Mahesh Prasad Khatri vs Mr. T. Smith and Another

Jwala Prasad, Ag. C.J.

In reply to the notice given to the Official Assignee through the Registrar of the Calcutta High Court, asking him to inform this Court whether he was going to take any steps in the matter, he has stated that he does not intend to take any step in this appeal (vide his letter No. 527, dated 13th July 1931 to the Registrar of this Court). The transfer of the decree in question by the insolvent on 6th August 1929, the present execution whereof has been taken by the private transferee, is not ipso facto void; but in certain circumstances it might be void against the Official Assignee.

Those circumstances are set forth in Section 55, Presidency Towns Insolvency Act 3 of 1909 which runs as follows:

Any transfer of property not being a transfer made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration shall if the transferor is adjudged insolvent within two years, after the date of the transfer, be void against the Official Assignee.

The execution was started on 22nd December 1928, in Execution Cases Nos. 227 and 228 of 1928 by the original decree-holder Maharaj Kishore Khanna. Notice of the execution was properly served under Order 21, Rule 22, Civil P.C., and the properties of the judgment-debtor were attached, valuation was fixed, and sale proclamation was directed to be issued fixing 11th November 1929 for sale. In the meantime on 6th November 1929 the transferee of the decree, Mahesh Prosad Kheteri, applied to the Court that he might be substituted in place of the original decree-holder and that the execution might proceed after such substitution. Notice of this application was given to the decree-holder in both the execution cases and served upon his pleader, Mr. Sanyal on 8th November 1929.

On the 11th November, the date fixed for consideration of the petition of the transferee, no objection was made by either the original decree-holder or the judgment-debtor. The judgment-debtor no doubt put in an objection to the execution of the decree upon the ground that the original decree-holder Mr. Khanna having been declared insolvent, the Official Assignee alone had the right to execute the decree vested in him under the Presidency Towns Insolvency Act. The Court on the 11th November recorded the following order:

There is no opposition to the substitution proposed by Mahesh Prasad Kheteri. He is therefore allowed to be substituted in place of the decree-holder.

As to the judgment-debtor''s application objecting to the execution on the ground that the execution could not proceed on account of the decree-holder having been adjudged insolvent, the Court adjourned the matter to the 20th November. Thereafter, after certain adjournments having been taken by the judgment-debtor the case was ultimately decided by an order dated 22nd January 1930, which is the subject-matter of the present appeal. The judgment-debtor also took an objection to the execution of the decree upon the ground that no notice under Order 21, Rule 16 was served. This was disposed of by the Court below holding that the notice was actually served upon the decree-holder. The judgment-debtor was a party to the execution and he was apprised of the assignment of the decree as well as of the petition of the transferee to be substituted in place of the original decree-holder and to carry on the execution. The judgment-debtor expressly mentions the fact in his objection petition filed on 11th November 1929. The Court below was therefore right in overruling the objection of the judgment-debtor so far as it was based on the ground of want of notice under Order 21, Rule 16.

The point is important when we consider the application of Section 55 to the case urged by the judgment-debtor as a bar to the execution by the transferee. The registered sale-deed transferring the decree to the assignee. Mr. Khetri was produced in Court, and on the face of it it shows that the transfer was for valuable consideration and in good faith. Neither the the decree-holder nor the judgment-debtor seriously objected to or tried to prove that the transaction was otherwise than in good faith and for valuable consideration. The lower Court however in view of the assignment having been for Rs. 8,000 in respect of decrees amounting to a much larger sum entertained the view that the transfer was not in good faith and for valuable consideration. In the absence of any evidence one way or the other, I do not think that it was open to the Court to hold that the transfer was not in good faith and for valuable consideration, in direct conflict with the recitals in the deed of assignment and the circumstances set forth therein. It is not sufficient for the judgment-debtor to say, as is stated towards the close of his petition of 9th December 1929, that the transaction was colourable and collusive and that the decree had vested in the Official Assignee by operation of law.

He had to show, not only that the Official Assignee was entitled to intervene, but also he had intervened or that he intended to intervene: Dasarathy Sinha v. Mahamulya Ash AIR 1920 Cal 817. The Official Assignee did not contest the point and did not take any steps to take possession of the decree and execute it himself. In fact, upon notice given to him by this Court stating the full facts and circumstances, he has expressly stated that he does not want to take any step in the appeal. The judgment-debtor has no right to object to the execution on this ground. It is for the Official Assignee or the creditors of the insolvent to object to the money due under the decree being paid to the transferee of the original decree-holder. Therefore Section 55 does not bar the execution of the decree by the transferee. Section 56 is not applicable, which prevents the transfer of property by the insolvent in favour of a particular creditor with a view to give that creditor a preference over the other creditors. No such case has been made out and therefore that section has no application.

The execution which was levied originally at the instance of the decree-holder and carried on by the transferee of the decree-holder cannot therefore be dismissed upon the ground stated by the Court below, that it is barred by the provisions of the Presidency Towns Insolvency Act.

The execution must therefore proceed, and it will be a matter between the transferee of the decree in question and the Official Assignee as to who will be entitled to the realization made in the execution of the decree in question, but the judgment-debtor cannot be permitted to frustrate the execution and to claim exemption from his liability to pay the decree upon the ground that the decree-holder has been adjudged insolvent. To dismiss the execution at this stage would be more prejudicial to the creditors than to allow the decree to be executed and even the whole proceeds thereof to be taken by the present transferee of the decree. If the execution is dismissed as has been done by the Court below, so much of insolvent''s property is lost to which the transferee or the others have a right to fall back for the realization of their dues.

We do not know the circumstances in which the Official Assignee in spite of notice of the transfer and the execution of the decree in question does not interest himself in the matter. If he thinks that the transfer is good there is no reason why the transferee should be debarred from executing the decree.

The result is that the order of the Court below dismissing the execution is set aside and the appeal is allowed with costs. The execution will proceed from the stage at which it stood when the Court below passed the order under appeal, viz., the order of 22nd January 1930. Let intimation of this be sent to the Official Assignee. James, J.--I agree.