This appeal presents a problem, the solution of which depends upon the legal effect of the annulment of an adjudication in an insolvency.

The material facts may be stated. Palani Goundan and his son Chinnathambi Goundan were adjudicated insolvents by the Subordinate Judge of Coimbatore on the 26th September, 1928. In the year 1935 their adjudication was annulled by the Subordinate Judge under section 35 of the Provincial Insolvency Act On appeal the District Judge reversed that decision and set aside the order of annulment. The High Court, in a revision petition, by an order dated 15th November, 1939, restored the order of the Subordinate Judge annulling the adjudication After annulment the High Court directed the assets of the insolvents to be handed over to them, except a sum of Rs. 3,600 which the insolvent paid fraudulently to one Periakaruppa Chettiar. In regard to this, the same was vested in the Official Receiver for distribution among the creditors under section 37 of Provincial Insolvency Act.

The petitioner, Arunachalam Chettiar, obtained a decree against Palani Goundan, Chinnathambi Goundan and the respondent, in O.S.No.109 of 1924. That suit had a prolonged existence on account of the intervening insolvency and the varying situations that arose and in view of the different orders of the Courts. After the annulment of the adjudication by the High Court the respondent who is the 4th defendant in the suit, filed I.A.No.905 of 1946 on the file of the Court of the District Munsiff, Tirupur, for scaling down the decree under Madras Act IV of 1938. The decree-holder contended that the petitioner was not entitled to the relief under the Act in respect of the insolvents’ shares in the debt as when the insolvency was pending, a dividend had been declared out of their assets Both the District Munsiff and on appeal the Subordinate Judge held that section 21 of Madras Act IV of 1938 had no application as the adjudication was annulled and therefore there was no pending insolvency. The plaintiff has preferred the above appeal. Mr.Sivaramakrishna Aiyar, learned counsel for the appellant, contends that though adjudication was annulled in the year 1939, the insolvents had no saleable interests either on 1st October, 1937, or 22nd March, 1938, and therefore the respondent, not being an agriculturist within the definition of the Act, would not be entitled to a relief thereunder. In support of his argument he relied upon a decision of Wadsworth and Patanjali Sastri, JJ., in Kudithipudi Venkatramayya. v. Mallacheruvu Pundareekakshudu1. On the other hand learned counsel for the respondent argued that the effect of annulment of adjudication was as if the adjudication had never taken place and therefore on the crucial dates the respondent had saleable interests. To substantiate his contention he pressed into service the decision of Horwill and Balakrishna Aiyar, JJ., in Gamoji Venkata Ramakrishna Rao v. Gullapalli Sambamoorthi2.

We find it difficult to reconcile the two decisions on any sound principle of law. The relevant facts in the decision in Kudithipudi Venkatramayya v. Mallacheruvu Pundareekakshudu1 are:

The first defendant had been adjudicated an insolvent in November, 1932. On the 1st November, 1938, the insolvency Court passed an order annulling the adjudication owing to the default of the insolvent and directing that under section 37 of the Provincial Insolvency Act the properties should vest in the Official Receiver. After the order was passed the first defendant filed an application for scaling down the debt. The vesting order under section 37 continued to be in force when the said application came to be disposed of. Two contentions were raised before the learned Judges: (1) that section 21 of Act IV of 1938 applied to any person who had been adjudicated insolvent whether or not he remained an adjudicated insolvent during the relevant period, and (2) that by reason of the vesting order the insolvency continued so that the section

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