. A preliminary decree for partition was made in April 1928. The commissioner appointed in the partition suit made an award which was confirmed in July 1928. Under the award Nistarini was allotted certain of the immovable properties belonging to Kritti Bash "to be held and enjoyed by her as a Hindu widow during, the term of her natural life." On 25 June 1928, Chuni Lal mortgaged his interest in the properties allotted to Nistarini on partition, and the mortgagee's interest passed by assignment to a lady of the name Manuja Bala i. On 5 October 1931, Chuni Lal was adjudicated an insolvent and in May 1933, the plaintiff was also adjudicated. Nistarini died in September 1936. Meanwhile Manuja Bala had instituted a mortgage suit on the mortgage executed by Chuni Lal and the mortgaged property was finally sold to Manuja Bala in 1937. Then, in 1937, Hira Lal filed a suit for partition in respect of the property which Nistarini had obtained under the award in the previous partition suit. The plaintiff submitted that he was entitled to one half thereof, and the sons of Chuni Lal to the other half. Manuja Bala contended that the plaintiff had no interest in the properties which were sought to be partitioned, because his right, title and interest therein vested in the Official Assignee, when he was adjudicated an insolvent, by reason of the provisions of Section 17, Presidency towns Insolvency Act. It was held in that case that the properties allotted to Nistarini were not inherited by her from Kritti Bash, and the effect, of the partition decree was to make them available for her maintenance, for which purpose she was entitled, in certain circumstances, to alienate them; but the interest which the two sons had obtained by inheritance on the death of their father was never divested; therefore, that interest was subsisting at the date of the adjudication of Hira Lal and under Section 17, Presidency-towns Insolvency Act, it passed to the Official Assignee. Learned Counsel for the appellant has, therefore, urged before us that though Mt. Rajwanti Kuer has been given the right to enjoy the interest on the Government Promissory Notes during her lifetime, that does not mean that the insolvents have no right of property in the Government Promissory Notes, and the insolvents right therein must vest in the Court or the Receiver, under the provisions of Section 28(2), Provincial Insolvency Act. There is, however, the following distinction between the case in and the case under our consideration. In the case under our consideration there is a clear prohibition in the terms of compromise against handing over or endorsing the Government Promissory Notes to any person during the lifetime of Mt. Rajwanti Kuer, who is still alive. THIS restriction is clearly a restriction against any assignment of the Government Promissory Notes during the lifetime of Mt. Rajwanti Kuer. Learned Counsel for the respondents has invited our attention to Section 2(d), Provincial Insolvency Act, which lays down that unless there is anything repugnant in the subject or context, "property" includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit. As has been observed in Bishwanath Sao V/s. Official Receiver the definition of the word "property" in the Provincial Insolvency Act is not exhaustive. It is however difficult to understand how the expression "property" in the Provincial Insolvency Act can mean property over which or the profits of which, the insolvent has not got a disposing power. As has been observed by their Lordships of the Judicial Committee in Sat Narain V/s. Behari Lal the property of an insolvent which by Section 17, Presidency-towns Insolvency Act (which corresponds to Section 28, Provincial Insolvency Act) vests in the Official Assignee must mean only the property which is divisible amongst his creditors. In my opinion, the learned Counsel for the respondents has rightly contended that as the insolvents have no disposing power in respect of the Government Promissory Notes during the life-time of Mt. Rajwanti Kuer, they have no such property in the said Government Promissory Notes as would vest in the Court or the Receiver under Section 28(2) of the Act. The cases in Balwant Singh V/s. Joti Prasad and U Zoe V/s. Ma Mya May A.I.R. 1930 Rang. 184 to which the learned Additional District Judge has referred, are not of any great assistance. In neither of those two cases was there any restriction against disposal of the property. 7. Learned Counsel for the respondents has also taken us through the provisions of the Indian Securities Act, 1920, with particular reference to Section 5. He has contended that under the provisions of that section no indorsement of a Government promissory note is valid unless made by the signature of the holder inscribed on the back of the security itself. He has, therefore, argued that under the terms of the agreement the insolvents were not entitled to make any indorsement during the lifetime of Mt. Rajwanti Kuer. If they were unable to do so, then they had no right of disposal over the property and nothing would vest in the Receiver for distribution amongst the creditors. THIS argument is the same argument in another shape namely, that the insolvents having no right of disposal had no such property in the Government Promissory Notes as would vest in the Insolvency Court or the Receiver. Learned Counsel for the respondents has contended that to transfer the property now would be tantamount to transferring a right to transfer at some future date. The reply of the learned Counsel for the appellant is that the insolvents could transfer their right in the Government Promissory Notes, though they had no present right of enjoyment. He has contended that the insolvents had a vested right in the Government Promissory Notes under Section 19, T.P. Act, which right could be transferred by them. Section 19 applies in its terms to an interest created on a transfer of property. The compromise arrangement in this case did not constitute a transfer of property, but was in the nature of a family arrangement which was binding on the parties. By that arrangement no right of transfer was given to any party with regard to the Government Promissory Notes as long as Mt. Rajwanti Kuer was alive. I am unable, therefore, to hold that Section 19, T.P. Act, is of any help to the appellant. 8. I have also considered whether under Section 4, Provincial Insolvency Act, it is expedient or necessary for the Insolvency Court to decide the question at issue in this case. It has been held in several decisions that the exercise of jurisdiction which the Insolvency Court derives under Section 4, Provincial Insolvency Act, is purely discretionary. Whether in any particular case an Insolvency Court in India should refuse to exercise its jurisdiction must necessarily depend upon the facts of each case and no hard and fast rule can be laid down in that behalf. In Rankasabapathi Chettiar V/s. G. Meenakshi Ammal A.I.R. 1935 Mad. 720 it has been held that an Insolvency Court would be justified in declining to exercise discretion as to jurisdiction under Section 4, Provincial Insolvency Act, where the dispute is of a difficult character and involves a large sum of money and where the result of assuming jurisdiction would be to deprive the unsuccessful party of a right of first appeal to the High Court and, perhaps, an appeal to the Privy Council. The Madras case was one in which an appeal lay to the District Court of Madura and no second appeal lay to the High Court. The High Court was moved by way of revision. In such circumstances, it was held that the result of assuming jurisdiction would have been to deprive the unsuccessful party of a right of first appeal to the High Court and, perhaps, an appeal to the Privy Council. Those considerations are not present in this case and the question at issue has arisen directly out of the bankruptcy proceeding. If the insolvents had any such property in the Government Promissory Notes as would vest in the Receiver under Section 28(2), Provincial Insolvency Act, it would be proper for the Insolvency Court to give a decision on the question so as to make the property available for distribution amongst the creditors. It is now well settled that the Insolvency Court may decide any question which it may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property, and in doing so it has ample power to decide questions of title arising between the estate of an insolvent and a third party. It is true that the present appellant, who is one of the creditors, had obtained a decree against Debendra Prasad alone. Debendra Prasad, one of the insolvents, is now dead. Debendra Prasad had separated from his sons before the application for adjudication was made, and the learned Additional District Judge has held that the creditors cannot proceed against the interest of the sons and that the interest of the sons does not vest in the Insolvency Court or in the Receiver. The question of the interest of the insolvents at the date of adjudication does, however, arise directly out of the bankruptcy proceeding and the Receiver, was entitled to ask the Insolvency Court to decide whether that interest vested in him or not. Though I had some doubt at the beginning whether it was expedient for the Insolvency Court to decide the question at issue in this case, I am of the view that the question directly arose out of the bankruptcy proceeding and it was necessary to give a decision on the question under Section 4, Provincial Insolvency Act. 9. For the reasons which I have given above, I think that the learned Additional District Judge was right in dismissing the application of the Receiver on the ground that the insolvents had no disposing power over either the corpus or the profits of the Government Promissory Notes during the lifetime of Mt. Rajwanti Kuer, and, therefore, they had no such property in the Government Promissory Notes as would vest in the Receiver under Section 28(2), Provincial Insolvency Act. 10. The result, therefore, is that the appeal fails, and is dismissed with costs. Manohar Lall, J. 11. I agree.