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1933 Supreme(SC) 14
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD TOMLIN, LORD THANKERTON, AND SIR GEORGE LOWNDES.
GUMMIDELLI ANANTAPADMANABHAO SWAMI - Appellant
Versus
OFFICIAL RECEIVER OF SECUNDERABAD - Respondents
On Appeal from the High Court at Madras.
Decided On : February 2, 1933.
Solicitors for appellant :Barrow, Rogers & Nevill. Solicitor for respondent No. 1: Harold Shephard.
A foreign insolvency adjudication does not override a prior local court attachment if the attachment precluded the insolvent from assigning the asset to the receiver, as the foreign receiver takes assets subject to existing local legal processes.
Headnote:(A) Code of Civil Procedure, 1908 - Sections 60, 64, 73 - Order XXI, Rule 53 - Provincial Insolvency Act, 1907 - Section 34 - Conflict between foreign insolvency adjudication and prior local attachment - Effect of attachment on the power of assignment - A foreign adjudication order is recognized under the rule of private international law and comity of nations, but it cannot interfere with a process already pending in the local territory if the bankrupt's freedom of disposal was affected such that the asset could not have been assigned to the receiver.
(B) Code of Civil Procedure, 1908 - Section 64 - Effect of attachment - An attachment operates as a charge or lien, rendering the property realizable by sale and precluding the insolvent from assigning the subject matter to a receiver.
Facts of the case:
A creditor obtained an attachment of a preliminary decree in a partition suit to satisfy a money decree. Subsequently, the judgment debtors were adjudged insolvents by a court in a foreign territory. The official receiver of the foreign insolvency sought to claim the benefit of the attached decree, arguing that the insolvency adjudication took priority over the prior attachment and that the attachment was merely prohibitory and did not create a title or lien.
Findings of Court:
The court found that the adjudicating court was a foreign court in relation to the local courts. It held that the prior attachment earmarked the decree for the creditor, creating an inchoate right that would have ripened into execution and sale. Since the insolvent could not have assigned the attached property to the receiver due to statutory prohibitions on transferring attached property, the receiver must take the asset subject to the existing attachment.
Issues: Whether an adjudication in insolvency by a foreign court vests the benefit of a decree in the receiver if that decree had been previously attached by a local court.
Ratio Decidendi: Under private international law, a foreign receiver can only claim assets that the bankrupt could have assigned to them at the date of adjudication. Because a prior attachment under the Code of Civil Procedure prohibits the assignment of the property, the foreign adjudication cannot override the existing attachment, as the receiver takes the assets subject to all liabilities and processes pending at the date of sequestration.
Result: Appeal allowed.
Legal Category Hierarchy
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private international law
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comity
- foreign insolvency
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comity
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practice and procedure
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civil procedure
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execution
- attachment
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execution
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civil procedure
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insolvency law
- vesting of assets
Judgement
Appeal (No. 86 of 1931) from a decree of the High Court in its appellate jurisdiction (October 2, 1930) reversing an order of the Court in its original jurisdiction (April 23, 1929).
The question for determination in the appeal was whether under an adjudication in insolvency by the District Court at Secunderabad on September 15, 1928, there vested in the respondent, as receiver, the benefit of a decree obtained by the insolvents in the Madras High Court freed from an attachment previously made by that High Court upon the application of the appellants father Lakshminarayana, since deceased and represented by the appellant.
The facts are stated in the judgment of the Judicial Committee.
Secunderabad was fixed for a British Cantonment pursuant to art. 4 of a treaty of 1798 between the Nizam and the East India Company. Civil Jurisdiction is exercised in the Administerial Areas of the Hyderabad State, which include the Cantonment of Secunderabad, under an order of the Governor-General in Council, made on December 21, 1925, under the Indian (Foreign Jurisdiction) Order in Council, 1902; the Order of 1925 superseded earlier Orders. In 1913 an Order similarly made applied the Provincial Insolvency Act (III. of 1907) to the Cantonment of Secunderabad ; the amending Act (V. of 1920) was not so applied until 1929.
The Appellate Court (Curgenven and Bhashyam Ayyangar JJ.), while agreeing with the view of the trial judge, Kumaraswamy Sastri J., that the District Court at Secunderabad was a foreign Court in relation to the Courts of British India, reversed his decision as to the effect of the adjudication. By separate judgments the learned judges held that the claim of the receiver in the insolvency had priority over the claim under the attachment. The appeal is reported at I. L. R. 54 M. 727.
1933. Jan. 16, 17. Upjohn K.C. and Hyam for the appellant. It was rightly held by the Courts in Madras that the District Court at Secunderabad was a foreign Court in relation to Courts in British India. The adjudication therefore affected no immovable property in British India, nor any movable property there which the insolvent could not assign to the receiver, although that inability was due to legal process which was incomplete Galbraith v. Grimshaw ([ 1910] A. C. 508.) ; Diceys Conflict of Laws, 5th ed., rr. 123, 124.
Upon the true construction of the Code of Civil Procedure the attachment operated as a charge or Ken on the decree, as it rendered the decree realizable by sale Code of Civil Procedure, 1908, ss. 60, 64, 73 ; Order xxi., r. 53 (4.) (6.) ; Appx. E, Forms 22, 23. The judgments to the contrary in Kristnasawmy Mudaliar v. Official Assignee of Madras (( 1903) I. L. R. 26 M. 673.) and Frederick Peacock v. Madan Gopal (( 1902) I. L. R. 29 C. 428.) conflicted with the judgment of the Board in Suraj Bunsi Koer v. Sheo Proshad Singh (( 1879) L. R. 6 I. A. 88, 109.) and that of the Calcutta Full Bench in Anand Chandra Pal v. Panchilal Sarma . (( 1870) 5 Ben. L. R. 691.) The judgment in Moti Lai v. Karrab-ul-din (( 1897) L. R. 24 I. A. 170.) was misunderstood and did not decide the question. The statement in Raghunath Das v. Sundar Das Khetri (( 1914) L. R. 411. A. 251.) was in terms based upon a concession by counsel. All the decisions relied on against the appellant upon this point were as to the effect of an adjudication in British India under the Indian Insolvent Act, 1848, upon a previous attachment, and that is a different question to that now arising. Whether or not the attachment created a charge, its effect, under s. 64 of the Code, was to preclude the insolvent from assigning it to the receiver ; consequently, upon the principle of international law already mentioned, the decree did not vest in the receiver, or vested subject to the attachment. It is not material that had the adjudication been in British India, s. 34 of the Provincial Insolvency Act, 1907, would have prevented the attachment being available against the off
