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Smart Summary

Factual and Procedural Background

This is an appeal against an order of the Second Additional Judge of Aligarh under the Provincial Insolvency Act. In June 1909 the appellants sued Keshab Deo and caused certain immoveable property of Keshab Deo to be attached under Order 38 of the Code of Civil Procedure before judgment. The appellants obtained a decree on 12 June 1913. Prior to the decree, parts of the property had been transferred by four sale-deeds dated 15 & 16 November and 6 & 9 December 1909, and part had been sold in 1909 in execution of a decree of the Bombay High Court. Keshab Deo was declared insolvent in 1911 and respondent Pandit Kanhaiya Lal Sharma was appointed receiver. The receiver claimed the property for the general body of creditors; the learned Judge held the property to be available for creditors and directed the Subordinate Judge to release it from attachment and hand it to the receiver. Execution of the appellants' decree was taken out in 1914, the property was proclaimed for sale (sale fixed for 22 January), and the receiver then claimed the property on behalf of the creditors. The appellants appealed against the order directing delivery to the receiver.

Legal Issues Presented

  1. Whether, for the purposes of the Provincial Insolvency Act (section 34), the property in question remained the property of the debtor where execution of a decree had issued but sale had not been completed.
  2. Whether private alienations and a prior execution sale, and the special right conferred by section 64 of the Code of Civil Procedure, prevent the receiver from claiming the property for the general body of creditors.

Arguments of the Parties

Appellants' Arguments

  • The property had ceased to be Keshab Deo's property due to private alienations and an execution sale; appellants only possess the special right under section 64 of the Code of Civil Procedure to execute their decree against the property notwithstanding those alienations.
  • Because the property was no longer the debtor's, section 34 of the Provincial Insolvency Act should not entitle the receiver to claim it for the creditors.

Respondent / Receiver's Position

  • The receiver claimed the property as available for distribution to the general body of creditors of the insolvent.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court examined the effect of private alienations and the prior execution sale vis-à-vis the rights of the appellants and the receiver. It observed that section 64 of the Code of Civil Procedure preserves the decree-holders' right to execute against property notwithstanding private alienations and execution sales. Even if those alienations and the prior execution sale were not voidable as against the receiver, the court held the property must still be regarded as the debtor's for the purpose of answering the appellants' decree because the alienations are void as against the decree-holders. The court read section 34 of the Provincial Insolvency Act as applying where execution of a decree has been issued against the debtor's property: no person (i.e., the receiver on behalf of creditors) is entitled to the benefit of execution against the receiver except as to assets realized by execution before adjudication. Here, sale had not taken place but execution had issued; therefore the property was to be treated as the debtor's and liable to meet the appellants' decree. The court concluded that section 34 was intended to place creditors who had not attached property before adjudication in at least as good a position as those who would be entitled to a rateable distribution of assets realized on execution sale. The court expressly declined to rule on the rights of alienees or purchasers at the prior execution sale because they were not before the court.

Holding and Implications

Appeal dismissed with costs.

Implications:

  • The court upheld the learned Judge's decision that the property was available for the general body of creditors under the Provincial Insolvency Act.
  • The direct effect is that the property was to be released from attachment and made over to the receiver as ordered by the subordinate court (as affirmed).
  • The court did not decide on the rights of private alienees or purchasers at the prior execution sale; no opinion on those rights was expressed.
  • No new precedent beyond this determination was articulated in the opinion.

    Kashi Nath And Another (Decree-Holders) v. Kanhaiya Lal Sharma (Receivers).

    Chamier and Piggott, JJ.:— This is an appeal against an order of the Second Additional Judge of Aligarh, passed under the Provincial Insolvency Act. In June, 1909, the appellants filed a suit against Keshab Deo and others and they caused certain immoveable property of Keshab Deo to be attached under order 38 of the Code of Civil Procedure before judgment. The appellants obtained a decree in that suit on June 12th, 1913. In the meantime Keshab Deo had transferred portions of the property by four sale-deeds, dated November 15th and 16th, and December 6th and 9th, 1909, and part of the property which had been attached had been sold in 1909 in execution of a decree passed by the Bombay High Court. Keshab Deo had, in 1911 been declared insolvent and the respondent, Pandit Kanhaiya Lal Sharma, had been appointed receiver of his property. The receiver has claimed the property in question as property which is available for the creditors of the insolvent, and the learned Judge has decided that it is property available for the creditors, and has directed the Subordinate Judge who placed the property under attachment to release it from the attachment and make it over to the receiver. It appears that execution of the decree obtained by the appellants was taken out by them in 1914, the property was proclaimed for sale and the sale was to have taken place on January 22nd last. It was at this point that the receiver claimed the property on behalf of the general body of creditors. Under section 64 of the Code of Civil Procedure neither the private alienations made by Keshab Deo nor the execution sale of the property could affect the rights of the appellants to bring the property to sale in execution of their decree. The appellant's case is that the property has under the private alienations and the execution sale ceased to be the property of Keshab Deo, and that all that the appellants have is the special right conferred upon them by section 64 of the Code of Civil Procedure to execute their decree against the property, notwithstanding the private alienations and the execution sale. They contend that the property is no longer the property of Keshab Deo, and therefore section 34 of the Provincial Insolvency Act does not apply so as to entitle the receiver to claim it. It may be that the private alienations and also the execution sale of the property are void as against the receiver, and if so, there can of course, be no doubt that the property is the property of Keshab Deo and section 34 must be held to be applicable. Assuming, however, that the private alienations and the execution sale are not voidable or void as against the receiver, we think that the property must still be regarded as the property of the debtor, Keshab Deo. The decree-holders are entitled to bring the property to sale as the property of Keshab Deo because the private alienations and execution sale are void as against them. section 34 of the Provincial Insolvency Act provides that where execution of a decree is issued against the property of a debtor, no person shall be entitled to the benefit of the execution against the receiver except in respect of assets realized in the course of execution by sale or otherwise before the date of the order of adjudication. The sale has not yet taken place, but execution of the appellant's decree has issued against the property. In our opinion the property must still be regarded as the property of the debtor, and it is as property of the debtor that it is liable to answer the decree held by the appellants. It seems to us quite clear that section 34 of the Provincial Insolvency Act was intended to put creditors of an insolvent who have not actually attached the property before the date of the order of adjudication in at least as good a position as creditors of the insolvent who, but for his insolvency, would have been entitled to claim a rateable distribution of the assets received on an execution sale. In our opinion the learned Judge was right in holding that the property was available for the general body of creditors. But we express no opinion as to the rights of the alienees or of the purchasers at the execution sale as they are not before us. The appeal is dismissed with costs.

    Appeal dismissed.

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    Comments

    Kashi Nath And Another (Decree-Holders) v. Kanhaiya Lal Sharma (Receivers).
    (May 10, 1915)