L JANAKIRAMA IYER S R KOOTHANANIAR PILLAI IN C A NO 77 OF 59 Vs. P M NILAKANTA IYER:P M NILAKANTA IYER

JUDGEMENT

(1.) These two appeals have been brought to this Court by two sets of defendants with a certificate of the Madras High Court and they arise out of a suit instituted under O. 1, R. 8 on behalf of the general body of creditors for administration against the trustees and alienees of the properties which belonged to their debtors. Defendant 14 and his sons defendants 18 to 24 are the appellants in Civil Appeal No. 62 of 1959 while defendants 12, 13 and 16 are the appellants in Civil Appeal No. 77 of 1959. Defendants 1 to 6 are the debtors. They were members of an undivided Hindu family known as Kalakkad Pannayar family in Tirunelveli District. The family was doing commission agency business in petrol, kerosene and crude oil. It had secured agency rights from the Burmah-Shell Company. The members of the family became heavily indebted by about June 1936 and as a result there was a pressure from their creditors. In order to meet the said pressure a deed of composition was executed (Ex. B. 2) on July 8, 1936. As a result of this composition 56 out of the creditors of the family agreed to a scheme for settlement of their debts. Under this deed defendant 7 was constituted as a trustee and as such was empowered to take over the assets of the debtors, sell them to the best advantage and distribute the proceeds rateably amongst all creditors. It appears that before the scheme under the composition could be successfully or effectively worked out one of the creditors, Ayyah Ayyar, filed an insolvency petition, No. 25 of 1936, in the Sub Court at Tirunelveli on July 30, 1936. By this petition the creditor wanted defendants 1 to 6 to be adjudged insolvents. During the pendency of these proceedings, on August 26, 1936, defendants 1 to 6 executed a deed of trust (Ex. B. 7); by this document they conveyed all their movable and immovable properties including the outstandings due to them to three trustees. These were defendant 7 Subbarayalu Reddiar, Veerabahu Pillai and Narayana Pillai. The trustees were authorised to dispose of the assets of defendants 1 to 6 and distribute the proceeds rateably amongst the creditors. Narayana Pillai died in February, 1938. Veerabahu Pillai died sometime before the present suit was instituted. Defendants 8, 9 and 10 are the undivided sons of defendant 7, whereas defendant it is the widow and defendants 12 and 13 are the step-brothers of Veerabahu Pillai. The trustees accepted the trust and entered upon their duties. They took possession of the immovable properties covered by the trust. They paid off the secured creditors, and in regard to unsecured creditors they arranged to pay 50% of their dues by selling the immovable properties either to the creditors themselves or to third parties directing them to discharge the secured debts, and the unsecured debts to the extent of 50% of their value. It is common ground that except their family house in which defendants 1 to 6 resided all other immovable properties belonging to them were conveyed under the trust deed.

(2.) Defendant 14 was a secured creditor in whose favour a mortgage of the first schedule properties had been executed for a sum of Rs. 30,000 on June 3, 1935 (Ex. B-95). This mortgage carried 10 1/2% compound interest. It appears that he had also lent a sum of Rs. 3,000 on a promissory note on July 17, 1935 (Ex. B-95 (a)), This note carried interest at 12%. The promissory note was supported by the pledge of the mortgage deed. In order to pay off the debts thus due to defendant 14 the trustees conveyed to him schedule I mortgaged properties for Rs. 42,000 on May 22, 1937 (Ex. B-94). Out of the said consideration the amount due under the mortgage as well as the amount due under the promissory vote were satisfied leaving a balance of Rs. 3,030 in the hands of the purchaser. He was directed to utilise this balance for repaying 50% of the dues of plaintiffs 2 and 3 who have brought the present suit. The sale deed in favour of defendant 14 was executed by only two out of the three trustees, defendant 7 and Veerabahu Pillai. Defendants 18 to 24 are the sons of defendant 14. As we have already seen defendant 14 and his sons are the appellants in Civil Appeal No. 62 of 1959.

(3.) Defendant 7 who was one of the trustees was a creditor of the estate to the extent of Rs. 6,000. His daughter-in-law was a creditor to the extent of Rs. 2,000. In satisfaction of 50% of the debt due to these two persons the trustees conveyed schedule III properties to defendants 8, 9 and 10 who are the undivided sons of defendant 7 (Ex. B. 8). This document was executed on December 16, 1936, for 4,000. The purchasers in their turn sold the properties to defendant 17 on May 30, 1947.