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Case Number

Appeal Against Appellate Orders Nos. 189 to 193 of 1927.,A.A.A.O No. 189 of 1927.

Attorney(S)

Messrs. M. Patanjali Sastriar and A. Sundaram Aiyar for the Appellants.
Messrs. C. S. Rama Rao Sahib, T. M. Krishnaswami Aiyar, V. S. Rangachari and K. Krishnaswami Aiyangar for the Respondent.

Judges

Ramesam
Jackson, JJ.

Acts

Section 4. Section 4 of the Provincial Insolvency Act corresponds to Section 7 of the Presidency Towns Insolvency Act and Section 105(1) of the English Bankruptcy Act.
Sections 53 and 54 of the Provincial Insolvency Act
SECTION 4 PROVINCIAL INSOLVENCY ACT
SECTION 43 TRANSFER OF PROPERTY ACT
Section 4 of the Insolvency Act
PROVINCIAL INSOLVENCY ACT

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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

Two brothers, K.L. Venkataram and K.L. Gopal, were adjudicated insolvent under the Provincial Insolvency Act and their property vested in the Official Receiver of Madura. The Official Receiver executed sale-deeds of separate items of their properties to various vendees (the respondents). The sale-deeds purported to convey the whole properties rather than merely the insolvents' shares.

The purchasers (respondents) sought delivery of possession of the purchased properties and encountered obstruction. The obstruction rested on a deed of trust dated 6 January 1926 under which the sons' shares were settled for the conduct of a charity; the insolvents had been appointed trustees under that trust and relied upon it to resist delivery of possession.

The central procedural vehicle contested was whether the purchasers could obtain delivery of possession of the sons' shares under Section 4 of the Provincial Insolvency Act. The petitions were initially filed under Section 56, and one was amended to add Section 4; the District Judge treated all as applications under Section 4. The court noted that Section 4 corresponds to Section 7 of the Presidency Towns Insolvency Act and Section 105(1) of the English Bankruptcy Act.

Legal Issues Presented

Whether purchasers from the Official Receiver can obtain delivery of possession of the sons' shares of the family property under Section 4 of the Provincial Insolvency Act.
Whether a purchaser who is a stranger and who has acquired the whole property can obtain joint possession of the insolvent's share (as distinct from the sons' shares).
Whether the interests of sons born after adjudication are separable from those of the father (depends on when a vesting order was made).

Arguments of the Parties

Respondents' Arguments (as recorded)

The learned Vakil for the respondents, Mr. Krishnaswami Aiyar, relied upon Ex parte Anderson (1870) L.R. 5 Ch. App. 473 as supporting their position (the opinion records that this decision was relied on by him, but the court found it not helpful in the context of sons' shares).
Mr. Krishnaswami Aiyar also relied upon Ramaswami Chettiar v. Ramaswami Aiyangar (1921) I.L.R. 45 Mad. 434 : 42 M.L.J. 185 (a decision in which the Insolvency Court was held able to consider an obstruction consisting of a claim that the purchase was benami, where no distinction was drawn between father's and sons' shares).

The opinion does not contain a detailed account of the other parties' arguments in the same structured way; it records authorities relied upon by the respondents and discusses authorities and principles bearing on the issues.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Abdul Khader v. The Official Assignee of Madras (1916) I.L.R. 40 Mad. 810	Section 4 construed as giving jurisdiction to the Insolvency Court to deal with claims of the insolvent as against properties and persons beyond the ordinary jurisdiction of the Court with insolvency jurisdiction.	The court cites this construction but notes doubt whether Section 4 covers the present case involving sons' shares.
The Official Assignee of Madras v. Ramachandra Aiyar (1922) I.L.R. 46 Mad. 54 : 43 M.L.J.	Held that the interest of the sons does not vest in the Official Assignee by reason of adjudication; the Official Assignee (as managing member) is entitled to joint possession along with the sons of family property. Also contains an observation that a stranger cannot, by reason of having purchased a share in joint property, insist on joint possession.	The court relies on this decision to show that the sons' interests are distinct and that a stranger purchaser cannot necessarily insist on joint possession of a son's share; however, it also reasons a purchaser of the whole property may be strictly entitled to the whole interest and that joint possession of the insolvent's share only might be ordered.
Sat Narain v. Behari Lal (1924) L.R. 52 I.A. 22 : I.L.R. 6 Lah. I : 47 M.L.J. 857 (P.C.)	Privy Council concluded that the property of the sons does not vest in the Official Receiver by reason of adjudication, but observed that the Official Receiver can deal with the son's share by reason of powers of the father which may vest in the Official Receiver by reason of insolvency.	The court cites this observation and notes that later Full Benches relied on it to place the sons' position on a different footing from that of the father.
Seetharama Chettiar v. Official Receiver, Tanjore (1926) I.L.R. 49 Mad. 849 : 51 M.L.J. 269 (F.B.)	Full Bench decision that the Official Receiver can sell the son's share also.	The court treats this as part of the body of authority establishing that the Official Receiver may sell sons' shares to strangers.
Basava Sankaran v. Anjaneyulu (1926) I.L.R. 50 Mad. 135 : 51 M.L.J. 529 (F.B.)	Held that where the Official Receiver sells the son's share at a time when there is no vesting order, the purchaser can take advantage of Section 43 of the Transfer of Property Act.	The court cites this to show that purchasers may have remedies when there is no vesting order; but this does not resolve the present procedural question under Section 4.
Ex parte Anderson (1870) L.R. 5 Ch. App. 473	(As relied upon by the respondents) an authority relied upon in argument.	The court records that Ex parte Anderson was relied upon by the respondents' counsel but states that it cannot help them in the present context of sons' shares.
Official Receiver of South Arcot v. Perumal Pillai (1923) 18 L.W. 884	Decision that an application of this kind (seeking delivery of sons' shares in insolvency proceedings) is not sustainable in an Insolvency Court.	The court cites this decision to support the conclusion that such applications are not maintainable under insolvency proceedings.
Chittammal v. Ponnuswami Naicker (1925) I.L.R. 49 Mad. 762 : 50 M.L.J. 180	Decision that similar applications are not sustainable in an Insolvency Court.	The court treats this as authority supporting the non-sustainability of the present kind of application in insolvency jurisdiction.
Ramaswami Chettiar v. Ramaswami Aiyangar (1921) I.L.R. 45 Mad. 434 : 42 M.L.J. 185	Held that where sons objected in respect of the whole estate (claiming the purchase to be benami) the Insolvency Court could consider the question; no distinction was then made between father's and sons' shares.	The court explains that this decision pre-dates the subsequent series of cases distinguishing the sons' position from the father's and that Ramaswami Chettiar cannot be taken as covering cases where objection is confined to the son's share alone.

Court's Reasoning and Analysis

The court conducted a focused analysis grounded in earlier decisions concerning the legal position of sons' shares in relation to insolvency and the powers of the Official Receiver. The reasoning proceeded along these lines:

The court acknowledged that Section 4 of the Provincial Insolvency Act confers wide powers to settle questions of priority or title arising in insolvency proceedings, and noted that it has been construed (in Abdul Khader) as conferring jurisdiction to deal with claims beyond the ordinary jurisdiction of the insolvency court.
The court then surveyed authorities addressing whether the interest of sons vests in the Official Receiver on adjudication. It noted that a line of decisions (including Official Assignee v. Ramachandra Aiyar and the Privy Council in Sat Narain v. Behari Lal) established that the sons' interests do not vest in the Official Receiver by reason of adjudication, although the Official Receiver might be able to deal with sons' shares by virtue of powers deriving from the father's position in certain circumstances.
Full Bench decisions (Seetharama Chettiar and Basava Sankaran) were recognized as establishing that the Official Receiver can sell the sons' shares and that purchasers in some situations may rely on Section 43 of the Transfer of Property Act where there is no vesting order.
Despite those propositions about saleability, the court drew a distinction between the Official Receiver's power to sell and the question whether a purchaser from the Official Receiver can, in insolvency proceedings under Section 4, obtain delivery of possession of the sons' shares. The court observed that once the Official Receiver has converted the insolvent's estate into money, his business is to distribute that money among creditors and that delivery of possession is not necessarily part of distributing assets.
The court further reasoned that where a claim is made against the insolvent in respect of his share only, or against a rival purchaser of the insolvent's property, the Insolvency Court may have to adjudicate; but when the claim concerns the sons' shares alone, the position is different and earlier authorities (Official Receiver of South Arcot v. Perumal Pillai; Chittammal v. Ponnuswami Naicker) indicate such an application is not sustainable in an Insolvency Court.
The court considered Ramaswami Chettiar but explained that it had been decided before the subsequent line of authorities that distinguish the sons' position; Ramaswami Chettiar involved objections to the whole estate and does not cover a son objecting solely in respect of his own share.
On the separate question of joint possession, the court noted an observation in Official Assignee v. Ramachandra Aiyar that a stranger purchaser of a share in joint property cannot insist on joint possession. However, where a purchaser had purchased the whole property (as in the present case), the court reasoned that the purchaser is strictly entitled to the whole interest and that there is no apparent reason why the purchaser should not be given joint possession of the insolvent's share only, even if doubts remain as to the sons' shares. The court acknowledged that joint possession might yield a practical benefit (for example, court-fee implications in a subsequent suit).
Finally, the court observed procedural developments in the lower courts: petitions had been filed by the Official Receiver for possession; any objections to delivery of the insolvents' shares could be considered in disposing of those petitions, and joint possession of the insolvents' shares could be ordered after hearing all petitions if the court below thought fit.

Holding and Implications

Core Ruling: Purchasers from the Official Receiver are not entitled, in proceedings under Section 4 of the Provincial Insolvency Act, to delivery of possession of the sons' shares.

Implications and direct consequences as stated by the court:

The appropriate remedy for purchasers seeking possession of the sons' shares is to pursue ordinary Civil Courts and file regular suits for possession; such relief is not available to them in these Section 4 insolvency proceedings.
The court left open the question whether the interests of sons born after the adjudication are separable from those of the father; this depends on when a vesting order was made and there were insufficient materials in the present record to decide the point. The court explicitly did not decide against the rights of purchasers or the Official Receiver regarding sons born after adjudication and left the matter to the lower courts if necessary.
On the narrower point of joint possession of the insolvent's share (as distinct from the sons' shares), the court indicated that the purchaser who acquired the whole property might be entitled to joint possession of the insolvent's share and that such relief could be ordered by the lower court after hearing all relevant petitions.
The Court of First Instance's order of remand was to stand subject to the observations recorded; petitions were to be disposed of as early as possible.
Each party was ordered to bear their own costs in the appeals. The present order also disposed of two Memoranda of Objections mentioned in the record.

No broader precedent was created by this decision beyond the court's application and reconciliation of existing authorities; the court confined itself to the direct effect on the parties and remanded matters for further consideration where appropriate.

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K.L Venkata Raman And Another (S). v. N.S Chokkier (Petitioner).

1. These Civil Miscellaneous Appeals arise out of insolvency proceedings under the Provincial Insolvency Act. Two brothers, K.L. Venkataram and K.L. Gopal, were declared insolvents and their property vested in the Official Receiver of Madura. The Official. Receiver executed sale-deeds of separate items of their properties to various vendees who are the respondents before us. The sale-deeds purport to have conveyed the whole properties and not the shares of the insolvents themselves. The purchasers applied for delivery of possession of the properties and complained of obstruction. The obstruction was based upon a deed of trust, dated 6th January, 1926, under which the shares of the sons were settled for the conduct of a charity. Under this trust deed the insolvents themselves were appointed trustees and they objected to the taking of possession by the purchasers relying on this trust deed. It is unnecessary to consider the nature (bona fide or otherwise) of the trust deed. Whatever its effect may be as a deed of trust, it certainly relates to the sons' shares of the properties and the question arises whether the purchasers from the Official Receiver can obtain delivery of possession of the shares of the sons of the insolvents under Section 4 of the Provincial Insolvency Act. The petitions were originally filed under Section 56 of the Act, but one of them was afterwards amended by adding Section 4 also. The District Judge considered all of them as applications under Section 4. Section 4 of the Provincial Insolvency Act corresponds to Section 7 of the Presidency Towns Insolvency Act and Section 105(1) of the English Bankruptcy Act. It gives very wide powers to the Insolvency Court to settle questions of priority or title arising in the course of the insolvency for the purpose of doing justice to the parties and for the proper distribution of the insolvent's estate. It has been construed in Abdul Khader v. The Official Assignee of Madras (1916) I.L.R. 40 Mad. 810 as giving jurisdiction to the Insolvency Court to deal with the claims of the insolvent as against properties and persons beyond the ordinary jurisdiction of the Court which has got the insolvency jurisdiction. This decision has been recently affirmed by a Full Bench decision of this Court but it is doubtful whether Section 4 covers a case of this kind that we have got before us now.

2. It will be convenient here to take a short survey of the decisions relating to the position of the Official Receiver in relation to the shares of the sons of the insolvent. In The Official Assignee of Madras v. Ramachandra Aiyar (1922) I.L.R. 46 Mad. 54 : 43 M.L.J. Schwabe, C.J. and Coutts-Trotter, J. (as he then was) held that the interest of the sons does not vest in the Official Assignee by reason of an adjudication and that the Official Assignee as representing the managing member is entitled to joint possession along with the sons of the family property. In Sat Narain v. Behari Lal (1924) L.R. 52 I.A. 22 : I.L.R. 6 Lah. I : 47 M.L.J. 857 (P.C.) the Judicial Committee also came to the same conclusion that the property of the sons does not vest in the Official Receiver by reason of the adjudication, but they observe that the Official Receiver can deal with the son's share by reason of the power of the father which may vest in the Official Receiver by reason of the insolvency. Relying on this observation of the Privy Council it was decided by a Full Bench, Seetharama Chettiar v. Official Receiver, Tanjore 1926) I.L.R. 49 Mad. 849 : 51 M.L.J. 269 (F.B.), that the Official Receiver can sell the son's share also and another Full Bench in Basava Sankaran v. Anjaneyulu (1926) I.L.R. 50 Mad. 135 : 51 M.L.J. 529 (F.B.) has held that where the Official Receiver sells the son's share at a time when there is no vesting order the purchaser can take advantage of Section 43 of the Transfer of Property Act. The law, therefore, as it now stands, shows that the Official Receiver can sell the son's share also to a stranger. The Official Receiver himself can apply under Section 4 for possession of the insolvent's share of the estate, but does it follow from these two positions that the purchaser from the Official Receiver can apply under Section 4? Once the Official Receiver has sold the property to a stranger and converted the insolvent's estate into money, his business is to distribute this money among the creditors and it cannot be said that delivery of possession is a necessary part in the work of distributing the assets of the insolvent among the creditors. Where a claim is made against the insolvent himself in respect of his share only or against a rival purchaser of the insolvents property itself the matter may be different. One of the objects of the Insolvency Act is to adjudicate upon the validity of such claims. Sections 53 and 54 of the Provincial Insolvency Act show that one of the primary duties of the Insolvency Court is to decide whether the alienations of the insolvent should be set aside as having been made in fraud of creditors or having been in fraudulent preference of one creditor against another; but where we have got to deal with the son's share the matter is entirely different and the decisionin Ex parte Anderson (1870) L.R. 5 Ch. App. 473 relied on by Mr. Krishnaswami Aiyar, the learned Vakil for the respondents, cannot, therefore, help him. On the other hand it has been held by this Court in Official Receiver of South Arcot v. Perumal Pillai (1923) 18 L.W. 884 and Chittammal v. Ponnuswami Naicker (1925) I.L.R. 49 Mad. 762 : 50 M.L.J. 180 that an application of this kind is not sustainable in an Insolvency Court. Mr. Krishnaswami Aiyar, on the other hand, relies upon Ramaswami Chettiar v. Ramaswami Aiyangar (1921) I.L.R. 45 Mad. 434 : 42 M.L.J. 185. That decision was before the series of cases which I referred to above and which place the position of the sons on a different footing from that of the father. In the case in Ramaswami Chettiar v. Ramaswami Aiyangar (1921) I.L.R. 45 Mad. 434 : 42 M.L.J. 185 the obstruction was by the sons not only in respect of their own shares but also in respect of the whole of the estate of the insolvent on the ground that the purchase was benami and no distinction was made between the father's share and son's share. It was really an obstruction to the Receiver taking possession of what was then considered as the insolvent's property. It was held that such a question can be considered by the Insolvency Court. But the position of the sons has been distinguished from the position of the father by the later cases and the decision in Ramaswami Chettiar v. Ramaswami Aiyangar (1921) I.L.R. 45 Mad. 434 : 42 M.L.J. 185 cannot be considered as covering the case of a son objecting in respect of his own share or of any objection raised by another person as guardian on behalf of a minor son or of any other person claiming any interest in respect of the son's share only.

3. The result is that we must hold that in so far as the sons' shares are concerned, the purchaser from the Official Receiver is not entitled to apply for delivery of possession under Section 4 of the Provincial Insolvency Act. His remedy would be by going to the ordinary Courts and by filing regular suits for possession.

4. Mr. Krishnaswami Aiyar pointed out that in this case one son of each of the insolvents was born after the adjudication and their interests cannot be separated from those of the father. Whether this is so or not depends upon when the vesting order was made. We have no materials here and if it is necessary the question can be gone into by the Courts below; but as the appellant has got to go to a Civil Court anyhow there is no purpose in deciding this point now.

5. A third question was raised whether the purchaser can get joint possession of the insolvent's share. In The Official Assignee of Madras v. Ramachandra Aiyar (1922) I.L.R. 46 M. 54 : 43 M.L.J. 569 there is an observation at page 58:

It is no doubt true that a stranger cannot by reason of having purchased a share in the joint property insist on having joint possession.

6. It is not clear whether this observation was made with reference to Section 4 of the Insolvency Act or with reference to the general "Hindu Law". In the present case it is not that the purchaser purchased the share of the insolvent only or of any member only but purchased the whole property. In such a case his rights are not strictly governed by mere considerations of equity. But apart from any question of procedure, he has purchased the whole interest in the property and, assuming there is no question of immorality or illegality of the debts, he is strictly entitled to the whole property. In such a case we do not see why he ought not to be given joint possession of the insolvent's share only, whatever doubts there may be as to the sons' shares. It may be that there is not much to obtain by joint possession but it makes a difference in the Court-fees which the purchaser has to pay in the regular suit he has to bring, but that at least is a substantial benefit to him.

7. We understand that meanwhile petitions have been filed by the Official Receiver himself for obtaining possession. Any objection to the delivery of the insolvents' shares may be considered in the disposal of those petitions and the joint possession of the insolvents' shares may be ordered after those petitions and the present petitions are all heard., should the Court think it fit to do so. In the disposal of the Civil Miscellaneous Appeals before us it is merely enough to say that the sons' shares cannot be delivered in these proceedings to the purchaser. We are not to be understood as having decided anything against the rights of the purchaser and the Official Receiver in respect of the shares of the sons who were born after the order of adjudication. We leave the point open and merely allow an order now to be passed in respect of the joint possession dealing with the shares of the insolvents only, if the Court below thinks fit to do so after hearing all the petitions. Each party will bear their own costs. Subject to these observations, the order of remand to the Court of First Instance will stand. The petitions may be disposed of as early as possible. This order also disposes of the two Memoranda of Objections.

K.L Venkata Raman And Another (S). v. N.S Chokkier (Petitioner).

Structured Summary of the Provided Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Respondents' Arguments (as recorded)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

K.L Venkata Raman And Another (S). v. N.S Chokkier (Petitioner).

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