S.R.M.S.T.R.M. Ramaswami Chettiar through his authorised agent Kuppan Ayyangar vs T.S. Ramaswami Aiyangar, Official Receiver and Another

This appeal in effect raises the question whether a purchaser from the Official Receiver, of a property of the insolvent whom the receiver

represents, can obtain an order from the Insolvency Court for delivery of possession of the property, where his application is resisted by a third

party.

This appeal has been argued before us on the footing that the rights of the parties are governed by the provisions of the Provincial Insolvency

Act, Act V of 1920. It is necessary to examine carefully the terms of Sections 4, 5 and 56 of this Act. By Section 56(3) it is provided that ""where

the Court appoints a receiver, it may remove the person, in whose possession or custody any such property as aforesaid is, from the possession or

custody thereof.

Provided that nothing in this section shall be deemed to authorize the Court to remove from the possession or custody of property any person

whom the insolvent has not a present right so to remove.

This section clearly applies to the case of a receiver applying for the removal of an obstructer from the possession of the property claimed to be

the property of the insolvent. It is also clear that, for the purpose of determining the right of the receiver as against the obstructer, to the possession

of the property, the Court can hold an enquiry under this section.

There is no section in the old Provincial Insolvency Act, Act III of 1907, corresponding to Section 4 of the present Act. There were conflicting

decisions in regard to the power of the Court to deal with the claim of third parties against the insolvent and it was to set at rest the doubt that

existed upon the subject that Section 4 was introduced into the present Act. It will be seen that very wide powers are given to the Court u/s 4 : the

Court may decide any question which it may deem it expedient or necessary to decide for the purpose of doing complete justice or making

complete distribution of property. Sub-Section (2) refers, in terms, to the claims between the debtor and the debtor''s estate on the one hand and

all claims against him or it on the other hand. It is also to be noted that a discretion is given to the Court to decide the question in the Insolvency

proceedings and that it is not binding upon the insolvency Court to decide under this section every claim which is brought up before it.

Passing to Section 5, it makes provision inter alia for effect being given to the orders and decrees passed by the Insolvency Court. Under these

sections does the purchaser from the Official Receiver have the right to apply to the Court for being put in possession of the property purchased by

him ? The District Judge disallowed the applications on the ground that the Court cannot issue a delivery warrant on the application of a stranger to

the proceedings. Clause (3) of Section 56 is not limited to the case of an application by the Receiver and the terms of the clause are general. Why

should we restrict the operation of this clause to applications by the Receiver himself ? The learned vakil for the respondent asks us, virtually, to

introduce into the section the words ""on the application of the Receiver"". In our opinion, there is no justification for refusing to give to the words of

clause (3) of Section 56 their natural meaning and for restricting the scope of the clause.

It has also been contended before us for the respondent that the Insolvency Court is not vested with powers to execute its orders except to the

limited extent of being enabled to execute orders in favour of the Receivers appointed under the Act. If it is conceded that there is an executing

machinery that is available to the Receiver, we fail to see on what principle this machinery cannot be availed of by a purchaser from the Receiver.

The execution of any order made by the Court u/s 56 or Section 4 will be regulated by the terms of Section 5. For instance, if an order for a

warrant of possession is made in favour of the Receiver or of a purchaser from him, the method of executing the warrant u/s 5 will be the same as

that prescribed for the execution of a warrant issued by the Court in the exercise of Original Civil Jurisdiction. The Legislature having invested the

Insolvency Courts with extensive powers u/s 4, it would be. in our opinion, anomalous to hold that the Courts are powerless to give effect to their

judgments or orders. The terms of Sections 4, 5 and. 56 do not suggest that any such limitation is intended. We are therefore, unable to accept the

contention of the learned vakil for the respondent that the auction-purchaser cannot, under the provisions of the Insolvency Act of 192 , apply to

the Insolvency Court for a warrant of possession.

Several cases were relied on by the respondent. The first case cited by him is Narasimhayya v. Veeraraghavalu I.L.R.(1917) Wad. 440.

Certain property alleged to belong to an insolvent was sold by the Receiver and the purchase while attempting to take possession was obstructed

by the appellants who claimed to be in possession as owners. The District Judge purporting to act u/s 47 of Act III of 1907 ordered the

possession to be given to the purchase. The High Court held that the District judge had no jurisdiction to pass such an order. Abdur Rahim J at

page 441, say: ""it would be going much too far to say that a judge in insolvency in the mufassil has powers by a summary proceeding to decide

questions of title with respect to property claimed by third person."" The Court have now power to decide questions of title u/s 4 of Act V of 1920

and the reasoning given in this judgment would not, therefore, apply to an application made under the present Act. The judgment proceeds upon

the ground that Section 47 of Act III of 1907 which corresponded to section 5 of the present Act did not apply because there was no decree and

a sale by the Receiver was not a sale in execution of a decree. We are of the opinion that the Court has the power not any to make an order in

favour of the purchase but also to give full effect to it. We fail to see that there is anything in the terms of Section 47 which fettered the power of

the Court because the sale happened to be a sale made by a Receiver and not a sale made in pursuance of a decree. However, it is sufficient to

say that this is a decision under the old Act and that it is distinguishable on that ground, especially in view of the enlaged power possessed by the

Court under the present Act.

We have no double that the Insolvency Court under Act V of 1920 has ample power to deal with questions arising between the estate of an

insolvent and a third party. Section 4 is modelled on Section 7 of the Presidency Towns Insolvency Act, Act III if 1909. Under this corresponding

provision of the Presidency Town Insolvency Act, it has been held that the Court is vested with jurisdiction to deal with questions arising between

the Official Assignee and third parties. This point was expressly decided in The Official Assignee of Madras V. Vedavalli Ammal 1 . Bakewell J

sitting in the Insolvency Court held that, although under the old Act, 11-12 Victoria Ch. 21, the Insolvency Court had a discretion to exercise

jurisdiction over third parties, the Act III of 1909 effected a change in the law, and that the jurisdiction was . curtailed. This view was not accepted

by the Appellate Court. The provisions of Section 4 of the present Provincial Insolvency Act are if anything, wider than the terms of Section 7 of

the Presidency Towns Insolvency Act, III of 1909. We have, therefore no hesitation in holding that the Insolvency Court has plenary powers to

deal with the claims of third parties under the provisions of the present Provincial Insolvency Act.

The next case cited to us is Maddipoti Peramma v. Gandrapu Krishnayya (1918) 8 L.W. 136, Bakewell, J. took the view that, u/s 18(3) of Act

III of 1907, the Court had power to remove a person in possession of property of the insolvent from possession, but that the power was not

intended to provide for the determination of questions of title as between the insolvent and third parties. Krishnan, J. took the opposite view on this

matter. But they agreed in holding that an order passed by the District Judge, on the application by a purchaser of the insolvent''s property from the

Official Receiver, directing the third party claiming title, to deliver possession of the property to the purchaser, was without jurisdiction. The

observations we made in regard to Narasimhaya v. Veeraraghavelu I.L.R(1917) . Mad. 440 apply to this case also and we are prepared to hold

that this case being a decision under the Old Act, does not stand in our way of deciding in favour of the rights contended for on behalf of the

purchaser from the Receiver.

We have been referred to Official Receiver, Tinnevelly v. Sankaralinga MudaliarI.L.R (1921) . Mad. 524 which is also a case decided under

the Old Act III of 1907. The observations of Seshagiri Iyer, J. at page 532 that ""Section 4 of the present Act should not be regarded as if for the

first time a new power had been conferred ""are obiter, and it is unnecessary to discuss this point.

We may observe that in the present case an application was also made by the Official Receiver to the District Court asking for possession of

the property. He applied that the auction purchaser might be put in possession of the property on his behalf. The learned District Judge was of the

opinion that, u/s 18(3) of the old Act the Official Receiver having ceased to be the owner could not apply. It is unnecessary to decide the question

whether, after parting with his interest, the Official Receiver can apply, because, as stated above, we are of opinion that the application on behalf of

the auction purchaser would lie to the Insolvency Court and that the District Judge was in error in refusing to entertain the application.

We would also like to refer to Minatoonessa Bibee v. Khatoonnessa Bibee I.L.R(1894) . Cal 479 where it was held by Sale, J. that a

purchaser at a Receiver''s sale had a right to obtain the assistance of the Court in obtaining possession."" No doubt, the Receiver referred to here

was a Receiver appointed in a suit. At page 482 reference is made to an order made by the Calcutta High Court in an Administration Suit in which

the receiver appointed in the suit was directed to sell and upon the application of the purchaser an order was made directing possession to be given

to the purchaser. In the judgment are given several instances of similar orders made by the Calcutta High Court in the exercise of its Original Civil

Jurisdiction. We think that there is no distinction in principle in this respect between a purchaser from a Receiver appointed in a suit and a

purchaser from a Receiver appointed in regard to an insolvent''s property.

The District fudge in the present case, on account of the view he took of his powers, refused to deal with the merits of the claim of the

obstructor who is the son of the insolvent and who put forward certain contentions. We set aside the order of the District Judge and remand the

application to be disposed of by him according to law in the light of the observations contained in this judgment.

Costs of this appeal will abide the result.