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The Official Receiver, Coimbatore (Petitioner). v. M.R.M.K.A.R.R.M Ardnachalam Chettiar ().

Madras High Court
Nov 15, 1933
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Structured Summary of the Opinion

Factual and Procedural Background

This appeal was brought by the Official Receiver of Coimbatore against the decision of Madhavan Nair, J., in Second Appeal. The underlying suit was O.S. No. 206 of 1926 (Subordinate Judge of Coimbatore), in which Arunachalam Chetti (plaintiff / decree-holder) sued Krishnaswami Goundan (judgment-debtor) on a promissory note. Before judgment there was an attachment of what was admittedly the joint family property of Krishnaswami Goundan, although the attachment described the property as that of Krishnaswami alone and the sons were not made parties to the suit.

The plaintiff obtained a decree on 11 December 1926 and applied for execution (sale) of the attached property. The judgment-debtor presented an insolvency petition (I.P. No. 320 of 1927) and was adjudicated an insolvent in February 1928. By an order of December 1927 the Official Receiver had been made interim Receiver pending adjudication. On 6 January 1928 both the Official Receiver and the judgment-debtor applied for a stay of the sale; the executing Court directed that the sale should proceed but that the sale proceeds should go to the Official Receiver.

After the sale, Arunachalam Chettiar applied for three-fourths of the proceeds to be sent to the executing Court on his behalf, claiming those amounts represented the shares of the three sons which had been attached before the insolvency petition. The executing Court ordered that three-fourths be sent to the executing Court; the Official Receiver transmitted the money but filed a petition seeking to be heard before a cheque was issued because he had not been given notice of the decree-holder's application.

The Principal Subordinate Judge held that no cheque should issue to the decree-holder for the three-fourths and ordered those funds returned to the Official Receiver. On appeal the District Judge ordered the money returned to the executing Court; that decision was upheld by Madhavan Nair, J. on Second Appeal. The present appeal is by the Official Receiver against that outcome.

Legal Issues Presented

  1. Whether an attachment and sale effected before the presentation of an insolvency petition — where the attachment is of the whole undivided joint family property described as the judgment-debtor's property only — prevents the father's power of disposal over his sons' shares from vesting in the Official Receiver upon adjudication in insolvency.
  2. Whether sale proceeds representing the sons' shares (sold before adjudication) can be treated as assets over which the Official Receiver has power by reason of the order of adjudication.
  3. Whether Section 51 of the Provincial Insolvency Act (limiting benefit of execution to the Receiver only for assets realised before admission of petition) applies so as to protect the Official Receiver's claim to sale proceeds.

Arguments of the Parties

Appellant (Official Receiver)

  • The view expressed by Madhavan Nair, J. — that the father's power of disposal of the sons' shares had been destroyed by the attachment and therefore the Official Receiver could not get power to deal with the sons' shares by reason of adjudication — is wrong.
  • The appellant accepts that the sons' shares do not vest in the Official Receiver (citing the Privy Council decision in Sat Narain v. Behari Lal), but relies on Full Bench decisions (Seetharama Chettiar v. Official Receiver; In re Sellamuthu Servai) which, as he interprets them, hold that under the relevant insolvency statutes the power of a Hindu father to sell the sons' shares for paying his debts can vest in the Official Receiver.
  • The crucial factual/legal question is whether the father's power of sale over the sons' shares was available at the time the insolvency petition was presented so that it could be vested in the Official Receiver on adjudication.

Decree-Holder / Executing Court (as represented in the proceedings)

  • Arunachalam Chettiar applied for three-fourths of the sale proceeds to be paid to the executing Court on his behalf on the ground that those sums represented the shares of the three sons, which had been attached before presentation of the insolvency petition.
  • The executing Court acted on that application and ordered the three-fourths to be sent to it; the Official Receiver did not receive notice of that application before transmitting the money.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Sat Narain v. Behari Lal (1924) L.R. 52 I.A. 22; I.L.R. 6 Lah. 1; 47 M.L.J. 857 (P.C.) Authority for the proposition that the shares of the sons do not vest in the Official Receiver on adjudication. The court acknowledges this Privy Council decision as correctly establishing that sons' shares do not vest in the Official Receiver; the appellant concedes this point.
Seetharama Chettiar v. Official Receiver, Tanjore (1926) I.L.R. 49 Mad. 849; 51 M.L.J. 269 (F.B.) Full Bench decision interpreting the Privy Council Lahore case and holding that under the Presidency-town Insolvency Act and Provincial Insolvency Act the father's power to sell sons' shares for paying his debts vests in the Official Receiver. Relied upon by the appellant to argue that, where available at the relevant time, the father's selling power can be exercised by the Official Receiver; the court considered this authority in the context of availability of the selling power at the time of presentation of the insolvency petition.
In re Sellamuthu Servai (1923) I.L.R. 47 Mad. 87; 46 M.L.J. 86 (F.B.) Full Bench holding that the Official Assignee (standing in the insolvent father's shoes) could exercise the father's right of selling sons' shares in ancestral estate to pay lawful debts. Quoted by the appellant to support the general proposition that an assignee/receiver can exercise the father's selling rights where those rights exist.
Subraya v. Nagappa (1908) I.L.R. 33 Bom. 264 Where a son's right, title and interest in ancestral property is attached in execution of a decree against him personally and the Court prohibits private alienation under the relevant CCP provision, the father is deprived of the power to alienate that interest in satisfaction of his debts. Distinguished by the court: that case concerned a son who was the sole defendant and an order prohibiting alienation; the present case involved attachment before judgment in a suit against the father alone.
Gopalakrishnayya v. Gopalan (1928) I.L.R. 51 Mad. 342; 54 M.L.J. 674 Held that where sons were made parties and their shares attached, such attachment could prevent the Official Receiver from exercising powers of sale over them. Recognized by the court as distinguishable because in that case the sons had been made parties and their shares separately attached; the present case did not involve joining the sons.
Doraiswami v. Nagaswami, A.I.R. 1929 Mad. 898 Held that a decree passed against the father after exoneration of his sons can be executed against family property; sons could claim exoneration only if the debt was illegal or immoral. Relied on by the court to show that execution against the father's interest can bind the family property and that sons' claims are limited to showing the debt does not bind them (e.g., illegal/immoral).
Subramania Pillai v. Venkatarama Reddi, A.I.R. 1930 Mad. 257 Where a decree against a father only leads to attachment of properties, execution against the father is prima facie effective to bind the son's undivided interest; ambiguity in descriptions (e.g., "right, title and interest") is to be construed so as not to defeat creditor's right. Applied by the court to support the proposition that attachment and sale of the father's interest can, absent a showing that the debt is not binding on sons, operate against the whole joint family property even if sons are not parties.
Sripat Singh Dugar v. Prodyat Kumar Tagore (1916) L.R. 44 I.A. 1; I.L.R. 44 Cal. 524; 32 M.L.J. 133 (P.C.) Privy Council authority that when a debt is legal and necessary, a judgment against the father may lead to sale of the whole family property; if debt is illegal/immoral only the father's one-third (or relevant portion) may be affected. Quoted by the court (Buckmaster, L.C.'s remarks) to assert that execution against a father can extend to the whole estate unless it is shown the debt was illegal or immoral; the court treated this as conclusive on the point.

Court's Reasoning and Analysis

The court undertook a step-by-step analysis grounded in the documents and the applicable authorities cited in the record:

  1. Character of the attachment and sale: The court examined the petition for attachment before judgment, the execution petition and the verified statement filed with it, and concluded that the entire immovable joint family property had been attached and brought to sale. Although the property was described as the property of the insolvent (the father) and the sons were not named, the attachment was of the property "in its entirety" and not merely of a bare power of sale exercisable by the father.
  2. Distinction between attachment of a right to sell and attachment of the property itself: The court observed that while Section 60 of the Civil Procedure Code permits attachment of property over which the judgment-debtor has disposing power, if only such a right is being attached it should be specifically stated. In this case no such limited attachment was manifested; the whole immoveable property was attached.
  3. Effect of non-joinder of sons: The court rejected the contention that the sons' non-joinder in the suit prevented attachment of their undivided shares. The court analyzed authorities distinguishing cases where the sons were joined (and their shares specifically attached or protected by court order) from cases where the father alone was sued and the property as a whole was proceeded against.
  4. Precedent synthesis: The court considered multiple precedents (including Privy Council decisions and Full Benches of the Madras Court) and concluded that execution against a father may be effective to bind the joint family property unless the sons can subsequently establish that the debt is not binding on their shares (for example, because the debt was illegal or immoral). The court found the Privy Council authority (Sripat Singh Dugar and related dicta) decisive in confirming that the whole estate may be sold if the debt is lawful and necessary.
  5. Sale proceeds and insolvency law: The court held that the fact the sons' shares had been sold and converted into sale proceeds did not change their character — the proceeds represent those shares. Further, Section 51 of the Provincial Insolvency Act did not assist the Official Receiver because, insofar as execution had been against the sons' shares, that execution was not against the property of the insolvent (the father). The Official Receiver did receive the sale proceeds attributable to the insolvent father's own one-quarter share for the benefit of general creditors.
  6. Conclusion as to availability of father's selling power: Having found that the whole property had been attached and sold and that no attempt had been made to show the debt was not binding on the sons, the court concluded that the attachment and sale were effective as to the sons' shares (represented now by proceeds) and that the Official Receiver could not claim the three-fourths on the basis that adjudication had vested a power to deal with those shares in him.

Holding and Implications

Holding: APPEAL DISMISSED WITH COSTS.

Direct consequences:

  • The decision of the District Judge to return the sale proceeds to the executing Court (and the Second Appeal decision of Madhavan Nair, J. upholding that) is affirmed by this Court; the Official Receiver's appeal fails.
  • The court treats the three-fourths of sale proceeds (representing the three sons' shares) as not falling within the Official Receiver's entitlement by reason of adjudication, because the attachment and sale had effectively bound those shares prior to the presentation of the insolvency petition and no showing was made that the debt did not bind the sons.
  • The sale proceeds attributable to the insolvent father's own share (one-quarter) went to the Official Receiver for the benefit of the general creditors.

Broader implications:

The court applied existing authorities but did not state that it was establishing a novel rule; it affirmed the principle that where a parent's debts are lawfully enforceable and the property has been attached and sold, execution against the father may operate against the whole joint family property unless it is shown the debt is illegal or immoral. No new precedent was announced beyond the application of the cited authorities to the facts of this case.


Opinion authored by: Horace Owen Compton Beasley, Kt., C.J. (with concurrence noted: "I agree.").

Show all summary ...

1. This is an appeal against the decision of., Madhavan Nair, J. in Second Appeal. The appellant is the Official Receiver of Coimbatore. A suit (O.S. No. 206 of 1926 on the file of the Subordinate Judge of Coimbatore) was brought by Arunachalam Chetti against Krishnasvvami Goundan on a promissory note. There was an attachment before judgment of what was admittedly the joint family property of Krishnaswami Goundan, though it was attached only as being the property of Krishnaswami Goundan, and his sons were not made parties to the suit. The plaintiff on 11th December, 1926, got a decree and applied in execution for the sale of the attached property. The judgment-debtor, Krishnaswami Goundan, filed an insolvency petition (I. P. No. 320 of 1927), on which he was adjudicated an insolvent in February, 1928. By an order passed in December, 1927,- the Official Receiver had been made interim Receiver pending the adjudication and on 6th January, 1928, both he and the judgment-debtor applied for stay of the sale in execution. The executing Court ordered that the sale should go on but that the sale proceeds should go to the Official Receiver. The sale proceeds were sent to the Official Receiver accordingly but Arunachalam Chettiar applied for three-fourths of them to be sent to the executing Court on his behalf, on the ground that they represented the shares of the three sons of the insolvent, which shares had been attached before the presentation of the insolvency petition. The three-fourths were ordered to be sent, and the Official Receiver transmitted the money. He had not, however, been given notice of the decree-holder's application and he filed the petition with which this appeal is concerned, praying that he might be heard before a cheque was issued. The Principal Subordinate Judge held that no cheque could be issued to the decree-holder for the three-fourths but that the three-fourths should be sent back to the Official Receiver. On appeal, however, the District Judge ordered the money to be returned to the executing Court and his decision has been upheld by Madhavan Nair, J. on Second Appeal.

2. That learned Judge in his judgment has thus expressed himself

"The petition for adjudication was presented after the date of the attachment. It therefore follows that the father's power of disposal of the sons' shares had been destroyed by the existing attachment of those shares; and the Official Receiver cannot therefore get any power to deal with the sons' shares by reason of the order of adjudication."
It is now argued for the appellant, Official Receiver, that this view of the law is wrong. Mr. Krishnaswamier in his argument has, of course, to allow that the shares of the sons do not vest in the Official Receiver. This has been decided by the Privy Council in Sat Narain v. Behari Lal ( 1924) L.R. 52 I.A. 22 : I.L.R. 6 Lah. 1 : 47 M.L.J. 857 (P.C.). But he refers us to the Full Bench decision in Seetharama Chettiar v. Official Receiver, Tanjore ( 1926) I.L.R. 49 Mad. 849 : 51 M.L.J. 269 (F.B.) in which the decision of the Privy Council in the Lahore case has been considered and explained and it has been held that, alike under the Presidency-towns Insolvency Act and the Provincial Insolvency Act, the power of a Hindu father to sell the shares of his sons for paying his just and proper debts, vests in the Official Receiver, the Privy Council decision not being an authority to the contrary. He also quotes another Full Bench decision in In re Sellamuthu Servai ( 1923) I.L.R. 47 Mad. 87 : 46 M.L.J. 86 (F.B.) in which it was held that the Official Assignee standing in the shoes of the insolvent father could exercise the father's right of selling the sons' shares also in the ancestral estate, in payment of any debt incurred by the father that was neither illegal nor immoral. What has to be shown, however, in the present case is whether the selling power of the insolvent over his sons' shares in the property was available at the time when the insolvency petition, on which adjudication followed, was presented so that that power was available for being vested in the Official Receiver.

3. There can be no doubt but that what was attached in the suit against Krishnaswami Goundan and what was afterwards brought to sale was the entire joint family property. Mr. Krishnaswamier for the appellant has argued that as far as the sons' shares were concerned it was only the father's rights of sale over them that were attached and sold but such is certainly not the case. The petition for attachment before judgment, the execution petition and the verified statement which was filed with the execution petition make it clear that it was the property itself in its entirety that was attached and afterwards brought to sale. It is true that the property is described as being the property of the insolvent (judgment-debtor) and that no reference is made to the insolvent's sons but that will not make it any the less the property of the insolvent and his three sons or alter the fact that it was the entire property as such. It may be that under Section 60 of the Civil Procedure Code, property which can be attached includes saleable property over which the judgment-debtor has a disposing power which he may exercise for his benefit, but if property of such a nature is to be attached it should be specifically stated that such is the case. Here what was attached was clearly the whole of the immoveable property and not any mere right of sale over it or any part of it. Mr. Krishnaswamier, however, further argues that even so the attachment will not be binding upon the shares of the sons in that they were not parties to the suit against the insolvent and that there was no order prohibiting the sons from alienating their shares. With reference to the latter of these two points he cites Subraya v. Nagappa (1908) I.L.R. 33 Bom. 264 in which it was held that when the right, title and interest of a Hindu son in joint ancestral property has been attached in execution of a decree against him and its private alienation by him has been prohibited by an order of the Court under Section 276 of the Code of Civil Procedure (to which the present Section 64 corresponds in a modified form his father is deprived of the power of alienation of that interest in satisfaction of his own debts. But that was a case in which the share of a son had been separately attached in execution of a decree in a suit in which he was the sole defendant in respect of a debt due from him personally. The present case in which the entire property was attached before judgment in a suit brought against the father is very different. Such a suit can be brought against the father alone, as in the present instance, or the sons may be joined as parties in it, but the fact of the sons not being joined in it will not affect the matter as it has been argued for the appellant that it will do. In Gopalakrishnayya v. Gopalan (1928) I.L.R. 51 Mad. 342 : 54 M.L.J. 674, which has been relied upon by Madhavan Nair, J., the sons had been made parties to the suit and their shares had been attached so as, as it was held, to prevent the Official Receiver from exercising powers of sale over them. But it was held by a Bench of this Court in Doraiswami v. Nagaswami A.I.R. 1929 Mad. 898 that a decree passed against the father personally after the exoneration of his sons can be executed against such family property, that such property is liable for the father's debt and that the sons could claim exoneration from the liability only on the ground that the debt is immoral or illegal. Even in this case, the sons, though exonerated, had been parties, but there is the further case also decided by a Bench, of Subramania Pillai v. Venkatarama Reddi A.I.R. 1930 Mad. 257 in which a decree had been obtained against a father only. It was there held that where a money decree had been obtained against a father and properties had been attached, even when there was ambiguity in the description of the properties such as by the use of the words "right, title and interest of the judgment-debtor," still it must be taken prima facie that the intention in the execution proceedings is to proceed against the whole of the interest that may be proceeded against on account of the Hindu Law that a father's debts may be executed against the son, and that execution against the father is effective enough to bind the son also. In the case now under notice there is no ambiguity either in the application for attachment or in the execution petition. This last decision is based upon a number of decisions of the Privy Council, none, however, of which is specified. But one of them appears to be that of Sripat Singh Dugar v. Prodyat Kumar Tagore (1916) L.R. 44 I.A. 1 : I.L.R. 44 Cal. 524 : 32 M.L.J. 133 (P.C). In that case a mortgage decree had been granted against the father of a joint Mitakshara family who alone was party to the mortgage, and in execution of it the entire family property was brought to sale. The sons and other members of the family contended that all that had passed under the sale was the father's one-third share. In a suit for a declaration that only one-third share had passed it was found that the debt was for a legal and necessary purpose and that when the contention that such was not its nature had failed, the whole of the property must be deemed to have passed by the sale. In the course of his judgment Buckmaster, L.C. remarked:

The property in question was joint property governed by the Mitak-shara Law. By that law a judgment against the father of the family cannot be executed against the whole of the Mitakshara property if the debt in respect of which the judgment has been obtained was a debt incurred for illegal or immoral purposes. In every other event it is open to the execution creditor to sell the whole of the estate in satisfaction of the judgment obtained against the father alone.

4. In the same judgment it was held that the use of the words " right, title and interest" (of the judgment-debtor) could only be taken to, mean that if it could be established that the debt had been incurred for immoral purposes, only one-third would be affected by the decree while if that contention was unsuccessful the whole of the estate would remain subject to the order for sale. If the meaning was otherwise the execution creditor would have been deprived of the undoubted right that he possessed, except upon the happening of one event which in the result has never arisen, to sell the entirety of the estate. This case is conclusive. There is no doubt an advantage in joining the undivided sons in a suit against their father for a debt, in that they can then at once set up their case, if they have one, of the debt being one that is illegal or immoral, but it is clear that the whole joint family property can be proceeded against as such even if they are not parties to the suit. Of course it is still open to them, if they are not parties to the suit, to oppose any proceedings against their shares on the ground of the debt being one that does not bind them, and to that extent any such proceedings in a suit to which they are not parties are conditional. But an attachment or sale of their shares in such circumstances will hold good till It has been established that the debt is not binding on their shares. In the present case no attempt has been made to show that it is not so binding.

5. The fact that the sons' shares have now been sold cannot make any difference to the position. The sale proceeds of them represent those shares, though they have taken another form.

6. Nor can Section 51 of the Provincial Insolvency Act have any application. By that section where execution of a decree has 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 realised in the course of the execution by sale or otherwise before the date of the admission of the petition. In so far as there has been execution against the shares of the sons it is not an execution against the property of the insolvent. As. to his own quarter share the sale proceeds of it have gone to the Official Receiver for the benefit of the general body of creditors.

7. In my opinion the decision of our learned brother is correct and this appeal must be dismissed with costs.

Horace Owen Compton Beasley, Kt., C.J.

8. I agree.