Subramonia Iyer, J.:— This is a plaintiff's second appeal against the decision of the District Judge of Mavelikara reversing that of the Munsif of the same place who decreed his suit for redemption of a mortgage.
2. The facts are short. Pending execution of a decree for money the judgment-debtor was declared insolvent, and the Official Receiver of the Court was appointed receiver of his properties. Nevertheless, execution of the decree proceeded without obtaining the sanction of the insolvency Court and without bringing the receiver on record. The properties sought to be redeemed were attached, sold in Court auction subject to a possessory mortgage, purchased by the decree-holder, and satisfaction of the decree was entered protanto. The plaintiff is an assignee of the rights of the purchaser and seeks redemption of the mortgage from the defendant as transferee thereof. The insolvent defaulted to apply for his discharge as ordered by Court and the adjudication was therefore annulled. There was no order vesting the property in any person for purpose of administration and discharge of the debts of the insolvent.
3. The contention urged by the default-mortgagee was that the auction sale on which the plaintiff depended as his title was void and therefore the plaintiff had no right to redeem. This plea was repelled by the Munsiff, but found favour with the District Judge on appeal. The only question in this second appeal is whether the auction sale of the property in execution of the decree against the insolvent without the leave of the insolvency Court and without impleading the receiver to represent the estate is valid, the order of adjudication which then existed having been annulled afterwards without ordering the vesting of the property in any person.
4. The question falls to be determined under the Travancore Insolvency Act 8 of 1108. The provisions thereof are the same as those contained in the Provincial Insolvency Act, 1920. The 2nd clause of the 28th section provides 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 as hereinafter provided, and shall become divisible among the creditors, and thereafter, except as provided by this Act, no creditors 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 proceedings, except with the leave of the Court on such terms as the Court may impose.”
5. The first clause of the forty-third section enacts:
“If the debtor does not appear on the day fixed for hearing his application for discharge or on such subsequent day as the Court may direct, or if the debtor does not apply for an order of discharge within the period—specified by the Court, (the Court may annul the order of adjudication or make such other order as it may think fit, and if the adjudication is so annulled, the provisions of S. 37 shall apply.)”
6. And the first clause of the thirty-seventh section reads as follows:
“Where an adjudication is annulled all sales and dispositions of property and payments duly made and all acts theretofore done by the Court or Receiver, shall be valid, but subject as aforesaid, the property of the debtor who was adjudged insolvent shall vest in such person as the Court may appoint, or in default of any such appointment, shall revert to the debtor to the extent of his right or interest therein on such conditions (if any) as the Court may by order in writing declare.”
7. The contention of the defendant-respondent is that the consequence of the prohibition against conduct of proceedings against the insolvent or his property during the pendency of the insolvency without the sanction of the insolvency Court and without the receiver on record, is to render such proceedings altogether null and void. The next step in the argument is that if they are null and void, no supervening event, even an unconditional annulment of the adjudication will render them operative for any purpose or binding upon any person.
8. We are unable to accept this contention. Section 28 first provides for the vesting of the property of the insolvent which becomes divisible among his creditors, in the Court or in the receiver appointed by the Court, and it proceeds to enact that thereafter no person shall pursue any remedy in Court against the insolvent or his property except with the leave of the Court. Proceedings started or continued otherwise than as aforesaid will not therefore affect the receiver or the insolvency Court and it may be right to say that those proceedings are void, as against the receiver in the sense that they are voidable at his instance, but the section contains no warrant for the contention that the proceedings are altogether void or void all round.
9. Insolvency is not and does not amount to a civil death of the insolvent. Claims not provable are unaffected by the insolvency and proceedings against the insolvent to enforce them are competent, though a secured creditor has to implead the receiver if he is sought to be bound. The insolvent retains his rights to the properties subject to discharge of his liabilities. The sixty-seventh section recognizes and reserves his rights by providing that he will be entitled to the residue of his assets after discharge of all the debts. When adjudication is annulled under S. 43, that section provides that the properties shall revert to the insolvent subject to any order the Court may pass vesting the property in any person for purpose of distribution among the creditors of the insolvent under S. 37. If no order under S. 37 be passed, on annulment of adjudication, the properties of the insolvent less what may have been dealt with already by the receiver will ‘revert’ to the insolvent.
10. The provision relating to the vesting of the property in the Court or receiver under S. 28 is for purposes of administration of the estate for discharging the debts of the insolvent. If that purpose is accomplished by discharge of all liabilities in full or becomes impossible on account of annulment of adjudication without a vesting order under S. 87, the insolvent gets back the property in his original right. No transfer from the receiver to the insolvent is needed. Nor would there he an interregnum when the insolvent had no right. The term ‘revert’ instead of ‘revest’ in the section renders the position clear.
11. The vesting of the property in the Court or receiver was for the purpose of administration and distribution among creditors. It must in point of time be co-extensive with and cannot survive the purpose. The moment the purpose is fully accomplished or or its accomplishment under the Act becomes impossible the property or its residue reverts to the insolvent.
12. During the subsistence of the receivership or of the order of adjudication the, rights of the insolvent are in a state of suspense or abeyance. They are not extinct. Whatever the insolvent may do and whatever proceedings may be taken against him will no doubt not bind the receiver or the insolence Court. But by his acts and by the proceedings to which he is in party the insolvent is bound. The obstacle to the operation of his acts and the proceedings on his properties being the existence or the receiver and the order of adjudication, on the disappearance of the obstacle by the accomplishment of the purpose or its becoming impossible by an unconditional order of annulment, the acts and proceedings will bind his property that reverts to him, as well.
13. The question was considered and the above view-taken by a Full Bench of the Madras High Court in — ‘Arunachalam Chettiar v. Narayanaswami Coundan,’ AIR 1951 Mad 63 (A) which was affirmed more recently by another Full bench of that Court in — ‘Subbaiah Goundan v. Ramasami Coundan,’ AIR 1954 Mad 604 (FB)(B), wherein the learned Judges after an exhaustive review of the statute and case law both English and Indian held in conformity with the view of the Allahabad, Calcutta and Patna High Courts that Court sale of the property of the insolvent, with the insolvent as a party but without leave of the insolvency Court and without the receiver on record will bind the property should it be an item which reverts to the judgment-debtor on a subsequent unconditional annulment of the adjudication.
14. We are with great respect in agreement with that view. Having regard to the exhaustive consideration of the entire matter, in the last mentioned Madras case it will be supererogation for us to traverse the ground in greater detail in this judgment and we refrain from doing so. We, therefore, hold that the purchase at the court-auction sale by the plaintiff's predecessor-in-interest is good, that title to the property passed to him thereunder and that the plaintiff as assignee of his rights is entitled to redeem. It follows that the second appeal should be allowed, and allowing it we reverse the decree of the District Judge in appeal and restore that of the Munsiff. The respondent will pay the costs of the appellant here and in the courts below.
15. Appeal allowed.