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1995 Supreme(Ker) 389
High Court of Kerala
K.G. Balakrishnan, B.N. Patnaik, JJ.
State of Kerala - Appellant
Versus
R V S Mani & Ors - Respondent
A.S. No. 310 of 1985
Decided On : 16-06-1995
The main legal point established in the judgment is the effect of an order of adjudication, the vesting of property in the court or receiver, and the prohibition on creditors from proceeding against the property of the insolvent. The court also clarified the representation of the State by Public Officers in the insolvency proceedings and the definition of a secured creditor.
Headnote:
Revenue Recovery Act - Insolvency Proceedings - S.69(2), S.36, S.28(2), S.28(7) of the Provincial Insolvency Act - The court discussed the effect of an order of adjudication, the vesting of property in the court or receiver, and the prohibition on creditors from proceeding against the property of the insolvent. The court held that the revenue sale held before the date of adjudication of the insolvency petition was void, and the sale by the official receiver supersedes that of the sale made by the Tahsildar. The court also determined that the State was represented by the Public Officers in the insolvency proceedings, making the orders passed in the insolvency proceeding binding on the State. The plaintiff-State was not considered a secured creditor when the insolvency proceeding was initiated, and the attachment of land did not create any charge on the property.
Fact of the Case:
The plaintiff, State of Kerala, appealed against the judgment dismissing its suit to recover possession of properties and declare a sale effect by the Official receiver in Insolvency Proceedings null and void. The suit was dismissed, and the undisputed facts included the initiation of revenue recovery proceedings, attachment of properties, insolvency proceedings, and subsequent sales of the property.
Finding of the Court:
The court found that the revenue sale held before the date of adjudication of the insolvency petition was void, and the sale by the official receiver superseded that of the sale made by the Tahsildar. The court also held that the orders passed in the insolvency proceeding were binding on the State as it was represented by the Public Officers. Additionally, the plaintiff-State was not considered a secured creditor when the insolvency proceeding was initiated.
Issues: The issues included the validity of the revenue sale, the representation of the State in the insolvency proceedings, and the status of the plaintiff-State as a secured creditor.
Ratio Decidendi: The court's decision was influenced by the interpretation of S.28(2) and S.28(7) of the Provincial Insolvency Act, which determined the vesting of property in the court or receiver and the prohibition on creditors from proceeding against the property of the insolvent. The court also considered the representation of the State by Public Officers in the insolvency proceedings and the definition of a secured creditor.
Final Decision: The appeal was dismissed, confirming the judgment and decree of the court below. The 34th respondent was entitled to proceed with the execution in O.S. 183/79, and the parties were directed to bear their costs in the appeal.
B.N. Patnaik, J.
1. This appeal by the plaintiff is against the judgment dated 21-1-1985 in O.S.No.136 of 1983 on the file at the Addl. Sub Judge, Cochin. State of Kerala is the plaintiff. The following prayers were made by the plaintiff in the suit (a) to direct the second defendant to deliver the plaint schedule properties with damages for use and occupation at the rate of Rs.750/- per month from the date of suit till the date of realisation and (b) for a declaration that the sale effect by the Official receiver in Insolvency Proceedings No.2 of 1973 before the Sub Court, Ernakulam is null and void and it is not binding en the plaintiff. The suit was dismissed with costs.
2. The undisputed facts are as follows: The first defendant is the owner in possession of the plaint schedule properties. He was an assessee under the Kerala Sales Tax Act. He defaulted in the payment of sales tax due under various assessments made by the Sales Tax Officer, Ist Circle, Mattancherry, Cochin. The Sales Tax Officer (31st respondent herein) initiated a proceeding under S.69(2) of the Revenue Recovery Act on 25-6-1972 for realisation of a sum of Rs.9,328.10. On the issue of a certificate by the District Collector, Cochin on 3-7-1972, the Tahsildar Cochin attached those properties on 20-11-1972 under S.36 of the Revenue Recovery Act. The first defendant had created an equitable mortgage by giving the plaint schedule property as security by deposit of title deeds and obtained a loan by way of overdraft from the second defendant-Bank. The mortgage was created on 2-9-1963. The first defendant was . indebted to several persons. When it came to a crisis, he filed insolvency proceedings No.2 of 1973 before the Sub Court, Ernakulam on 13-4-1973 for being adjudged as an insolvent. Defendant No.2 was the first respondent and defendant No.31 was the 30th defendant in that petition. The other defendants herein were also parties in the petition. Notice was served on the 31st defendant, viz. the Sales Tax Officer on 5-6-1973 and he entered appearance in the insolvency case on 19-6-1973. In spite of the fact that the 31st defendant had been served with the notice of the insolvency proceeding, the Tahsildar held the sale of the property on 28-6-1973. The 34th defendant as the highest bidder, purchased the property for Rs.33,000/- He had deposited 15% of the bid amount on the date of sale and the balance on 28-7-1973. The second defendant informed the Tahsildar on 1-8-1973 that the properties are involved in the said Insolvency Proceeding No.2 of 1973 filed by the first defendant. The Sub Collector confirmed the revenue sale on 17-2-1973 though later by an order dated 25-5-1975, he cancelled the revenue sale. But the Board of Revenue suo motu by its order dated 7-8-1976 cancelled the order of the Sub Collector. The second defendant filed O.P.No.4986 of 1976 before the High Court challenging the order of the Board of Revenue dated 7-8-1976. The said O.P. was dismissed on the ground that an alternative remedy by way of revision to Government was available with an observation that the dismissal of the original petition will not in any manner affect the disposal of the case pending before the Insolvency Court or before the civil court or before the R.D.O. and they will have to dispose of the case untrammelled by the fact that the writ petition has been dismissed. In the insolvency proceeding, the Official Receiver was directed to take possession of the plaint schedule property. In compliance with the said order, he took possession of the property on 11-1-1974. In his report, the official receiver sought for a direction from the court to sell the property and intimated the court about the revenue sale that had taken place. Defendant No.2 the Tahsildar and the 34th defendant were heard in the matter and the insolvency court passed orders directing the official receiver to sell the property in public auction according to law by ignoring the revenue sale alleged t
