S.R.M. Ramaswami Chettiar and Others vs The Official Assignee of Madras

Curgenven, J.—These two appeals arise out of two applications by the Official Assignee of Madras for the delivery to him of certain

property alleged to belong to a firm known as the T.S.N. Firm, which was adjudicated insolvent on 10th March, 1930, by the High Court of

Rangoon in I.C. No. 14 of 1930. The applications recite that that High Court sent a copy of the order of adjudication to this Court, and requested

that, u/s 126 of the Presidency Towns Insolvency Act read with Section 77 of the Provincial Insolvency Act, the Official Assignee of Madras

should be directed to act as auxiliary to the Official Assignee of Rangoon in respect of the properties within the jurisdiction of this Court. This

direction being given, the Official Assignee sent a representative to Tiruppapuliyur to take possession of certain properties believed to belong to the

insolvent firm, but the representative was met by a refusal to deliver on the ground that the properties were trust properties the income of which

was dedicated to charitable purposes. The Official Assignee accordingly took out applications before our learned brother Waller, J., sitting in

insolvency, calling upon certain members of the firm and their agents to show cause why they should not deliver possession. It is stated, and I think

it must on the materials before us be conceded, that the respondents to these notices were not afforded sufficient opportunity to appear before the

Court and show cause in accordance with the terms of the summonses issued to them. The Judge''s summonses appear to have issued on the 16th

January, orders in terms of the applications were passed on the 26th and the appellants here have given reasons, which it is not possible at present

to dispute, why they were unable to get their case ready in the interval. So far as appears from the record, therefore, the Official Assignee''s

prayers for orders directing the insolvents and their agents to deliver possession were granted ex parte, upon the representations which his

applications contained. This is as much as I can infer from the learned Judge''s orders, which give no reasons for the summary character of the

orders passed. The question now raised before us is whether the Court had jurisdiction under the terms of the Presidency Towns Insolvency Act

to pass such orders.

This raises the general question whether the Insolvency Court, in a case where the title of the insolvent to certain property is disputed, can

authorise the Official Assignee to take charge of that property pending settlement of the dispute; because 1 conclude that it was only to that length

that the learned Judge''s orders were intended to go, and that it was not his intention to deprive the respondents to the applications of further

opportunity to contest either the jurisdiction of the Court to make the orders or the liability of the property to form the subject-matter of them.

Under Sub-section (2) of Section 58 of the Presidency Towns Insolvency Act

The Official Assignee shall, in relation to, and for the purpose of acquiring or retaining possession of, the property of the insolvent, be in the same

position as if he were a receiver of the property appointed under the Code of Civil Procedure, and the Court may, on his application, enforce such

acquisition or retention accordingly.

Now it is indisputable that under the terms of Order 40, Rule 1 of the CPC it is perfectly open to a Court to commit property of which the title

is in dispute into (he hands of a receiver, pending settlement of that dispute. In fact, no receiver pendente lite could be appointed if it were first

necessary to determine the ownership of the property. It seems further evident that this principle must extend, subject to Sub-section (2) of Rule 1

of Order 40, to cases where, as here, one of the parties alleges that the property is held under a paramount title. This point has, I think, been

correctly dealt with in Hudson v. Morgan ILR (1909) 36 C. 713. The circumstances of that case were of a more extreme kind than we have here,

because there a stranger to the litigation set up a paramount title, whereas here it is the insolvents themselves (and their agents) who claim title,

though in a capacity different from that in which they were adjudicated. ""If this,"" the learned Judges say,

were the true rule, of law, the action of the Court might be paralysed by the groundless assertion of an entirely unfounded claim. But as was

pointed out by this Court in the case of Budh Singh Dudhuria v. Niradbaran Roy (1905) 2 C.L.J. 431 it is an elementary principle that when the

jurisdiction of a Court to take cognizance of a matter brought before it is disputed, the Court must adjudicate upon the question. The jurisdiction of

the Court is ousted, not by the mere assertion of the existence of the circumstances under which the Court loses its jurisdiction, but upon proof of

their actual existence.

No doubt the question of jurisdiction must be judicially investigated, but the view that the Court must stay its hand upon the mere assertion of a

paramount title cannot be supported. I cannot, therefore, accede to the appellants'' contention that the learned Judge had no power to pass his

orders, not only until they had had an opportunity of representing their case but until the Court had adjudicated upon such questions of jurisdiction

and title as they thought fit to raise.

There remains the question whether we should interfere with the discretionary power exercised by the Insolvency Court. I think that, in view of

the allegations contained in the Official Assignee''s reports, there are no sufficient grounds at this, stage to take this course. On the broad facts

alleged, and without prejudging the issues, I am not prepared to say that the order was wrong. As, however, the title of the Official Assignee is

likely to be contested, I think that, until due opportunity for such contest has been given, he should hold them as would an interim receiver, without

disposing either of the properties themselves or their proceeds. The appeals are dismissed. The Official Assignee will get his costs out of the Estate

and the appellants will bear their own.

Cornish, J.

I agree. If the property is held by the insolvents on trust for charity it will not be property of the insolvent which vests in the Official Assignee,

and the Court would not be competent to order delivery of it to the Official Assignee. But it appears from the Official Assignee''s report that the

only ground for supposing the property to be trust property is the statement by an agent of the insolvents that the property is ""earmarked for

charities,"" whatever that may mean. The insolvents themselves, who reside without the jurisdiction of the Court, have declined, in spite of several

letters from the Official Assignee, to give him any information or assistance in discovering the true character of the property. On the other hand the

enquiries made by the Official Assignee show that these properties stand in the names of the insolvents personally in the Municipal Registers. This

is not, of course, conclusive that the insolvents are not trustees of the property. But ostensibly the property is the property of the insolvents, and in

the circumstances this would justify the order of the Court u/s 58 (2), Presidency Towns Insolvency Act, for the delivery of the properties to the

Official Assignee. The order, however, will not preclude the insolvents from showing to the satisfaction either of the Official Assignee or of the

Court that they have no more than the legal interest of trustees in the properties.