NOONY SURYANARAYANAMURTHI, MINOR REPRESENTED BY NEXT FRIEND AND MATERNAL GRANDFATHER CHODE-CHINA PATTABHIRAMAYYA Vs. NOONY VEERRAIU

JUDGEMENT

(1.) These connected appeals arise out of a suit for partition brought by the appellant in the main appeal A.S. No. 89 of 1943, impleading his father as the first defendant and his brother as the third defendant. The first defendant having been adjudicated insolvent, the Official Receiver in whom the property of the insolvent had vested was joined as the second defendant. Defendants 4 to 6 were the unmarried daughters of the first defendant. Certain creditors and alienees of family properties were also impleaded as defendants 7 to 18, and questions were raised as to the binding character of the transactions which they had respectively entered into with the first or the second defendant as the case may be.

(2.) Before the third defendant was born in 1938, the half share in the family properties to which the first defendant was entitled at the time of his adjudication (23 March, 1933) had become vested in the second defendant. After the proceedings in insolvency had lasted for several years, in the course of which the second defendant had realised some of the family properties and distributed dividends, the first defendant applied on 24 June, 1941, under Section 35 of the Provincial Insolvency Act for annulment of his adjudication which had been made ex parte. The application was rejected by the Insolvency Court, but, on appeal, the District Court of East Godavari annulled the adjudication on 7 October, 1944, on the ground that it ought not to have been made, as the alleged fraudulent preference relied on by the petitioning creditor as the sole act of insolvency was not proved to be such in I.A. No. 731 of 1937, initiated by the Official Receiver. The learned District Judge however directed in his order that " the properties of the debtor shall vest in the Official Receiver and suitable directions will be given by the insolvency Court with respect to these properties." From this order the first defendant preferred C.R.P. No. 1621 of 1944 to this Court. It was not clear why the learned Judge vested the debtor's properties in the Official Receiver notwithstanding the annulment of the adjudication. As, however, his order would be justified if the " suitable directions " which he contemplated were intended to relate merely to the completion of unfinished acts of administration or to other special matters, we suggested, with a view to have the position clarified, that the first defendant might apply to the Insolvency Court for further directions as to the delivery of the properties to him. On such application being made that Court, however, was of opinion that in view of the general terms of the vesting order made by the District Court under Section 37, it could not direct the properties to be delivered to the debtor although there were no special circumstances rendering necessary any further interference with the debtor's estate by the Official Receiver, and accordingly ordered the administration in insolvency to proceed as if the adjudication had not been annulled. If the order of the learned District Judge were intended to have this effect it would obviously be in excess of his powers, for it has been held by a Full Bench of this Court in Periakaruppan v. Arunachalam I.L.R. (1940) Mad. 441 that, when an adjudication is annulled under Section 35 of the Provincial Insolvency Act, no vesting order should be made under Section 37 except to the extent that any special circumstances render such vesting necessary. We accordingly allowed the C.R.P. No. 1621 of 1944 and set aside the order of the District Court in so far as it vested the properties of the first defendant in the Official Receiver, but directed that officer to retain the cash realisations in his hands pending the decision in these appeals as to the utilisation, of that fund. The position, therefore, is that the properties of the first defendant which had, on his adjudication, vested in the Official Receiver, now "reverted" to him as provided in Section 37 of the Provincial Insolvency Act.

(3.) The question next arises as to whether, on such reverter, the properties are held by the first defendant as his separate properties, or as family properties liable to be divided among the members along with the other assets of the family. On the answer to this question depends the quantum of the shares to be allotted to the members of the family; for, as has been stated, the third defendant was born after the first defendant was adjudicated and his share (then one half) in the family properties was vested in the Official Receiver, and if such share now reverts to him as his separate property the plaintiff and the third defendant would each be entitled only to a fourth share, while, if the first defendant's share comes back to him only as family property which it undoubtedly was when it vested in the Official Receiver, the father and the sons would each be entitled to a third share in the entire properties. The decree of the lower Court is based on the former view, and the question is whether it is correct.