M ABDUL RAHIM Vs. OFFICIAL ASSIGNEE OF MADRAS

JUDGEMENT

(1.) This is an appeal against an order of Clark, j., passed in insolvency on the Original Side of this Court. One Syed Yousuff Sahib was adjudicated insolvent on 22nd October, 1930. On 20th September, 1934, he purchased a house for Rs. 800 and on 22nd May, 1943, he conveyed it to his brother-in-law, the appellant before us. The consideration was a sum of Rs. 750, but of which Rs. 350 were paid in cash and the appellant undertook to pay the balance in discharge of a mortgage which the insolvent had executed in favour of one Bijraj Sowcar on 6 April, 1937. On 5 July, 1943, the appellant in his turn sold the property to one Mahomed Badsha Sahib for Rs. 600, out of which a sum of Rs. 400 was Utilised to pay off the mortgage in favour of the Sowcar. Contemporaneous with the sale by the appellant to Mahomed Badsha Sahib, there was an agreement by Mahomed Badsha Sahib to re-convey the property to the appellant. In pursuance of this latter agreement, the appellant paid the consideration for the reconveyance to Hasena Bi, the widow of Mahomed Badsha who had died in the meantime. Before the property was re-conveyed, the Official Assignee coming to know of these transactions, after notice to the appellant and the tenant of the property, filed an application to this Court in the exercise of insolvency jurisdiction for an order declaring that the property in question was vested in him and that neither the appellant nor Hasena Bi had any rights to the said property. He also claimed delivery of title deeds of the property and prayed for a direction that the appellant or Hasena Bi should pay to him the rent for three years collected by them from the property in question. The application was made on the ground that Syed Yousuf Sahib continued at all material times to be an undischarged insolvent and the property vested in the Assignee on and from the date of the purchase by the insolvent in 1934 and the subsequent transactions were not valid and binding upon the Assignee. It was conceded by the Official Assignee at the trial that the transfer by the insolvent to the appellant was bona fide and for value.

(2.) The learned Judge granted the application of the Official Assignee in so far as it prayed for a declaration that the property was vested in him and that the appellant had no right to the property and for delivery of the title deeds. But he dismissed the application in so far as it prayed for the recovery of the rent for three years collected by the appellant and Hasena Bi from the property.

(3.) The law relating to insolvency in the Presidency Towns is contained in the Presidency Towns Insolvency Act (III of 1909). The provisions relevant to the disposal of the present appeal are the following: 17. On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the Official Assignee and shall become divisible among his creditors.... 52. The property of the insolvent divisible amongst his creditors, and in this Act referred to as the property of the insolvent shall not comprise the following particulars, namely: (a) property held by the insolvent on trust for any other person; (b) the tools (if any) of his trade and the necessary wearing apparel, bedding, cooking vessels, and furniture of himself, his wife and children.... (2) Subject as aforesaid, the property of the insolvent shall comprise the following particulars, namely (a) all such property as may belong to or be vested in the insolvent at the commencement of the insolvency or may be acquired by, or devolve on him before his discharge; (b) the capacity to exercise and to take proceedings for exercising all such powers- in or over or in respect of property as might have been exercised by the insolvent for his own benefit at the commencement of his insolvency or before his discharge; and (c) all goods, being at the commencement of the insolvency in the possession, order or disposition of the insolvent, in his trade or business by the consent and permission of the true owner, under such circumstances that he is the reputed owner thereof. The language of these provisions follows the language of the corresponding pro visions of the English Bankruptcy Act of 1883, the material portions of which run thus: 44. The property of the Bankrupt divisible amongst his creditors and in this Act referred to as the property of the bankrupt...shall comprise the following particulars: (1) All such property as may belong to or be vested in the bankrupt at the commencement of the bankruptcy or may be acquired by or devolve on him before the discharge. 54. (1) Until a trustee is appointed the official receiver shall be the trustee for the purposes of this Act and immediately on a debtor being adjudged bankrupt the property of the bankrupt shall vest in the trustee; (2) On the appointment of a trustee the property shall forthwith pass to and vest in the trustee appointed. Confining one's attention to the words of the sections, it is clear that no distinction is made between property belonging to and vested in the insolvent at the commencement of the insolvency and property which may be acquired by, or devolve on him subsequent to the adjudication and before discharge. Both kinds of property are comprised in the property of the insolvent divisible amongst his creditors. Both kinds of property vest in the Official Assignee or the trustee in bankruptcy, and they vest in him in precisely the same manner. It follows that the moment a property is acquired by, or devolves on, an undischarged insolvent, such property becomes eo instanti vested in the Official Assignee or receiver. A similar provision of the Provincial Insolvency Act (III of 1907) was construed in that manner by their Lordships of the Judicial Committee in Kala Chand Banerjee V/s. Jagannath Marwari (1927) 52 M.L.J. 734 : L.R. 54 I.A. 190 : I.L.R. 54 Cal. 595 (P.C.) Section 16(4) of the Provincial Insolvency Act is as follows: All such property as may be acquired by or devolve on the insolvent after the date of an order of adjudication and before his discharge shall forthwith vest in the Court or Receiver and become divisible among the creditors in accordance with the provisions of Sub-section (2), Clause (a). Dealing with this provision, their Lordships say: This provision is perfectly clear. The moment the inheritance devolved on the insolvent Amulya, who was still undischarged, it vested in the Receiver already appointed, and he alone was entitled to deal with the equity of rdemption. The alternative in the section applicable to vesting in the Court was no doubt inserted to provide for the case of a Receiver not being appointed at the same time as the adjudication of insolvency was made and to foreclose an argument that vesting was suspended until the actual appointment of a Receiver. The matter, however, is complicated by the course of case-law in England and the importation into the law in this country of principles laid down in the English decisions, so far as after-acquired property is concerned. The result has been not a little of uncertainty and divergence of judicial opinion.