Bapna, J. - (1.) THIS is an appeal under sec. 75 (2) of the Provincial Insolvency Act against the order of the learned District Judge of Merta, dated 28th February, 1955, by which he rejected the application of the insolvents Mangilal and Premraj for discharge and by the same order annulled the order of adjudication of the debtors as insolvents which was made earlier by order of 17th March, 1952.
(2.) THE appellants Mangilal and his son Premraj applied to the court on 15th June, 1946, for being adjudged as insolvents. THEy were declared insolvents on 17th March, 1952, and were directed to apply for discharge within six months. This they did by application on 21st July, 1952. THE application was contested by the creditors Hazarimal and Jeewanlal. THE learned District Judge rejected the application for absolute discharge and annulled the order of adjudication on the following grounds - (1) Mst. Man Kanwar, mother of Mangilal obtained a decree against the debtors which was set aside by the High Court as being collusive vide its judgment, dated 19th July, 1954, in Ijlas-i-khas Appeal No. 5 of 1951 Ex. B. THE learned District Judge said that the High Court had held in that judgment, "that Mst. Man Kanwar in collusion with Shri Mangilal had obtained the decree more with a view to defeat Shri Hazarimal's claim than to realise anything herself from her son. " THE learned District Judge held that this observation satisfactorily proved that the insolvents had been guilty of fraud. (2) THE insolvents continued to trade with Umrao & Co. ; Ganganagar after they knew that they were insolvents. (3) THE insolvents' assets were insufficient to pay eight annas in a rupee to the creditors and they have not proved at all that this was due to circumstances for which they could not be held justly responsible. (4) THE evidence of witnesses Shri Hanuman D. W. 1, Shri Parasram D. W. 2 and Shrichand D. W. 3 proved satisfactorily that the insolvents have got sufficient ornaments of gold and silver with them and they were spending Rs. 400/- or Rs. 500/- per month and living a good life and doing business in the market and spending sufficient amount at the time of marriages. He held in the subsequent para of his order that the entire assets after realisation amounted to Rs. 15,337/- and the proved claims of the creditors were - 1. Shri Hazari Mal . . . . . . Rs. 92,168. 9. 0 2. Shri Jeewanmal Rs. 45,784. 9. 3 . . . . . . Shri Jeewanmal Rs. 2,082. 12. 6 . . . . . . Rs. 54,874-5 -9 Umrao & Co. , Ganganagar . . . . . . Rs. 3,761-14-0 3. The learned Judge further ordered that the amount of Rs. 15,337/- lying in deposit may be rateably distributed among the above three creditors. 4. Hazarimal died during the pendency of the appeal and Motilal was brought on record as his legal representative by order of this Court, dated 7th September, 1956. Learned counsel for Motilal raised two preliminary objections - The first preliminary-objection was that Hazarimal died on 21st July, 1955, and an application to bring on record Smt. Ganeshi widow of Hazarimal as his heir and legal representative was made on 24th August, 1955. She, however, died on 1st Oct. , 1955, and the application to bring on record one Sukhlal as the legal representative of Ganeshi was submitted by the appellants on 31st January, 1956, i. e. more than 90 days after the death of Ganeshi and, therefore, the appeal had abated against Mst. Ganeshi, who is now represented by Motilal. It may be mentioned that an application was made by Motilal respondent on 9th July, 1956, that Mst. Ganeshi, who was the heir of Hazarimal had died on 1st Oct. , 1955, but prior to that date she had assigned the decretal debt to Motilal by a deed of assignment, dated 16th September, 1955 and, therefore, it was prayed on behalf of Motilal that he may be brought on record in place of Hazarimal or Mst. Ganeshi. A second application was also made by Motilal on 11th July, 1956 in which it was said that Smt. Dhapu wife of Motilal was the daughter of Smt. Ganeshi and her heir-at-law under the Hindu Law. It was also alleged that Smt. Ganeshi had executed a will in favour of Subh Karan son of Motilal and Smt. Dhapu and this Subh Karan was the universal legatee and the legal representative of Smt. Ganeshi. It was then said in this application that the appellants had not tried to bring the real legal representative of Smt. Ganeshi, but even their application to bring on record Sukhlal was barred by time. It was also contended that Smt. Ganeshi having died before she was brought on record, the application to bring her on record had become infructuous and the application of 31st January, 1956, if considered to be an application for bringing on record the legal representative of Hazarimal was barred by time under Art. 177 of the Indian Limitation Act having been brought after 90 days of the death of Hazarimal. In my opinion this preliminary objection has no force. Art. 177 of the Limitation Act is as follows - "art. 177. Under the same Code to have the legal representative of a deceased defendant or of a deceased respondent made a party. Ninety days. The date of the death of the deceased defendant or respondent. " Hazarimal was the respondent in the case. He died on 21st July, 1955. The application for making his legal representative as party to the appeal was made on 24th August, 1955. This application was clearly within the time, permitted by Art. 177 of the Limitation Act. The next application of 31st January, 1956, to bring on record Sukhlal, a collateral of Hazarimal owing to the death of Mst. Ganeshi on 1st October, 1955, cannot be governed by Art. 177. Mst. Ganeshi had not been made a respondent as her death took place before she could be made a party. The application, dated 31st January, 1956, could neither be under O. XXII, R. 4, C. P. C. nor could it be governed by Art. 177, for the simple reason that Ganeshi died before she had been made a party to the appeal and O. XXII, R. 4 (1) as also Art. 177 only becomes applicable when an application is made for causing the legal representative of the deceased respondent a party to the appeal. The provision under which an application of the nature under consideration can be made is sec. 146, C. P. C. Under that section, except in certain cases (which are not of relevance in the present case), where any proceedings have been taken or application made by any person, then the proceedings may be taken or an application may be made by or on behalf of any person claiming under him. The proceedings which could be taken in the present case were for the continuance of the appeal and this proceeding was to be taken against the person claiming under the respondent. Motilal claimed under Mst. Ganeshi and the latter claimed under Hazarimal. An application to bring on record Sukhlal or Motilal, (who was subsequently brought on record), could be made under sec. 146, C. P. C. The only article of limitation applicable to an application of this nature could be the residuary Art. 181, Limitation Act. I am supported in this view by two decisions : Manindra Kumar vs. Santi Rani (1) and Manmanthappa vs. Parvathi Bai (2 ). It may also be stated that while the appellants came to know from enquiry that Sukhlal was the collateral of Hazarimal and the nearest heir of Hazarimal, Motilal him self made an application that he may be brought on record as an assignee of the decree by Mst. Ganeshi. The assignment was alleged to be made on 16th September, 1955, and was within the special knowledge of Motilal himself. There is no period of limitation prescribed for an application by the legal representative of the deceased to be brought on record. In that view also, Motilal was rightly brought on record on 19th July, 1956. In view of the assignment, the application of 11th July, 1956 that Smt. Dhapu or Subhkaran was the legal representative could not be seriously considered. There is no force in the first preliminary objection, which is hereby rejected. The next preliminary objection was that the receiver was not made a party to the appeal and, therefore, the appeal should be dismissed. A few facts are required to be stated in respect of this objection : The receiver had made a report on 21st July, 1952 about what realisations he could do and thereafter, what he stated, in substance is as follows : - "the insolvents have now no other property not have any current source of income nor are they doing any business. Only Premraj has joined service and it is with great difficulty that he is able to maintain the family of the inslovents. There does not appear to be any source of income of the appellants, which may give rise to any income in future. The insolvents have not concealed any property. Some of the property had been auctioned in execution of decrees previously and what remained has now been aold for Rs. 460/ -. As stated earlier, the lower court had passed an order of annulment of adjudications and had given directions that the amount lying in deposit with the receiver should be distributed among several creditors. The effect of an order of annulment is given in sec. 37 of the Insolvency Act and while certain acts of the receiver mentioned in the section are declared to be valid, that section lays down that "the property of the debtor who was adjudged insolvent shall vest in such person as the court may appoint, or, in default of such appointment shall revert to the debtor to the extent of his right or interest therein on such conditions (if any) as the Court may, by order in writing, declare". A plain reading of the section shows that the receiver washes his hands off, where an order of adjudication is annulled. The property which had been vested in the receiver is either vested in the person appointed by the count or in the debtor. In the present case, the order of discharge can be taken to have the effect of vesting the amount realised with the creditors in certain pro-portions and what was left to be done by the receiver was the doing of the ministerial act of distribution in the proportion ordered by the court. The receiver, according to the order of the court, became divested of the property and in that view, he was not necessary to be made a party in the present appeal.
(3.) LEARNED counsel for the respondent urged that the learned District Judge, no doubt, annulled the adjudication but he had also rejected the application for discharge and the present appeal not only challenges the annulment, but also the refusal of the application for discharge. It was contended that in an appeal where the debtor wishes to challenge the refusal to discharge, the receiver is a necessary party. The last contention is correct so far as it goes. If the order had only been the refusal to discharge, the receiver would have continued to hold the property and would have continued to represent the estate of the insolvents. But in the circumstances of the present case when he was divested of the property of the insolvents, he was not a necessary party to this appeal. Further, in view of the report of the receiver, no other property of the insolvents existed, which was required to be administered by the receiver. He has not opposed the grant of discharge. In the circumstances, the hearing of this appeal will not be affected by the omission of the receiver to be made a party respondent. The two preliminary objections having been disposed of, as above, learned counsel for the appellants contended that order of annulment was wholly unjustified in the circumstances of the case. Learned counsel relied on the summary of the conditions on which the adjudication may be annulled given by Sir D. F. Mulla at p. 312 of his Law of Insolvency in India (Second Edition ). It was urged that none of the grounds mentioned by the learned District Judge in support of the order fell within secs. 35, 36, 39 and 43 (1) of the Insolvency Act under which an order of annulment can be made. Learned counsel for the respondent conceded that the order of annulment could not be made in the present case as none of the circumstances which may justify the annulment existed. I agree with learned counsel for the appellant that the order of annulment was wholly erroneous. The grounds mentioned in the earlier part of the judgment given by the learned District Judge are not the grounds on which an order of annulment may be passed. It was next contended by learned counsel for the appellants that the lower court erred in throwing out the application of the appellants for absolute discharge. Sec. 42 of the Provincial Insolvency Act refers to the grounds on which an absolute order of discharge can be refused, Learned counsel for the respondent supported the order on the grounds mentioned by the learned District Judge and placed in the forefront of his arguments, the contention that the debtors had not satisfied the court that they cannot be held justly responsible for the assets being of under value. It was argued that the debtors had obtained a collusive decree in favour of Man Kanwar, in respect whereof the creditors took steps for setting it aside and the final court of appeal in that case held that the debtors were guilty of collusion and fraud. It was contended that the finding of the lower court, that the debtors were in possession of large amount of cash and jewellery and were living in affluence, was justified on the evidence and the debtors could, if they chose, place such property before the court and increase the value of assets to eight annas in a rupee. It was also urged that clause (b) of sec. 42 also stood in the way of the insolvents as they could not show by production of their account books how they came to be indebted to such a large extent. It was next urged that the lower court was right in holding that the appellants continued to trade with Umrao & Co. , after they knew that they were practically insolvents. Learned counsel also urged that the debtors had failed to prove why they continued to borrow such huge amounts when they knew that they were not able to pay the same and that clause (d) of sec. 42 also stood in the way of granting absolute discharge. The matter of fraud in respect of the decree by Man Kanwar was set up as a bar to the grant of absolute discharge under clause (1) of sec. 42. I have gone through the record with the assistance of learned counsel and I have no hesitation in holding that none of the grounds existed in the present case which may bar the grant of absolute discharge. Learned counsel for the respondent in respect of his first contention relied on two authorities. Vasant Rao vs. Uttam Rao (3) and Alidino Wali Muhammad vs. Noor Muhammad{4 ). ;