Gamoji Venkata Ramakrishnarao vs Gullapalli Sambamurti

Horwill, J.—The appellant filed a petition in the Court of the District Judge of East Godavari, the order on which is under appeal, to scale

down his debt u/s 19 of Madras Act IV of 1938; Evidence was adduced; and after hearing arguments, the learned Judge framed three points as

arising for determination on the allegations in the petition and counter and on the evidence and arguments, They were:

(1) Whether the petitioner is barred by principles of res judicata from preferring the petition ?

(2) Whether the petitioner is entitled to the benefits of Act IV of 1938?

and

(3) What is the amount which will be due if the decree is scaled down ?

On the first point the learned District Judge decided in favour of the appellant. On the second point he held that the appellant was not possessed of

any saleable interest in the property on the relevant dates, 1st October, 1937, and 22nd March, 1938, and that he was therefore not entitled to the

benefits of Act IV of 1938. Because of this finding the petition had to be dismissed; and so the learned District Judge did not consider the third

question as to the extent to which the decree would have to be scaled down.

The decree to be scaled down was passed in O.S. No. 32 of 1933. The appellant on his own application was adjudged an insolvent on 16th

April, 1937; and on account of his own laches the adjudication was annulled on 5th March, 1941. The argument which appealed to the learned

Judge was that both on 1st October, 1937, the relevant date referred to in Act IV of 1938, and on 22nd March, 1938, when the Madras Act IV

of 1938 came into force, the property was vested in the Official Receiver; for those dates were subsequent to the adjudication and prior to the

annulment of the adjudication. It is now well-settled law that the effect of the annulment of an adjudication is to bring about the same state of affairs

as if the adjudication had never taken place. The learned advocate for the appellant has cited to us Ratnavelu Chettiar by mother and guardian

Madhuravalli Ammal and Another Vs. Franciscu Udayar and Others, ., in which Somayya, J., held that a transaction which had taken place

between the date of adjudication and the date of annulment without the permission of the Court was valid, because the annulment dated back to

the date of adjudication. In that, he followed Kothandarama Routh and Another Vs. Murugesa Mudali and Another, , in which on the Insolvency

Act then in force the learned Judges held that the adjudication was null and Void. After Somayya, J., had decided the above case, his decision

came up for consideration by a Bench of this Court in Sakhamuri Peraya and Others Vs. Nimmaraju Kondayya and Others, ., There, the law

bearing on the subject was considered in detail, and reference made not only to Kothandarama Routh and Another Vs. Murugesa Mudali and

Another, , but also to an earlier decision on which Kothandarama Routh and Another Vs. Murugesa Mudali and Another, , was based, namely,

Ramasami Kottadiar and Others Vs. Murugesa Madali and Others, . It. was pointed out that although at the time when Ramasami Kottadiar and

Others Vs. Murugesa Madali and Others, ; and Kothandarama Routh and Another Vs. Murugesa Mudali and Another, , were decided, the law

governing insolvency was the Indian Insolvency Act 11 and 12, Victoria, 1848; yet despite some slight change in the wording, the law relating to

the effect of the annulment of the adjudication remained the same. In support of that conclusion three decisions of single Judges to that effect were

referred to : Lingappa v. Official Receiver, Bellary (1937) 47 L.W. 366, Dharmasamarajayya Vs. Sankamma and Others, , and Ratnavelu

Chettiar by mother and guardian Madhuravalli Ammal and Another Vs. Franciscu Udayar and Others, . The judgment of Somayya, J., in particular

was considered at some length; and it was pointed out that his remarks the at if the annulment did not have retrospective effect, there would be no

need for the clause validating acts done by the Court or by the Receiver, for they would be valid, were very pertinent. So there can be no doubt

that the effect of the annulment of the adjudication on 5th March, 1941 was to bring about the same state of affairs as if there had never been an

adjudication on 16th April, I937, which means that on the relevant dates 1st October, 1937 and 22nd March, 1938 the property vested in the

appellant.

The learned District Judge felt himself compelled to follow Kudithipudi Venkatramayya Vs. Mallacheruvu Pundareekakshudu and Others, . In

that case, as in the present case, the relevant dates occurred during the period between the adjudication and the annulment of the adjudication; but

the learned Judge overlooked the distinction between that case and this in that there, upon the annulment of adjudication, it was ordered that the

property should continue to vest in the Official Receiver. If it had revested in the insolvent, then the date on which the revesting would be deemed

to have taken place would: be the date on which the original order of adjudication was passed, which would, in effect, mean the wiping out of the

intermediate period. Where, how-ever, at the time of the annulment of the adjudication, an order is passed continuing the property in the Official

Receiver, no question arises of the revesting of the property in the insolvent; nor does the annulment of adjudication have the effect of putting the

insolvent in the same position; with regard to his property as he would have been in had he not been adjudicated an insolvent. It is not therefore

surprising that in the judgment of Wadsworth, J. who delivered the judgment in that case, we find only a passing reference to the effect of Sections

37 and 43. The learned Judges almost entirely confined their consideration to an examination of Section 21 of the Agriculturists Relief Act. They

did not therefore consider what effect the annulment of adjudication would have upon the ownership of the property on the relevant dates.

Kudithipudi Venkatramayya Vs. Mallacheruvu Pundareekakshudu and Others, , is therefore easily distinguished; and we are bound by the other

decisions above referred to. We therefore hold that the property must be deemed to have been the property of the insolvent on 1st October, 1937

and 22nd March, 1938, and that therefore the provisions of Madras Act IV of 1938 would apply.

Mr. Somasundaram for the respondent seeks to support the dismissal of the application by contending that the learned District Judge was wrong

in his finding on the first point. He contends that the appellant was barred from putting forward this plea in his application u/s 19; because he could

and should have put it forward during the course of the earlier execution proceedings; and he therefore argues that the principle of constructive res

judicata would therefore have to be applied. In executing a decree, the executing Court cannot go behind the decree and is bound to take steps for

executing the decree for the sum for which the decree is passed. It was not open to the insolvent by way of a. counter to Claim that he was entitled

to the benefits of Act IV of 1938. If he had done so, the Court would have directed him to separate proceedings u/s 19, which would have to be

taken, not in the executing Court, but in the Court which passed the decree. Mr. Somasundaram pointed out that the learned District Judge relied

on Ramaswami v. Ramaswami AIR 1945 Mad. 342, in which the learned Judges, following agappa v. Annapoorani ILR 1941 Mad. 261 : ILR

1948 Mad. 505 (P.C.), held that since an application u/s 19 was a proceeding outside execution proceedings, the principal of res judicata would

not apply. Nagappa v. Annapoorani ILR 1941 Mad. 261 : ILR 1948 Mad. 505 (P.C.), was overruled by Adaikappa Chettiar v. Chandrasekhara

Thevar (1948) 1 M.L.J. 41 : L.R. 74 IndAp 264, which does not however help the respondent in any way. Even assuming that if there were points

raised in the application u/s 19 which could and should have been raised in the prior proceedings and if they were not, then the principle of res

judicata would apply; yet that principle would not apply to the facts of this case for the reasons already given.

It has finally been argued on behalf of the respondent that if these two points are found against the respondent, the respondent should be given

an opportunity of pressing the points raised by him in paragraph 3 of his counter and showing for other reasons why the appellant would not be

entitled to the benefits of the Act. There is no evidence of any value bearing on the points raised in paragraph 3 of the counter, and clearly no

arguments were advanced on them or the learned Judge would have referred to them in his order. We have no doubt that these points were given

up during the course of the arguments, if not before.

As we have pointed out in the opening paragraph, the learned Judge did not give a finding on question No. 3 of the questions framed by him for

determination. The appeal is therefore allowed and I.A. No. 125 of 1946, remanded to the District Judge of Rajahmundry for disposal on the third

question. The costs of this appeal will abide the result and be provided for in the order of the lower Court.