Thumbalam Gooty Thimmiah vs The Official Receiver of Bellary and Others

Abdur Rahman, J.—The only question which has to be determined in this revision is whether a creditor in insolvency who happens to hold a

debt, free from any taint of immorality or illegality, incurred by a father as manager of a joint Hindu family has any priority over the debts incurred

by a son who was a junior member of the joint family when both the father and the son were adjudicated insolvents by one order in an insolvency

petition. In order to support his contention that the creditors of the father would take precedence over those of his son the learned Counsel for the

petitioner tried to invoke the principle under which the father''s power to sell the joint family property for his just debts has been held to subsist at

the time of partition and bearing his powers as a karta of the family in mind the Courts have usually provided for the payment of such debts out of

the joint estate before the properties belonging to the joint Hindu family have been partitioned. It has been submitted that if it were right to give

priority to the debts incurred by the father, which were neither illegal nor immoral, in a suit for partition, it would be right to follow the same

principle in cases where the property of both the father and the son vests in the Official Receiver on account of their insolvency and to give priority

to such of the debts incurred by the father as were binding on the family. The second argument advanced to achieve the same object was that

inasmuch as the father''s power of disposal over his son''s share in the joint family property must be held to have vested in the Official Receiver, it

can be exercised by him on the father''s adjudication unaffected by the consideration that the son was also adjudicated along with his father. It was

therefore contended that the sale proceeds of the son''s share in the joint family property should be first applied to discharge the debts incurred by

the father and the balance alone, if any, should be paid to the creditors of the son.

Before these contentions are examined, it would be well5 to remember that in this case there were other sons who were members of the joint

family at the time when the father and the son were adjudicated. They were not declared insolvents and since the insolvency of a member of a joint

Hindu family does not ipso facto affect a severance in his status, it would follow that those that were adjudicated continued to remain members of

the joint family in spite of their insolvency. For this reason, if for no other, the principle underlying the first contention cannot be applied to this case.

The joint family has not been divided so far and there is thus no scope for the argument that the debts incurred by the father should be paid out of

the family property, the whole of which has not even vested in the Official Receiver. Moreover the appellant who is a simple money creditor cannot

be said to have a charge on the family property, although it may have been possible for him to proceed against it in execution of a money decree as

long as his debt was a just one and binding on the family. This could however be done only if the shares of the property belonging to the other

members of the family were still available and had neither been alienated nor got at by their creditors who might have been more vigilant than those

of the father. It cannot be reasonably contended that a son''s creditor would not be entitled to recover the debt due to him out of the son''s

undefined share in the family property and would have to wait until all the creditors of his father have been paid out of the family estate, If this were

so, a suit by a son''s creditor for the recovery of his debt would be almost an impossibility and would have necessarily to take the form of an

administration suit in which the father''s creditors would have to be first ascertained and their debts provided for or paid before a son''s creditor

may hope to realise his debt out of the residue. This would be the logical result of the contention raised by the learned Counsel for the appellant but

he was not prepared to go to that length when he was arguing his case before me. It is fairly obvious that the proposition, even if urged, could not

have been given effect to. As for the second contention, it is correct to say that in the insolvency of a father, his power of disposal over his son''s

share in the joint family property would vest in the Official Receiver; but it must be observed in this connection that there is a great deal of

difference between the power of disposal in a property and the property itself. The former does but the latter does not vest in the Official Receiver

on the father''s adjudication. As a direct consequence of this distinction it would follow that if the son''s right in the property has been attached,

alienated or even partitioned before the power of disposal has been exercised by the Official Assignee, the power of disposal would cease to exist.

The existence of the property and of a joint status are sine quo non for the continuance of that power. When the property has ceased to belong to

the son or the son''s right to deal with the property has come to an end, or when the son does not remain joint with the father, his right to deal with

his son''s share, and that was all which could have devolved on the Official Receiver by operation of law, would come to an end see Subraya v.

Nagappa I.L.R.(1908) 33 Bom. 264 and Adusumilli Gopalakrishnayya Vs. Peyyeti Gopalam and Others, . It is thus impossible for the Official

Receiver to claim any more rights than the father possessed himself. Baluswami Aiyar, In Re: A.N.B. Baluswamy Iyer and A.N.B. Narasimha Iyer,

. If this is the law, the father''s power of disposal would cease to exist as soon as the son''s property comes on his insolvency to vest in the Official

Receiver. The contention therefore that the father''s power of disposal continues to remain in him or vests in the Official Receiver on his

adjudication in spite of the son''s insolvency is incorrect and must be overruled.

These contentions however can be decided on a much simpler ground. When dealing with the matter in an insolvency proceeding one must,

unlike a partition suit, necessarily look into the provisions of the Insolvency Act - Provincial or Presidency Towns whichever be applicable - and

try to ascertain the rules made by the legislature. It cannot be denied that the provisions of these Acts must be taken to be exhaustive so far as they

go and there is no room for the contention that the doctrines of a personal law must be read in conjunction with the provisions of these acts so as

to extend or limit their operation. If one looks to the provisions contained in Section 61 of the Provincial Insolvency Act, it would be found to

provide in Sub-clause (5) that all debts entered in the schedule have to be paid rateably according to the amount of such debts and without any

preference except to those which have been otherwise specified in the Provincial Insolvency Act. The debts payable to secured creditors have

been exempted by Section 28 of the Act and Section 61 cannot therefore affect their rights of priority. The other debts to which priority has been

given are mentioned in Sub-clause (1) of Section 61. The learned Counsel for the petitioner has not been able to point to any provision in the

Provincial Insolvency Act under which he could claim priority for the debt in question and so far as proceedings in insolvency are concerned, the

petitioner must, as provided in Sub-clause (5), share rateably without any preference. It is obviously the policy of the Insolvency Law to distribute

the estate among the creditors fairly and unless a preference was given by the Act to any particular debt, it must necessarily be held to fall within

the sub-clause and no priority can legitimately be claimed in regard to the same. Viewed in the light of this section the unrealised simple debts of the

father and that of the son would stand oil the same footing. The fact that the father and the son were adjudicated jointly on the same petition should

not make any difference. A joint application and even one order passed to adjudicate them both does not affect the situation. If the application and

the order are split into two, and taken to have been presented and passed separately against the father and the son, the creditors of the one will not

be entitled to claim any priority or a share in the property of the other. It would be different of course if a debt is proved to be payable not only

jointly but also personally by the father and the son, in which case the property of both will be jointly liable. This is how the matter should be dealt

with in these proceedings. What will happen to the residue, if some remains after such of the joint debts as have been indicated above and the

debts payable only by the son have been paid in their entirety and if the debts of the father are not satisfied fully, need not be gone into by the

Insolvency Court which will have to deliver it to the son. It may be open then to the father''s creditors to proceed against the son in separate and

appropriate proceedings but it is unnecessary for me to consider that contingency here.

The result is that this revision fails and is dismissed with costs.