S.K. Rajalingam Chetty and Others vs Official Assignee

Krishnaswami Nayudu, J.—The heirs of a deceased insolvent, who was adjudicated in I. P. No. 23 of 1892, apply for payment out of Rs.

1400/- standing to the credit of the estate with the Official Assignee.

The insolvent in this case died without obtaining final discharge as provided for under the Act, i.e., Insolvent Debtors Act, Ch. XXI of 1848. It

was found long after his death that he was entitled to l/3rd share in premises No. 6, Vaikunta Vadhyar Street, G. T., Madras. That property was

sold in execution of the mortgage decree in O. S. No. 177 of 1943 on the file of the City Civil Court. The insolvent''s share was vested in the

Official Assignee and the present sura represents the net sale proceeds of the insolvent''s share in the said property.

The present application is based on the ground that no creditors are available for payment and that the applicants being the heirs of the insolvent

have become entitled to the amount. Section 127 of the Presidency Towns Insolvency Act (Act III of 1909) is as follows :

The proceedings under an insolvency petition under the Indian Insolvency Act, 1848, pending at the commencement of this Act shall, except so far

as any provisions of this Act is expressly applied to pending proceedings, continue, and all the provisions of the said Indian Insolvency Act shall,

except as aforesaid, apply thereto, as if this Act had not been passed.

The relevant provision therefore under which payment out can be asked for by the insolvent or his legal representatives under the Act of 1848 is

Section 87. Section 87 provides that when the debts or demands in respect of a judgment had been entered u/s 86 of the said Act shall have been

discharged and satisfied, it shall be lawful for the Court, upon application of the insolvent, his heirs, executors, or administrators, to direct

satisfaction to be entered, and if after such discharge and satisfaction, there shall remain in the possession, or subject to the control of his assignee,

any property which has come to such assignee by virtue of the order made in that behalf, then the Court would be entitled to order that such

property will be vested either in the insolvent, or his heirs, or executors whomsoever may apply. The Act of 1848 contemplates a final discharge,

before which u/s 86 the Court, for the relief of the insolvent debtors, may direct a judgment to be entered up against the insolvent for the amount of

the debts or demands mentioned in the schedule. It is in the nature of a decree against the insolvent, which decree must be shown to have been

satisfied in order to entitle the heirs to claim the property remaining in the hands of the assignee.

The position in this estate is that the insolvent obtained only an order of personal discharge on the opposition of some of the creditors; but there

was no final discharge or certificate granted to him as provided in the Act of 1848. It was therefore contended by the Deputy Official Assignee that

the one-third share continued to vest in the Official Assignee and the claim to the sale proceeds representing one-third share could not therefore be

sustained. The right of an insolvent or his heirs to be entitled to any surplus in the hands of the Official Assignee arises only when there is a surplus

after payment in full with interest the claims of the creditors either under the Indian Insolvency Act of 1848, or u/s 76 of the present Act (Act III of

1909). In this case, the proceedings in insolvency are still pending. The creditors have not been paid. In such circumstances, under the Act of

1848, the assignee-should seek the directions of Court u/s 44 and act according to the directions of the Court as to the disposal of the money due

to such creditors. Under the present Act, in respect of unclaimed dividends the rule framed under the Insolvency rules is Order 11, Rule 13 . If the

creditors have not applied for dividends within six months after the declaration thereof, the Court may issue directions to the Official Assignee to

transfer such dividends to the Provincial Government or make such order as it thinks fit.

In this case, in any view, neither the; insolvent nor his heirs have become entitled to the amount, since the amount cannot be said to have

revested in the insolvent. The applicants are therefore not entitled to recover the sum. The application is dismissed.