- (1.) On 27-2-1946, one Mohanlal Lallubhai filed Application No. 5 of 1946 in the Court of the Civil Judge (Senior Division) at Ahmedabad, in the exercise of insolvency jurisdiction, for adjudicating one Gordhandas Suthar an insolvent. On 28-2-1946, the Insolvency Court appointed an Interim receiver, of the estate of Gordhandas Suthar. An order adjudicating Gordhandas Suthar was passed on 2910- 1946, end one Dalai, a pleader, was appointed Receiver in Insolvency of his property by the same order. It appears that the insolvent had certain property in British India as it then was. He was also owner of S. N. 291 of the village of Adivad in the Baroda State, and of a factory for manufacture of bobbins standing thereon. One Gajjar who was a cousin of the insolvent filed on 20-2-1946, Suit No. 118 of 1945-46 in the Court of the Subordinate Judge at Kalol for a money decree and obtained on 3-3-1946, an order for attachment before judgment of S. No. 291 and the bobbin factory standing thereon. It may be mentioned that the property attached was outside British India, Similarly the Court at Kalol was a Court in the Baroda State which was not a part of British India as it then was. On 29-3-1946, a decree 'ex parte' was passed in Gajjar's suit and the order of attachment before judgment was confirmed by the Court at Kalol. Gajjar thereafter filed a darkhast for executing the decree and on 21-9-1946, the property attached was brought to sale and was ultimately purchased by a stranger to these proceedings. The auction-purchaser deposited in the Court at Kalol Rs. 5,200 being the amount for which he purchased the property and the amount was paid under order of the Court to Gajjar on 6-11-1946. The insolvent having failed to apply for discharge, the Insolvency Court at Ahmedabad annulled the adjudication by order dated 244- 1948, but it was directed by the order of annulment that "All the properties of the insolvent-debtor and in particular his half share in Pethapur property and the sale amount of Rs. 5,200 recovered by one of his creditors and cash held by him (receiver) at present are vested in the receiver. The receiver to continue his work and after deducting his costs and remuneration and the costs of the appellant-creditor should distribute the surplus when realised among the proved creditors in the Schedule." It may be observed that Gajjar had attempted to make a claim for the balance remaining due to him in insolvency proceedings in the Ahmedabad Court but had not prosecuted the claim. On 17-2-1949, the Receiver in Insolvency filed Suit No. 54 of 1949 in the Court of the Civil Judge (Senior Division) at Ahmedabad against Gajjar for a decree for Rs. 5,200 which Gajjar had received from the Kalol Court. Gajjar resisted the claim. During the pendency of the suit Baroda State merged with the Indian Union on 1-5-1949.
(2.) The learned trial Judge held that Gajjar having failed to challenge the order vesting Rs. 5,200 in the Receiver in Insolvency the suit was maintainable against him; _ that the civil Courts in India were bound to recognise the validity of the order passed by the Insolvency Court in India and to enforce the order passed by that Court; that even though the property at Adivad was situate outside British India at the date of adjudication it still vested in the Receiver and continued to vest in the Receiver under the order of annulment passed on 24-4-1948. The learned Judge also held that even though the order of adjudication was passed on 29-10-1946, and the property was sold prior to that date, the insolvency related back to 28-2-1946, and the defendant having received the amount after that date the Receiver in Insolvency was entitled to recover that amount by a suit filed in the Civil Court at Ahmedabad. The learned Judge in the course of his judgment observed: "The amount was recovered by the defendant (Gajjar) by the sale of the insolvent's property after the filing of the insolvency petition. Under the Insolvency Act the property of the insolvent even in foreign territory vests in the receiver. This property in Adivad belonging to the insolvent had thus vested in the interim receiver. Attachment before judgment can have no effect to prevent the vesting of the property in the receiver or to create any charge or right in favour of the attaching creditor against the receiver, so far as the administration of law is concerned this Court will have to respect our own law. It would have been different if the receiver had gone to the Kalol Court (Baroda State). That Court would not have respected the adjudication order passed, by this court being a foreign Court so far as the Kalol Court was concerned. But this does not mean that we cannot recognise our own adjudication order so as to hold that the property of the insolvent within Kalol jurisdiction had not vested in the receiver and that the attachment before judgment of that Court would create a right in the attaching creditor against the receiver." It must be pointed out that the learned Judge in the Court below was in error in assuming that by the appointment of an interim receiver the property of Gordhandas Suthar vested in the receiver. Under Section 20, Provincial Insolvency Act, an interim receiver has powers conferrable on a receiver appointed under the Code of Civil Procedure. The property of the debtor against whom an application for adjudication is made is not vested in the interim receiver. Till the debtor is adjudicated an insolvent, the property continues to remain vested in the debtor. It is only when an order of adjudication is passed that the title of the Receiver in Insolvency relates back to the date of the application for adjudication.
(3.) The assumption made by the learned trial Judge that a Receiver in Insolvency in whom the estate vested by order of the Court in British India was entitled to ignore proceedings competently entertained by a foreign Court in respect of immoveable property of the insolvent and the order passed therein and to claim the amount received by a creditor of the insolvent by those proceedings as if the amount was property of the insolvent to which the receiver was entitled by reason of the order of adjudication, is in my judgment fallacious. Indisputably, the Kalol Court had jurisdiction to entertain the suit against the insolvent when filed. That Court was competent to attach the property and to sell it in enforcement of the decree passed by it. The Kalol Court was not bound to recognise the title of the Receiver even if by the law of British India, which had no operation in the Baroda State, the property had vested in the Receiver. Gajjar received the amount paid by the auction-purchaser under orders of the Court at Kalol and the operation of that order was not liable to be questioned under the extra-territorial operation of a statute which might have been under the rules of private International law respected, if steps had been taken for obtaining recognition of the title of the Receiver, but which it was not obligatory upon the Court at Kalol to respect. Section 28(2), Provincial Insolvency Act, provides: "On the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as hereinafter provided, and shall become divisible among the creditors, and thereafter, except as provided by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceeding, except with the leave of the Court and on such terms as the Court may impose." Sub-section (7) of Section 28 provides that "An order of adjudication shall relate back to, and take effect from, the date of the presentation of the petition on which it is made." Under Section 51(1) of the Act "Where execution of a decree has issued against the property of a debtor, no person shall be entitled to the benefit of the execution against the receiver except in respect of assets realised in the course of the execution by sale or otherwise before the date of the admission of the petition," It cannot be disputed that the expression "the whole of the property of the insolvent" as used in Sub-section (2) of Section 28 would include all properties of the insolvent wherever situate. That provision has apparently extra-territorial operation; but that extra-territorial operation can become effective only if its validity is recognised in the foreign State.;