S.M. Thangapal Nadar vs M.K. Ahmed Mohideen and Others

Varadarajan J.

The Plaintiff, who failed in both the Courts below, is the Appellant. The Defendants 1 and 2 in the suit filed Original Suit No. 40 of 1967 in the

trial Court against the Plaintiff for recovery of Rs. 40,000 under a mortgage, dated 21st January 1963 executed by the Appellant herein, who was

the Defendant in that suit. During the pendency of that suit, the Plaintiff was adjudicated insolvent in Insolvency Petition No. 15 of 1967 on 11th

April 1968 and the Official Receiver was impleaded as the second Defendant. The preliminary decree and final decree were passed in that suit on

27th January 1968 and 8th October 1968 respectively. Subsequently Defendants 1 and 2 as the Plaintiffs in that suit, filed execution Petition No 3.

of 1969 on 29 October 1968 and brought the hypotheca to sale on 28th March 1969. The second Defendant became the successful bidder and

the sale was confirmed on 7th June 1969. There was no application under Order XXI, Rule 90 Code of Civil Procedure, for setting aside that

sale. But the Plaintiff filed the present suit on 26th July 1969 for a declaration that the Court sale in favour of the second Defendant was null and

void, impleading even the Official Receiver as the third Defendant. The ground alleged was that the Plaintiff was not served with any notice under

Order XXI Rule 66, Code of Civil Procedure, and that the sale was, therefore, null and void. The Plaintiff alleged that the property was worth

more than 2 1/2 lakhs of rupees subject to encumbrance, but had been sold in the Court auction to the second Defendant only for Rs. 80,005

subject to two encumbrances of Rs. 60,000 that the amount for which the property was sold was low and that the property could be sold for such

a low amount only because there was no proper notice of sale.

Defendants 1 and 2 contested the suit. The main defence was that the suit filed by the insolvent-Plaintiff was not maintainable and that, in any

event, only an application under Order XXI rule 90 could have been filed and not a suit, and Section 47 and Order XXI Rule 92 of the CPC bar

the present suit. The Defendants denied that there was no service of notice on the Appellant and contended that due notice was served not only on

the Appellant but also on the Official Receiver.

Both the Courts below held that the Plaintiff, an insolvent, was not entitled to file the suit, though they were of the opinion that it is open to the

Plaintiff to file a suit of the kind if there had been no notice under Order XXI Rule 66 of the Code of Civil Procedure. They further found that the

Appellant had been served with notice and that the Official Receiver, who represented him had also been served with notice. In that view, they

dismissed the suit.

There is no dispute that the Appellant''s property had been mortgaged on 21st January 1963 by him and. that Respondents 1 and 2 obtained a

preliminary decree in Original Suit No. 40 of 1967 on the file of the trial Court, dated 27th January 1968 and a final decree, dated 8th October

1968 on that mortgage against the Appellant. There is also no dispute that during pendency of that suit the Appellant was adjudged insolvent on

11th April 1968 in Insolvency Petition No. 15 of 1967 on the file of the trial Court and that the Official Receiver of Tirunelveli, the third

Respondent, was thereupon impleaded as second Defendant in that suit. Respondents 1 and 2 had filed Execution Petition No. 3 of 1969 for

bringing the hypotheca to sale in pursuance of the final decree on 29th October 1968. Exhibit B-5 is a certificate copy of that execution petition

and the orders passed thereon. It is seen from exhibit B-5 that the sale notice required by Order XXI Rule 64, Code of Civil Procedure, was

ordered on 2nd January 1969 for 28th January 1969. Exhibit A-1 the certified copy of the notice intended to be served on the Appellant and the

endorsement made thereon by the returning officer of the Court. Exhibit B-5 shows that the second Respondent had been served with the notice

and he filed a counter affidavit and that it was reported to the trial Court that the Appellant had been affixed as gone to Madras and that the Court

declared service on the Appellant as sufficient and posted the matter for enquiry and settlement of proclamation on 28th January 1969 to 30th

January 1969. On 30th January 1969 proclamation was issued for sale on 28th March 1969 with a direction that the value mentioned by the third

Respondent in his counter affidavit should also be noted in the proclamation of sale and that the upset price was Rs. 80,000 subject to

encumbrances. It it further seen from exhibit B-5 that the property had been sold for Rs. 80,005 on 28th March 1969 subject to the

encumbrances to the second Respondent himself, evidently after he had obtained permission to bid and set off, and that no petition having been

filed to set aside the sale, the sale was confirmed on 7th June 1969 after full satisfaction had been recorded. Order XXI Rule 64, Code of Civil

Procedure, lays down:

Any Court executing a decree may order that any property attached by it and liable to sale, or such portion thereof as may seem necessary to

satisfy the decree, shall be sold and that the precedes of such sale, or a sufficient portion thereof shall be paid to the party entitled under the decree

to receive the same.

Order XXI Rule 66(1) and (2) lay down:

(1) Where any property is ordered to be sold by public auction in execution of a decree the Court shall cause a proclamation of the intended sale

to be made in the language of such Court.

(2) Such proclamation shall be drawn up after notice to the decree-holder and the judgment-debtor and shall state tat time and place of sale, and

specify as fairly and accurately as possible:

(a) the property to be sold ;

(b) the revenue assessed upon the estate or part of the estate, where the property to be sold is an interest in an estate or in part of an estate paying

revenue to the Government;

(c) any incumbrance to which the property is liable;

(d) the amount for the recovery of which the sale is ordered; and

(e) every other thing which the Court considers material for a purchaser to know in order to judge of the nature and value of the property.

Therefore, the proclamation had to be drawn up only after notice to the decree-holder and the judgment-debtor, stating the time and place of sale

and specifying as fairly and accurately as possible the particulars mentioned in Sub-rule (2) of Order XXI Rule 66, Code of Civil Procedure.

The Appellant had been described in the execution petition, exhibit B-5, as a resident of Pudupettai Street, Palayamkottai. It is not disputed that

Pudupettai Street, is also called as Mutharamman Koil Street. The endorsement made by the serving officer on the notice exhibit A-1, is that when

he went to the premises mentioned as the Appellant''s residence in the execution petition on 18th January 1969 and made enquiries--he was

informed by the residents of the house and the neighbours that the Appellant had gone to Madras 10 days earlier and that it was not known when

he would return and that he therefore, affixed the copy of the notice on the outer door of the house with an endorsement that the Appellant may

apply for and obtain a copy of the proclamation of sale (sic) was required.

Now, the case of the Appellant is that he had ceased to occupy the house situate in Mutharamman Koil Street after the date of the institution of

the suit about two years earlier and was residing thereafter in Daniel Thomas Street, Palayamkottai, and that he left for Madras on 11th January

1969 and returned to Tirunelveli only on 11th April 1969 and only thereafter he came to known about the execution proceedings. He has alleged

in the plaint thus:

No notice of the settlement of proclamation has been served on the Plaintiff (1st Defendant) as required by Order 21, Rule 66 of the Code of Civil

Procedure. The Plaintiff learns on enquiry that a notice was taken out to the former address of the Plaintiff in Palayamkottai and the notice was

returned on he ground that the Plaintiff had left for Madras and could not be served There was no real attempt to serve the notice. The Plaintiff left

his residence in Mutharamman Koi. Street, Palayamkottai about two years ago and he had been residing in Darnel Thomas Street, Palayamkottai,

for the last two years. The Plaintiff had left for Madras on 11th January 1969 and returned to Tirunelveli only on 11th April 1969. It is only

thereafter the Plaintiff came to known about the execution proceedings in this suit and the execution sale referred to above. The Plaintiff being the

judgment-debtor, he ought to have been served with the notice of the settlement of proclamation and in the absence of such a notice the sale is

without jurisdiction and is a nullity and it has, therefore, to be declared as such.

Respondents 1 and 2 denied that the Appellant left for Madras on 11th January 1969 and returned only on 11th April 1969 and contended that

that notice was taken to the proper address and he knew that date of adjournment of the execution proceedings, that he had become insolvent and

had ceased to be the owner of the property and the Official Receiver had become the legal owner of the property and he had no complaint or

grievance and that notices have been served properly and legally and the sale is perfectly valid and is not a nullity.

The trail Court had disbelieved the case of the Appellant that he was residing in Daniel Thomas Street and not in Mutharamman Koil Street and

held that he had been served with notice in the execution petition by affixture, on the basis of the endorsement made on the notice by the returning

officer. The Appellant produced a number of rent receipt (exhibits. A-6 to A-28) and a number of letters (exhibits A-29 to A-60) to substantiate

his contention that he was residing at the relevant time in Daniel Thomas Street. The trial Court expressed the opinion that the rent receipts been

obtained for the purpose of the suit, as contended by Respondents 1 and 2, and had failed to draw any inference from the letters.

The learned Additional District Judge, on appeal, agreed with the trial Court about the sufficiency of the service but did not refer in his judgment

to either the rent receipt or the letters produced by the Appellant. The point for consideration is whether the conclusion of the Courts below that

there had been sufficient service of notice on the Appellant is correct.

It is not disputed that when the mortgage suit was filed, the Appellant was a resident of Mutharamman Koil Street, also called as Pudupettai

Street. That was in 1967. He had been described even in exhibit B-11, the copy of the memorandum of grounds, dated 21st February 1969 in

Civil Miscellaneous Appeal No. 72 of 1969, which arose out of a order passed in Interlocutory Application No. 548 of 1968, in Original Suit No.

40 of 1969, as a resident of Pudupettai Street. Mr. Ramachandran, the learned Counsel for the Appellant submitted that he had been described in

exhibit B-1l as a resident of Pudupettai Street only with reference to his address found in the earlier proceedings in the suit and that he had been

residing at the relevant time only in Daniel Thomas Street. One Nagoor Meeran, examined as D.W. 1, has not stated in his evidence that he

accompanied the serving officer at the time of the alleged affixture of the copy of the notice on the outer door of the residence in Pudupettai Street.

The process server or amin, who is stated to have affixed the copy of the notice on the outer door of the house, has not been examined. There is

no admission on the part of the Appellant in his plaint or in his evidence that there was affixture of the copy of the notice on the outer door of the

house in Mutharamman Koil Street. Respondents 1 and 2 should,, therefore, have examined the process server or the amin who is stated to have

affixed a copy of the notice on the outer door. But they have not done so and it is not open to them to request the Court to infer that the copy of

the notice had been affixed on the outer door merely oft the basis of the endorsement made on the notice, exhibit A-1.

The Appellant examined as P.W. 1, has denied the suggestion that he was merely going to Daniel Thomas Street for worshipping the Idol and

he has stated that he was residing only in Daniel Thomas Street at the relevant time and not in Mutharamman Koil Street. The rent receipts

(exhibits A-6 to A-28) show that the Appellant had been paying rent for the premises in Daniel Thomas Street from January 1967 to September

1969. The learned Subordinate Judge had observed, as already stated, that these rent receipts had been obtained for purposes of the present suit.

There is no material from which the learned Subordinate Judge could have drawn that inference. Even if those rent receipts could not be relied

upon, there is absolutely no reason for not relying upon the post-cards, inland-letters, registered letters and copy of telegram exhibits A-29 to A-

60 sent to the Appellant as a resident of Daniel Thomas Street, Palayamkottai, between 7th February 1968 and 22nd March 1969. The Appellant

could not have got up these letters, etc., the genuineness of which could not be suspected, for the purpose of this suit. Therefore, the learned

Subordinate Judge erred in not referring to these letters in his judgment and the learned Additional District Judge erred in failing to refer to these

letters and to the rent receipts (all exhibits A-6 to A-60), in his judgment. Exhibits A-6 to A-60 establish clearly that the Appellant was a resident

of Daniel Thomas Street and not of Pudupettai Street or Mutharaman Koil Street in January 1969 when the notice under Order XXI Rule 64,

CPC is stated to have been affixed on the outer door of the house at Mutharaman Koi-Street. The finding of the Court below that the Appellant

was a resident of Pudupettai Street or Mutharamman Koil Street in January 1969, without reference to the rent receipts and letters, exhibits A-6 to

A-60 is perverse and could not be accepted by this Court. Any affixture at Mutharamman Koil Street even if true would not amount to notice as

the Appellant was not residing there at the time. Therefore, I agree with the learned Counsel for the Appellant that there was no service of notice of

sale or any notice under Order XXI Rule 66, CPC on the Appellant, though the third Respondent (Official Receiver) has been served with the sale

notice and he filed a counter-affidavit saying that the property was worth Rs. 2,00,000 subject to encumbrances.

Order V Rule 17 of the CPC reads as follows:

Where the Defendant or his agent or such other person as aforesaid refuses to sign the acknowledgment, or where the serving officer, after using

all due and reasonable diligence cannot find the Defendant and there is no agent empowered to accept service of the summons on his behalf, nor

any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous

part of the house in which the Defendant ordinarily resides or carries on business or personally works for gain, and shall then return the original to

the Court from which it was issued, with a report endorsed thereon or annexed there to stating that he has so affixed the copy the circumstances

under which he did so and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was

affixed.

A Full Bench of this Court has observed in Parasurama v. Appadurai AIR 1970 Mad. 371 (F.B.):

Order XLVIII Rule 2 says that all orders, notices and other documents required by this Code to be given to or served on any person shall be

served in the manner provided for the service of summons. There is no provision in Order XXI, to the manner of service of the notice under Order

XXI, Rule 66 and hence Order XLVIII Rule 2 will apply which means that the provisions of Order V relating to the manner of service will apply

even to the notice issued under Order XXI Rule 66 Hence the provisions of Order V Rule 19 will apply.

The serving officer, under Order V Rule 17, could serve by affixture only when, after using all due and reasonable diligence, he could not find the

Defendant and there was no agent empowered to accept the service on his behalf or any other person on whom service could be made. The

serving officer has stated in exhibit A-1 that he made enquiries from the residents of the house and of neighbours and that he came to know that the

Appellant had left for Madras 10 days earlier and that it was not known when he would return. He has not stated in his endorsement of return that

there was no agent or any adult male member in the house on whom the notice could be served, as per Order V Rule 15 of Code of Civil

Procedure. Therefore, I am of the opinion that the serving officer was not justified in affixing a copy of the notice on the outer door without

ascertaining whether there was no agent empowered to accept the service of the summons or there was no adult male member in the house on

whom service could be made.

Mr. Mani the learned Counsel for Respondents 1 and 2, submitted that even if the notice had not been served, it would be only an irregularity

and it would not make the sale null and void and that the Appellant, who admittedly came to know of the execution proceedings after he returned

from Madras in April, 1969, should have filed an application under Order XXI Rule 90, CPC for setting aside the sale. In this connection, he

relied upon some decisions. In Kothayadath Karunakaran Nair Vs. Methalayil Chathu, , Panchapakesa Ayyar, J. has observed:

So, of course it is possible that in some rare cases a failure to issue notice under Order 21 Rule 66 CPC may make the sale void as when the sale

is held without the judgment-debt being even aware of it, but that normally, a mere failure to issue a notice under Order 21 Rule 66 CPC to the

judgment-debtor would not make the sale null and void, but would only be an irregularity, especially if the evidence show as here that the

judgment-debtor was very well aware of the sale proclamation and the sale even though a notice under Order 21 Rule 66 was not given to him.

There is no evidence in the present case to show that the Appellant was aware of the sale before it was made, even though he had not been served

with a notice under Order XXI Rule 66. A Bench of this Court had observed in Natarajan Vs. Chandmull Amarchand by Power-of-Attorney, K.

Milopchand and Another,

If there had been a notice under Order 21, Rule 64, and there was an order for sale, then it might be that the absence of a further notice under

Order 21, Rule 66, would not make the sale void, but only voidable, and further, the application would fall under Order 21, Rule 90, and the same

would have to be filed within the shorter period of thirty days prescribed by Article 166 of the Limitation Act of 1908 and the corresponding

Article 127 of the Limitation Act of 1963.

As already stated, the notice, exhibit A-1, appears from exhibit B-5 to have been only a sale notice required by Order XXI Rule 64 and it has

been found that there was no service of the notice on the Appellant.

The learned Counsel for Respondents 1 and 2 relied upon the decision of the Federal Court of India in. Shyamakant Lal v. Rambhajan Singh

(1939) 2 M.L.J. 45 (F.C.) where the learned Judge has observed:

The existing S-13 (as did the repealed Section 16) merely enjoins the estimation of the value of the property and that of a sufficient part thereof,

and does not itself deal with the entry of the name in the proclamation of sale. It is therefore, not in conflict with Order-21 Rule 66. Nor is there

anything in the proviso permitting the Court to order the whole property to be sold which clashes with the rule. Unless the value is in some way

estimated, it is impossible for the Court to ascertain what portion of the property would be sufficient to satisfy the decree, which consideration is

enjoined upon the Court under the terms of the mortgage decree itself passed under Order 34 Rule 5(3) and Form No. 6 of Appendix D. There is

an analogous provision in Order 21, Rule 64, which applies to attached properties.

This decision does not lay down that no notice under Order XXI Rule 64 is necessary.

The learned Counsel then relied upon a decision of the Supreme Court in Dhirendra Nath Gorai and Subal Chandra Shaw and Others Vs.

Sudhir Chandra Ghosh and Others, where there was a Court sale of property in execution of a decree, and the judgment-debtor did not object to

the valuation even after the service of notice. But an application for setting aside the sale on the ground of non-compliance with the provisions of

Section 35 of the Bengal Money Lenders Act was filed. It has been held that a party who received the notice of the proclamation but did not

attend at the drawing up of the proclamation or did not object to the said defect, cannot maintain an application under Order 21 Rule 90, and even

if he could, the sale cannot be set aside unless by reason of the said defect or irregularity he had sustained substantial injury. This decision would

not apply to the facts of the present case where it has been found that the Appellant had not been served with only notice under Order XXI, Rule

64, Code of Civil Procedure.

He Mr. Mani next relied upon the decision of a Full Bench of the Kerala High Court in Govinda Menon Vs. Varkey and Others, where the

learned Judges have observed:

The question then is whether lack of notice under Rule 66 of Order XXI to the judgment-debtors before settlement of the proclamation would

make the sale that followed on such a proclamation void. This has been answered in the negative by two decision of this Court in Kuttikrishnan

Nair Vs. Madhavan Nair, and in Kunjan Raman v. Cheria [1960] 1 Ker. L.R. 315. This was also the view of the Madras High Court in the earlier

decisions referred to in Kuttikrishnan Nair Vs. Madhavan Nair, but there are two later decisions of the Madras High Court which took a different

view. The later view of the Madras High Court has not been accepted by this Court in Kuttikrishnan Nair Vs. Madhavan Nair, . We see no reason

to differ from the views taken in the decisions in Kuttikrishnan Nair Vs. Madhavan Nair, and in Kunjan Raman v. Cheria [1960] 1 Ker. L.R. 315.

We, hold that the sale therefore is not void.

I am bound by the later view of the Madras High Court which, however, had not been accepted by the learned Judges of the Kerala High Court in

this Full Bench decision.

On the other hand, Mr. Ramachandran, learned Counsel for the Appellant, invited my attention to the decision of Veeraswami J. (as he then

was) in Ramalingam Pillai Vs. Sankara Iyer (Died) and Others, where the learned Judge has observed:

If then there was no notice served upon the Appellant under Order XXI, Rule 66, the question directly arises as to whether the present suit is

barred and that the Appellant''s only remedy was under Order XXI, Rule 90... Separate sets of rules are framed under Order XXI one set relating

to settlement of proclamation and the other to the manner of publication of a proclamation of sale. Nevertheless Rule 90 speaks of material

irregularity or fraud in publishing or conducting a sale. The rule, to my mind, will not, therefore, cover any irregularity in the settlement of

proclamation. That I find is also the view of a Division Bench of this Court in Neelu Nethiar v. Subramania Moothan AIR 1920 Mad. 481. The

learned Judges have held that an objection to an execution sale on the ground that before the drawing up of the proclamation the notice required to

be given under Order XXI Rule 66(2), Code of Civil Procedure, was not given to some of the judgment-debtors was not a matter relating to the

publication or conduct of the sale within the meaning Order XXI, Rule 90. Following this view of the scope of Rule 90, I hold, disagreeing with the

lower appellate Court, that the remedy of the Appellant was not under Order XXI, Rule 90.

The next contention of the learned Counsel for the Respondents 1 and 2s that by reason of the adjudication of the Appellant as an insolvent

during the pendency of the mortgage suit and the addition of the Official Receiver in the execution petition, no notice was required to be served on

the Appellant and that he has no right to have the sale declared void on the ground that there was no service of notice on him, as required by

Order XXI, Rule 66, Code of Civil Procedure. He relied upon a number of decisions In support of that contention. A Bench of this Court has

observed in an old decision in Subraya Chettiar v. Papathi Ammal 7 L.W. 516 thus:

At the date of suit Plaintiff was an undischarged insolvent and u/s 16 of the Provincial Insolvency Act all his property vested in the Official

Receiver, who Would then have the right to sue in respect of that property. It is, however, contended for Appellant that he had the permission of

the Official Receiver to bring this suit, and therefore could do so inasmuch as there remained vested in him an interest in the property, as would

appear from the fact that any residue of his estate after administration in insolvency would be returned to him. This contention must, however, be

rejected for when the property becomes vested in the Official Receiver the insolvent must ipso facto be divested of the same, and can have no

vested interest in the property until it is restored to him after administration...We must therefore hold that Plaintiff had no right to institute this suit.

The view enforced in this decision that the insolvent has no manner of right is not in consonance with the one expressed in Subbia Goundan Vs.

Ramaswami Goundan and Others,

The privy Counsel has observed in Kola Chand Banerje v. Jagannath Marwari 26 L.W. 268:

That the rights of secured creditor over a property are not affected by the fact that the mortgagor or his heir has been adjudicated an insolvent is,

of course, plain, but that does not in the least imply that an action against him may proceed in the absence of the person to whom the equity of

redemption has been assigned by the operation of law.

The latter alone is entitled to transact in regard to it, and he and not the insolvent, has the sole interest in the subject-matte of the suit. To him,

therefore, must be given the opportunity of redeeming the property. The contrary view would encourage collusive arrangements between the

secured creditor and the insolvent and might involve the sacrifice of valuable equities of redemption which ought to be made available for the

benefit of the unsecured creditors of the insolvent with whose interests the Receiver is charged.

There is no evidence to show that there is any collusion in the present case.

Rangnekar J., of the Bombay High Court has observed in Balakrishna v. Calcutta Soap Works 40 Bom. L.R. 956:

The Petitioner was adjudicated an insolvent on December 11, 1935. He applied for discharge on September 10, 1936, and those proceedings are

pending. After the adjudication order, that is to say December 28, 1935, he filed the present application. It seems to me that it is fundamentally

opposed to all principles of insolvency to say that an insolvent after an adjudication order is competent to file a suit in his own name, and that is

clear from a consideration of the provisions of Sections 25 and 59 of the Provincial Insolvency Act Mr. Ganjendragdkar, however, relies upon a

decision in Ramachandra v. Shripati 31 Bom. L.R. 357 in which it does appear to have been held by a division Bench of this Court that an

insolvent can file an appeal after an adjudication order against him. It is not necessary for me to express any opinion on that decision.

With respect, it is known how the learned Judge had held that it was not open to an insolvent, after an adjudication order, to file a suit while it has

been held by a Bench of the Bombay High Court, by which the learned Judge was bound, that an insolvent can file an appeal after an adjudication

order had been made against him.

A Bench of this Court has observed in Ramagopal Naicker Vs. Muthukrishna Ayyar and Another,

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 least temporarily ceases and become fully vested in the Court or the Official Receiver. In other words, the Court or the Official Receiver stands

in the shoes of the insolvent and he has all the rights, privileges and commitments which the insolvent may have... 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.... We are at a loss to

understand how Section 47 can in any way derogate of reduce the nature of the Official Receiver''s right in the property that is vested in him.

If the learned Judges had held that the insolvent has no manner of interest at all in the property, it would be opposed to the decision of the Full

Bench of this Court in Subbia Goundan Vs. Ramaswami Goundan and Others, which will be referred to presently.

A Bench of the Allahabad High Court has observed in Kribanath v. Ganga Prasad ILR [1961] All. 200, 213:

The real effect of the vesting was that the right, title and interest of the Defendant No. 1 in the property got completely suspended, and the Court

and after the appointment of the receiver the receiver became the owner of the property entitled to take possession of it and to deal with it for

certain purpose. Had that not been the legal position it would not have been possible for the Court or the receiver to pass a valid and complete title

to the property when it transferred it for the satisfaction of the debts of the insolvent.

The contention that as a result of the vesting only same sort of title passes to the Court or the receiver and not the whole title, and something

continues to vest in the insolvent, must also be rejected on the same basis. As a result of the order of adjudication all the rights and interest which

the insolvent had in the property got transferred by operation of law to the Court or the receiver and the Plaintiffs could not say that any rights

against which their claim could be enforced continued to remain in the Defendant No. 1.

This decision also is opposed to the principles laid down in the Full Bench decision referred to above.

In Velayudha Konar v. Kora Miah Sahib (1974) 2 M.L.J. 408 decided by a Bench of this Court, after a final decree in a mortgage suit the

judgment-debtor was declared an insolvent and in the execution proceedings taken out subsequently the Official Receiver was not made a party

and in the Court sale held in execution of the decree, the decree-holder himself purchased the property. But ignoring the Court sale the Official

Receiver sold the property to a third party; The learned Judges held that the Official Receiver had stepped into the shoes of the judgment-debtor

before the Court sale was held and ought to have been made a party to the execution proceedings; and he not having been made a party, the

Court sale was of no effect at all a� against him and could be ignored by him as void. They have observed:

We are of the opinion that in a case where the Official Receiver in whom the property had vested exercises his option then, the fact that the

judgment-debtor was a party to the execution proceedings is of no consequence at all. In such a situation, the Court-auction-sale is just in the same

position as one without notice to the judgment-debtor (in a case where, there is no insolvency). It is like a third party having been, impleaded in the

execution proceedings leaving out the judgment-debtor. There can be no doubt that once the Official Receiver in whom the equity of redemption

vests exercises his option, the insolvent mortgagor becomes a non-entity, though, however, in a different situation, namely when the Official

Receiver does not exercise his option, the transaction between the mortgagor (judgment-debtor) and the decree-holder would be perfectly valid.

As the Supreme Court put it in the case mentioned above at page 603 Nagubai Ammal and Others Vs. B. Shama Rao and Others, the purchaser

from the insolvent judgment-debtor gets a good and impeccable title subject only to any right which the Official Receiver may so exercise.

The learned Judges have not expressed any opinion which is not in consonance with the principle laid down in the Full Bench decision of our High

Court.

On the other hand, the learned Counsel for the Appellant relies strongly upon the decision Of the Full Bench of this Court in Subbiah Goundan

v. Ramaswami Gounden (1953) M.L.J. 766 (F.B.) referred to above. In that case two divided brothers, Murugappa and Krishnaswami, started a

chit fund in 1922. The chit was to run for a period of 12 years, one chit being auctioned every year. The brothers executed a security bond in 1923

in favour of the ticket holders in. respect of their respective properties for proper conduct of the chit and securing due repayment of the amount

subscribed by them. The chit ran smoothly till the tenth auction, in which the ticket was purchased jointly by Venkataramana Iyer, the second

Defendant, and one Palani Goundan, who were each entitled to a half share in the amount to be paid by Murugappa and Krishnaswami Goundan.

Murugappa paid his half share to Palani Goundan, but Krishna-swami Goundan did not pay his half share to Venkataramana Iyer. Consequently,

Venkataramana Iyer filed Original Suit No. 192 of 1931 in the Sub-Court, Coimbatore, against both the brothers for enforcing payment as per the

terms of the security bond. There was a mortgage decree in that suit on 5th December 1931. But, in the meanwhile Insolvency Petition No. 311 of

1931 was filed on 14th October 1931 by a creditor of Murugappa for adjudicating him as an insolvent and he obtained an order of adjudication

on 19th March 1932. The Official Receiver was not a party to the mortgage suit, and Venkataramana Iyer brought the properties given as security

for sale on 21st March 1935 and he himself purchased the properties under a sale certificate, dated 25th February 1932 and took possession on

5th April 1934. The adjudication was annulled on 13th October 1935 on account of the failure on the part of the insolvent to apply for discharge,

without making any vesting order. The auction purchaser Venkataramana Iyer sold the properties to the first Defendant on 11th March 1940. The

Appellant in that case was one of the two sons of Murugappa. The question raised on his behalf was that as the Official Receiver, in whom the

right, title and interest of the judgment-debtor in the properties became vested after adjudication was not impleaded as a party to the decree and

execution proceedings, the decree and execution proceedings were null and void and did not bind the properties. It was contended that the

objection that the decree and the sale in pursuance thereof are null and void can be taken only by the Official Receiver and not by the insolvent

himself who was party to the proceedings. The learned Judges have observed at page 769:

Notwithstanding the insolvency of the mortgagor, the mortgagor under the law as it now exists, is a necessary and proper party, as u/s 91 of the

Transfer of Property Act, the mortgagor is a person entitled to redeem the property and under Order 34, Rule 1, Code of Civil Procedure, all

persons having an interest either in the mortgage security or in the right of redemption have to be joined as parties in any suit relating to mortgage,

so that even if a person has no interest in the mortgage security, if he has still the right of redemption he should be joined as a party to a mortgage

action and an insolvent mortgagor is no exception to the rule. As he is a person entitled to redeem u/s 91 of the Transfer of Property Act, his right

of redemption would become barred only if he is impleaded as a party and not otherwise. The effect of not impleading the Official Receiver in

whom the entire interest in the property had vested was only to keep unaffected his right of redemption of the property, and the title to the property

does not vest in the Court auction-purchaser.

Subba Rao, J. (as he then was) has observed in his separate but concurrent judgment in that case:

The status of an insolvent in connection with his right to prefer an appeal under sections 68 and 75 of the Provincial Insolvency Act came up for a

judicial scrutiny by a Full Bench of this Court in Narasimham v. Ramayya [1950] 1 M.L.J. 484. The learned Judges held that an appeal would lies

to the High Court at the instance of the insolvent under certain circumstances. They accepted the doctrine that the position of an insolvent is not

that of a person who is civiliter morthus. They also acted upon the following passage of Farewell J. in Bird v. L.R. [1900] 1 Ch. 822, 828

Farewell, J. put the position of an insolvent in the following words:

...Subject his non-interference with the administration and with the management of the trustee during the bankruptcy in the due course of the

execution his duty, he can in my opinion, demand the surplus, and has a right to the surplus--a right which he can dispose of by will or deed or

otherwise during the pendency of the first bankruptcy, even before the surplus is ascertained, although such deposition will of course be ineffectual

unless in the event there prove to be a surplus upon which it can operate.

The aforesaid passage indicates that the insolvent on adjudication has not been incapacitated from entering into contracts or transferring property.

From the aforesaid decisions the following principles emerge; Insolvency does not operate as civil death. The insolvent''s property vests in the

Official Receiver for the purpose of administering the estate and for meeting the claim of the creditors. The Act does not affect the capacity of the

insolvent to enter into contracts and otherwise deal with the property. He is in the position of a person who has alienated all his property or

otherwise lost it. But his position cannot be equated to that of a minor or a lunatic. He can be sued with or without the leave of the Court as the

case may be, and in that suit he can properly represent himself. But any decree that might be obtained against him would not bind the Official

Receiver in whom his entire properties vest. If the properties vested in the Official Receiver are sold as if they were the properties of the insolvent,

the sale would be valid and the judgment-debtor cannot quest on the validity of the sale such a sale would be analogous to a sale of the property of

a third party as if it was the property of the judgment-debtor. The sale cannot be held to be a nullity or one made without jurisdiction.

It follows from the aforesaid principles that the Appellant who is the representative of the insolvent judgment-debtor is precluded from questioning

the validity of the sale on the ground that the Official Receiver was not a party to the decree or to the execution proceedings.

This decision of the Full Bench lays down that the mortgagee as the Appellant in the present case who had been adjudged an insolvent, is a person

entitled to redeem u/s 91 of the Transfer of Property Act and he is a necessary party and that subject to his non-interference with the

administration of the estate and its management by the Official Receiver, he can demand the surplus remaining after the administration is over and

would therefore, be a necessary party in a mortgage wit even after the adjudication. It is, perhaps, for the same reason that the Appellant had been

impleaded as one of the Respondents in the execution petition along with the Official Receiver the third Respondent. If he is a necessary party, he

is entitled to have the notice under Order XXI Rules 64 and 66, and if no Order XXI Rule 66 had been served on him, notice as required by the

sale would be a nullity, and he would be entitled to file a suit for a declaration that the sale is void, as has been held by Veeraswami J., as he then

was, in Ramalingam Pillai Vs. Sankara Iyer (Died) and Others, and the decisions of the later Benches of this Court referred to in Govinda Menon

Vs. Varkey and Others,

In Subbaraya Goundan and Another Vs. V.V.R. Virappa Chettiar Bank and its partners being Valliappa Chettiar and Others, the learned

Judges hare observed:

The insolvency petition was filed after the properties were sold in Court auction and until the sale is set aside, the properties will not vest in the

official receiver. The official receiver has not taken any steps to set aside the sale ; and the assets having been realised before the date of the

admission of the insolvency petition he cannot even claim the benefit of the execution: Vide Section 51, Provincial Insolvency Act. It follows,

therefore, that the judgment-debtor whose interests are affected by the sale cannot only file an application under Order 21, Rule 90, but also prefer

an appeal against the Subordinate Judge''s order.

A similar view had been expressed by a Bench of this Court in Manthiri Goundan Vs. Arunachalam Goundan and Another, where it is

observed:

The first point, namely, the Appellant''s right to apply to have the sale set aside is governed by the provisions of Order 21, Rule 90, Code of Civil

Procedure, under which the application was made. That rule provides that any person whose interests are affected by the sale may apply to set

aside the sale. The question therefore for decision is whether the Appellant is not a person whose interests are affected by the sale of the properties

in question. Those properties were undoubtedly his properties which had been mortgaged and which had been sold in execution of the mortgage

decree. His adjudication as an insolvent and the vesting of these properties and all his other properties in the Official Receiver no doubt deprived

him of all interest in the property in present. But does this mean that he ceased to be a person whose interests are affected by the sale of the

properties?

The point is really concluded in our opinion by the Full Bench decision in Subbaraya Goundan v. Veerappa Chettiar Bank 65 M.L.J. 719. That

was also a case of an insolvent and it was held that the insolvency of the judgment-debtor did not per seen render it incompetent for him to

continue proceedings initiated by him under Order 31, Rule 90, and that he had also a right to prefer an appeal from an order dismissing such on

application. There is an earlier case reported at p. 359 of the same volume of the Madras Law Journal decided by a single Judge, namely

Swaminatha Udayar v. Kalyanarama Iyengar 65 M.L.J. 359. We have also been referred to the latest Full Bench decision in Ayyappa v. Kasi

Perumal ILR [1939] Mad. 374 in which it is pointed out by the learned Chief Justice that the narrower meaning given to the phrase whose interests

are affected by the sale in certain decisions is not the correct meaning to be given to those words but that the words should be taken to mean any

person whose pecuniary interests are immediately and directly affected and that the decision in Kathiresan Chettiar v. Ramasami Chettiar 27

M.L.J. 302 which interpreted the words to mean ''having an interest in the property sold'' was wrong, and that decision was overruled expressly by

the Full Bench.

In these circumstances, it is obvious that the learned Subordinate was not right in coming to the contrary conclusion relying on the cases reported in

Hari Rao v. Official Assignee Madras I.L.R.Mad. 461 and Venkatramayya v. Bangarayya 67 M.L.J. 942 which were not concerned with the

words with which we are now concerned, namely the word found in Order 21 Rule 90 but with the word ''aggrieved'' found in the Insolvency

Acts. It seems to us that the words ''whose interests an affected by the sale'' must be construed in their ordinary sense, and it is too much to say

that merely because a person is adjudicated insolvent his interests are not adversely affected by the sale of property that belonged to him before

adjudication...we find on the right of the Appellant to present the application to set aside the sale is wrong and that he is entitled to present the

application and to ask the Court to adjudicate upon it.

Even in C.S. Ponnusami Mudaliar Vs. Subbaraya Mudaliar and Others, a Bench of this Court has held that an insolvent would be a person

whose interests are affected by the sale with in the meaning of Order 21, Rule 90 of the CPC and the learned Judges have observed : The

amendment of Rule 22 of Order 21 cannot, however, effect the question whether the insolvent was a person interested within the meaning of

Order 21, Rule 20; and since it was held in Manthiri Goundan Vs. Arunachalam Goundan and Another, that an insolvent was a person interested

within the ordinary meaning of that expression and that the decision based on insolvency law in which it was held that insolvent not a person

aggrieved had no application to petitions under Order 21, Rule 90, it would follow that the learned Subordinate Judge was wrong on this point.

These three decisions regarded to above lay down that it is open to an insolvent to file an application under Order XXI, Rule 90 Code of Civil

Procedure, to have the sale set aside for any irregularity. Therefore, it cannot be stated that he could not be entitled to file a suit to have the sale

declared as void for want of notice required under Order XXI Rule 66 merely because he had been adjudged an insolvent during the pendency of

the mortgage Therefore, I agree with the learned Counsel for the Appellant that the Appellant is entitled to file a suit for obtaining a declaration that

the Court auction sale is void.

The lower Court has erred in law in failing to draw the necessary inference from the rent receipts and letters, exhibits A-6 to A-60, and in

holding that the Appellant has no locus standi to file the suit.

The second appeal is, therefore, allowed with costs throughout payable by Respondents 1 and 2. No leave.