S. Kasi Chettiar v. Right Hon'Ble The Secretary Of State

1. Ramaswami Chettiar applied to the Subordinate Judge, Devakottai, on the 2nd November, 1931, to be declared an insolvent (I. P. No. 33 of 1931). He was adjudicated on the 7th July, 1932. While this application was pending a property of his was sold for arrears of income-tax and purchased by the second defendant on the 25th April, 1932. The sale was confirmed on the 4th June, of that year. The Official Receiver of the Ramnad District brought a suit in the Court of the Subordinate Judge, Devakottai for the cancellation of the sale (O.S. No. 27 of 1933) on the 6th February, 1933. The suit was dismissed and the decree passed by him was confirmed on appeal by the District Judge of Ramnad on the 13th February, 1937. The Official Receiver refused to prefer an appeal against that decree. One of the creditors, who is the present appellant in this Court, applied to this Court for leave to present an appeal. This was granted on the 25th October, 1937, but without issuing a notice to the opposite party.

2. A preliminary objection has been taken on behalf of the second defendant as well as on. behalf of the Secretary of State that the appellant, not having been a party to the litigation, was not competent to prefer this appeal. The question to decide is if he was entitled so to do. Learned Counsel for the appellant urged in the first instance that the Official Receiver represented him and other creditors of Ramaswami Chettiar in O.S. No. 27 of 1933 and on the Official Receiver's failure to prefer an appeal, his client, who was one of the creditors, was competent to do so. The second contention advanced by him was that even if Section 75 of the Provincial Insolvency Act has no application, his client should be held entitled to prefer an appeal on the analogy of that section. The third contention was that the relationship between his client and other creditors on the one side and the Official Receiver on the other was that of a cestui que trust and a trustee and in so far as the latter's failure to prefer an appeal against the decree would affect him and other creditors of Ramaswamy adversely he or they should be held competent to bring the litigation, which was carried up to a certain stage by the Official Receiver, to the highest Court of the Presidency and to get a final adjudication in regard to that matter from that Court.

3. A right of appeal is not a mere matter of procedure. It is a substantive right and is primarily a creature of statute. As such, it can be exercised only by those in whom the power rests either expressly or by necessary implication.

4. The question to decide is if the appellant can be held to, have this right in the absence of any specific provision either in the Code of Civil Procedure or in any other enactment for the time being in force. O, 41, Rule 1 of the Code of Civil Procedure does not specify the person who is entitled to prefer an appeal. This led Mr. Champakesa Aiyangar, learned Counsel for the appellant, to argue that the omission was deliberate and was obviously made with the object of conferring a right of appeal on persons who were not parties to the suit originally. This may be to a certain extent correct but it cannot possibly lead one to infer that a person, who does not fall within the purview of the provisions of the Code of Civil Procedure or of any other statute conferring that right on him either expressly or impliedly, would be entitled to prefer an appeal from the decision of a suit or other proceeding to which he was not a party. The right to prefer an appeal by parties to a suit can be safely deduced from Order 41, Rule 4, Civil Procedure Code, although the object of its enactment was different. The only other provisions of the Code of Civil Procedure to which a reference can be made for this purpose are contained in Section 96, and Order 22, Rule 10. The plaintiff does not fulfil the requirements of Order 22, Rule 10, Civil Procedure Code. The interests of the Official Receiver cannot be said to have devolved on him during the pendency of the suit. Nor can any interest be said to have been created in his favour or assigned to him during the pendency of the suit which would have entitled him to continue the suit or prefer an appeal. The contention that the Official Receiver represented the creditors when he figures as a plaintiff is not correct. He is a creature of statute in whom the whole estate of the debtor vests for certain purposes. As those purposes are, speaking generally, to liquidate the whole of the debtor's estate, to divide it amongst his creditors to the extent of the debts due to them and to pay the balance, if any, to the debtor himself, he would be representing the interests of the creditors and of the debtor to a very large extent. But to contend that he represents the interests of creditors only is not quite correct. In trying to defend or save the estate for the benefit of the creditors and that of the debtor he has to come into conflict sometimes with the one or sometimes with the other and at times both with the debtor and some of the creditors. It would be therefore incorrect to argue that he represents the interest of all the creditors of an estate at all times. But even 'if he does so, it would not follow that any creditor can of his own choice replace or cast him as a shadow and usurp the power which the law has conferred on him. He is not an agent of the creditors and cannot for that reason be done away with at the sweet will of one or even of, the whole band of creditors. He represents larger interests than those of creditors alone and cannot be said to be functioning on their behalf merely. Even if the whole body of creditors of an insolvent estate joined hands and decided to take an action against or on behalf of the estate they would not be able so to do. For the above reasons, I must hold that the Official Receiver is not a representative of the creditors and it is not possible for the creditors to ignore him or act independently of him in the manner in which they have done in this appeal.

5. It is equally impossible to accept the contention in regard to Section 75 of the Provincial Insolvency Act or the extension of the principle underlying that section and its application to a case like the present by way of an analogy. The considerations which led the legislature to confer a right of appeal not only on the debtors, creditors or on receivers but also on any other person aggrieved by a decision given or an order made in the exercise of insolvency jurisdiction were totally different and have no application when we are dealing with a suit which, being an action in personam, determines the rights of the parties who are either actually or in cases such as those where leave is taken or given to sue or be sued or to defend on behalf of or for the benefit of all persons so interested, constructively, before the Court. In the absence of a provision similar to what is contained in Section 75 of the Provincial Insolvency Act, it is not possible to confer a right of appeal by analogy.

6. As for the contention that the Official Receiver is a trustee on behalf of all the creditors, it may be true that in his dealings with the affairs of the estate he may be accountable as a trustee, but having regard to the facts that he is an officer appointed by the Local Government and no suit could lie against him for a dividend (S. 65) it is difficult to see how he can be said to be a trustee on behalf of the creditors. It cannot be denied that he would be accountable to the Court and any executive act of his or any decision by him is liable to be reversed or modified by the Court, but to say that every creditor and debtor is competent to maintain an action and can compel him to render accounts to each individual would make his situation hopeless and the Act unworkable. No authority has been shown to me by learned Counsel for the appellant that he was ever held to be accountable in that manner. Nor has any authority been brought to my notice that if a trustee brought a suit, a cestui que trust would be in the absence of an assignment as contemplated by Order 22, Rule 10, Civil Procedure Code, entitled to prefer an appeal if the trustee fails or refuses to do so. The decision in Balakrishria Menon v. Kakkat Manakkal Uma (1928) 55 M.L.J. 873 : I.L.R. 52 Mad. 263, was cited by learned Counsel for the appellant for a different purpose. But it goes to show that when he comes or is brought to Court, he does so in his personal capacity. He was Held by a Division Bench of this Court in that Case to be personally liable for costs in the absence of any other direction to the contrary. This would point to the conclusion that the Official Receiver appears in his individual capacity although he may be entitled to be reimbursed by the insolvent's estate later.

7. I have examined the contentions raised on behalf of the appellant and found them to be devoid of any force. There is a direct decision of a Division Bench of this Court in The Indian Bank Ltd., v. Seth Bansiram Jeshamal (1933) 66 M.L.J. 532 : I.L.R. 57 Mad. 670, which is on all fours, or almost so, with the facts of this case and it is quite sufficient to say that in spite of my request to distinguish it on any material fact, learned Counsel for the appellant was unable so to do. Even if I were of a contrary opinion, this would have been binding on me, but now that I find myself of the same opinion I respectfully follow it.

8. The only question then is whether any difference could be made on account of the leave granted to the appellant by this Court in October, 1937. No notice was issued to the respondents and the order by this Court must be regarded to have been passed without prejudice to the interests of those against whom it was passed.

9. It remains for me to point out that the action taken by the appellant in this case was misconceived. He would have been well advised to go to the Insolvency Court under Section 68 of the Act and to apply for a reversal of the refusal by the Official Receiver to prefer an appeal to this Court and either for a direction to him to appeal against the decree passed by the 'District Judge of Ramnad or in the alternative for a permission to appeal himself in the name of the Official Receiver.

10. For the above reason the appeal fails and is dismissed with costs--one set of costs to be divided between the first and the second respondents.

11. Leave to appeal is refused.