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 [4] 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: (i) 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 [4] 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, 1-10-

1937 and 22-3-1938, and that he was, therefore, not entitled to the benefits of Act IV [4] of 1938. Because of this finding the petition has 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 16-4-

1937; and on account of his own laches the adjudication was annulled on 5-3-1941. The argument which appealed to the learned Judge was that

both on 1-10-1937, the relevant date referred to in Act IV [4] of 1938, and on 22-3-1938, when the Madras Act IV [4] 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 Tollowed Kothandaram Ravuth v. Murugesa Mudaliar, 27 Mad. 7, 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 Peraya v. Kondayya, ILR 1948 Mad. 872: AIR 1948 Mad. 430. There, the law bearing on the subject was

considered in detail, and reference made not only to Kothandaram Ravuth v. Murugesa Mudaliar, 27 Mad. 7, but also to an earlier decision on

which Kothandaram Ravuth v. Muruugesa Mudaliar, 27 Mad. 7, was based, namely, Rama-sami Kottadiar v. Murugesa Mudali, 20 Mad. 452 : 7

M. L. J. 229. It was pointed out that although at the time when Ramasami Kottadiar v. Murugesa Mudali, 20 Mad. 452 : 7 M. L. J. 229 and

Kothandarama Ravuth v. Murugesa Mudaliar, 27 Mad. 7, were decided, the law governing insolvency was the Indian Insolvency Act--11 and 12

vict. 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: Bhyradevanhalli Lingappa Vs. Official Receiver, ,

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 that 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 5-3-1941 was to bring about

the same state of affairs as if there had never been an adjudication on 16-4-1947, which means that on the relevant dates 1-10-1937 and 22-3-

1938 the property vested in the appellant.

The learned District Judge felt himself impelled 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, however, at the time of the annulment of the adjudication, or 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 poaition 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, 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 [4] 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 or 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 [4] 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. Ramasami A. I. R. 1945 Mad. 342 : ILR (1945) Mad. 742 in which the learned Judges, following Nagappa v.

Anna-poorni Achi, I. L. R. (1941) Mad. 261 : A. I. R. 1941 Mad. 235 , held that since an application u/s 19 was a proceeding outside execution

proceedings, the principle of res judicata would not apply. Nagappa v. Annapoorni, ILR (1941) Mad. 261 : AIR 1941 Mad. 235 , was overruled

by AIR 1948 12 (Privy Council) 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 para. 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 para. 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 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.