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Chitturi Perraju And Another v. Chitturi China Perraju And Others

Andhra Pradesh High Court
Nov 15, 1955
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Opinion Summary: Viswanatha Sastri, J.

Factual and Procedural Background

The plaintiffs (appellants) sued for partition and delivery of separate possession of their 1/6th share in joint family properties, seeking relief from the claims of purchasers who acquired titles under sales made by the official receiver in the insolvency of their paternal grandfather (the first defendant). Defendants 2 to 4 were the sons of the first defendant; the plaintiffs were the sons of the second defendant. The first defendant was adjudicated insolvent in I.P. No. 23 of 1936 in 1937, and the official receiver sold the properties in 1939 during administration.

The plaintiffs' case was that the official receiver's sales did not convey the plaintiffs' shares (or even the share of their father) and that the purchasers obtained at most the insolvent's own share. They did not challenge the underlying debts as tainted by immorality or illegality nor claim that the debts were not binding on the sons by reason of pious obligation.

In the court below, respondents relied on section 28-a of the Provincial Insolvency Act (Act V of 1920), arguing that the property of the insolvent included the capacity to exercise powers over property which the insolvent had, and that the official receiver exercised the insolvent's power to sell the shares of his grandsons. The subordinate judge rejected the contention that section 28-a was ultra vires and held it intra vires, and the present judgment proceeds from those factual and procedural foundations.

Legal Issues Presented

  1. Whether the sales made by the official receiver in the insolvency conveyed the co-parcenary / sons' (and grandsons') shares in the joint family property or only the insolvent's own share.
  2. Whether section 28-a of the Provincial Insolvency Act (Act V of 1920) was intra vires the Dominion (central) legislature despite affecting rights in or over land.
  3. Whether, in order to sell the sons' shares, the official receiver was obligated to proceed under section 4 of the Provincial Insolvency Act and give the sons full notice and seizure of their shares.
  4. What evidentiary or documentary indicia in a sale proclamation or sale deed are necessary to establish that the official receiver in fact exercised the insolvent father's power to sell the sons' shares.

Arguments of the Parties

Appellants' Arguments (Plaintiffs)

  • The sales by the official receiver did not convey the sons' (or grandsons') shares in the joint family properties; at most purchasers obtained the insolvent's own share.
  • The official receiver, if he intended to sell the sons' interests, ought to have proceeded under section 4 of the Provincial Insolvency Act and seized their shares after giving full notice (relying on Fatehchand Dipchand v. Hiralal Shraogi).
  • The sale deeds and sale proceedings do not show that the official receiver actually exercised the insolvent father's power to sell the sons' shares; therefore the sons' interests did not vest in purchasers.

Respondents' Arguments (Defendants / Alienees)

  • Section 28-a of the Provincial Insolvency Act, being retrospective, vested in the official receiver not only the insolvent's share but also the power to dispose of the shares of his sons and grandsons; accordingly the sales conveyed the entire interest including the sons' shares.
  • The amendment (section 28-a) was intended to and did supersede the earlier full bench decision in Ramasastrulu v. Balakrishna Rao that had limited the official receiver's power.
  • The proclamation and sale deeds in the present case show that the official receiver advertised and sold the entire family properties inclusive of the sons' shares, and one sample sale deed conveyed the insolvent's right in the property with absolute powers, with a schedule describing the property without excluding sons' shares.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ramasastrulu v. Balakrishna Rao, (1942) 2 M.L.J. 457 : I.L.R. (1943) Mad. 83 (Full Bench) Held that insolvency of a Mitakshara father would not vest in the official receiver the power to sell the sons' shares for discharge of debts binding on the sons by pious obligation. The court observed that section 28-a (Act V of 1920) was enacted to supersede this full bench decision; hence Ramasastrulu's rule did not control once section 28-a was in force.
Kolandayammal v. Sinnavelappa Goundan, (1951) 2 M.L.J. 438 Concluded that section 28-a was intra vires the Dominion legislature and that the official receiver could sell entire joint family property including sons' shares. The court expressly accepted and said it was in respectful agreement with the decision and relied on it to uphold the intra vires character of section 28-a and the official receiver's power to sell sons' shares.
Fatehchand Dipchand v. Hiralal Shraogi, A.I.R. 1935 Nag. 193 Proposition that if the receiver intended to sell the sons' interest, he ought to have proceeded under section 4 and seized their share after giving full notice. The court considered this authority but held that it is not obligatory in every case for the court to hold an inquiry under section 4 before the official receiver exercises the father's power to sell the sons' shares; distinguished on facts and circumstances.
Thirumaleshwara Bhatta v. Govinda Bhatta, (1952) 1 M.L.J. 681 Held, on the particular facts and sale documentation there, that the sons' share did not vest in the purchaser from the official receiver because the deed lacked specific language or other indication that the larger estate (including the son's share) was intended to be conveyed. The court treated this as a fact-specific decision: it accepted the principle that actual exercise of the power must be shown on the sale documents or proceedings, but held that a deed need not necessarily recite the statutory sections — it is sufficient if the official receiver purports to convey the entire interest and the proclamation/deed show that intent.
Abdul Aziz Khan v. Appayasami Naicker, (1903) I.L.R. 27 Mad. 131 : L.R. 31 I.A. 1 (P.C.) Cited in support of the proposition that sales by an official receiver may be presumed to have been made in conformity with the prevailing view of law at the time. The court relied on this citation to justify presuming that the official receiver, acting in accordance with the law understood at the time of sale, exercised the right to sell sons' shares when the legal view then permitted the father (and hence the receiver) to do so.
Gudivada Rama Rao v. Pottiswamy, A.I.R. 1938 Mad. 299 Reached a similar view that the official receiver could effect sales operative to convey interests under the law as understood. The court cited this case as supporting authority for the conclusion that sales by the official receiver could convey the full interest including sons' shares.

Court's Reasoning and Analysis

The court's analysis proceeded in several connected steps:

  1. On the constitutional validity challenge, the court accepted the subordinate judge's exhaustive reasoning and the decisions in Kolandayammal v. Sinnavelappa Goundan to hold that section 28-a of Act V of 1920 is intra vires the Dominion legislature. The court therefore treated section 28-a (which was intended to be retrospective) as operative to alter the earlier Full Bench view in Ramasastrulu.
  2. The court then examined the question of quantum of interest actually sold. It rejected the submission that an enquiry under section 4 was mandatory in every case where the official receiver purported to exercise the father's power to sell sons' shares. In the present case there was no allegation that the debts were not antecedent or were tainted by illegality or immorality, and the court found it difficult to see what objection the sons could have legitimately raised that would have required a section 4 adjudication.
  3. The court emphasized that whether a co-parcenary interest passes in an execution sale depends on what the proceedings, sale proclamation and sale certificate indicate the court intended to sell and what the purchaser bargained and paid for. The absence of impleading the sons does not by itself prevent their co-parcenary interest from passing if the sale proceedings show an intent to sell the larger estate.
  4. The court considered the question of whether the official receiver had in fact exercised the insolvent father's power to sell the sons' shares. While recognizing that the existence of a power is different from its exercise, the court held that the deed of sale need not specifically recite that the receiver was exercising statutory powers under sections 28 and 28-a; it suffices if the sale documents purport to convey the entire interest.
  5. On the facts, the sale proclamation expressly stated that the official receiver would be selling the entire family properties inclusive of the sons' shares in exercise of his power, and a sample sale deed conveyed the right of the insolvent in the scheduled properties with absolute powers of disposition and without any indication that anything less than the entire property was sold. Given these document-based indicia, the court concluded that the official receiver did exercise the power to sell the whole interest and that the purchasers obtained the entire joint family properties including the plaintiffs' shares.
  6. The court also factored in the prevailing legal understanding at the time of sale — that a father could convey the interest of his sons for discharge of untainted debts and that the official receiver, standing in the insolvent's shoes, had a similar right — and relied on the authority of Abdul Aziz Khan and other cases to presume the sales conformed to that prevailing view.

Holding and Implications

Holding: Appeal dismissed.

Rationale: The court held that the sales made by the official receiver were valid and operative to convey the entire joint family properties, including the plaintiffs' shares, to the purchasers. The court found section 28-a intra vires, concluded it was not obligatory to proceed under section 4 in the circumstances of this case, and determined on the documentary evidence (proclamation and sample sale deed) that the official receiver had exercised the insolvent father's power to sell the whole interest.

Direct consequences for the parties: The plaintiffs' claim for partition and delivery of separate possession of their asserted 1/6th share is defeated; the purchasers who bought under the official receiver's sales hold the conveyed interests. The appeal was dismissed with costs.

No new broad legal principle was announced beyond the application and reconciliation of existing authorities; the court followed and applied prior decisions (e.g., Kolandayammal) and resolved the present facts accordingly.

Show all summary ...

Viswanatha Sastri, J.:-

(1) The plaintiffs are the appellants in this appeal. They sued for partition and delivery of separate possession of their 1 /6th share of their family properties free from the claims of purchasers at a sale held by the official receiver in the insolvency of their paternal grand - father the first defendant. Defendants 2 to 4 are the sons of the fist defendant and the plaintiffs are the sons of the second defendant. The ist defendant was adjudicated an insolvent in i. P. No. 23 of 1936 in 1937. The official receiver in whom the properties of the insolvent vested sold them to various purchasers in the course of administration. The sales by the official receiver were effected in 1939. The case of the plaintiffs was that the sales by the official receiver did not convey their shares in the joint family properties or even the share of their father the second defendant and all that the purchsers got under the sale effected by the official receiver in their favour was the 1 /4th share of the first defendant, the insolvent, in the family properties. There was no challenge by the plaintiffs that the debts incurred by the first defendant were tainted by immorality or illegality or were such as would not be binding on the plaintiffs' share of the family properties by reason of their pious obligation to discharge the debts of their paternal grand - father. In the court below, the plaintiffs were met by the defence that under section 28 - a of the provincial insolvency act v of 1920 the property of the insolvent comprised 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 and that the official receiver had exercised the power of the insolvent to sell the shares of his grand - sons.

(2) It is well - known that the effect of the enactment of section 28 - a of act v of 1920 in 1948 was to supersede the decision of the full bench of the madras high court in ramasastrulu v. Balakrishna rao, (1942) 2 m. L. J. 457 : i. L. R. (1943) mad. 83 (f. B.). Which laid down that the insolvency of the father of a mitakshara joint family would not vest in the official receiver the power of the father to sell the sons' shares for the discharge of debts binding on the sons either on the ground of family necessity or of pious obligation. The amendment of the law by the enactment of section 28 - a was intended to be retrospective and was expressed to be such. It was contended on behalf of the alienees that the sale by the official receiver conveyed not only the interest of the insolvent but the entire interest in the property including the interest of the insolvent's sons and grand - sons. The alienees relied upon the amendment of the law by the enactment of section 28 - a in support of their contention that on the adjudication of the first defendant as an insolvent not only his share but also his power to dispose of the shares of his sons and grand - sons vested in the official receiver under section 28 of the provincial insolvency act.

(3) In the court below, a prolonged and strenuous argument was directed to establish that section 28 - a. Of the provincial insolvency act was ultra vires the central legislature in - as - much as it affected rights in or over land and the transfer, alienation and devolution of agricultural land comprised in entry 21 of list ii of the provincial legislative list of the constitution act of 1935. This contention was negatived by the learned subordinate judge in an exhaustive judgment. It was elaborately dealt with by subba rao and panchapakesa ayyar, jj. , in kolandayammal v. Sinnavelappa goundan, (1951) 2 m. L. J. 438. And the learned judges came to the conclusion that section 28 - a was intra vires the dominion legislature and the power to sell the entire joint family property including the shares of the sons vested in the official receiver on the insolvency of the father of a mitakshara joint family. It is unnecessary for us to deal at length with the reasons that have been given by the learned judges in support of their conclusion and it is enough to say that we are in respectful agreement with the decision.

(4) The next question that was argued related to the quantum of the interest sold by the official receiver in the course of his administration of the estate of the insolvent. The contention of the learned advocate for the appellant is that the official receiver had not conveyed the interest of the sons in the joint family properties and had not taken the necessary steps for the purpose of enabling him to exercise the power which the insolvent had, to dispose of the sons' share of the family properties. Reliance has been placed on the decision of a learned single judge of the nagpur high court in fatehchand dipchand v. Hiralal shraogi, a. I. R. 1935 nag. 193, , for the proposition that if the receiver had intended to sell the sons' interest also, he ought to have proceeded under section 4 of the provincial insolvency act,and seized their share after giving them full notice. Section 4 of the provincial insolvency act enables the insolvency court to decide all questions whether of title or priority, or of any nature what - so - ever, and whether involving matters of law or of fact, which may arise in any case of insolvency coming within the cognisance of the court, or which the court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case. In our opinion, it is not obligatory on the court in every case where, on the insolvency of a hindu mitakshara father, the official receiver purports to exercise the power vested in the father to sell the sons' shares for satisfying his debts, to hold an enquiry under section 4 of the act. In the present case, there is not even an allegation that the debts were not antecedent debts binding on the share of the sons or grandsons by reason of their pious obligation. Nor is there an allegation that the debts were tainted by illegality or immorality. In these circumstances, it is difficult to see what objection the sons could have put forward to the exercise of the power of sale by the official receiver in a proceeding under section 4 of the provincial insolvency act. In the case of an ordinary creditor it is open to him to enforce payment of the personal debt of a father not being illegal or immoral, by attachment and sale of the entire interest of the father and his sons in the family property and it is not necessary that the sons should be made parties either to the suit itself or to the proceedings in execution. The question whether the execution sale passes only the father's interest in the property sold or the whole property including the sons' interest depends upon the scope of the execution proceedings including the sale proclamation and the sale certificate.

(5) It cannot be contended that the co - parcenary interest of the sons would not pass to the purchaser at an execution sale merely because the suit was against the father alone and the sons were not impleaded. The question in each case will be what did the court intend to sell and what did the purchaser bargain and pay for. If in a proceeding under section 4 of the act initiated by the sons or by the creditors, the sons dispute the right of the official receiver to sell their shares in the family properties and the matter is decided one way or the other, the adjudication would be binding on the parties and the official receiver should, in administering and selling the property of the insolvent, give effect to that decision. If no proceeding under section 4 had been taken, all that the sons could claim is an opportunity to show that the sale by the official receiver was not binding on their interest in the property by reason of the debts of the father not being binding upon them under the rule of pious obligation. As already observed, in the present case, it is not suggested that the debts were such as the sons or the grand - sons of the insolvent would not be bound to pay by reason of their pious obligation under the hindu law.

(6) The further contention of the learned advocate for the appellants is that though it was open to the official receiver to sell the share of the sons by exercising the power of the father he had not actually done so in this case. The question whether in a particular case, the official receiver has exercised that power and has conveyed the entire interest in the property including the sons' share must be decided on the facts of that case. It is true that the mere fact that the order of adjudication vests in the official receiver not only the share of the father but also the power of disposition possessed by the father over the sons' shares would not by itself convey to the purchaser the shares of the sons unless there is indication in the deed of sale or in the sale proceedings which preceded the sale that the official receiver purported to exercise that power of sale and did in fact sell the sons' shares also. Reference was made to thirumaleshwara bhatta v. Govinda bhatta, (1952) 1 m. L. J. 681. Where satyanarayana rao, j. , held that in the circumstances of that case the sons' share did not vest in the purchaser from the official receiver in the insolvency of a hindu father. The decision of the learned judge was based on the facts of that case and on the terms of the proclamation of the sale and the sale deed actually executed by the official receiver. The learned judge observed as follows :

"if he (the official receiver) had conveyed not merely the insolvent's right bul also the right of the son it could very well be presumed that he purported to exercise the right to sell the right of the father to sell the son's share as well. But in the absence of any specific language in the deed conveying the interest of the son in the property or in the absence of any other indication in the deed from which the intention to convey the larger estate could be gathered, it is impossible to uphold the contention urged on behalf of the second defendant by mr. Krishna rao that this deed vested in the second defendant not merely the share of the father but also the share of the son as well."

(7) We are not here concerned with the correctness of the conclusion of the learned judge of the facts of the particular case. All that we respectfully point out is that it is sufficient if the official receiver in fact exercises the right of the father to sell the share of the sons and conveys the entire interest in the property to the purchaser. The official receiver need not purport

" to exercise the right to sell the right of the father to sell the son's share as well, whatever this might mean."
it is sufficient if he sells the absolute interest in the property. There is no doubt a difference between the existence of a power and its actual exercise and the mere existence of power may not be sufficient to show that in any particular case that it was exercised. At the same time the deed of sale executed by the official receiver need not specifically recite that he was exercising the power of sale vested in him under sections 28 and 28 - a of the act. It will be sufficient if he purports to convey the entire interest in the property and not merely, the share of the insolvent father.

(8) In the present case, what has been sold is the right of the insolvent in the property described in the schedule. This is the usual clause found in sale deeds executed by official receivers in order to exclude the statutory warranty of title and to intimate to the purchaser that he takes the risk of any defect in the title to the property conveyed. The proclamation of sale published by the official receiver clearly stated that he would be selling the entire family properties inclusive of the sons' shares in exercise of the power of sale vested in him and the properties described in the sale notice were thereafter sold. One of the sale deeds executed by the official receiver has been filed by way of sample in the present case and under that document, the right of the insolvent in the properties described in the schedule was conveyed to the purchaser with absolute powers of disposition by way of gift, sale etc. , the schedule annexed to the sale deed clearly describes the property and there is no indication in the document that anything less than the entire property or only the share of the father in the property or the property excluding the sons' shares, was sold. It was not only the right but the duty of the official receiver to sell the entire property of the insolvent for the benefit of his creditors and where the insolvent's property included the power to sell his sons' shares in respect of the insolvent's antecedent debts not tainted by illegality or immorality it may be presumed that the official receiver exercised the right vested in him by law for the benefit of the creditors though the sale deed does not say so. We have also to take due notice of the fact that at the time of the sale by the official receiver, the well understood legal position was that the father could convey the interest of his sons for the discharge of his untainted debts and that the official receiver in whom the father's interest vested on his insolvency, had also a similar right.

(9) The question in these cases is what was intended and accepted to be sold and actually was sold, according to the law understood to be prevailing at the time and not what might have been sold under an alteration in the law as subsequently declared by judicial decisions. At the time of the sale, the decisions were to the effect - and the law was declared by the decisions - that the official receiver could exercise the power of sale which a hindu father had and sell the interest of the sons in the joint family property. We may presume that the sales by the official receiver were made in conformity with the then prevailing view of the law. See abdul aziz khan v. Appayasami naicker, (1903) i. L. R. 27 mad. 131 : l. R. 31 i. A. 1 (p. C.).

(10) For these reasons we are of the opinion that the entire joint family properties including the shares of the plaintiffs were sold by the official receiver and that such sales were valid and operative to convey the interest of the plaintiffs to the purchasers. A similar view was taken in gudivada rama rao v. Pottiswamy, a. I. R. 1938 mad. 299. And in kolandayammal v. Sinnavelappa goundan. , (1951) 2 m. L. J. 438. The result is that this appeal fails and is dismissed with costs. Appeal dismissed.