Goberdhan Das and Another vs Jagat Narain

Foster, J.—It appears to me to be beyond question that the appellants have right on their side in the matter before us. They are the sons of one Girdhar Das, who came into Court, so far as the papers before us indicate, as early as 29th March 1924. He as a creditor lodged an objection to the application of another creditor for the adjudication of insolvency of Goberdhan Das. It was not till the 2nd August 1924, that Goberdhan Das was adjudged an insolvent. Meanwhile a local pleader, Babu Jagat Narayan, had been appointed ad interim Receiver. Unfortunately the Court overlooked at the time of the adjudication the necessity of the formal appointment of a Receiver in insolvency invested with the powers and duties indicated in Sections 56 and 59 of the Provincial Insolvency Act. Three days after the adjudication, the present appellants, who are the sons of Girdhar Das, although they had not been substituted in place of their father, put in a petition asking that an enquiry be held as to the ownership of a house in Mahalla Ratanpure in Chapra town by the Receiver. It appears that this house had been recorded by the Receiver as the property of the insolvent and in fact as his only immovable property. The substitution of the present appellants in the place of their father took place a few days later, and when they next appeared before the Receiver they undoubtedly appeared as party-creditors and they were claiming the house to be their own. Now, it is quite clear that the Court could before adjudication depute the Receiver ad interim to collect evidence as to the assets of the insolvent, but it is clear that the Receiver could not in a claim case of this nature pass the final order. In Section 56(3) of the Act it is laid down that when

the Court appoints a Receiver, it may remove the person in whose possession or custody any such property as aforesaid is from the possession or custody thereof: provided that nothing in this section shall be deemed to authorize the Court to remove from the possession or custody of property any person whom the insolvent has not a present right so to remove.

Two inferences seem to be deducible from the phraseology of this enactment. The Court, before it takes any action under this Sub-section in the way of realization of property, must have appointed a Receiver; and that means a Receiver in insolvency and not a Receiver ad interim before the adjudication.

Secondly, the power to remove property from the possession of any person is reserved to the Court. Another matter to be noticed in the new Insolvency Act is that the new Section 4 read with Section 5, which was the old Section 47, apparently intends that the Court in such matters of forcible realization of property is to act with the procedure and no doubt with the judicial caution of a civil Court. u/s 4 the decision of a dispute between the debtor and the debtor''s estate on the one hand, and claimant against it on the other, is to be final and binding; and u/s 5 the Court in regard to the proceedings under the Act is to have the same powers and to follow the same procedure as it has and follows in the exercise of original civil jurisdiction. Now, what I deduce from this is that the claimants who are here in appeal have a right to be heard judicially and to have from the Court a final decision before the property is wrested from their possession. No doubt after the order under appeal the property has been taken possession of. But if that act has been ultra vires it can only be ignored. The appellants did, as I have said, put in a petition before the Receiver in August last after they had been substituted in place of their father as creditors and as claimants. They applied for time continually, and in fact they do not appear to have taken any active step in the presence of the so-called Receiver. So in November we find that the so called Receiver reported the fact to the Court. The Court then had the responsibility before it of carrying out the law which I have quoted from Sections 56 and 4 and 5 of the Provincial Insolvency Act. But instead of holding an enquiry the Court passed an order on the 15th November 1924 to the effect that the possession of the house with all other things mentioned in the Insolvency petition be given to the Receiver through the Nazir. This order was passed without the slightest attempt at making an enquiry. Again, on the 5th December, the District Judge passed the second order which is the order under appeal. He mentioned that the present appellants had prayed that they might be allowed to adduce evidence in support of their claims having been unable to do so previously on account of malarial fever. As he was not satisfied with this explanation of the appellants'' previous conduct, he rejected the application.

Now it is perfectly obvious that the learned Judge had no power under the law to reject that application on these grounds. An enquiry by the so-called Receiver would not after adjudication be an enquiry of a person having authority under the Act. The Court had no evidence whatever before it and had never in fact taken measures to hear the evidence in respect of this claim. The so-called Receiver had no power to make any such decision as is mentioned in Section 68 of the Act; nor, as I have said before, would a Receiver in insolvency have power u/s 56 to remove property from the possession of others than the insolvent.

It appears to me therefore that the order under appeal was one which was entirely without jurisdiction. It is now the Court''s duty to appoint a Receiver in the regular manner; and in regard to the claim before it to pass a judicial decision as if this claim was a question agitated in an original civil Court following the same procedure so far as it can be followed. The decision thus arrived at after hearing the appellant''s evidence, and such evidence as the Receiver may adduce, will obviously have the force of a decree u/s 4 and will be appealable to the High Court u/s 75. As the case stands there has as yet been no judicial treatment of this claim. I would therefore order accordingly allowing the appeal. The appellants will get their costs out of the estate.

Das, J.

I agree.