The main legal point established in the judgment is that the property vested in the Official Receiver under Section 37 of the Provincial Insolvency Act is to be administered for the benefit of all creditors, and no single creditor can appropriate the funds to the exclusion of others. Additionally, a creditor who receives funds in excess of what is justly entitled must refund the excess amount.

Venkataramana Rao, J.

1. This civil miscellaneous second appeal is from the order of the learned District Judge of Guntur confirming the order of the Additional Subordinate Judge of Guntur dismissing the petition filed by five creditors of an insolvent Thomas Reddi in I. p. No. 42 of 1923 on the file of the District Court of Guntur for the grant of certain reliefs against respondents 1 and 2 in the appeal. Respondent 1 is another creditor of the insolvent and respondent 2, P.V.S. Rao, is the special receiver, Guntur. Several questions of law were argued during the hearing of the appeal. In order to appreciate them, a statement of facts is necessary. Thomas Reddi was adjudicated insolvent on 8th January 1924. The adjudication was annulled on 7th December 1927, by reason of the insolvent failing to apply for his discharge in time. While annulling the adjudication, the District Judge of Guntur passed the following order:

I think that in the interest of the general body of creditors the property should vest in Mr. P.V.S. Rao, Official Receiver and order accordingly.

2. On 17th March 1928 one Yeruva chinnappa Reddi, respondent 1 herein, as assignee of a promissory note dated 10th May 1922 executed by Thomas Reddi instituted a suit in the Court of the Subordinate Judge of Guntur for recovery of a sum of Rs. 11,466-10-0 against the Official Receiver, Guntur, and Thomas Reddi. The debt due under the said promissory note was included in the schedule of debts filed by the insolvent. Both the defendants were ex parte and the following decree was passed:

Suit decreed for the plaintiff against defendant 2 (Thomas Reddi) and his properties in the hands of defendant 1 (Official Receiver) for the suit amount, costs and interest (further interest at six per cent, per annum) as prayed for.

3. This decree was passed on 31st March 1928. During the pendency of the suit, Chinnappa Reddy got an order for attachment before-judgment of the moneys in the hands of the Official Receiver. Within four days of the obtaining of the decree Chinnappa Reddi filed an execution petition (E. p. No. 25 of 1928) for recovery of a sum of Rs. 7415 in the hands of the Official Receiver to the credit of the estate of the insolvent. The Official Receiver opposed the application on the ground that in spite of the annulment the insolvency must be deemed to continue, that the petition for execution was incompetent and that the amount in his hands was liable to be distributed among all the creditors of Thomas Reddi. His contentions were negatived and he was directed to deposit the money into Court. Accordingly the said money was deposited into Court and was drawn by the decree-holder, Chinnappareddi. No appeal was preferred against the said order and it became final. It was incumbent on the Official Receiver to have obtained the directions of the insolvency Court before-the payment of the money into the executing Court. He should have also carried the matter in appeal having regard to the form-of the order passed by the District Judge in vesting the property in him. His explanation is that on legal advice he dropped further proceedings and the advice was not to prefer an appeal in view of the decision in Arunagiri Mudaliar v. Official Reciver of North Arcot 1926 M.W.N. 950. After drawing the said money from Court, Chinnappa Eeddi filed a second execution petition (E. P. NO. 42 of 1929) for attachment of certain decrees obtained by the Official Receiver against the debtors to the estate of the insolvent. The Official Receiver opposed the application urging the contentions which he raised in the prior execution petition. The learned Subordinate Judge upheld the objections of the Official Receiver and dismissed the petition. C.M.A. No. 182 of 1931 was filed against the said decision and the order of the learned Subordinate Judge was reversed on the ground that the Official Receiver was bound by the rule of res judicata by reason of the order in the prior E.P. No. 25 of 1928