1. Plaintiff is the son of the 2nd defendant The 1st defendant is the Official Receiver of Masulipatam. Defendants 3 to 5 are vendees of the plaint property from the 1st defendant. The plaintiff has brought this suit for declaration that the sale by the 1st defendant of the plaintiff's share of the property to defendants 3 to 5 is invalid and for a division by metes and bounds of his share of the property. The plaintiff's case is that the 2nd defendant, his father, was leading an immoral life and that he contracted debts for purposes which could not bind the plaintiff, his undivided son, and that the Official Receiver had no right to sell his share of the property to the defendants 3 to 5. The 2nd defendant applied to be adjudicated an insolvent on 24th January, 1918. His petition was referred for disposal to the Official Receiver on 31st January, 1918. The 2nd defendant was adjudicated insolvent on 15th July, 1918. The Official Receiver held an auction sale of the property of the insolvent on 25th August, 1918, and executed a sale deed in favour of the defendants 3 to 5 on 12th September, 1918. The plaint was filed on 27th June, 1919. The District Munsif gave a preliminary decree in favour of the plaintiff and passed a final decree. On appeal the Subordinate Judge of Masulipatam held that the Official Receiver had no right to sell the property inasmuch as on the date of the sale the property did not vest in him and dismissed the appeal of the defendants 3 to 5. The District Munsif found that the debts of the 2nd defendant were not tainted with illegality or immorality. The Subordinate Judge held that the Official Receiver purported to sell the whole of the property including the son's share.
2. Mr. Varadachariar who appears for the appellants contends that the whole property vested in the Official Receiver and under the law the Official Receiver is entitled to dispose of the whole property including the son's share and that by the vesting order of 1st February, 1921, any defect in the title of the Official Receiver was cured. An objection was taken that as the property did not vest in the Official Receiver the sale by him was bad. There are decisions of this Court which held that there must be an order by the District Court vesting the property in the Official Receiver; otherwise, the Official Receiver has no right to deal with the property. Under Section 27 of the Provincial Insolvency Act (Act V of 1920), on the making of an order of adjudication, the whole property of the insolvent vests in the Court and till the Court appoints a Receiver of the property under Section 56 of the Provincial Insolvency Act the property does not vest in him. In this case no such order was passed by the District Court till 1st February, 1921. The judgment of the District Munsif was delivered on 9th February, 1921. The question in this case is whether the Official Receiver could give a good title to the vendee. It is admitted that on the date of the sale the property did not vest in him, no order to that effect having been passed by the District Court. It is urged by Mr. Varadachariar that the property of the insolvent vested in the District Court and therefore the plaintiff could not sue for a declaration of his right. It was held by the learned Chief Justice and Coutts Trotter, J. in Official Assignee of Madras v. Ramachandra Aiyar (1922) ILR 46 M 54 : 43 MLJ 569 that
"where the managing member of a joint Hindu family consisting of himself and his sons is adjudicated an insolvent, the interest of the sons does not vest in the Official Assignee by reason of the adjudication, although it would be competent to the latter to deal with their shares if the debts of the insolvent were of such a nature as to be binding on their interest."
Mr. Varadachariar's contention is that there is a difference between the law as contained in the
Provincial Insolvency Act (Act V of 1920) and that contained in the
Presidency Towns Insolvency Act (Act III of 1909) so far as this point is concerned and that
Section 52 of the Presidency Towns Insolvency Act gives power specifically to the Official Assignee to exercise and take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the insolvent for his own benefit; and that such a provision as that contained in Section 52, not being enacted in the
Provincial Insolvency Act, it must be assumed that what vests in the Official Receiver is not only the property of the insolvent but the property of the undivided Hindu son as well. I was at first inclined to uphold this contention as the definition of the word ' property ' clearly includes not only the property of the insolvent but all the property over which he could exercise a right for his own benefit and a Hindu father can sell for his own debt his undivided son's share. Though a literal interpretation of the definition of the word ' property ' in
Section 2 of the Provincial Insolvency Act V of 1920 may be favourable to the appellants' contention yet sitting as a single Judge I felt bound to follow the decision in The
Official Assignee of Madras v. Kamachandra Iyer (
1922) ILR 46 M 54 :
43 MLJ 569. But before I delivered the judgment in the case, I came across in 20 L.W. a short note of the recent decision of the learned Officiating Chief Justice and Srinivasa Aiyangar, J. in A.S. No. 139 of 1921. I sent for the decision and as I found that the learned Chief Justice dissented from the ruling in The
Official Assignee of Madras v. Ramachandra Aiyar (
1922) ILR 46 M 54 :
43 MLJ 569, I had the case posted for further argument and heard it with reference to that ruling. The learned Officiating Chief Justice and Srinivasa Aiyangar, J. held that what vests in the Official Receiver is not only the share of a Hindu father but also the share of his undivided son which he could alienate for his own debt. Following that decision I hold that the share of the plaintiff did vest in the District Court. This does not prevent a son from bringing a suit for partition of his share on the ground that the father's debt was illegal or immoral and that the father could not convey his share validly for such a debt.
Section 27 of the Provincial Insolvency Act V of 1920 applies only to suits by creditors of the insolvent. A suit by a person who is not a creditor and who claims independently of the insolvent is not barred by the
provisions of the Indian Insolvency Act.
3. In this case the Official Receiver purported to sell the son's share also. That is the finding of the Subordinate Judge and that is also the plaintiff's case as set out in para. 7 of the plaint. The contention for the respondent is that the Official Receiver could not convey the property which did not vest in him and that the vendees did not get a good title. On Since reported as Kuppuswami Goundan v. Marimuthu Goundan (1924) 47MLJ 487. the date of the sale the property of the insolvent including that of the son's share was vested in the District Court. On 1st February, 1921 the District Court passed an order vesting the property in the Official Receiver. Two points are urged for the appellant--(1) that the sale being by an agent of a principal who afterwards ratified it, is good, (1920) 40 MLJ 209 though the property did not vest in the Official Receiver before the date of sale yet invested in him after the sale and under Section 43 of the Transfer of Property Act the vendees get a good title. As regards the first contention, it is urged on behalf of the respondent that Sunder Section 200 of the Contract Act a principal could not ratify an act to the prejudice of third persons. The Official Receiver is an Officer of the Court and acts oh behalf of the District Court. As a rule the District Court by an order vests the property of the insolvent in the Official Receiver. In this case such an order was not passed, although the District Court transferred the petition of the insolvent for disposal. When the District Court was appraised of the fact that it was necessary that it should pass an order vesting the property in the Official Receiver it passed such an order on 1st February, 1921. Before the order was passed, the Official Receiver sold the property to the appellants. Where a person who acts ordinarily as an agent bona fide thinking that he has a right to act for the principal conveys the property of the principal it is open to the principal to ratify such act and thereby give a good title to the vendee. If an agent acts without authority and thereby prejudices the rights of third persons, the ratification by the principal would not validate the act. But where the principal's property is alienated, and the only person that could be prejudiced is the principal himself, Section 200 does not stand in the way of such an act being ratified by the principal. In Subba Aiyar v. Ramaswami Iyengar (1920) 40 MLJ 209 it was held that a sale by the Official Receiver before the vesting order was valid. The learned Judges observed that the Official Receiver is an agent of the District Court and that his act is valid. No doubt in that case they relied upon the general terms of the order as giving power to the Official Receiver to deal with the property though there was no subsequent order vesting the property. In this case there is an order subsequent to the sale, vesting the property in the Official Receiver. This decision is quoted with approval in Sankaranarayana Pillai v. Rajamani (1923) ILR 47 M 462 : 46 MLJ 314. Phillips, J. observes with reference to the case in Subba Aiyar v. Ramaswami Iyengar (1920) 40 MLJ 209
" accepting this case as an authority for the proposition that the Official Receiver can act as agent it is clear that the subsequent ratification by the Court would make the proceedings valid."
The respondent relies upon two cases, one in
Kavali Sankara Rao v. Ramakrishnayya (
1923) 46 MLJ 184 and another in
Vythilinga Padayachi v. Ponnuswami Padayachi (
1920) 41 MLJ 78 as supporting his contention that in the absence of vesting order before the date of sale the Official Receiver could not give a valid title to the vendee from him. But in those two cases, there was no vesting order. It is well settled that there should be an order by the District Court vesting the property of the insolvent in the Official Receiver otherwise the property of the insolvent would not vest in him. The two cases relied upon by the respondent do not conflict with the decisions in Subba Aiyar v. Ramaswami Iyengar (
1920) 40 MLJ 209 and
Sankaranarayana Pillai v. Rajamani (
1923) ILR 47 M 462 :
46 MLJ 314. In this case the order of the District Judge vesting the property in the Official Receiver is sufficient ratification of his act so as to give a good title to the appellants.
4. The second contention of the appellants is entitled to considerable weight. By the vesting order the property of the insolvent actually vested in the Official Receiver. In other words what vests by reason of Section 27 of the Provincial Insolvency Act in the District Court is made to vest in the Official Receiver and the vendee from the Official Receiver at a time when the property did not vest in him can claim the benefit of Section 43 of the Transfer of Property Act when the property vests in him. Supposing an agent sells the property of his principal when he had no right to convey the property and if subsequently the principal conveys that property to the agent, the vendee will get good title by reason of Section 43 of the Transfer of Property Act. In this case the property of the insolvent vested in the Official Receiver on 1st Feb. 1921, and the appellants are entitled to rely upon that fact and set up their right against the plaintiff. It is contended on behalf of the respondent that on the date of the filing of the plaint, the appellants had no title to the property. But the order of the District Court was passed before the judgment was delivered by the District Munsif in favour of the respondent. I hold that the appellants have derived a good title from the Official Receiver and in the light of the findings of the lower Courts, the plaintiff is not entitled to a decree for partition inasmuch as his share has been validly conveyed by the Official Receiver to the appellants. In the result the appeals are allowed and the plaintiff's suit is dismissed, but considering the fact that the Official Receiver sold the property before it vested in him I think this is a fit case where both the parties should be made to bear their own costs throughout. The Memorandum of Objections is dismissed.