Mahabir Prasad and Others vs Shivanandan Sahay and Others

Agarwala, J.—The facts out of which these miscellaneous appeals arise are as follows. In October 1931, one Dalu Ram who at that time owed Rs. 48,000 to the firm of Debi Bux Brijmohan (Respondent 2), entered into a contract with the latter, agreeing to convey to the firm, in satisfaction of their debt, a certain property at Buxar in this Province and other properties outside the Province, and also assigned to the firm a debt that was due to Dalu Ram. The properties agreed to be conveyed were the properties of the joint family of which Dalu Ram was the karta, and the debt in respect of which the properties were to be conveyed had been incurred by Dalu Ram for the purposes of the family business. In pursuance of this contract Dalu Ram actually executed the assignment already referred to and also a transfer of that portion of the property which lies outside this Province. In November 1931, Dalu Ram died before executing the conveyance of the Buxar property. In the meantime his son Murlidhar had applied to be declared an insolvent; and in January 1932, by consent of the parties, a Receiver of the applicant''s property was appointed.

Murlidhar was declared an insolvent by the District Judge of Shahabad in September 1932. The firm respondent 2, then applied for execution by the Receiver of the conveyance of the Buxar property which Dalu Ram had agreed to convey by the contract of October 1931. Murlidhar''s wife and sons objected to this application on the ground that, as their interests had not vested in the Receiver, the latter had no power to execute a conveyance of their interest in the property. Objection was also put forward by four of Murlidhar''s creditors on the ground that the conveyance, if executed, would have the effect of preferring one creditor of the insolvent to the others. The learned District Judge overruled the objections holding "that the debt having been contracted by the father and grand-father, is binding on the minors, and so also the contract". M.A., 162 of 1933 has been preferred by the sons of Murlidhar one of whom is a minor, and M.A. 246 of 1933, has been preferred by the firm Debi Bux Brijmohan.

In M.A., 162, on behalf of the sons of Murlidhar, Mr. Mahabir Prasad contends that it is no part of the duty of a Receiver to fulfil contracts entered into by the insolvent and that in any case the interest of the sons of Murlidhar in the family property did not vest in the Receiver. Reference was made to Sub-section (2) of Section 28, of the Provincial Insolvency Act, 1920, the material portion of which is as follows:

On the making of an order of adjudication the whole of the property of the insolvent shall vest in the Court or in a receiver as hereinafter provided and shall become divisible among the creditors....

The meaning of the words "property" in this sub-section, is defined in Sub-section (2), Clause (1)(d). as

property over which or the profits of which any person has a disposing power which he may exercise for his own benefit.

The question whether the property which vests in the Receiver on the insolvency of a member of a joint Mitakshara family includes the interests of other members of the family has been set at rest by the decision of the Privy Council in Sat Narain v. Behari Lal 1925 PC 18.

Their Lordships of the Judicial Committee there held that it is only the insolvent''s share in the joint family property which vests in the Receiver, and pointed out that in cases where the sons of the insolvent are liable for the debt of their father, the Receiver, by adopting the appropriate procedure, may bring the shares of the sons to sale. In such a case of course the sale proceeds in the hands of the Receiver are divisible among the insolvent''s creditors. The power of the Receiver to sell the property of the insolvent is one of the powers mentioned in Section 59 of the Act, which enumerates the powers conferred on the Receiver by the statute.

But it is clear from the opening words of the section that the powers conferred upon the Receiver are exercisable only for the purpose of realising the property of the debtor in order to distribute dividends among the creditors. Money realized by the Receiver by the sale of the insolvent''s property is divisible among the general body of creditors. It may be observed that amongst the powers enumerated in Section 59 of the Act, there is no power conferred on the Receiver to, execute a conveyance such as is the subject matter of these appeals which would result in a valuable part of the insolvent''s estate being lost to the general body of creditors without the purchase price being utilized to satisfy their claims.

On behalf of the respondents Mr. Sushil Madhab Mullick argued that Murlidhar could have sold the interest of his sons for satisfaction of the debt of Rs. 48,000 and that this right to sell his son''s interest is "property" within the meaning of Section 28, Sub-section (2)(1)(d). Mr. Mullick contends that the Receiver can be made to do what the insolvent himself could have-done but for the fact that he had been adjudicated an insolvent. It is not disputed by the appellants that the Receiver might have taken steps to bring the interests of the sons to sale in satisfaction of the debts; but, as has already been pointed out, the contention of the appellants is that this can only be done by a sale which results in the sale proceeds being made available for distribution among the general body of creditors, and not by a sale which results only in the extinction of the debt of one of the creditors.

The object of the insolvency Act is to make all the property of the insolvent divisible amongst all his creditors. To accede to the contention of the respondent will be, in my opinion, to defeat the object of the Act; nor can I find anything in the Act to justify the course adopted by the Court below in the present cases. Mr. S.M. Mullick also contended that as the contract was enforceable against Murlidhar and his sons it was also enforceable against the Receiver. This contention at once fails, however, when it is held that the interests of the sons of Murlidhar did not vest in the Receiver. I would therefore set aside the order of the Court below and decree these appeals with costs.

Courtney-Terrell, C.J.

I agree.