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1953 DIGILAW 275 (MAD)

Firm of Seth Arjundas Vasudev by partner Chhugomal v. S. R. Narayana Pillai and others

1953-08-31

RAMASWAMI

body1953
Judgement JUDGMENT :- This is an appeal preferred against the order made by the learned Subordinate Judge of Salem in R.E.A. No. 819 of 1952 in R.E.P. No. 175 of 1949 in O.S. No. 35 of 1949. 2. The established facts are :- The appellant firm is an assignee of the decree obtained by respondent 5 against respondents 1 to 3 in O.S. No. 35 of 1949. E.P. No. 175 of 1949 was filed by respondent 5 and in these execution proceedings certain properties belonging to respondents 1 to 3 were brought to sale and the sale was fixed for 17-8-1950. Before the sale could take place another firm of creditors of respondents 1 to 3 filed I.P. No. 32 of 1950, on 12-8-1950 seeking the adjudication of respondents 1 to 3 as insolvents. On the same date an application for appointment of an interim receiver to take possession of the properties of respondents 1 to 3 was made. That application was ordered and the Official Receiver, Salem, was appointed interim Receiver. Another application was made for stopping the sale fixed to take place-on 17-8-1950. The insolvency Court, however, refused this request and allowed the sale to proceed and directed that the sale proceeds should be handed, over to the Official Receiver for distribution among all the creditors. The sale was held on 17-8-1950 and was concluded on 18-8-1950. One-fourth of the entire sale-amount was deposited into Court on 18-8-1950 and the balance was realised on 29-8-1950. A sum of Rs. 5,338-4-0 representing the sale proceeds was remitted to the Official Receiver, Salem, in pursuance of the order of the Insolvency Court in I.A. No. 508 of 1950 in I.P. 32 of 1950. In the meanwhile, another creditor of respondents 1 to 3 filed I.P. No. 44 of 1950, on 16-11-1950 for adjudging respondents 1 to 3 as insolvents. Both the petitions were consolidated and these proceedings were pending till 25-6-1951 on which date respondents 1 to 3 were adjudged insolvents in I.P. No. 44 of 1950 and I.P. No. 32 of 1950 was dismissed as unnecessary. Both the petitions were consolidated and these proceedings were pending till 25-6-1951 on which date respondents 1 to 3 were adjudged insolvents in I.P. No. 44 of 1950 and I.P. No. 32 of 1950 was dismissed as unnecessary. The acts of insolvency alleged in the two insolvency petitions were different because the act of insolvency alleged in the later application was the execution sale held at the instance of respondent 5 while private alienations of properties by the insolvent were the acts of insolvency relied on in I.P. No. 32 of 1950. 3. The case for the petitioner-appellant was that he was entitled to exclude the other creditors of respondents 1 to 3 from participation in the sale proceeds and this was based upon the contention that I.P. Nos. 32 and 44 of 1950 were not consolidated and were distinct I.Ps. and had different disposals and that having regard to the provisions of clause (2) of Section 28, Provincial Insolvency Act, the benefit of an order appointing an interim receiver in I.P. No. 32 of 1950 could not extend to the proceedings in I.P. No. 44 of 1950 and that unless another order of appointment of a receiver in I.P. No. 44 of 1950 bad been made, and which had not been made, the properties oh the insolvents did not vest in the Official Receiver who was appointed interim receiver in the first petition thereby resulting in the sale proceeds being ear-marked for satisfying the decree debt of the appellant. 4. On the other hand, the contention of the respondents was that the dismissal of I.P. No. 32 of 1950 was incompetent and that the interim receiver who was appointed in I.P. No. 32 of 1950 was vested with the entire estate of the insolvents and the adjudication order though made in I.P. No. 44 of 1950 took effect from the date of admission of I.P. No. 32 of 1950 since both the petitions were consolidated and heard together. 5. The entire point in controversy is whether I.P. Nos. 32 and 44 of 1950 were consolidated under Section 15, Provincial Insolvency Act because if they were so consolidated and disposed of, the appellant has no case and if they were not so consolidated and disposed of as such, the respondents have no case. 5. The entire point in controversy is whether I.P. Nos. 32 and 44 of 1950 were consolidated under Section 15, Provincial Insolvency Act because if they were so consolidated and disposed of, the appellant has no case and if they were not so consolidated and disposed of as such, the respondents have no case. The learned Subordinate Judge held that there was consolidation in this case and rejected the claim of the appellant and hence this appeal. 6. On a review of the entire circumstances of the case I have come to the same conclusion as the learned Subordinate Judge and here are my reasons. 7. Under Section 15, Provincial Insolvency Act the Court has power to consolidate separate petitions against the same debtor. The only limitation is that the section does not empower the Court to pass an order of consolidation on a petition in insolvency before it is admitted and before an opportunity had been afforded to the other parties concerned of showing that the petition is not competent. Prima facie this section refers to consolidation of I.Ps. after they are admitted and pre-supposes that such petitions are otherwise competent - Dayaram v. Sakhibai, AIR 1931 Sind 65 (A). This has been the case here. This section also does not require that a formal order of consolidation should be passed because the language used is "The Court may consolidate the proceedings or any of them on such terms as the Court thinks fit". Express order is not necessary and can be inferred from the conduct of the proceedings. In this case though, formal order is not forthcoming, the conduct of the proceedings in the two petitions clearly establishes, as pointed out by the learned Subordinate Judge, that both the insolvency petitions were consolidated and heard together. I.P. No. 32 of 1950 was pending trial when I.P. No. 44 of 1950 was instituted. Both the petitions were posted for the same date and were finally taken together for disposal on 25-6-1951. The debtors were absent and consequently an order of adjudication was made in I.P. No. 44 of 1950. I.P. No. 32 of 1950 was pending trial when I.P. No. 44 of 1950 was instituted. Both the petitions were posted for the same date and were finally taken together for disposal on 25-6-1951. The debtors were absent and consequently an order of adjudication was made in I.P. No. 44 of 1950. The Advocate for the petitioner in I.P. No. 32 of 1950 had made the following endorsement on his petition : "Since the respondents herein have been adjudged insolvents in I.P. No. 44/50, the question of fraudulent preference or otherwise of the act of insolvency alleged herein may be left open and this application is not pressed". The Court passed an order on this endorsement "Ordered as endorsed above". If the learned Subordinate Judge who had passed this order had been an experienced Subordinate Judge in insolvency work, he would have adjudicated the debtors as insolvents in this I.P. also. But what he purported to do was to make a decretal order dismissing I.P. No. 32 of 1950 and another decretal order in I.P. No. 44 of 1950 adjudicating respondents 1 to 3 as insolvents. I need not point out that this made no difference because there was absolutely no conflict of interest between the petitioner in I.P. No. 32 of 1950 and the petitioner in I.P. No. 44 of 1950. There was no contest in either petition and the respondents were absent. The only point involved at both the insolvency petitions was whether the debtors had committed an act of insolvency. The fraudulent preference which was the act of Insolvency alleged in I.P. No. 32 of 1950 was not decided because the act of insolvency alleged in I.P. No. 44 of 1950 was sufficient by itself to adjudicate the respondents as insolvents. In addition, the act of insolvency in I.P. No. 32 of 1950 was one which could be properly dealt with by the Official Receiver taking suitable proceedings in the course of administration of the estate of the insolvents. Therefore, looked at from any point of view, it is obvious that the Court had consolidated the proceedings under Section 15 and it passed an order which was applicable to both the insolvency petitions and consequently the order of adjudication took effect from the date of the order appointing an interim receiver in I.P. 32 of 1950. Therefore, looked at from any point of view, it is obvious that the Court had consolidated the proceedings under Section 15 and it passed an order which was applicable to both the insolvency petitions and consequently the order of adjudication took effect from the date of the order appointing an interim receiver in I.P. 32 of 1950. It follows therefore that the creditor who brought the properties to sale cannot get exclusive benefit of the fruits of execution and in tact this was not certainly the attitude of the creditor who filed I.P. No. 32 of 1950. 8. Both before the lower Court and here reliance was placed upon the decisions in - D.N. Chatterjee and Co. v. V. Raj Kumar, AIR 1933 Cal 651 (B) and -Maung Maung v. A.R.R.M.A.N. Firm AIR 1930 Rang 265 (1)(C). These decisions are clearly distinguishable from the facts of the present case because in both these cases an execution sale against the properties of the judgment-debtors was allowed to proceed after the insolvency petition against the judgment-debtor had been admitted and the sale proceeds had been directed to be remitted to the Official Receiver. Subsequent to this order the insolvency petition under which the interim receiver had been appointed was dismissed either for non-prosecution or for other defects. Sometime after the dismissal of the first insolvency petition a second insolvency petition was filed for adjudicating the debtors insolvents. The receiver appointed under the second insolvency petition claimed the proceeds of the sale and the question that arose for consideration was whether the receiver in the second insolvency petition was entitled to the sale proceeds. In both these decisions it was held that the vesting of the properties of the insolvents in the first receiver ceased the moment the first insolvency petition was dismissed and the admission of the second, insolvency petition had not the effect of reviving the prior insolvency petition. In the present case there is no interval between the dismissal of I.P. No. 32 of 1950 and the order of adjudication in I.P. No. 44 of 1950. In fact even during the pendency of I.P. No. 32 of 1950, I.P. No. 44 of 1950 was instituted and both the petitions were consolidated and heard together and I.P. No. 32 of 1950 was dismissed on the ground that the respondents had been adjudged insolvents in I.P. No. 44 of 1950. In fact even during the pendency of I.P. No. 32 of 1950, I.P. No. 44 of 1950 was instituted and both the petitions were consolidated and heard together and I.P. No. 32 of 1950 was dismissed on the ground that the respondents had been adjudged insolvents in I.P. No. 44 of 1950. Therefore both these decisions are irrelevant for our purpose. 9. The final argument of the learned counsel for the appellant was that a diligent creditor should not be deprived of the fruits of his execution and for this purpose he relied upon the decision in - Venkata Sivayya v. Suryanarayana, AIR 1938 Mad 906 (D). This decision also is not relevant for our purpose because the question which arose there was whether a particular execution sale was invalid as being in contravention of Section 62, Provincial Insolvency Act. The finding of the High Court was that the mere knowledge of the admission of the insolvency petition on the part of the decree-holder who purchased the property in execution sale did not by itself connote want of good faith on the part of the purchaser. There no question arose as to who would be entitled to the sale proceeds. In addition, the preference a to be shown to the diligent creditor cannot be carried farther than the advantages provided for under the Provincial Insolvency Act. The insolvency law has a twofold purpose to serve. One is to give relief to the debtor from the harassment of his creditors whose claims he is unable to meet and the other is to prevent a scramble among the creditors to get at the assets of the debtor promoting fraud and collusion between the creditor and debtor and facilitating the vicious principle of each one for himself and Devil take the hindmost and provide a machinery by which all creditors are equitably satisfied. In the matter of Tun Eye Maung, AIR 1936 Rang 412 (E); - Mahabir Prasad v. Shivanandan, Sahay, AIR 1934 Pat 514 (F);- Sooni Ram Rammranjandas v. S.A.H.M. Chettyar Firm, AIR 1933 Rang 363 (G); - Anand Prakash v. Naren Das Donki AIR 1931 All 162 (FB) (H); - Attorney-General of British Columbia v. Attorney-General of Canada, AIR 1937 PC 95(1) : - Tulsi Ram v. Fleming Shaw Co., Amritsar, AIR 1936 Lah 407 (J). 10. 10. In the result, this appeal fails and is hereby dismissed, and in the circumstances where the respondents have not appeared without costs. Appeal dismissed.