Bhyradevanhalli Lingappa vs Official Receiver

Beasley, J.—The suit here was to recover Rs. 165-11-0 due on a promissory note dated 10th August 1930 executed by the defendant in

favour of one Malliah who endorsed it to plaintiff 1 for Rs. 120 payable with interest at 12 per cent, per annum. The date of the endorsement is

14th August 1934. Before that, on 14th July 1934, Malliah the transferor had been adjudicated an insolvent and the Official Receiver was made a

party to the suit. The defendant contended amongst other things that the plaintiff''s were not entitled to sue and he also pleaded partial discharge.

This latter plea was found against by the trial Judge who held that the suit was maintainable and that plaintiff 2, namely the Official Receiver, stood

in the shoes of the debtor and he therefore gave a decree in favour of plaintiff 2 with costs but dismissed plaintiff 1''s suit, plaintiff 1 being the

endorsee of the promissory note. If the adjudication of Malliah had stood, there would be nothing wrong so far as I am able to see with the lower

Court''s order; but further information shows that the order of adjudication passed on 14th July 1934 was passed on a creditor''s petition and was

ex parte, and that later on, on 20th August 1936, on a petition by the debtor and after contest the insolvency petition itself was dismissed, the

order of dismissal being dated 28th October 1936. All this appears from the report made to the High Court by the District Judge dated 21st

January 1937.

As before stated, as things stood on the date of the lower Court''s order, that order was correct; but from what has transpired since, the order

was wrong although of course the trial Court could not know what was going to happen in the future. In my view, the lower Court''s order should

now be corrected in view of later proceedings and what has to be considered therefore is what effect those later proceedings have had upon this

transfer. Obviously, after the date of an adjudication the insolvent has no power whatsoever to deal with his property which, by reason of the order

of adjudication, vests in the Official Receiver. Therefore any transfer by the insolvent of any of his property subsequent to the order of adjudication

is void. What effect however has a subsequent order dismissing the insolvency petition upon such a transfer? The effect of such an order is to

revest the debtor''s property in the debtor as from the date of the order of adjudication. There is clear authority for this in this High Court and I am

much obliged to learned counsel for the petitioner for having directed my attention to them. The first of these cases is Ramaswami Kottadiar v.

Mutugesa Mudali (1897) 20 Mad 452 where it was held that the effect of an order setting aside an adjudication was to revest the debtor''s

property in him as from the (late of the vesting order, subject however to all acts done by the assignee, or under his authority, during the

continuance of the vesting order. The second case is Kothandarama Ravuth v. Murugesa Mudaliar (1904) 27 Mad 7 and is to the same effect,

There is also a Calcutta case reported in Lachmi Chand Jhawar Vs. Bipin Behari Ghose, , where in the course of the judgment there are similar

observations.

Viewing this case in the light of its sub. sequent history, the transfer by the insolvent to the assignee of the promissory note was a good transfer

and plaintiff 1, the assignee, was entitled to sue. That being, so, I consider that the proper order to make now is to give a decree to plaintiff 1 in the

suit instead of the Official Receiver for the amount claimed. The Official Receiver, although a respondent to this petition, has not appeared to assert

any claim to the decree amount. Had he done so, I should have considered whether I should set aside the decree passed in his favour because,

although the effect of a subsequent setting aside of the adjudication is as I have already stated, nevertheless any intervening acts properly done by

the Court are validated, but since the Official Receiver now makes no claim to this decree, I make the order already indicated. No costs. The civil

revision petition is dismissed otherwise.