The legal effect of a vesting order under Section 37 of the Provincial Insolvency Act prevents the property from reverting to the debtor and a sale held without the appointee on record is null and void.

Somayya, J.

1. The plaintiff is the appellant and he filed the suit for recovery of possession of three items of immovable properties on the strength of a Court sale held in execution of a money decree obtained against one Yegnayya.

2. The contesting respondents are subsequent purchasers of the properties from the heirs-at-law of Yegnayya and their defence is that no title passed to the plaintiff under the Court sale. Yegnayya was adjudged an insolvent and his adjudication was subsequently annulled under Section 43 of the Provincial Insolvency Act for failure to apply for discharge within time. While annulling the adjudication the Insolvency Court passed an order under Section 37 of the Act vesting the debtors properties in the Official Receiver for a period of one year.

3. Before the year expired, the appellant brought the properties to sale without impleading the Receiver and purchased the properties. It appears that the debtor died before the sale and his heirs were brought on record as his legal representatives.

4. Without impleading the Official Receiver in whom the properties were directed to be vested under Section 37 and apparently without even notice to him, the Court sale was held. Is the sale valid and does it pass any title to the appellant?

5. The question turns upon the effect of a vesting order passed under Section 37 of the Act. What is the legal status and position of the person in whom the properties are vested? In whom does the legal title rest--is it in the debtor?

6. The effect of a vesting order has been the subject of several decisions and the High Courts have taken different views and even the same Court has expressed different opinions which it is not easy to reconcile. A Full Bench of our High Court has considered this question in the case of Veerayya v. Srinivasa Rao (1935)69MLJ364 , Three possible alternative views that may be held on this question are set out on pages 921 and 922 of the report:

Three points of view are possible. The first is that with the annulment the insolvency proceedings come to an abrupt and final conclusion. The Insolvency Court has no longer any power to pass any orders in regard to the insolvents property, its order vesting that property in the appointee being its last expiring act. The appointee is a mere custodian of the insolvents property. No doubt he should carry on the ordinary work of administering and preserving the property in his hands, but he has no further control over it, and must merely hold it subject to any orders as to attachment and sale which he may receive from any Court entertaining an application in execution against the insolvent. The insolvents creditors, subject to anything which may have been validated by Section 37, are restored to the position in which they found themselves before the insolvency proceedings began, and all must pursue afresh their remedies by execution or by suit in the ordinary way, which will mean; in practice that the insolvents property will go to some and some only of his creditors. The second view is that if a vesting order is made the insolvency proceedings are continued for all purposes. The third view is one intermediate between these two, and we think, is the view which must prevail. It is this, that the appointee continues to be subject to the directions of the Insolvency Court which appointed him, that these directions relate to the property of the insolvent, and that they should be given in accordance with the policy and provisions of the Insolvency Act. It will be found on our further examination that this is not in all respects equivalent to the actual continuation of the insolvency proceedings.

7. The first of these views was rejected by the Pull Bench but has found acceptance with the Rangoon High Court in the case of Annamalai Chettiar v. Bannerjee I.L.R.(1936) Rang. 254 and with the Allahabad High Court in Panna Lal v. Official Receiver I.L.R.(1930) All. 313. The appellants attempt to place reliance on the decis