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Nidamanuri Satyamma v. Official Reciever, Kistna District At Masulipatam
Factual and Procedural Background
The appeal was filed by the plaintiff who sought a declaration of title to a one‑eighteenth share in a rice and oil‑mill at Bezwada. The plaintiff asserted that she contributed money toward that share; the money was initially credited in the name of defendant 2 and later in the name of defendant 1. Defendant 3 is the husband of the plaintiff's sister and defendant 1 is defendant 3's brother; the plaintiff claimed the defendants held the share nominally for her and that on 26 April 1924 she obtained a release deed (Ex. A) from them in respect of the share.
Defendants 3 and 4 (creditors of defendant 2) instituted I.P. No. 2 of 1924 in the Sub‑Court, Bezwada, seeking adjudication of insolvency against defendants 1 and 2. Ultimately only defendant 2 was declared insolvent, Ex. A was held invalid in that insolvency proceeding, and defendant 2's estate vested in defendant 5, the Official Receiver for Kistna District. The District Munsif originally decreed the plaintiff's suit in her favour, but on appeal by the Official Receiver the decree was reversed and the suit dismissed. The suit was abandoned at an early stage as against the creditor‑defendants 3 and 4, so the remaining contest is between the plaintiff and the Official Receiver.
Legal Issues Presented
- Whether the plaintiff had, on the facts and on the evidence, a title to the one‑eighteenth share in the mill (i.e., whether she had contributed money to purchase the share and so was entitled to a declaration of title).
- Whether the release deed (Ex. A) could be treated as giving the plaintiff title or whether Ex. A was ineffective in the context of the insolvency and the available evidence.
- Whether the plaintiff, even if not entitled to title, was entitled to an equitable charge or trust (a charge on the share) because her money had been mixed with the assets of defendant 2 or entrusted to the defendants for the purpose of buying the share.
- Procedural questions: whether the suit should have been dismissed for want of leave under Section 28(2) of the Provincial Insolvency Act (and whether any failure to obtain leave was waived), and whether notice to the Official Receiver under Section 80, Civil P.C., was required and whether such notice could be waived.
Arguments of the Parties
Appellant (Plaintiff)'s Arguments
- The plaintiff contended she had contributed money to purchase the one‑eighteenth share and that the share was held nominally in the names of defendants 1 and 2 because they were relations; she relied on a release deed (Ex. A) dated 26 April 1924 as a formal recognition of her ownership.
- She asserted she had given about Rs. 1,250 to defendant 2 for her share and that defendants 1 and 2 had executed a promissory note in her favour (no promissory note was produced).
- In the alternative (argued later in the proceedings) she submitted she was entitled to a charge on the share because money of hers had been mixed with defendant 2's assets or had been entrusted to the defendants for the specific purpose of buying the share.
Respondent (Official Receiver) and Defendants' Arguments / Evidence
- Defendant 2 (P.W.2) stated the amounts (Rs. 400 and Rs. 200) related to proceeds of sale of jewels; however, the court found this testimony inconsistent with the accounts.
- The Official Receiver appealed the District Munsif's decree and maintained the suit should be dismissed. Procedurally, the Official Receiver advanced two points: (a) that leave to file the suit had not been granted under Section 28(2) of the Provincial Insolvency Act, and (b) that notice should have been given to the Official Receiver under Section 80, Civil P.C.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Official Assignee, Madras v. Krishnaji Bhat, AIR 1933 PC 148 | Illustration of a case where money had been deposited for a specific purpose (support for claim to a charge or interest). | The court found this decision inapplicable because that case involved a deposit for a specific purpose, whereas in the present case there was no evidence that the plaintiff had deposited money for a specific purpose of buying the share. |
| In re Hallett's Estate, Knatchbull v. Hallett (1880) 13 Ch D 696 | Principles about tracing mixed funds and equitable claims to assets purchased with such funds. | The court held this authority had no bearing on the facts because there was no evidence the plaintiff had deposited money with either defendant for any specific purpose of buying the share; the deposit was treated as a mere deposit. |
| G. Ghouse Khan v. Bala Subba Rowther, AIR 1927 Mad 925 | Rule that a suit which requires permission under the relevant Insolvency provision, if brought without such permission, suffers a defect that cannot be cured. | The court referred to this case as authority that where permission under the section is required and not obtained, the defect may be incurable; but noted this does not directly resolve the question of waiver raised in the present factual context. |
| Ponnuswami v. Kaliaperumal, AIR 1929 Mad 480 | Similar principle to G. Ghouse Khan about the requirement of leave under the Insolvency provision. | The court cited it alongside G. Ghouse Khan but observed that in both cited cases the objection was taken at an early stage; the court distinguished those circumstances from the present one where the point was not raised in the first instance. |
| Subramanyam v. Narasimham, AIR 1929 Mad 323 | Considered the effect of absence of leave under the former corresponding provision; held that lack of leave did not render a decree void where the court was competent and had jurisdiction over parties. | The court relied on the principle in this decision to support the view that failure to obtain leave did not render the decree a nullity and that the question could be one of waiver; the decision informed the court's conclusion that the objection could and should have been raised in the first instance. |
| Narasimham v. Subramaniam, AIR 1927 Mad 201 (Phillips, J.) | Held that objection as to want of leave was a ground of objection to the suit and if not taken must be deemed waived. | The court noted Phillips, J.'s view and treated it as part of the authority indicating that the principle of waiver applies where the objection is not raised at an early stage. |
| Manindra Chandra Nandi v. Secretary of State (1907) 34 Cal 257 | Authority addressing waiver of the requirement to give notice (in context). | The court cited this case to support the view that objection under Section 80, Civil P.C., could be waived. |
| Bhola Nath Roy v. Secretary of State (1913) 40 Cal 503 | Another authority on waiver of notice requirements. | The court cited this case alongside Manindra Chandra Nandi to justify the conclusion that the Section 80 objection was waived. |
Court's Reasoning and Analysis
The court's factual analysis centered on the documentary accounts (Ex. B, the rough day book of defendant 2) and the contents of the release deed (Ex. A). The court found the plaintiff's narrative that she entrusted money to defendants to buy the mill share unsupported by reliable evidence and inconsistent with the accounts.
Key factual and analytical points:
- The accounts showed credits to the plaintiff on specific dates (e.g., Rs. 331 on 9 Nov 1921, Rs. 221‑12‑9 on 14 Nov 1921, Rs. 124 on 1 July 1922) and separate entries showing payments "towards our share in the mill" (Rs. 400 on 9 Nov 1921 and Rs. 200 on 3 Sep 1922) that were not recorded as having been paid on the plaintiff's behalf.
- The court observed that the Rs. 400 payment could not reasonably be regarded as coming from the plaintiff's Rs. 331 credit on the same day and that there was no accounting linkage between the later credits to the plaintiff and the debits described as payments for the share.
- The recital in Ex. A (stating Rs. 400 on 10 Nov 1921 and Rs. 200 on 3 Sep 1922 were given by the plaintiff) conflicted with the entries in Ex. B; the court gave greater weight to the accounts and found the recital inconsistent with them.
- Defendant 2's testimony (that sums derived from sale proceeds of jewels) did not align with the accounts and therefore could not be accepted.
- The plaintiff's claim of having given about Rs. 1,250 and of a promissory note being executed was unsupported (no promissory note produced and Ex. A referred only to Rs. 600), weakening her case.
- The court noted relationships between the plaintiff and the defendants (close family connections) and the insolvency adjudication against defendant 2 (one of the defendants who executed Ex. A was adjudged insolvent shortly after Ex. A's execution) as circumstances that undermined the reliability of the plaintiff's account.
- The court questioned why both defendants 1 and 2 would execute Ex. A if the share had already been transferred into defendant 1's name (as the plaintiff alleged), criticizing the plaintiff's account as improbable.
- On the equitable charge argument, the court examined the precedents cited by the plaintiff (notably Official Assignee, Madras v. Krishnaji Bhat and In re Hallett's Estate) and rejected their applicability because those cases involved deposits for a specific purpose or tracing mixed funds; here there was no evidence of a specific purpose or of funds being deposited specifically to buy the share—the deposits were treated as mere deposits.
- On procedural objections raised by the Official Receiver (failure to obtain leave under Section 28(2) of the Provincial Insolvency Act and failure to give notice under Section 80, Civil P.C.), the court analyzed waiver. It concluded that the leave objection was not raised in the first instance and, relying on the principle in Subramanyam v. Narasimham and related authorities, treated the failure to raise the point early as amounting to waiver such that the decree was not a nullity. On the Section 80 notice objection the court held (citing Manindra Chandra Nandi and Bhola Nath Roy) that the objection could be waived and was waived.
Because the factual evidence did not support the plaintiff's primary claim (title), and given the court's conclusions about the inapplicability of the equitable authorities relied upon by the plaintiff, the court determined the appeal failed on the facts.
Holding and Implications
Holding: The second appeal fails and is dismissed with costs.
Implications and direct effects:
- The plaintiff's claim for a declaration of title to the one‑eighteenth share was rejected on the basis that the evidence (notably the accounts Ex. B and the lack of corroborative documents) did not support her story that she deposited money specifically to purchase the share.
- The court declined to give the plaintiff an equitable charge or trust over the share because there was no evidence of a deposit for a specific purpose or of tracing that would bring the case within the precedents cited.
- Procedurally, the court held that the Official Receiver's objections under Section 28(2) (Provincial Insolvency Act) and Section 80, Civil P.C., were not available at this stage because they were not raised in the first instance and had been waived; the court did not decide whether the suit required permission under Section 28(2) on the merits as that point was not necessary to decide the appeal.
- No new legal precedent was established by this opinion; the decision is based on application of existing authorities and the court's factual findings in this case.
1. The appeal is by the plaintiff. She sued for a declaration of her title to one-eighteenth share in a rice and oil-mill at Bezwada. Her case is that she contributed money towards the share, that the money was first credited in the name of defendant 2 and afterwards in the name of defendant 1. Defendant 3 is the husband of her sister and defendant 1 is his brother and she says, that as these two defendants are her relations her share was nominally standing in their names, but that on 26th April 1924 she got a release deed from them in respect of her share. Defendants 3 and 4 who are creditors of defendant 2 brought I.P. No. 2 of 1924 of the Sub-Court, Bezwada, to have defendants 1 and 2 adjudicated insolvents. In the end only defendant 2 was declared insolvent and it was held that the release deed, Ex. A was invalid and that defendant 2's estate vested in defendant 5 who is the Official Receiver, Kistna District. The District Munsif decreed the suit in favour of the plaintiff, but on the appeal by the Official Receiver the decree was reversed and the suit was dismissed. The matter is now only one between the plaintiff and the Official Receiver as the suit was given up at an early stage as against the creditors, defendants 3 and 4.
2. On the evidence I think it perfectly clear that the plaintiff did not entrust money either to defendant 1 or defendant 2, or to both of them, in order to the purchasing of a share in the mill. The evidence on the subject is discrepant and, such as it is, is not borne out by the accounts. The accounts clearly show that some money was deposited by the plaintiff with the defendants, but they do not show for what purpose it was deposited and the indications are that it was not deposited, as the plaintiff contends, for the definite purpose of buying a share in the mill. Ex. B, the rough day book of defendant 2, shows that on 9th November 1921 Rs. 331 were credited to the plaintiff as the proceeds of the sale of her jewels; and on the same day Rs. 400 are shown as having been spent "towards our share in the mill." The amount thus spent on the share is not noted as having been spent on behalf of the plaintiff while it is considerably more than the amount received on that date on the plaintiff's account. No further sum is shown as having been held for the plaintiff on that date. It is of course impossible to say that an amount of Rs. 400 could have been paid out of an amount of Rs. 331. Another payment of Rs. 200 for the share, which again is not shown in the accounts as having been paid by or for the plaintiff, was made on 3rd September 1922. On 14th November 1921 according to the accounts, Ex. B, the plaintiff had been credited with Rs. 221-12-9 as the sale proceeds of another jewel but there is nothing to connect this credit with the debit over nine months later of Rs. 200 towards the purchase of the share which purchase is entered as being in the name of defendant. 1. A third credit to the plaintiff of Rs. 124 odd was made on 1st July 1922. This too can in no way be connected with the payment of Rs. 200. All then that the account can be relied upon to show is that a total amount of Rs. 676 odd was held to the plaintiff's credit but there is nothing in the accounts by which it is shown or from which it could be inferred that the money was deposited by the plaintiff in order to the buying of a share in the mill. Further the recital in the release deed, Ex. A, differs from what appears in the accounts. According to it the plaintiff gave to defendant 2 Rs. 400 on 10th November 1921 and Rs. 200 on 3rd September 1922 towards her share. These statements are incompatible with the entries in the accounts to which I have referred above.
3. It is the version given by defendant 2 as P.W. 2 that these amounts of Rs. 400 and Rs. 200 were received from the sale proceeds of jewels though from the judgment of the District Munsif he appears to have said that the credit was in his own name. Any way his evidence cannot be accepted as it does not square with the accounts. The plaintiff has said that she gave about Rs. 1,250 to defendant 2 for her share. This story is not supported by the accounts or by Ex. A which refers only to Rs. 600. She says that defendants 1 and 2 executed a promissory note in her favour but no such promissory note has been produced. The whole story then as to the purchase of this share on behalf of the plaintiff is not supported by any evidence to which credit can be given and therefore cannot be accepted. It is hardly necessary to refer to circumstances of suspicion in a case where evidence has failed but it cannot be overlooked that the plaintiff is closely connected with the defendants and that one of them has been adjudged an insolvent on a petition put in not long after the execution of Ex. A. It has also to be remembered that Ex. A was executed to the plaintiff not only by defendant 1 but also by defendant 2. The case for the plaintiff is that the share which the plaintiff claimed was first credited in the name of defendant 2 but that it was afterwards transferred to the name of defendant 1 owing to some rule of the factory. This must have been some time before the entry of the resolution dated 18th April 1923 in Ex. 1, the resolution book. But in spite of this transfer in the name of defendant 1 we find both defendants 1 and 2 executing the release deed, Ex. A. It is represented that defendant 2 was a party to this document as a matter of greater precaution; but still, if he had parted with his interest in the share, there should have been no need for him to have been a party to it and indeed there was no reason why this share should not have been in the name of the plaintiff all along.
4. It has been urged that the Official Receiver has not taken steps to have Ex. A avoided; but this is not a case in which Ex. A can be taken as a valid document in the absence of avoidance. The plaintiff is setting up a definite case that the suit share actually belonged to her and had been purchased with her money and Ex. A came in by way of a formality, putting into her own name what in fact was already hers, in virtue of a consideration that had passed long before. I must hold in agreement with the learned Subordinate Judge in the light of what has been discussed above that her whole story has to be disbelieved. Then it has been argued, for the first time in this second appeal, that the plaintiff is entitled in any case to a charge, on the share in that it has been bought with money of her own which had been mixed up with the assets of defendant 2 and which money she had entrusted to the defendants for the definite purpose of buying a share. Reference is made in this connexion to the Privy Council decision in Official Assignee, Madras v. Krishnaji Bhat AIR 1933 PC 148, I find that that decision has no application to this case. It was one in which money had been deposited for a specific purpose. Nor has the decision in In re Hallett's Estate, Knatchbull v. Hallett (1880) 13 Ch D 696, any bearing on the facts of the case. In the case now under consideration. I find no evidence that the plaintiff had deposited her money with either defendant for any specific purpose. It was a mere deposit and nothing more.
5. Two legal points have been taken on behalf of the respondent. These it is unnecessary for me to discuss at any length as I hold that the appeal fails on the facts; but I will just refer to them. One is that the suit should be dismissed as leave to the plaintiff for filing it had not been granted under Section 28(2), Prov. Ins. Act. This point was not taken in the Court of first instance though it was taken on appeal and the learned Additional Subordinate Judge held that it must be taken as having been waived. No definite authority has been shown as to whether there could be a waiver in such a case while it has been held in G. Ghouse Khan v. Bala Subba Rowther, AIR 1927 Mad 925, and Ponnuswami v. Kaliaperumal, AIR 1929 Mad 480, that, if a suit, to bring which permission under Section 28(2) is required, is brought without such permission, the defect cannot afterwards be cured. This however does not deal with the point of waiver in a case such as this. In both cases the objection that no leave had been given was taken at an early stage of the proceedings. With reference to Section 16(2) of the former Prov. Ins. Act, corresponding to Section 28(2) of the present Act the question has been considered at length in Subramanyam v. Narasimham AIR 1929 Mad 323 though in a different connexion. In that decision it was held that the fact that no leave under the section had been obtained did not render a decree passed in such a suit a nullity. It was pointed out that the suit was one which the Court in which it was instituted was competent to try and that the Court had jurisdiction over the parties and that the question whether the suit could be maintained without the leave of the Insolvency Court did not affect the competency of the Court to try the suit but was only a question which might have been raised for determination in the suit. These remarks set out a principle with reference to which the question of waiver can be decided. The point whether leave should have been given ought to have been raised for determination in the suit. It was not raised and a decree was passed which decree was not a nullity. This decision was on appeal from a decision by Phillips, J., which is reported in Narasimham v. Subramaniam AIR 1927 Mad 201 and in which he held that the objection as to want of leave was a ground of objection to the suit and that as it was not taken it must be deemed to have been waived. I think that this principle must equally apply to a case such as this. It was perfectly open to the respondent Official Receiver to raise the point in the first Court, but he did not choose to do so; and as it was not a question of the original Court having acted entirely without jurisdiction so that its proceedings could in no circumstances be valid, I do not see how it is open to the Official Receiver to raise the point on the appeal and contend that, because of the failure to obtain leave, the suit ought to have been dismissed on that ground alone. As this point is not one on which the decision of this appeal depends, I do not discuss whether the suit was of such a kind as required permission under Section 28(2) for its being brought.
6. The other objection taken is that notice should have been given to the Official Receiver under Section 80, Civil P.C. The learned Subordinate Judge held as to this objection also that it was waived and could be waived; and this view appears to be correct having regard to the decisions in Manindra Chandra Nandi v. Secy. of State (1907) 34 Cal 257 and Bhola Nath Roy v. Secy. of State (1913) 40 Cal 503. The second appeal fails and is dismissed with costs.
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