Ramagopal Naicker vs Muthukrishna Ayyar and Another

Krishnaswami Nayudu, J.—This appeal raises an interesting question of limitation. The suit was on a simple mortgage executed by defendant

1 in favour of the plaintiff Ex., A-3 dated 25-4-1927, for a sum of Rs. 500. The amount was payable in instalments and the final Instalment was

payable on 25-4-1930. The suit was Instituted on 30-9-1948.

Defendant 2 is the purchaser of the suit property from the Official Receiver. Since defendant 1 was adjudged insolvent in I. P. No. 9 of 1935 on

the file of the District Munsif''s Court,. Koilpatti, the property became vested in the Official Receiver, Tirunelveli. Reliance was placed on Ex. A-5

dated 23-12-1940, a certified c6py of the sale deed in I. P. No. 5 of 1936, executed by the Official Receiver, in favour of defendant 2, wherein it

appears that the Official Receiver has stated that the sale was subject to the mortgage under Ex. A-3.

If this amounts to an acknowledgment of lia-bility u/s 19, Limitation Act, the suit would be within time. In Currimbhai Abdulhusain Vs. Ahmedali

Lukmanji, Sir John Beaumont c. J. and Blackwell J. took the. view that the Official Assignee was not the duly authorised agent of the insolvent to

give acknowledgment of a liability in respect of a debt due by the insolvent. Relying on this decision the learned District Munsif dismissed the suit

which dismissal was confirmed in appeal.

Mr. Venkatadri for the appellant brings to my notice a Bench decision of our High Court in Paramasivan Pillai v. Aristatle Chakona. AIR 1918

Mad 1122 where in an application to sell the insolvent''s property, the Official Receiver had furnished particulars regarding the encumbrances

existing on the property. It was held by Oldfield and Phillips JJ. that the admission of the debt in that application was sufficient acknowledgment of

the liability within the meaning of Section 19, Limitation Act.

The judgment of Sir John Beaumont C. J. and Blackwell J. in Currimbhai Abdulhusain Vs. Ahmedali Lukmanji, does not refer to this Madras case.

In view of the language of Section 19, Limitation Act, it is for consideration whether the Official Receiver could be considered to be the duly

authorised agent of the insolvent and whether he could be held to be a person against whom such property or right is claimed or some person

through whom he derives title or liability within the meaning of the section notwithstanding that the insolvent''s property might vest in the Official

Receiver u/s 28(2), Provincial Insolvency Act.

It will, therefore, be better to have this appeal disposed of by a Bench or a Full Bench as the Honourable the Chief Justice may decide. The papers

may be placed before the Honourable the Chief Justice for orders as to posting the appeal before a Bench.

JUDGMENT OF THE DIVISION BENCH

Govinda Menon, J.

The order of reference to the Bench by Krishnaswami Nayudu J. is sufficiently detailed as regards the facts of the case and no useful purpose

will be served by our re-stating them once again. As stated by the learned Judge the question is whether an acknowledgment by an Official

Receiver would be sufficient to prolong the period during which claim subsists. That, there is an acknowledgment in writing of an existing debt

cannot be disputed in view of Ex. A-5 if it is admissible in which the Official Receiver has explicitly stated that the sale would be subject to the

mortgage under Ex. A-3.

But the question is whether it would be an acknowledgment of a liability u/s 19, Limitation Act. Paragraph 1 which lays down that if an

acknowledgment of liability in respect of a property or a right has been made in writing signed fey the party against whom such property or right is

claimed or by some person through whom he derives title or liability a fresh period of limitation shall be computed from the time when the

acknowledgment was so signed.

Whether the Official Receiver who has signed the document ig the party against whom such property or right -is claimed Has to be decided. The

effect of the order of adjudication is contained in Section 28, Provincial Insolvency Act, Sub-section (2), 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, and thereafter, except as provided by this Act, no creditor to whom the Insolvent is indebted in

respect of any debt provable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the

insolvent in respect of the debt, or commence"" any suit, or other legal proceeding except with the leave of the Court and on such terms as the

Court may impose.

There can be no doubt that so far as the properties are concerned the insolvent completely goes out of the picture; his ownership in the

properties at lease temporarily ceases and becomes fully vested in the Court or the Official Receiver. In other words the Court or the Offlcial

Receiver stands in the shoes of the insolvent and he has all the rights, privileges and commitments which the Insolvent may have.

Learned counsel for the respondents wanted us to compare the provisions of Sections 47, 59 and 61 along with Section 28(2) and hold that as a

result of such comparative reading the only inference that could be drawn is that the vesting of the property of the insolvent in the Court or the

receiver u/s 28(2) of the Act is only for a limited purpose, so that the Insolvent is not completely effaced out of the scene.

Section 47 speaks of secured creditors who after realising their security may prove for the balance-due to them after deducting the net amount

realised. But where they relinquish their security for the general benefit of the creditors, they may prove for their whole debt. Sub-section (3)

contemplates a set of circumstances where the secured creditor has not either realised or relinquished his security. We are not concerned with

Sub-sections (4) to (6).

We are at a loss to understand how Section 47, can in any way derogate or reduce the nature of the Official Receiver''s right In the property

that is vested in him. Section 59 lays down the duties and powers of the Official Receiver. Clauses (a) to (h) are mainly concerned with the powers

which the Official Receiver can exercise and Clause (i) imposes a liability on him to divide in their existing form amongst the creditors according to

their estimated value, any property which from its peculiar nature or other special circumstances cannot readily or advantageously be sold.

Clause (g) gives a right to the Official Receiver to mortgage or pledge any part of the property of insolvent for the purpose of raising money for the

payment of his debts. If such a power vests in the Official Receiver we fail to see why ho could not renew an existing valid mortgage on the

insolvent''s property.

To take an example, suppose before the expiry of the period of limitation for filing a suit on a mortgage from the insolvent the mortgagee threatens

with a suit which might be detrimental to the interests of the insolvent''s estate for some reason is it not open to the Official Receiver to renew the

mortgage for a fresh term and thereby avert danger or loss to the estate of the insolvent by a precipitous sale of the property in court auction?

Learned counsel for the respondents Mr. S. V. Venugopalachari had to admit that it is within the competence of the Official Receiver to renew a

valid mortgage in order to avert loss or danger to the property of the insolvent. If that is the case, we fail to see any distinction in the Official

Receiver acknowledging an existing mortgage and thereby permitting a further period of limitation for the mortgagee to sue on the document.

In our opinion Clause (g) of Section 59 of the Act affords sufficient answer to the contention that the Official Receiver has no power to

acknowledge a binding debt of an insolvent, Section 61 deals with the priority of debts the provisions of which do not strictly concern the subject

matter of the present appeal. Such being the case a combined reading of Sections 28(2) and 59(g) makes it clear that when the property of the

insolvent is vested in the Official Receiver he can mortgage or sell the property or renew the existing mortgage for a further term.

It is difficult to hold that the Official Receiver is only an agent of the insolvent when he gives an acknowledgment of the insolvent''s liability. The

relationship between an Official Receiver and an insolvent is nothing akin to that between a principal and his agent and the relevant sections relating

to agency in the Indian Contract Act can by no stretch of imagination be made applicable to an Official Receiver.

Whereas in the case of a principal he is the dominating personality under whose directions and within the four corners of the authority given by him

to his agent the latter has to act, in the case of an insolvent he in no way resembles the principal and with due respect to the learned Judges of the

Bombay High Court who decided the case in Currimbhai Abdulhusain Vs. Ahmedali Lukmanji, , it seems to us that the Official Receiver is not an

agent of the insolvent.

The learned Chief Justice, Sir John Beaumont refers to the decision of Coutts-Trotter J, in Govindaswami Pillai v. Dasai Goundan, ILR 44 Mad

971 : AIR 1921 Mad 704 . with regard to the power of the Official Assignee in whom the insolvent''s property is vested to sign an

acknowledgment on behalf of the insolvent and then seeks to distinguish that case. But it seems to us that the principle enunciated by Courts-

Trotter J. is applicable and not distinguishable. Moreover the Bombay case does not discuss the import and implications of Section 28(2),

Provincial Insolvency Act.

The decision in AIR 1918 Mad 1122 is directly applicable to the present case though the reasoning in that case is based upon the provisions of

Section 354, Civil P. C., 1882. We do not find that under the present Provincial Insolvency Act, there is any difference with regard to vesting of

property.

Under Section 354, Civil P. C., 1882, just like. Section 28(2) of the present Provincial Insolvency Act all the properties of the insolvent vest in the

Official Receiver and therefore, as the learned Judge rightly puts it he is the party against whom such property or right can be claimed and hence

u/s 19, Limitation Act an acknowledgment by the Official Receiver will furnish a fresh starting point for limitation. The following observations of the

learned Judge are relevant :

This acknowledgment is contained in Ex. c an application by the receiver to sell the mortgaged property which contains an admission of the debt

due to the plaintiff. The contention that Ex. C does not amount to an acknowledgment is not seriously pressed, for it undoubtedly is an

acknowledgment, vide Uppi Haji v. Mammavan ILR 16 Mad 366 and Narayana Aiyar v. Venkatarama-na Aiyar, ILR 25 Mad 220 but a more

difficult Question is raised in the objection that the receiver could not make an acknowledgment on behalf of the mortgagor.

Under Section 354, Civil P. C. of 1882, the order of 18-12-1899 operated to vest in the receiver all the insolvent''s property and consequently

plaintiff''s claim under the mortgage had to be enforced against the receiver and the receiver would appear to be the party against whom such

property or right (i.e., the right under the mortgage) is claimed, within the meaning of Section 19, Limitation Act.

Under Section 19, therefore, an acknowledgment by the receiver would furnish a fresh starting point for limitation. It is urged that u/s 356, Civil P.

C. the receiver''s duties are strictly limited and must be carried out under the direction of the Court and that as there had been no direction of the

Court to make an acknowledgment the receiver acted beyond his powers.

Reliance was placed upon the English cases such as Whitley v. Lowe. (1858) 25 Beav 421 in Re Hale, Lilley v. Foad, 1899 2 Ch. 107 and the

well known case Chinnery v. Evans, (1864) 11 HLC 115.

In our view this decision is directly applicable. A very recent judgment of Viswanatha Sas-tri J. in Venku Dhikshitulu v. Subbayya Setti, 1955

AWR 626(I) is also instructive. Viswanatha Sastri J. discusses the application of Section 20 Sub-section (1). Limitation Act and the meaning of the

words ""a person liable to pay"" and comes to the conclusion that the words ""a person liable to pay"" are of wide import and necessarily confined to a

person who is personally liable under his covenant or promise to pay the debt and that the words are wide enough to cover property liability also.

Then the learned Judge observes ""the position of the Official Receiver is not analogous to that of a ''de facto'' guardian or a mere manager or

custodian of the property but is that of a person in whom the title to the property of the insolvent vests.

Therefore the Official Receiver in whom the estate of the mortgagor vested on his adjudication comes within the description of ""a. person liable to

pay"" the mortgage debt within the meaning of Section 20(1), Limitation Act and an endorsement of payment of certain amount and the signature by

the Official Receiver on the mortgage document is operative to give a fresh starting point of limitation for the suit on the mortgage u/s 20(1),

Limitation Act. We are in entire agreement with the learned Judge.

Then he discusses a large body of case law on the subject. This decision was not concerned with an acknowledgment under s, 19, Limitation

Act. But when once we come to the conclusion that the Official Receiver is the person in whom the property of the insolvent vests then there can

be no doubt that he comes within the provisions of Section 19(1), . Limitation Act.

Learned counsel for the appellant also invited our attention to the decision in Lakshumanan Chetti v. Sadayappa Chetti, 35 M LJ 571: AIR. 1919

Mad 816 , wherein it was held that an acknowledgment of a debt due by a firm under dissolution made by a receiver of that firm is valid to have

limitation if it is authorised by the terms of the order appointing the receiver. These observations are not very helpful with regard to what we have

to consider in the present case. Likewise the observations contained in ''Venkataramiah Pantulu v Subramaniam Pillai, 16 M LT 489: AIR 1915

Mad 137 are not very helpful.

On the other hand we are pressed by the respondent with the judgment of Panchapakesa Ayyar J. In Kakumanu Venkatasubbamma Vs.

Kakumanu Venugopala Rao (died) and Others, where the learned Judge has observed that the Official Receiver is a trustee in respect of the entire

body of creditors and has no power to acknowledge or to pay time barred debts not binding on the insolvent''s estate under the law including the

law of limitation. He has not considered the decision in AIR 1918 Mad 1122 or the effect of Section 28(2) read with Section 59 Provincial

Insolvency Act. It, seems to us that this decision is not good law and cannot be followed.

The decision in AIR 1918 Mad 1122 has been followed by Jagannatha Das and Panigrahi JJ. in Una Vigesu Patro Vs. Vysyaraju Somayya

Raju, , and we are in entire agreement with the reasoning in that judgment especially when the learned Judge, Jagannatha Das J. stated that a

person in the position of an Official Receiver in an insolvency is in relation to the equity of redemption which originally belonged to the judgment-

debtor and which now vests in him, covered by the phrase ""the party against whom such property or right is claimed."" Dealing with the relationship

between the Official Receiver and the insolvent the learned Judge observes :

We are therefore quite clear in our mind that the acknowledgment in the present case is by a person competent to make it and that it binds the

judgment-debtor.

This view is supported by the judgment of Phillips J. in the case reported in AIR 1918 Mad 1122 . It is no doubt true that in that case the other

learned Judge, Oldfleld J. was not prepared to go as far as Phillips J. on the ground that having regard to the terms of 8. 354, Civil P. C. which

was the governing provision relating to the powers of a receiver in connection with the insolvency then in question he was not prepared to say that

the receiver had the power to make arrangements in respect of the property for the future advantage of the creditors.

But in that very judgment his Lordship pointed out that the position would be different with reference to Section 20, Provincial Insolvency Act of

1907, which contained clear provisions relating to the powers of the Official Receiver as regards arrangements for the future advantage of

creditors. A corresponding provision is now made in Section 59 of the present Insolvency Act of 1921. Therefore, the objection with reference to

which His Lordship Old-field J. hesitated to agree with the conclusion reached by Phillips J. no longer exists and the view expressed by Phillips J.

holds good under the provisions of the present Provincial Insolvency Act.

The decision o! the Courts below that the respondent''s application for execution filed on 3-2-1947 is not barred by time is correct and must be

upheld and the appeal must be dismissed with costs. We endorse our full concurrence with this passage. For the reasons stated above it cannot be

said that an acknowledgment by the Official Receiver will not have the bar of limitation.

The question then is whether there has been a valid acknowledgment in the present case. Learned counsel for the respondents has referred to

Ex A. 4, as not containing any acknowledgment at all. Ex. A. 4 is to the effect that items 1 to 4 are subject to two mortgages one for Rs. 150 and

the other for Rs. 450. The mortgage in question is for Rs. 500 and could never have been the subject matter of the statement in Ex. A 4.

With regard to Ex. A. 5, it has to be mentioned that it is not a registration copy. It purports to be a certified copy of the office copy of the sale

deed stated to have been issued by the Official Receiver in favour of defendant 2. It is therefore a copy of a copy. That being the case, Ex. A 5 is

Inadmissible in evidence. The original sale deed has not been produced and the copy of the office copy cannot be taken to be a certified copy.

Under these circumstances it has to be held that the alleged acknowledgment has not been proved. While, therefore, agreeing with the learned

counsel for the appellant on the question of law argued by him we hold agreeing with the learned Subordinate Judge that the acknowledgment

sought to be proved has not been proved. The second appeal fails and is dismissed but in the circumstances without costs throughout.