Katrapati Hanumayamma vs Official Receiver

Abdur Rahman, J.—This is an appeal from an order of the learned District Judge of Guntur reversing an order passed by the Additional

Subordinate Judge of that place and holding that the charge created in the appellant''s favour was not binding on the Official Receiver. A suit for

maintenance was instituted by the appellant on 28th September 1932 in the District Munsif''s Court at Guntur in which she had also prayed for the

creation of a charge on certain immovable properties belonging to her husband Venkatanarayana (O.S. No. 463 of 1932). This was decreed on

20fch March 1933 but the charge was created by the Court only over one item of the property. Venkatanarayana had in the meantime applied for

insolvency (I.P. No. 158 of 1932). This petition was presented on 11th October 1932 although he was not adjudicated until 9th September 1933.

A year later, the Official Receiver made an application to the Subordinate Judge, Guntur, under Sections 4, 53 and 54, Provincial Insolvency Act,

asking for a declaration that the charge created by the District Munsif in the appellant''s favour in O.S. No. 463 of 1932 was not binding on him

(I.A. No. 1563 of 1934). This prayer was based on the allegations that the suit was not contested by the insolvent and that he had collusively

suffered the decree to be passed against himself with intent to defeat, delay and defraud his creditors. Reliance was placed by the Official Receiver

also on the fact that the petition for insolvency was pending at the time when the charge was ordered to be created and it was therefore urged that

the appellant would not be entitled to claim protection u/s 55, Provincial Insolvency Act. It was stated on behalf of the appellant on the other hand

that her relations with her husband had been strained and that she had been living separately from her husband for more than 15 years. She also

alleged that the petition for insolvency was presented by Vekatanarayana to defeat her rights after a defence had been filed by him in the civil suit

and he found the plaintiff''s claim to be unanswerable. It was also urged that inasmuch as the suit on behalf of the appellant was instituted before the

insolvency petition was filed, the charge created by the Court in her favour would remain unaffected by the order of adjudication passed after the

decree had been obtained by her. The learned Subordinate Judge, who heard the application, was of opinion that there was no evidence to show

that any collusion existed between the appellant and her husband, Venkatanarayana, and since the suit was contested by the latter, the decree

could not be held to have been suffered by him with intent to defeat, delay and defraud his creditors. He also held that the Court was justified in

passing the decree creating a charge in the appellant''s favour and that the insolvency proceedings were subject to the Civil Court''s decree. The

Official Receiver''s objection was there fore turned down. This order was appealed against, and the learned District Judge held that

the maintenance decree passed by the District Munsif and the charge for it created by him, are in effect, a farce to defeat and delay the general

body of creditors.

He was also of opinion that the suit for maintenance, though seemingly a contested suit, was really ""an ex parte suit"" and that the District

Munsif''s observation, made while rejecting an application presented by certain creditors who had applied to be impleaded as parties that the suit

was being hotly contested, was incorrect. The Official Receiver''s appeal was therefore accepted. This has given rise to the present appeal. It may

be noted that the Official Receiver did not, in his application, attack the portion of the decree passed by the District Munsif granting maintenance to

the appellant at the rate of Rs. 96 per annum and yet a perusal of the learned District Judge''s judgment would show that even that portion of the

decree was held by him to be void against the Official Receiver. How in the absence of any evidence on the record the learned District Judge came

to the conclusion that any collusion existed between the appellant and her husband, it is not easy to see unless he was influenced by the fact that the

suit was between the husband and the wife and that it was filed a fortnight before the actual presentation of the insolvency petition. The duty of

maintaining a wife is cast by Hindu law on her husband, Mahalakshmamma Garu v. Yenkataratnamma Garu (1883) 6 Mad. 83 and if he neglects

or refuses to maintain his wife, which he is legally bound to do, she would have no option but to have recourse to law. The relationship between the

parties could not by itself be a ground for arriving at the decision that any litigation between them must necessarily be held to be collusive. The

other fact that the suit by the appellant was filed within a few days before the actual presentation of the insolvency petition is not, although

suggestive of collusion, enough by itself to arrive at the conclusion that it was filed in consequence of a conspiracy existing between them. It may

well have been, as suggested in the appellant''s reply to the petition, that the petition for insolvency was itself prompted by the knowledge of the

institution of the suit for maintenance.

There are other facts however which lead to an inference that the suit, for maintenance was not collusive but that of a bona fide character. That it

was contested admits of no doubt. The record shows that it was. If the husband wished to contest the suit earnestly he had to disclose the debts

which he owed. This was a very material fact which Venkatanarayana had to plead in order to bring down the rate of maintenance, if granted by

the Court, to as low a figure as possible. He did so, and the Court was apparently influenced by the plea. The fact cannot be overlooked that while

passing a decree for maintenance, the creation of a charge rests with the Court. It is a discretionary matter and the discretion need not at all have

been exercised in the appellant''s favour. Had a charge been created on his property by the husband either directly or indirectly or had he even

given his consent to its creation by a third person or even by the Court the matter might have assumed a different aspect. But when the question of

creating a charge depends entirely on the discretion of the Court, it cannot be reasonably contended that any charge created by the Court was in

consequence of a collusion existing between the parties to the suit. Moreover, the exercise of a judicial discretion by the Court can also be inferred

from the fact that while a charge was being claimed by the appellant in respect of four properties mentioned in the schedule attached to the plaint,

the Court did not accede to that prayer but ordered the charge to be limited to one item only. The proposition that a Court is legally entitled to

create a charge in a suit for maintenance is well recognized and was not contested before me. It is this fact which distinguishes, in my mind, cases

such as Tulsiram v. Mohomed Arif (1928) 16 AIR Lah. 738 and Achutaramayya v. Official Receiver, East Godavari (1938) 22 AIR Mad. 817,

cited by the learned Counsel for the respondent.

In the first case, the insolvent and his creditor had agreed to refer their dispute in regard to certain money to an arbitration after a petition for the

adjudication of the debtor had been presented to the Court. The arbitrator did not only rest content with passing a decree in the creditor''s favour

but ordered it to be a charge on some of the debtor''s property. The petition for insolvency was followed by an order of adjudication. It is

therefore clear that the charge created in the creditor''s favour could not have been held to be valid both on the ground that the matter was referred

to arbitration while the insolvency application was pending against the debtor and for the reason that the arbitrator did not have the power to create

a charge unless it was either authorized or suffered by the owner of the property, i.e. the debtor and the creditor''s claim was, if I may say so with

respect, rightly disallowed. The second case cited on behalf of the respondent can be explained on more or less the same grounds. In that case a

debtor had executed an agreement in favour of a creditor undertaking to execute a mortgage as security for his debts. An insolvency petition was

presented against the debtor before a mortgage deed was executed and the creditor''s debt was included in the schedule of debts filed by the

insolvent. Subsequent to the presentation of the petition for insolvency, but prior to the order of adjudication, the creditor brought a suit for specific

performance of the contract. This was defended by the debtor to begin with but the defence was subsequently withdrawn and the suit was

decreed. It was held in those circumstances that the decree for specific performance in the creditor''s favour was not binding upon the Official

Receiver. The facts of the case thus show that it was the debtor''s acts in executing an agreement and in withdrawing from the defence he had filed

in the suit for specific performance, which led to the decree being passed by the Court. The case therefore fell directly within the provisions of

Section 54, Provincial Insolvency Act. Moreover having regard to Section 28 of the Act, the whole of the insolvent''s property including the one

covered by the suit for specific performance had to be held as vesting in the Insolvency Court or in the Official Receiver not only from the date of

adjudication but from the date of the presentation of the petition.

The same however could not be said of the suit for maintenance filed by the appellant. I have already come to a finding that the decree in that

suit was not passed in consequence of any collusion between Venkatanarayana and his wife; and bearing the proceedings of that suit in mind, I am

also of opinion that the decree could not be legitimately said to have been suffered by the husband. There was no justification for the remark made

by the learned District Judge that the suit for maintenance was ""seemingly a contested suit"" and ""the charge created by the Court was in effect a

farce to defeat or delay the general body of creditors."" This is strong language and the appellant''s complaint on that score was reasonable. It

added nothing to the case and has provided to some extent, a handle to attack the judgment. The fact that the Official Receiver has not even

impugned the decree for maintenance and has confined his attack to the creation of the charge by the Court leads me to the same conelusion.

Learned Counsel for the respondent however wants me to divide the decree for maintenance into two portions and to hold that two decrees, i.e.

one for maintenance and the other creating a charge, were passed by the Court simultaneously and incorporated in one sheet. He urged that if the

matter were thus viewed, the absence of attack against one decree could not have any adverse effect on the Official Receiver in regard to the

portion of the decree which he was contesting. I am not prepared to assent to this dissection as the two portions of the decree are not independent

but interdependent to a large extent. If the claim of maintenance were to be ignored, the creation of a charge would be meaningless. If on the other

hand, the creation of charge is taken out of the decree, there would be no means left for the decree-holder to realize her decree. But even if I

accede to the contention, it would not take one very far. It would only mean that the Official Receiver is entitled to contest that portion of the

decree which created a charge in the appellant''s favour. But it would not mean that if the portion of the decree granting maintenance was

unassailable for want of collusion, the other portion of the decree creating a charge was so as a result of collusion between the husband and the

wife. Venkata Narayana had not agreed to a charge being created and unless some sort of collusion is imputed to the Court, which it is impossible

to do, the order creating a charge cannot be successfully attacked on that ground.

It was next contended on behalf of the respondent that the Official Receiver was not bound to accept the judgment passed by the District

Munsif as conclusive in favour of the appellant, but was entitled to go behind it and question the charge created in her favour. It is quite true that a

judgment given by a competent Court is merely prima facie proof of a debt and a Court of Bankruptcy is particularly when the suit has not been

fought on merits, entitled to look into what has been called the consideration for the judgment debt and ask the decree-holder to establish his claim

before it. Sir W.M. James, L.J. in pronouncing his opinion in the leading case in Ex parte Kibble In re Onslow (1875) 10 Ch. A. 373 observed:

It is the settled rule of the Court of Bankruptcy, on which we have always acted, that the Court of Bankruptcy can inquire into the consideration

for a judgment debt.... If a judgment were conclusive a man might allow any number of judgments to be obtained by default against him by his

friends or relations without any debt being due on them at all; it is therefore necessary that the consideration of the judgment should be liable to

investigation.

There is no need to refer to a number of other cases, which have been cited for the same proposition in Union Indian Sugar Mills Co. Ltd. Vs.

Brij Lal Jagannath, . It must be however remembered that in cases of simple money debts it is the claimant or the decree-holder who would have

to go to the Insolvency Court or to the Official Receiver and request his name to be entered in the schedule of creditors. The case in Union Indian

Sugar Mills Co. Ltd. Vs. Brij Lal Jagannath, was that of a decree-holder who had obtained a money decree on the basis of an admission by the

defendant in that case. The Official Receiver was not therefore held bound to treat the decree as conclusive evidence of the debt and was entitled

to ask the decree-holder to adduce other evidence to show that the whole of the debt claimed by the decree-holder was actually due. The same

however could not be said of a case where there has been a real contest or of cases where decree-holders claim to be mortgagees or charge

holders. Section 28, Provincial Insolvency Act, provides that the powers of a secured creditor to realize or otherwise deal with his security remain

unaffected by a debtor''s insolvency and what comes to vest in the Official Receiver on a person''s adjudication is the rest of his estate without

taking the securities already created on his property into account. In such a case it would be open to the Official Receiver to question a charge or a

mortgage by taking appropriate proceedings, but then he would have to show the grounds which would entitle him to have them annulled under

Sections 53 and 54 of the Act.

This is exactly the position in this case. The appellant did not go to the Official Receiver to have her claim admitted or to have her name included

in the schedule of creditors. The Official Receiver has, on the other hand, come to the Court and asked for the annulment of that portion of the

decree passed by the District Munsif which declared a charge in the appellant''s favour. He has failed to establish any collusion between the

husband and the appellant or even negligence by the husband in defending the suit for maintenance. Learned Counsel for the respondent was at

pains to show that the failure to prove collusion or negligence would not disentitle his client from getting the relief which he seeks if he has been able

to prove that the maintenance decree has caused a miscarriage of justice; but when the learned Counsel was pressed to state what he actually

meant by these words, his reply was that the creation of charge by the Court was nothing short of gross injustice as it would have the effect of

depriving the insolvent''s creditors from realizing their just debts out of the property over which the charge has been declared. This is not the

correct way to interpret these words. The creditors would be affected by every security which may have been created by their debtors validly.

These words have been used in some English cases and were taken to convey, as held in Re Hawkins, Ex parte Troup (1895) 1 Q.B. 404, that

for some good reason there ought not to have been a judgment. It has not been shown in this case why the judgment ought not to have been given

by the District Munsif in the appellant''s favour.

An attempt was then made to argue that the powers of the Court were co-extensive with that of the debtor and if a party could not alienate the

property after an application for insolvency was made by him, the Court could not also exercise the power. The fallacy in this argument lies in the

assumption that the Court like an arbitrator derives its powers from the parties. It is obviously not so. Moreover, the principle on which the case

Seetharamanujacharyulu v. Venkatasubbamma (1930) 17 AIR Mad. 824, was decided would show that although a party may not be able to

create a charge on a property which has been auctioned through Court, the sale would not deprive another Court of the power to create a charge

on the same property in certain circumstances. The attack in this case is confined, as stated above, to the form in which the District Munsif chose

to pass the decree. This was pre-eminently the concern of the Court and nothing has been or could have been said now to show that the exercise

of discretion by the District Munsif was not justified. The observations in In re Beauchamp, Ex parte Beauchamp (1904) 1 K.B. 572 are

instructive. In delivering the judgment of the Court in that case Vaughan Williams L.J. observed:

It is plain that the objection to the judgment, if any, is one of form only, and the power of the Court of bankruptcy to go behind a judgment is a

power to inquire into the consideration for and not into the form of the judgment. The judgment, in our opinion, is conclusive, unless the

consideration can be questioned.

I would therefore agree with the learned Subordinate Judge that the Official Receiver is not entitled to question the form in which the decree

was passed by the District Munsif. As a half-hearted attempt was made to show that the decree was defective on the ground that the Official

Receiver was not impleaded as a defendant, it might not be out of place to mention that he could not have been impleaded in that suit, as the order

of adjudication was not passed until a few months after the decree had been passed against the husband. These findings, however beneficial they

may be to the appellant, are not enough to decide the case in her favour unless it is found that the charge did in fact or must be deemed to have

come into existence before the application for his insolvency was presented by Venkata Narayana. If this is not so, the charge created by the

Court in the appellant''s favour would be hit by Section 53, Provincial Insolvency Act, which has been held to apply not only to voluntary

alienations but also to transfers in invitum, Ramabrahmam Vs. Gudimalla Andalamma, . The suit, as already stated, was instituted by the plaintiff on

28th September 1932 and the petition for insolvency was presented on 11th October 1932. The charge cannot be said to have been in existence

prior to the suit.

The only question then is if it can be deemed to have come into existence on the date when the suit was instituted. If the doctrine of relation

back, as applied to the orders of adjudication can also be applied to the decrees passed in suits for maintenance, the appellant''s position would be

secure. It has been held by a Division Bench of this Court that a maintenance decree creating a charge on a specific immovable property

mentioned in the plaint operates to give a charge to the plaintiff not merely from the date of the decree but from the date on which the plaint was

presented : Seetharamanujacharyulu v. Venkatasubbamma (1930) 17 AIR Mad. 824. The proposition settled by this case was not controverted

by the learned Counsel for the respondent but it was argued that as the learned Judges were not dealing with a case of supervening insolvency it

could not be of any assistance to the appellant. It is true that the contest in that case was between a widow and an auction-purchaser but I cannot

see what difference in principle would it make if an Official Receiver is substituted for the auction-purchaser. The question in both the cases would

relate to the date on which the charge should be deemed to have come into existence and it was this point which has been settled by that case.

I must therefore hold that the charge in the appellant''s favour although ordered subsequently would take effect from the date on which she filed

the suit. The learned Counsel for the respondent finally urged that the appellant had not specifically mentioned the properties over which she

prayed for the creation of a charge in respect of her maintenance and it could not therefore be contended that the charge would take effect from

the date on which the suit was instituted. A perusal of the plaint presented (by the appellant would however show that this contention has

absolutely no force. The plaintiff had mentioned four items of properties on which she claimed a charge in the schedule attached to the plaint and

the fact that the District Munsif declared it in regard to one property only would not justify the contention that the property did not form the

subject-matter of the suit. See Sri Rajah Bommadevara Rajya Lakshmidevamma Bahadur Zamindarini Garu Vs. (Boggavarappu) Subba Rao and

Others, . For the above reasons, this appeal must be and is hereby allowed, and the first Court''s order restored. The appellant will have her costs

both in this and in the lower Appellate Court.