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2003 DIGILAW 582 (AP)

Puvvada Nageswararaoand v. Kantamani Ratna Kumar

2003-04-16

B.SRI ATCHUTHANANDA SWAMY, TAMADA GOPAL KRISHNA

body2003
JUDGMENT : B.S.A. Swamy, J. One Mr. Puvvada Narsimha Murthy filed O.S.No.181 of 1976 seeking a declaration that the plaint "A' schedule moveable properties lying in the Shyamala Theatre as shown in Ex.A-5 the list of items that were taken over by the Official Receiver in I.P.No.24 of 1970 belongs to him, and consequently direct the defendants either to return the articles or the value of the articles to him. During the pendency of the suit, the first defendant was the auction purchaser of the theatre in a suit filed by the second defendant for recovery of the money passed on promissory note. The Defendant No.2 is the plaintiff in O.S.No.60 of 1979 who obtained a decree for Rs. 4,20,000/- subject to clearance of equitable mortgage for an amount of Rs.8,75,000/- in favour of his brother. Defendant No.3 was the proprietor of theatre. Defendants 4 to 10 were the legal representatives of late Alapati Bhaskara Ramayya. During the pendency of the suit, the plaintiff seems to have died. The legal representatives of the plaintiff were brought on record as plaintiffs 2 and 3. Likewise,R-11 to R-13 perhaps, female members of the late plaintiff were also brought on record as formal parties to the proceedings. 2. The auction purchaser as well as the other defendants contested the suit. 3. While the plaintiffs examined as many as four witnesses on their side and marked documents Exs.A-1 to A-18. On behalf of the defendants, the father of the first defendant, Mr. K. Ramchander, who worked as Clerk under the plaintiff was examined as D.W.2 and Exs.B-1 and B-12 were marked on behalf of the defendants. 4. On the basis of the above pleadings, the following issues were framed. (1) Whether the plaintiff is entitled for the declaration as prayed for- (2) Whether the suit is bad for non-joinder of necessary and proper parties i.e., LRs of Bhaskara Ramayya or the partners in the cinema- (3) To what relief- 5. The learned Senior Civil Judge having appreciated the oral and documentary evidence held all the issues against the plaintiff and dismissed the suit. Hence, the appeal by the plaintiffs. 6. The parties shall be referred to as arrayed in the cause title of the suit. The learned Senior Civil Judge having appreciated the oral and documentary evidence held all the issues against the plaintiff and dismissed the suit. Hence, the appeal by the plaintiffs. 6. The parties shall be referred to as arrayed in the cause title of the suit. The counsel for the appellants fairly conceded that having regard to the finding of the Insolvency Court that the lease deed is sham and nominal, he is estopped from advancing any arguments with regard to the movables claimed by the plaintiff. But at the same time, his case is that after he took over the theatre on lease he purchased generator because of the acute power supply in the area to run the theatre without any break and the same has to be declared as his property. The learned Judge commented on the evidence of P.W.1 with regard to the generator purchased by the father of P.W.1 at the time of taking inventory by the official receiver leaving other items of the property and noted down only about item No.7 generator in the inventory. He also observed a generator like item No.7 of the plaint schedule is not a small article. If the first plaintiff really purchased, he would have mentioned when he purchased that item of property and from whom and would have produced the receipt for purchase of the same. There is no satisfactory oral or documentary evidence in proof of the allegation that item No.7 of the plaint "A' schedule property was purchased by the first plaintiff. Coming to the documentary evidence on his behalf the ledgers and cashbooks maintained during the subsistence of the lease for the years 1970-71 till the possession of the theatre was taken over by the Official Receiver was marked as Exs.A-7 to A-17. We have gone through the entries in all these books to find out whether any entry was made either in the ledger or in the cashbook, which reflected the day-to-day transaction of a business firm, but we could not find anything with regard to the purchase of the generator. Admittedly he has not produced the receipt under which he purchased the generator. In his oral evidence, he stated that the account book for the relevant period was missing. Admittedly he has not produced the receipt under which he purchased the generator. In his oral evidence, he stated that the account book for the relevant period was missing. All these facts when read together, clearly go to prove that the plaintiffs have miserably failed to produce any evidence worthy of credence, that they have purchased generator during the subsistence of the contract. Hence, we do not find any merit in the appeal and it is accordingly dismissed. 7. During the course of hearing it came to light that some of the creditors of late Alapati Bhaskar Ramayya filed I.P.No.24 of 1970 and all the debts incurred by Bhaskar Ramayya came to about Rs. twenty lakhs. The properties that were shown in the Insolvency Petition include Shyamala Theatre, three houses in Rajahmundry and landed properties in Narenderpuram of Amalapuram taluk of East Godavari district. Both the parties admitted, that apart from the properties shown in the schedule to the Insolvency Petition, late Bhaskara Ramayya was having some more immovable properties worth in lakhs. We are given to understand that during the pendency of the suit one Advocate Commissioner was appointed to manage the cinema theatre and some other immovable properties belonging to late Bhaskara Ramayya was declared as insolvent. After Bhaskara Ramayya was declared as insolvent by order dated 9-7-1973, the Official Receiver took possession of other properties on 20-8-1973, and the Advocate Receiver appointed in O.S.No.60 of 1979 continued to manage the properties all these years. In fact the court below seemed to have given a direction to the Advocate Receiver to sell twenty-four plots and a house in Rajahmundry town. After O.S.No. 70 of 1979 was decreed the Advocate Receiver brought the theatre to sale and after discharging the suit debt of Rs.12,50,000/-, deposited, an amount of Rs.4,20,000/- were deposited to the credit of the Insolvent Petition. The Official Liquidator brought to our notice that the Advocate Receiver sold 24 plots and the amount was not deposited to the credit of the suit. We understand that the Advocate Receiver died recently. 8. The Official Liquidator brought to our notice that the Advocate Receiver sold 24 plots and the amount was not deposited to the credit of the suit. We understand that the Advocate Receiver died recently. 8. From the above it is seen that from the year 1970 till now the Advocate Receiver continued to be in possession of the properties even after the proceedings in the suit were terminated and after Official Liquidator has taken over the properties after Late Bhaskara Ramayya was declared as Insolvent on 20-8-1973 in violation of the provisions of the Provincial Insolvency Act, 1920 and he seemed to have misappropriated the sale proceeds of the lands. 9. Under Section 28(4) of the Provincial Insolvency Act, when once the debtor is declared as an insolvent, all property of the judgment debtor shall vest in the Official Receiver and he has to manage the properties. It is useful to extract Sec. 28 (4) of the Act. Section 28: Effect of an order of adjudication: Section 28 (4): All property which is acquired by or devolves on the insolvent after the date of an order of adjudication and before his discharge shall forthwith vest in the Court or receiver, and the provisions of sub- sec. (2) shall apply in respect thereof. 10. Likewise, Section 56 of the Provincial Insolvency Act, 1920 deals with the appointment of receiver. Section 56 of the Act reads as under: Section 56 Appointment of Receiver:(1) The Court may, at the time of the order of adjudication, or at any time afterwards, appoint a Receiver of the property of the insolvent, and such property shall thereupon vest in such receiver. (2) Subject to such conditions as may be prescribed the Court may- (a) required the receiver to give such security, as it thinks fit duly to account for what he shall receive in respect of the property. (b) by general or special order, fix the amount to be paid as remuneration for the services of the Receiver out of the assets of the insolvent. (b) by general or special order, fix the amount to be paid as remuneration for the services of the Receiver out of the assets of the insolvent. (3) Where the Court appoints a receiver, it may remove the person in whose possession or custody any such property as aforesaid is from the possession or custody thereof; Provided that nothing in this section shall be deemed to authorise the Court to remove from the possession or custody of property any person whom the insolvent has not a present right so to remove. (4) Where a receiver appointed under this section - (a) fails to submit his accounts at such periods and in such form as the Court directs, or (b) fails to pay the balance due from him thereon as the court directs, or (c) occasions loss to the property by his willful default or gross negligence, the Court may direct his property to be attached and sold, and may apply the proceeds to make good any balance found to be due from him or any loss so occasioned by him. 11. From the above, it is seen that when once the judgment-debtor is adjudged as an insolvent, all the properties held by the judgment-debtor shall vest in Official Receiver as per Section 56(1) of the Act. Under sub-section (3), the position is made further clear (i.e.,) when a court appoints a receiver it may remove the person in whose possession or custody of the property is to put it aptly. Under sub-section (3) after appointment of a Receiver the court is expected to remove the person in whose custody the property is and entrust the same to the Official Receiver. 12. But in this case unfortunately neither the Judicial Officers concerned have noted these provisions nor the Advocate Receiver appointed by the Court or the parties brought to the notice of the court the legal position that emerged after the debtor was declared as insolvent. In the result, the Advocate Receiver appointed during the pendency of money suit continued till now and what amount he was collecting from the house and Acs: 51-00 of land for over 33 years and how the amounts realized are being adjusted to satisfy the claims of the creditors for all these years is not known. In the result, the Advocate Receiver appointed during the pendency of money suit continued till now and what amount he was collecting from the house and Acs: 51-00 of land for over 33 years and how the amounts realized are being adjusted to satisfy the claims of the creditors for all these years is not known. It is also interesting to see how the creditors having filed the Insolvency Petition kept quiet all these three long decades knowing fully well that their amounts are very much safe and when it is not difficult for them to realize the monies due to them by bringing atleast one of the properties to sale. The Advocate Receiver seemed to have died very recently. The court below is directed to handover the possession of the properties in the possession of the Advocate Receiver to the Official Receiver forthwith and also see whether the claim of the creditors can be satisfied with the funds that are deposited to the credit of the Insolvency Petition. We are sure that if no amounts were left to satisfy the debts, it would be proper to put one of the house properties in Rajahmundry town to sale, so that the decree can be satisfied. Therefore, the Official Liquidator shall take immediate steps to dispose of one of the properties of the Insolvent so as to satisfy the claims of all the creditors within six months from the date of receipt of copy of this order. The Official Liquidator is also directed to find out the details of the properties that were handed over to the Advocate Receiver in O.S.No.60 of 1979 and whether the Advocate Receiver accounted for the receipts and expenditure and if any, amounts are lying to the credit of the suit before taking further action for discharge of the debits as directed above. He should also explore the possibility of filing suit on the legal representatives of the Advocate Receiver for realization of amounts if permissible in law. 13. We do not find any merit in the appeal and it is accordingly dismissed. No costs. 14. He should also explore the possibility of filing suit on the legal representatives of the Advocate Receiver for realization of amounts if permissible in law. 13. We do not find any merit in the appeal and it is accordingly dismissed. No costs. 14. The Registry shall mark a copy of the judgment to the A.P. Judicial Academy to bring to the notice of all the trainees about the provisions of the Provincial Insolvency Act, 1920 and the steps that have to be taken by the Judges when a person is adjudged as an insolvent.