MUTHUKARUPPAYEE ACHI ALIAS VISALAKSHI ACHI Vs. POTHAPULAR PILLAI

JUDGEMENT

(1.) The facts in this appeal are very peculiar. One Meyyappa Chettiar was adjudicated insolvent in I.P. No. 4 of 1936 on the file of the Sub-Court, Sivaganga. Among his properties were two items, subject to a mortgage, dated 31 March, 1925, in favour of the first respondent Pothapular Pillai, for Rs. 125. Several attempts by the Official Receiver to sell these two items for a reasonable price subject to the mortgage met with failure. So, he wrote to the Sub-Court, Sivaganga, asking for permission to sell the properties free of all encum- brances, as the first respondent, the mortgagee, was willing to bid for Rs. 200 and buy the properties and write off the rest of the amount due to him under the mortgage. It is, of course, well known that Official Receivers move the Insolvency Courts often for a sale of mortgaged properties free of encumbrance, one of the ideas in doing so being to get an extra commission. But, curiously enough, in this case, there was a comedy of errors. The Insolvency Court passed an order permitting the Official Receiver to sell the mortgaged properties subject to the mortgage, with an upset price of Rs. 200. The Official Receiver, who never applies and never need apply for a sale of mortgaged properties subject to the mortgage, erroneously took the order to mean that his request to sell the properties free of encumbrances had been granted, without perusing it closely or carefully as he was bound to do. He sold the properties free of encumbrances, in July, 1938, with an upset price of Rs. 200 and, of course, the first respondent bought them for that price and wrote off the rest of the dues under the mortgage. The Official Receiver discovered his mistake, to his horror, in August, 1939, and requested the insolvency Court to correct the clerical mistake of the Court, as he conceived it to be, or to instruct him whether he could cancel the sale at that stare and ask the party to return to him the sale deed duly executed in his favour on 8 August, 1938 and nold a fresh sale. He suggested that the phrase "subject to the mortgage" in the order of the insolvency Court was a clerical slip for "free from all encumbrances." The insolvency Court, by its order, dated 20th September, 1939, informed the Official Receiver, that in its opinion, there was no clerical error in the previous order (passed by a preceding Sub-Judge) which appeared to have been deliberately worded by me preceding Judge whose intention must undoubtedly have been that the properties should be sold subject to the mortgage starting with an upset price of Rs. 200. It went on to say that the Official Receiver should, therefore, cancel the sale and proceed to sell the properties afresh by proclaiming it subject to the mortgage. But, of course, this letter of the Insolvency Court left the Official Receiver in a quandary. He had already confirmed the sale and executed a registered sale deed more than a year before. He could only file a suit against the purchaser for cancellation of that sale pleading mistake, and it was extremely doubtful whether he would have succeeded in such a suit in the circumstances of this case. So, the then Official Receiver did nothing. He did not carry out the directions of the insolvency Court. His successor moved the Insolvency Court to exercise its dis- cretion and condone the irregularity and regularise the sale which had been hed free of all encumbrances. The Insolvency Court did so by an order, dated 13 June, 1945.

(2.) Meanwhile, the adjudication of Meyyappa Chettiar was itself annulled on 2nd February, 1946, but the properties were vested in the Official Receiver. The first respondent sold the properties to the third respondent for Rs. 380 on 3 August, 1943. Muthukaruppayee Achi alias Visalakshi Achi, the appellant, who is no other than the wife of the insolvent, though she claimed to be a creditor of his in addition filed a Petition under Secs.4 and 56(3) of the Provincial Insolvency Act, I.A. No. 346 of 1945, in the Sub-Court, Sivaganga, for declaring that the properties still belong to the estate of the insolvent, for directing the second respondent, the Official Receiver, Ramnad, to sell the same in public auction subject to the mortgage and with an upset price of Rs. 200 as directed by the Insolvency Court, and to direct an enquiry into the mesne profits due from the first respondent to the estate. The Subordinate Judge, Sivaganga, dismissed her application with the costs of the first respondent, holding that an application under Section 4 would not lie five years after the annulment of the adjudication, that the Official Receiver nad a perfect legal right to sell the properties free of all encumbrances in spite of an administrative order of the Insolvency Court directing him to sell the properties subject to tne mortgage, that the Order of the Insolvency Court directing the Official Receiver to cancel the sale and sell the properties afresh was not a judicial order binding on him but only an administrative advice tendered to him, which he was, not bound to follow, and that the Insolvency Court itself had condoned the irregularity by its order, dated 13 June, 1945.

(3.) The matter was taken in appeal by the petitioner. The District Judge, Ramnad, agreed with tne findings of the trial Court." He held further that the price, Rs. 200, realised at the sale by the Official Receiver free of ail encumbrances, was not proved to be inadequate at the time when the sale was held, and, while not deciding whether an application under Section 4 would lie in this case, was of opinion that it might not he in the circumstances. He dismissed the appeal with costs. Hence the second appeal.