Bishwanath Sao and Others vs Official Receiver and Others

Fazl Ali, J.—The principal question to be decided in this reference is whether upon the father of a Hindu joint family being adjudicated insolvent under the Provincial Insolvency Act, the Insolvency Court or the receiver has power to sell the property of the joint Hindu family including the interest of the minor son of the insolvent.

If we act on the maxim stare decisis there can be no difficulty whatsoever in deciding this question, because in a long course of decisions under the present Insolvency Act as well as the enactments which preceded this Act it has been held that the Insolvency Court or the receiver appointed by it has the same power over the joint family property as the insolvent had and can therefore sell not only the interest of the father who has been declared insolvent but also the interest of his son or sons in order to pay off such of his antecedent debts as are not shown to have been contracted for any illegal or immoral purposes. It is however contended before us that these decisions are not correct and at any rate the matter requires further examination in view of the decision of the Privy Council in AIR 1925 18 (Privy Council) . In that case a Hindu son instituted a suit to establish his right of pre-emption in respect of certain property which adjoined the ancestral property of the family to which he belonged; but the suit was resisted on the ground that his father having been declared an insolvent the whole property including his interest had vested in the Receiver and that consequently he was not entitled to pre-empt. This objection found favour with the High Court but their Lordships of the Judicial Committee overruling the decision of the High Court held that it was not the intention of the statute under which the case had been decided (that statute being the Presidency Towns Insolvency Act) that on the insolvency of a father the joint property of his family should at once vest in the Official Assignee. It may be stated here that the question whether the Official Assignee could sell the entire family property including the interest of the son for the payment of the just debts of the father did not arise directly before the Judicial Committee. Their Lordships however referred to Section 2(e) of the Act which defines the word ''property'' and to Section 52(2)(b) which provides that:

The property of the insolvent divisible among his creditors shall comprise the capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the insolvent for his own benefit.

Section 2(e) states that ''property'' includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit and after referring to this provision their Lordships observed as follows:

The father''s power to dispose of the joint property is not absolute but conditional on his having debts which are liable to be satisfied out of that property and Section 2 seems to contemplate an absolute and unconditional power of disposal.

As to Section 52 their Lordships said:

It may be that under the provisions of Section 52 or in some other way that property (the joint property of the family) may in a proper case be made available for the payment of the father''s just debts.

The argument which is founded upon these observations is twofold: (1) that as the definition of the word ''property'' in the Presidency Towns Insolvency Act which was construed by the Privy Council is identical with the definition in the Provincial Insolvency Act, it can no longer be held that the power which the father has to sell the whole of the ancestral property including his son''s interest in satisfaction of his just debts (debts which were not contracted for illegal or immoral purposes) is property of the insolvent within the meaning of the statute; and (2) that though, having regard to the language of Section 52, Presidency Towns Insolvency Act, it might be possible to hold that under that Act the joint family property including the interest of the son is available for the payment of the father''s legitimate debts, there being no similar provisions in the Provincial Insolvency Act, such property cannot be sold by the Court or the Receiver in cases arising under the latter Act. The argument is a plausible one and as it seems to have found favour with a Division Bench of this Court in Nilkantha Narayan Tewari v. Debendra Nath Ray AIR 1936 Pat 115 and several distinguished Judges of other High Courts, it becomes necessary to examine the matter with care. The provisions of the Insolvency Act which are relevant to the present discussion are contained in Section 28(2) and Section 59. Section 28(2) runs as follows:

On the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as hereinafter provided, and shall become divisible among the creditors...

The words have been underlined [italicized] by me. Again Section 59 lays down:

Subject to the provisions of this Act, the receiver shall, with all convenient speed, realize the property of the debtor and distribute dividends among the creditors entitled thereto, and for that purpose may sell all or any part of the property of the insolvent.

It is quite clear from these provisions that the whole of the insolvent''s property is available to the receiver for the payment of his legitimate debts and therefore the crucial question to be considered is whether the power or the right which the father has under the Hindu law to sell his son''s interest for the payment of his proper debts is "property of the insolvent" within the meaning of the statute. Now, as I have already indicated, in Section 2(d) of the Act it is stated that:

Property includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit.

The view which seems to have prevailed in all the High Courts in this country before the decision of the Judicial Committee in AIR 1925 18 (Privy Council) was that this clause was wide enough to cover the power of the father to sell his son''s interest for the payment of his legitimate debts. But in almost all the cases which have been decided recently it has been held that this view must be abandoned in the light of the observations of the Privy Council that the words quoted above seem to contemplate an absolute and unconditional power of disposal and not a power which could be exercised only upon proof that the property had to be sold for the payment of antecedent debts and that the debts had not been contracted for any illegal or immoral purposes. The actual words used by the Privy Council in this connection are these:

The father''s power to dispose of the joint property is not absolute but conditional on his having debts which are liable to be satisfied out of that property; and Section 2 seems to contemplate an absolute and unconditional power of disposal. And if the later sections of the Act are examined, it becomes apparent that this cannot have been the intention of the Statute.

The words "And" and "this" have been underlined [italicized] by me. One of the arguments which was addressed to us was that this passage has been generally misunderstood and that what their Lordships intended to point out was that the apparent meaning conveyed by the words used in Section 2(d) could not be their real meaning, because such a meaning was not in consonance with the intention of the statute. This argument becomes plausible if we read the word and as ''but,'' and if we remember that the underlined [italicized] word this could have reference only to what was said in the previous sentence as to the apparent meaning of Section 2. Assuming, however, that this interpretation of their Lordships'' judgment is not correct, it seems to me to be quite clear that the definition of the word "property" in Section 2(d), Prov. Insol. Act, is not exhaustive but was inserted only to emphasize the fact that certain kinds of property, which in ordinary parlance may not be regarded as the property of the insolvent, are to be treated as "property" for the purpose of the Insolvency Act. It is to be noticed that in defining the various words which were intended to be defined in Section 2 sometimes the word "means" has been used and sometimes the word "includes" has been used. It seems to me to be clear that when in an interpretation clause it is stated that a certain term includes so and so, it is implied that the term retains its ordinary meaning whatever else it may mean. If therefore it is held that the definition of the word "property" in Section 2 is not exhaustive, it becomes necessary to consider whether the peculiar right of disposal which the father has over his son''s interest in the joint family property is or is not property within the ordinary meaning of the term. The word "property" ay far as I am aware has not been exhaustively defined in any Indian statute; but to use the language of Lord Langdale:

It is the most comprehensive of all terms which can be used inasmuch as it is indicative and descriptive of every possible interest which the party can have: see Jones v. Skinner (1835) 5 LJ Ch 87.

I do not wish to encumber this discussion by referring to the wide range of rights and objects to which the word "property" has been held to be applicable, but I think that it can be legitimately held that the word "property" as used in the Provincial Insolvency Act includes, to use the language of the learned author of a well known text book,

all valuable right or rights which may be turned into money or whose worth can be assessed in money (William s Principles of the Law of Real Property, Edn. 24, 1926, p. 4).

This simple definition of the word "property" is in my opinion comprehensive enough to include the right which the father has of bringing to sale his son''s interest to pay his own legitimate debts. The position of the father in a Hindu joint family is a peculiar one and if we give a restricted meaning to the word "property" and construe it to mean only those objects and rights over which the father has an absolute power of disposal, the question as to what is the whole property of the father which vests in the Receiver u/s 28, when he has been declared insolvent, would be surrounded with many difficulties and it may even be questioned whether strictly speaking any property would vest in the Receiver. The question has been dealt with so exhaustively by Mukerji and King, JJ. in Anand Prakash and Another Vs. Narain Das-Dori Lal and Another that I shall content myself by reproducing the following passage from the judgment of King, J.:

It must be remembered that the father''s power of disposal of his own undivided share is no greater than his power of disposing of the entire co-parcenary property. His undivided share only belongs to him in the sense that it would fall to his share in the event of a partition. I doubt whether his undivided share can properly be said to be "vested" in him. The share is indefinite and fluctuating in extent. The ownership of the co-parcenary property is vested in the whole body of co-parceners. No individual member can claim that he has a definite share. The father''s power of disposal of his undivided share is conspicuous by its absence. He cannot dispose of it by gift or by will. On his death intestate it does not pass to his heirs. He cannot even alienate it for value without the consent of his co-parceners. In short his power of dealing with his undivided share is no greater than his power of dealing with the co-parcenary property as a whole. Considering that the father can be said to ''own'' his undivided share in a very limited sense, and that he has no special power of disposing of that share, I think it will be very anomalous, if only his undivided share vests in the receiver, while his very valuable right and power of disposing of the joint family property for discharging his personal debts does not so vest.

I may state here that the decision of the Privy Council in AIR 1925 18 (Privy Council) has been explained in a series of cases and almost all the High Courts are now agreed that the view which prevailed before that decision should be adhered to: see Balavenkata Seetharama Chettiar v. Official Receiver Tanjore AIR 1926 Mad 994 Anand Prakash and Another Vs. Narain Das-Dori Lal and Another Haridas Himatlal v. Lallubhai Mulchand Mehta AIR 1931 Bom 50 Khem Chand v. Narain Das AIR 1926 Lah. 41 . The matter has also been set at rest by the Judicial Committee in their recent decision in AIR 1936 277 (Privy Council) so far as cases arising under the Presidency Towns Insolvency Act are concerned. In that case it has been held that though upon the adjudication of a Hindu father as insolvent the son''s interest in the family property does not vest in the Official Assignee, yet the capacity to exercise the power of the insolvent father to sell the joint family property for his antecedent debts not incurred for immoral or illegal purposes vests in him u/s 52(2)(b), Presidency Towns Insolvency Act. As I have already stated there is no provision in the Provincial Insolvency Act corresponding to Section 52(2)(b), Presidency Towns Insolvency Act, but their Lordships have at least in one passage referred to Section 17 of that Act which does correspond to Section 28, Provincial Insolvency Act. However that may be, I think that the legislature could never have intended that while in the Presidency-towns the Official Assignee should be able to sell the undivided share of the son to pay the father''s debt, the Court or the receiver should not have such a power in the mofussil towns. It is to be remembered that the Presidency Towns Insolvency Act was enacted in 1909, whereas the Provincial Insolvency Act was enacted 11 years later in 1920. In Section 52, Presidency Towns Insolvency Act all that is enacted is that the property of the insolvent shall comprise the capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the insolvent for his own benefit at the commencement of his insolvency or before his discharge. This provision merely emphasizes that the capacity to exercise the powers referred to therein is a species of property. The mere absence therefore of words corresponding to those used in Section 52 which merely refer to a species of property cannot restrict the meaning of the word "property." This word, as I have already stated, has ordinarily a very wide meaning and might, even without there being any express provision specifying what it does and what it does not comprise, embrace all those rights and interests which are said to be comprised within the term "property" according to Section 52, Presidency Towns Insolvency Act. As the law applicable to the Presidency-towns was modelled on the English law, most of the provisions in the Presidency Towns Insolvency Act have been copied from the English Bankruptcy Act and Section 52 of the former Act is almost a verbatim reproduction of Section 38 of the latter Act. Some of these provisions however may not have been reproduced in the Provincial Insolvency Act because they were considered redundant or unnecessary.

I think that under the old decisions it was possible to take the view that u/s 28 the whole property which the father could sell voluntarily to pay off his debts is by operation of law transferred to the Court or the Receiver. This view can no longer be taken, because it has been definitely held by the Privy Council that upon the adjudication of a Hindu father the son''s interest in the family property does not vest in the Official Assignee or the Receiver. This decision, however, does not affect the view that a Receiver, by his peculiar position under the Act, may be taken to represent the insolvent as well his creditors. If he represents the insolvent, it would be illogical to hold that he cannot exercise the power which the insolvent could exercise to pay off his debts; and similarly it would be contrary to principle to hold that though the holder of a simple decree against the father can attach and sell the joint family property including the interest of his sons, the Receiver is unable to do so. In my opinion the answer to the first question which has been submitted to us for decision should be given in the following terms: When a Hindu father is adjudicated insolvent, the interest of his son or sons in the family property does not vest in the Court or the Receiver, but the Court or, the Receiver has power to sell the joint family property including the interest of the minor son or sons of the insolvent for the payment of his antecedent debts not incurred for immoral or illegal purposes. The second and the third questions which have been referred to this Bench have been formulated in these terms:

(2) Having regard to the decision of the Judicial Committee of the Privy Council in AIR 1925 18 (Privy Council) is the law correctly stated in the decisions of this Court in Chairman, District Board, Monghyr v. Sheodutt Singh AIR 1926 Pat 438 and Bhola Prasad v. Ramkumar Marwari AIR 1932 Pat 231?

(3) Was the case in Nilkantha Narayan Tewari v. Debendra Nath Ray AIR 1936 Pat 115 correctly decided?

In view of the aforesaid discussion, I think that our answer to these questions should be that the first two cases, namely Chairman, District Board, Monghyr v. Sheodutt Singh AIR 1926 Pat 438 and Bhola Prasad v. Ramkumar Marwari AIR 1932 Pat 231 were correctly decided so far as the decision in these cases bear on the first question, and that the third case, namely Nilkantha Narayan Tewari v. Debendra Nath Ray AIR 1936 Pat 115 was not correctly decided.

Courtney-Terrell, C.J.

I agree.

James, J.

I agree.