Chittammal and Another vs Ponnuswami Naicker and Another

Devadoss, J.—This appeal is against the order of the District Judge of Tinnevelly directing the appellants to hand over possession of the

property in their possession to the Official Receiver and his lessee. The 1st respondent herein is the lessee of the property from the 2nd respondent

who is the Official Receiver of Tinnevelly. The appellants were in occupation of the property in dispute from the year 1897. The respondents

applied to the District Judge for an order u/s 56 of the Provincial Insolvency Act directing the appellants to hand over possession of the property in

dispute to the respondents on the ground that the property was the property of the insolvent. The learned Judge has passed an order u/s 56(3) in

favour of the respondents. The question for consideration is whether such an order can be passed against persons who claim adversely to the

insolvent. Section 56, Clause 3, para. 2, is in these terms:

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.

An application u/s 56 is made for the purpose of realisation of the property of the insolvent. If a person is in possession of the property on behalf

of the insolvent, or claims under the insolvent, possession of such property may be taken under the orders of the Court by the Official Receiver.

But where the person in possession claims adversely to the insolvent, or where he is able to show that the insolvent is not entitled to present

possession, the Court has no power to proceed u/s 56, for the second paragraph of Clause 3 specifically says 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."" The corresponding provision in the Presidency Towns Insolvency Act is Section 58; and Clause 2 of that section puts the matter beyond

doubt. It is as follows:

The Official Assignee shall, in relation to and for the purpose of acquiring or retaining possession of the property of the insolvent, be in the same

position as if he were a receiver of the property appointed under the Code of Civil Procedure, 1908, and the Court may, on his application,

enforce such acquisition or retention accordingly.

The position of the Official Assignee is therefore the same as that of a Receiver appointed under the Code of Civil Procedure. Order 40, Rule

1(2) is as follows:

Nothing in this rule shall authorise the Court to remove from the possession or custody of property any person whom any party to the suit has not a

present right so to remove.

The power of the Court under the Provincial Insolvency Act, Section 56 is not any higher than the power of the High Court under the

Presidency Towns Insolvency Act, Section �3. The Court therefore cannot, acting u/s 56, direct any person to deliver up property in his

possession to the Official Receiver unless the insolvent is entitled on the date of such application to possession of such property. If a title, however

flimsy, is set up by the person in possession, the Court should not act u/s 56. It is open to the Court on a proper application being made u/s 4 of

the Provincial Insolvency Act to try the issue whether the insolvent is entitled to the property or not. But in order to enable the Court to do that a

proper application ought to be made u/s 4 of the Provincial Insolvency Act, and the other side should be asked to plead thereto.

In this case it is suggested for the respondents that, though the application was made u/s 56, it must be deemed that the enquiry was held u/s 4

and the order was made under that section. But it is clear from the sixth paragraph of the District Judge''s order that he passed the order only u/s

56(3) and we cannot import into it something which is not there. If the application was one u/s 4 the 1st respondent should not have been made a

party. Nobody other than the Official Receiver can move u/s 4 unless the Official Receiver is unwilling to act and that the Court authorises a

creditor or any other person interested in preserving the insolvent''s estate to act under that section in the name of the Official Receiver.

It is again urged that the question of the title of the appellant has been gone into and has been found against, and therefore it is unnecessary that

there should be a fresh proceeding u/s 4. When an order is passed u/s 56(3) it does not determine the rights of the parties and though the Judge

may incidentally determine the question yet it cannot be said that the question is finally determined. It would not be right to allow a loose procedure

to obtain in insolvency proceedings. The Law of Insolvency is not properly understood in the mofussil and it would not be right on ''the part of the

Court to adopt a loose procedure for the purpose of realising the estate of the insolvent Such a procedure would lead inevitably to hardship and to

an unsettled state of the law.

In regard to the merits it is unnecessary to say much. The appellants were in possession of the property from 1897. They claim to have been in

possession of the property by virtue of an arrangement in the family. It is urged by Mr. Bhashyam Aiyangar that no registered document is

necessary for a family arrangement. If the appellant could show that there was a proper arrangement, they would be entitled to retain possession of

the property against the insolvent and against the Official Receiver.

On behalf of the respondents it is urged that the 1st appellant is dead and therefore the 2nd appellant, daughter of the 1st appellant, has no right

to be in possession of the property. This question again will have to be gone into fully, and, in the absence of an investigation into the title of the 2nd

appellant, it would not be right to deprive her of the possession of the property and drive her to a suit. If the order is to be construed as an order

u/s 4 a suit would be barred; if it is construed as an order u/s 56(3) the order is illegal inasmuch as the insolvent is not entitled to present possession

of the property.

In a recent case it was decided by Spencer, J. and myself that the power given by Section 4 of the Provincial Insolvency Act is subject to the

provisions of the Act, one of which is the proviso to Section 56(3) which is in the way of the Court removing any person from the possession of

property whom the insolvent has no present right to remove.

The appeal is allowed and the order of the Lower Court is set aside with costs throughout.

Waller, J.

I agree that, where there is a dispute as to the insolvent''s title, Section 56 cannot be invoked. For, in order that that section may be resorted to,

the insolvent must have an immediate right to remove from possession. Proceedings therefore should have been taken u/s 4.