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Andhra Pradesh High Court
Judges : VENKATESAM
Mutha Subbarao - Appellant
Versus
Official Receiver, West Godawari at Eluru - Respondent
Decided On : 01-04-63
INSOLVENCY - ATTACHMENT - POWER OF OFFICIAL RECEIVER - LIABILITY OF SONS' SHARES - RATABLE DISTRIBUTION OF SALE PROCEEDS - PROVINCIAL INSOLVENCY ACT, 1920 - SECTIONS 4, 5, 28-A - CIVIL PROCEDURE CODE, 1908 - SECTIONS 64, 73.
Fact of the Case:
The Official Receiver filed an application under Sections 4 and 5 of the Provincial Insolvency Act (hereinafter referred as "the Act), and Sec. 151 of the Civil Procedure Code, on behalf of the general body of creditors. Respondents 1 and 2 therein are the sons of one of the insolvents, Satyanarayana, and the third respondent is the son of another insolvent, Shesha Rao, both of whom were adjudicated insolvents on their own application in I. P. No. 20 of 53 on the file of the Sub Court, Eluru. Respondents 4 to 8 are the creditors of the two insolvents, who filed suits both against the insolvents and their sons (respondents 1 to 3), and obtained decrees. The 4th respondent obtained two decrees, one in O. S. 35 of 53, on the file of Sub Court, Eluru another in O. S. 307 of 57 on the file of the District Munsif s Court, Tanuku. In execution of the decree in O. S. 35/33, he filed E. P. 160/56 and brought the 5/6 share of the sons of insolvents (R. 1 to R. 3) in some of the joint family properties to sale, which fetched Rs. 10,250. 00 The 4th respondent, and the other respondents 5 to 8, filed E. Ps. in the Sub Court, Eluru for rateable distribution of those sale proceeds towards the satisfaction of the decrees in their favour.
Finding of the Court:
The Court held that the Official Receiver is entitled to the declaration prayer for. It also held that as per the order dated 1-7-1957 in I. A. No. 488 of 1957 the sale was held, and the proceeds were deposited in e. P. 160/56 and that should be made over to the Official Receiver for distribution amongst all the creditors.
Issues: 1. Whether the appellants in C. M. S. A. 128/58 are entitled to claim the sale proceeds in E. P. 160 of to the exclusion of the other creditors of the insolvents. 2. Whether the Official Receiver is entitled to pray for a declaration that the debts of the creditors of the insolvents are binding on the shares of the sons, and get at the shares of the sons, or their sale proceeds.
Ratio Decidendi: 1. An attachment, whether before or after judgment, does not create any charge on the attached property. An attaching creditor, is not a secured creditor. Hence, if an order of adjudication is made after attachment but before sale, the property vests in the Official Assignee or Receiver for the benefit of the general body of creditors and the attaching creditor is not entitled to obtain satisfaction of his decrees by sale of the attached property. The order of adjudication divests the rights of the attaching creditor and remits him to the position of an ordinary creditor. 2. On the Insolvency of a father of a joint Hindu Family governed by the Mitaskshara law, there vests in Official Assignee or Receiver- (a) the separate property of the insolvent father; and, (b) the power which the father of a joint family has to alienate the joint family property, including his sons share in the joint family property for paying his antecedent debts, not contracted for an immoral purpose. In case governed by the Presidency Towns Insolvency Act, this power vests in the Official Assignee under Sec. 52 (2) of that Act and the power can be exercised by him subject to all the limitations under which the father himself could exercise it; 3. The Official Receiver can by appropriate proceedings against the sons shares in the insolvency proceedings themselves.
Final Decision: The appeals are dismissed with costs of the Official Receiver in C. M. S. A. No. 128 No. 85 of 1960. Leave refused.
( 1 ) THIS batch of Civil Miscellaneous Second Appeals arises out of the order of the learned District Judge, Eluru, in C. M. As. 20 of 1958 and A. S. Nos. 85 to 90 of 1958, which were disposed of by a common judgment. C. M. S. A. 128 of 1958 is against C. M. A. No. 20 of 58, which was itself an appeal against the order in I. A. No. 479 of 1957. That application was filed by the Official Receiver, Eluru, under Sections 4 and 5 of the Provincial Insolvency Act (hereinafter referred as "the Act), and Sec. 151 of the Civil Procedure Code, on behalf of the general body of creditors. Respondents 1 and 2 therein are the sons of one of the insolvents, Satyanarayana, and the third respondent is the son of another insolvent, Shesha Rao, both of whom were adjudicated insolvents on their own application in I. P. No. 20 of 53 on the file of the Sub Court, Eluru. Respondents 4 to 8 are the creditors of the two insolvents, who filed suits both against the insolvents and their sons (respondents 1 to 3), and obtained decrees. The 4th respondent obtained two decrees, one in O. S. 35 of 53, on the file of Sub Court, Eluru another in O. S. 307 of 57 on the file of the District Munsif s Court, Tanuku. In execution of the decree in O. S. 35/33, he filed E. P. 160/56 and brought the 5/6 share of the sons of insolvents (R. 1 to R. 3) in some of the joint family properties to sale, which fetched Rs. 10,250. 00 The 4th respondent, and the other respondents 5 to 8, filed E. Ps. in the Sub Court, Eluru for rateable distribution of those sale proceeds towards the satisfaction of the decrees in their favour. C. M. S. A. 128/58 was filed by respondents 4 to 8 in I. A. 479 of 57, while the other C. M. S. As. 84 to 89 of 60 were filed by each of the respondents 4 to 8 against the sons of insolvents, R. 1 to R. 3 against the order of the E. Ps. filed by them for rateable distribution of the sale proceeds in satisfaction of the decrees obtained by them.
( 2 ) THE question arising in all these second appeals is, whether the appellants in C. M. S. A. 128/58 are entitled to claim the sale proceeds in E. P. 160 of to the exclusion of the other creditors of the insolvents.
( 3 ) THE facts leading to this litigation may shortly be stated. The 4th respondent, Mutha Subbarao, filed O. S. No. 35 of 1953 on 1-4-1953 on the file of Sub Court, Eluru against the two insolvents and their sons R. 1 to R. 3 and got an order for attachment before judgment of their immovable properties on 24-4-53, and had them attached on 2-7-53. The two insolvents filed on 26-8-53 I. P. No. 20 of 53 on the file of Sub Court, Eluru for their being adjudicated as insolvents, and an order of adjudication was passed on 31-8-54. O. S. 35/53 was decreed on 12-4-1954, i. e. , after the filing of the insolvency petition and before the order of adjudication. By reason of the order of adjudication, 4th respondent brought only the shares of the sons of the two insolvents to sale in E. P. 160/56. At that stage, Official Receiver (the first respondent in C. M. S. A. 128/58) filed I. A. 479/57 in I. P. No. 20/53 for a declaration that the debts mentioned in the schedule annexed to the petition are binding on the sons of the insolvents, and for an order vesting their 5/6 share in him, and for stay of execution of the decree in O. S. 35/53 and the other decrees obtained by respondents 4 to 8. The Official Receiver prayed that the entire sale proceeds in E. P. 160/56 be made over to him, if the court did not think it fit to stop the execution of the sale.
( 4 ) THE case of the Official Receiver was that the respondents 1 to 3 and the insolvents were all members of a joint Hindu family, and that the several debts referred to in his petition were admittedly neither illegal nor immoral, and as such binding upon their sons under the doctrine of pious obligation. O. S. 35/53 in which the first appellant in C. M. S. A. 128/58 obtained 2 decrees as well as the other suits, were all decreed against the
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