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2005 DIGILAW 55 (AP)

K. Namaiah v. G. Narshimaiah Setty

2005-01-25

L.NARASIMHA REDDY

body2005
L. NARASIMHA REDDY, J. ( 1 ) THESE two revisions are between the same parties and arose under similar circumstances. Hence, they are disposed of through a common order. Sri G. Narshimaiah Setty is the sole respondent in C. R. P. No. 2315 of 2002. In c. R. P. No. 2318 of 2002, he is the first respondent, and respondents, 2, 3 and 4 are his brothers. Reference to him, will extend to other respondents also. ( 2 ) THE petitioner filed O. S. Nos. 19 and 20 of 2000, in the Court of Junior Civil Judge, alampur, against the respondent for recovery of certain amounts, on the strength of pronotes. He also obtained orders of attachment before judgment in both the suits. The suits were ultimately decreed on 14-7-2000. Thereafter, he filed E. P. Nos. 1 and 2 of 2000 respectively, against the respondent, for execution of the decrees. On coming to know that an item of property belonging to the respondent was sold in e. P. No. 20 of 1999 in O. S. No. 87 of 1998, in the same Court and a sum of Rs. 2,37,000/- is lying in deposit, the petitioner prayed for attachment of the sale proceeds for the benefit of the E. P. Nos. 1 and 2 of 2000. ( 3 ) THE respondent filed I. P. No. 35 of 2000, in the Court of District Judge, Kurnool. The item of property, which is the subject matter of E. P. No. 20 of 1999, was also shown in the schedule in the I. P. The receiver appointed in the I. P. , filed a memo before the Court of Junior Civil Judge, alampur, to the effect that the sale proceeds in E. P. No. 20 of 1999 constitute the subject matter of I. P. No. 35 of 2000, and the amount may not be paid to any parties. The executing court took the memo into account and dismissed the E. Ps filed by the petitioner. Hence, these Civil Revision petitions. ( 4 ) LEARNED counsel for the petitioner, sri K. Subba Rao, submits that the suits filed by the petitioner are anterior in point of time to the I. P. filed by the respondent, and the executing court ought to have accepted the claim of the petitioner, vis-a-vis, the amount which is in deposit to the credit of E. P. No. 20 of 1999. Placing reliance on certain judgments of this Court, he contends that mere pendency of I. P. filed by the respondent does not disentitle the petitioner to realize the fruits of the decrees passed in his favour. ( 5 ) THERE was no representation by the respondent even after service of notice on him. Having regard to the importance of the matter, this Court requested sri M. R. S. Srinivas to assist the Court. He acceded to the request and made elaborate submissions. He submits that in view of specific mandate contained in Sections 51 and 52 of Provincial Insolvency Act (for short "the Act"), the executing court has no alternative, but to reject the request of the petitioner. ( 6 ) THE petitioner obtained two decrees in o. S. No. 19 and 20 of 2000 against the respondent, on the strength of pronotes. Another suit, being O. S. No. 87 of 1998 filed by a different person, was decreed against the respondent. In E. P. No. 20 of 1999 filed by the decree holders therein, an item of property was sold for a sum of rs. 2,37,000/- and the amount is lying to the credit of that E. P. The petitioner wanted the decrees in his favour to be satisfied out of the said amount. ( 7 ) THE respondent filed I. P. No. 35 of 2000, in the Court of District Judge, Kurnool. It is not in dispute that the subject matter of the E. P. No. 20 of 1999 was shown as an item of property in the schedule to the IP. The Receiver appointed by the District court, Kurnool, filed a memo before the executing court, stating that the amount therein cannot be parted with, and be made available for distribution among the creditors in the I. P. ( 8 ) THE Act contains an elaborate procedure in the matter of adjudication of persons as insolvents, be it at their own instance, or at the instance of the creditors of such persons. Once an I. P. is admitted under Section 18 of the Act, several consequences ensue. The Court can appoint an interim Receiver for the property of the debtor, under Section 20 of the Act, and direct him to take immediate possession thereof. Once an I. P. is admitted under Section 18 of the Act, several consequences ensue. The Court can appoint an interim Receiver for the property of the debtor, under Section 20 of the Act, and direct him to take immediate possession thereof. Even while the debtor is yet to be adjudicated as insolvent, the Receiver is vested with the power to assume control over the properties and ensure their availability for the eventual distribution among the creditors. Sub-section (6) of section 28 of the Act protects the rights of secured creditors, as defined under section 2-E of the Act. It reads as under;-"nothing in this Section shall effect the power of any secured creditor to realise or otherwise deal with his security, in the same manner as he would have been entitled to realise or deal with it if this Section had not been passed. " ( 9 ) JUDICIAL opinion is divided as to the exact purport of this provisions. The High courts of Delhi and Bombay have taken the view that the protection under this provision is only to the extent of preserving the right of the secured creditor, such as mortgages, to seek redemption of the mortgage, and the proceeds thereof are liable to be shared along with other creditors. In padmavathamma v. B. Parthasarathi, this court held that the protection accorded to secured creditor under sub-section (6) of section 28 is absolute and unconditional. In fact, this view accords with the scheme of the Act, and in particular sub-section (2) of section 51 of the Act. ( 10 ) IN the instant case, the petitioner is not a secured creditor. Therefore, the decrees obtained by him do not acquire any precedence over the claims of the creditors listed in the I. P. filed by the respondent. Learned counsel for the petitioner places reliance upon a judgment of this Court in vasavi and Company v. Nampally Padma. In that case also, the decree holders were treated as secured creditors. The ratio laid down therein does not apply to the facts of this care. Hence, no exception can be taken to the orders under revision. ( 11 ) THE Civil Revision Petitions are accordingly dismissed. There shall be no order as to costs.