RAO BAHADUR PATRI VENKATA SRINIVASA RAO OFFICIAL RECEIVER Vs. SECRETARY OF STATE FOR INDIA IN COUNCIL REPRESENTED BY THE COLLECTOR

JUDGEMENT

(1.) This appeal raises a point which appears to be entirely free from authority. The appeal is by the Official Receiver of Guntur and the respondent is the Secretary of State for India in Council. One K. Thomasu Reddy was adjudged an insolvent in 1924. Subsequently his adjudication was annulled because he failed to apply for his discharge within the time specified by the Court. Upon the annulment of the adjudication under Section 37 of the Provincial Insolvency Act the property of the debtor was by order vested in the Official Receiver who sold some of the properties of the insolvent and is in possession of the sale proceeds and other properties of the debtor. Subsequent to the date of the annulment of the adjudication, the debtor preferred four appeals in the District Court, Guntur, in forma pauperis. These appeals were dismissed and the court-fee payable on the respective appeals was ordered to be paid to Government. Government then put in an application to the Official Receiver for payment of the court-fees payable by reason of the appellate decrees out of the assets of the debtor's estate in his hands claiming to be entitled to be paid in priority to the debts of all other creditors because the debt due is a Crown debt. The Official Receiver declined to recognise the Government's claim contending that, on account of the order under Section 37 of the Pror vincial Insolvency Act vesting the property in him, he held the property of the debtor for the benefit of creditors whose debts were provable and proved in the insolvency and that in distributing the assests in his hands as a result of the vesting order he has to be governed by the same rules that govern the case of an insolvency. It is quite clear that by reason of Section 34(2) the debts provable in insolvency are those which the debtor is subject to when he is adjudged an insolvent or to which he may become subject before his discharge by reason of any obligation incurred before the date of his adjudication. Therefore, no debt incurred after adjudication is provable in insolvency. Hence it is contended by the appellant that as this was a debt incurred after the insolvent's adjudication, indeed after the annulment of the adjudication, the Crown has no debt which the Official Receiver can recognise. The learned District Judge allowed the claim of the Crown.

(2.) What we have to consider is what is the effect of the annulment of an adjudication and the subsequent vesting order under Section 37(1) of the Provincial Insolvency Act? A Full Bench of this High Court has on a reference to it in Veerayya V/s. Srinivasa Rao (1935) 69 M.L.J. 364 (F.B.) considered the following question, namely: Where the Insolvency Court annuls an adjudication under Section 43 of the Provincial Insolvency Act V of 1920 and chooses to pass an order under Section 37 vesting the properties of the quondum insolvent in an appointee (Official Receiver or any other person) is the administration in insolvency to continue for the realisation and distribution of the assets of such a person despite the annulment of the adjudication itself.

(3.) and has given the following answer, namely: the appointee continues to be subject to the directions of the Insolvency Court which appointed him, that these directions relate to the property of the insolvent and that they should be given in accordance with the policy and provisions of the Insolvency Act.