V.S.A.R.M. Annamalai Chettiar vs Vellayan Chettiar and Others

Wadsworth, J.—This petition raises a question relating to rateable distribution which is not, so far as I am aware, covered by any precise

authority. The petitioner, the first respondent and the second respondent, all had decrees against the third respondent and his father, who became

an insolvent. The first respondent executed his decree on 15th October, 1934, and on 5th January, 1935, the Court ordered sale of the entire

properties of the father and the Son. This order was modified by a later order restricting the sale only to the second defendant''s half share and

after this order, the Official Receiver was impleaded and when he did not appear, the order was again revised directing that the entire properties

should be sold. At this stage, the Official Receiver wrote to the Court pointing out that if he were permitted to sell the entire property as the agent

of the Court and deposit into Court the share of the non-insolvent son, this procedure would be for the benefit of the attaching decree-holder. The

Court on 13th February, 1935, passed an order permitting the Official Receiver to sell the entire property as desired by him and directing him to

hold the sale within three months. The Official Receiver did not hold the sale within the time allowed and the executing Court was approached to

withdraw the sale from the Official Receiver and sell through the Court. While correspondence between the Court and the Official Receiver was

proceeding with reference to this proposal, the Official Receiver actually sold the property on 28th October, 1935,''the price being received by the

Official Receiver in two instalments on 29th October, 1935, and 7th November, 1935. It is common ground that on the latter date the execution

petitions of the petitioner and the second respondent had not yet been filed. The petitioner''s execution petition was filed on 30th November, 1935,

and that of the second respondent on 20th December, 1935. After the Official Receiver''s sale was concluded, there was further correspondence

and no sale deed was drawn up until on 30th March, 1936, the Official Receiver paid the son''s share of the sale proceeds into Court and on 8th

April, 1936, the sale was finally ratified by the Court.

Quite clearly, if the date of the payment of the sale proceeds to the Official Receiver is the date of the receipt of the assets by the Court, for the

purpose of Section 73 of the Civil Procedure Code, the petitioner and the second respondent have no right to share rateably in these assets. If, on

the other hand, the date of the receipt is the date when the money was actually paid by the Official Receiver into Court, then both the petitioner

and the second respondent are entitled to rateable distribution. The learned Subordinate Judge has taken the view that the date of the receipt of the

assets is the date of the receipt by the Official Receiver acting as the agent of the Court. He rests his view largely on the decision in Galstaun v.

Woomes Chandra Bonnerjee ILR (1916)Cal. 789 which can hardly be said to be a case exactly covering the facts with which we now have to

deal. That was a case of the sale of movable property by the Court and with reference to movable property the rules prescribe that the price of

each lot shall be paid at the time of the sale, presumably to the officer who holds the sale. The learned Judges, distinguishing a case relating to

immovable property, point out that if the entire purchase money was paid by the purchasers into the hands of the auctioneers in one instalment, it

was immaterial for the purpose of Section 73 whether the purchase money was actually paid into the treasury or into the hands of the person

employed by the Court to hold the sale.

The present case, however, presents certain special features. At the time when the Official Receiver held this sale, he was not authorised to hold

it. He had failed to hold it within the time allowed and when he actually held the sale, the Court had apparently decided to withdraw from him the

power to hold the sale. Presumably he must be regarded as having been appointed in the first instance as the selling officer under Order 21, Rule

But it does not appear that there was any regular proclamation by the Court, though the value for the purpose of the proclamation had been

settled at an earlier stage. Assuming that the Official Receiver was the selling officer appointed by the Court under Rule 65, his proceedings would

necessarily be governed by the provisions of Order 21. In accordance with those provisions he would have authority to receive a deposit of 25 per

cent, of the purchase price, but the balance would under Rule 85 be payable into Court. Assuming that the lack of authority of the Official Receiver

to sell at the time of the sale and the lack of regularity in the manner of the sale have been condoned by the subsequent ratification of the Court and

by the absence of any objection to the irregularities of the procedure, it seems to me difficult to hold that the Official Receiver was the agent of |he

Court to receive this money when, in the case of sales of immovable property, the rules under which the Official Receiver was authorised

contemplate only the power of the officer, to receive 25 per cent, of the purchase price, the balance being payable into Court. When there is

clearly no authority given to the agent to receive the full amount of the purchase price, I find difficulty in holding that the receipt by the agent in

contravention of the rules under which he should have been operating, can, by virtue of subsequent ratification of his irregular sale, be deemed to

have been a receipt by the Court; and there is the further difficulty that the adoption of such a view would deprive the other decree-holders of their

accrued rights of sharing in any assets which might be received by the Court after the date on which their execution petitions were filed. It cannot,

in my opinion, be said that there had been, at the time when these two execution petitions were filed, any receipt of these sale proceeds by the

Court. All that had then happened was an unauthorised and irregular sale by the Official Receiver and an unauthorised receipt by the Official

Receiver of the proceeds of that sale. There was nothing in the hands of the Court resulting from this sale and there was at the time when these

execution petitions were filed, no subsisting authority to the Official Receiver to sell. We are not now concerned with the final validity of the sale.

That has been accepted by the Court and no one has ''objected. But it does seem to me apparent that this subsequent ratification by the Court

cannot transmute the unauthorised receipt of this money by the Official Receiver into a receipt by the Court. My attention has been drawn to

numerous cases relating to the receipt of assets by Collectors executing decrees under the third schedule to the, Civil Procedure Code. I do not

propose to discuss those cases, for it seems to me that they depend upon the special statutory provisions which give to the Collector functions to

some extent analogous to those of executing Courts and have no real bearing on the facts of the present case. It is clear that the Official Receiver in

this case must have been either the officer appointed by the Court to sell under Rule 65, or a party selling with the permission of the Court under

Rule 83, if the sale is to have any validity so far as the son''s share was concerned. In the Court below it was not suggested that he, acted under

Rule 83 and it seems to me unnecessary to consider the case from this aspect.

In the result therefore I am of opinion that the date of the receipt of the assets by the Court must be the date on which the money was actually

paid by the Official Receiver into the Court. The petition is therefore allowed with costs here and in the Court below. The petitioner and the

second respondent will be entitled to share rateably in the proceeds of the sale of the third respondent''s share in the property.