VENKATA REDDI AND ORS. v. POTHI REDDI

Provision makes it clear that the law is and has always been that upon the father’s insolvency his disposing power over the interest of his undivided sons in the joint family property vests in the Official Receiver and that consequently the latter has a right to sell that interest

Case name: Venkata Reddi And Ors. v. Pothi Reddi
Citation: 1963 AIR 992, 1963 SCR Supl. (2) 616
Court: The Supreme Court of India
Bench: JUSTICE MUDHOLKAR, JUSTICE K.SUBBA RAO               JUSTICE N. RAJAGOPALA AYYANGR
Decided on: NOVEMBER 30, 1962
Relevant Act/Sections: Section 28A of Provincial  Insolvency (Amendment) Act , 1948, The Presidency Towns Insolvency Act, Section 97, 105, 151 and 152 of the Code of Civil Procedure, The Bankruptcy Act, 1914
  • BRIEF FACTS AND PROCEDURAL HISTORY:
  • Venkata Reddy, the father of the appellants. At that time only the appellants 1 and 2 were born while the third appellant was born later. The father’s one third share was put up for auction by the Official Receiver and was purchased by one Karuppan Pillai for Rs. 80/-.
  • The Official Receiver then put up for auction the two-third share belonging to appellants 1 and 2 on July 27, 1936, which was purchased by the same person for Rs. 341/-. He sold the entire property to the respondent Pethi Reddy on May 25, 1939, for Rs. 300/-.
  • The appellants instituted a suit on February 1, 1943, for the partition of the joint family property to which suit they made Pethi Reddy a party and claimed thereunder two-thirds share in the property purchased by him. In that suit it was contended on behalf of the respondent that on their father’s insolvency the share of the appellants in the joint family property also vested in the Official Receiver and that he had the power to sell it. The contention was negatived by the trial court which passed a preliminary decree for partition in favour of the appellants.
  • PROCEDURAL HISTORY:
  • The decree was affirmed in appeal by the District Judge and eventually by the High Court in second appeal, except with a slight variation regarding the amount of mesne profits. The decision of the High Court is dated November 18, 1946. On January 18, 1946 the appellants made an application for a final decree which was granted ex parte on August 17, 1946. At the instance of the present respondent this decree was set aside. By that time the new provision, that is, s. 28A of the Provincial Insolvency Act, had come into force. On the basis of this provision it was contended by the respondent that the appellants were not entitled to the allotment of their two-thirds share in the property purchased by him inasmuch as that share had also vested in the Official Receiver. The District Munsif held that Act 25 of 1948 which introduced s. 28A did not affect the preliminary decree for partition since it had been passed on August 20, 1943.
  • Therefore, restored the ex parte final decree which had been set aside on December 17, 1950. The appeal preferred by the respondent against the decision of the District Munsif was dismissed by the Principal Subordinate Judge, Salem, whereupon he preferred a second appeal before the High Court. The High Court allowed the appeal and dismissed the application of the appellant for passing the final decree. Hence, present appeal was filed by Appellant.
  • ISSUE BEFORE THE COURT:
  • Whether the meaning to be given to the expression final decision’ occurring in the first proviso to s. 28 A of the Provincial Insolvency Act, 1920 (Act No. 5 of 1920), introduced by Act No. 25 of 1948?
  • Whether the preliminary decree for partition passed in this case which was affirmed finally in second (1) I.L.R. [1943] Mad. 83?
  • Whether it is in a mort- gage suit or a partition suit?
  • RATIO OF THE COURT:
  • The objects and reasons set out in the bill which sought to introduce this provision were to bring the provisions of the provincial insolvency Act in line with those of the Presidency Towns Insolvency Act in so far as the vesting of the joint family property in the Official Receiver upon the father”s insolvency was concerned. While under the Presidency Towns Insolvency Act, in a case of this kind, the disposing power of the father over the interest of his undivided sons also vests in the Official Receiver and not merely the father’s own interest in the joint family property’ there was divergence of opinion amongst the High Courts in India as to whether under the Provincial Insolvency Act the father’s disposing power over his undivided sons’ interest also vests in the Official Receiver.
  • A Full Bench of the Madras High Court held in Ramasastrulu v. Balakrishna Rao (1) that it does not. It was in the light of this decision that in the appellants suit for partition, a preliminary decree was passed with respect to their two- thirds interest in the joint family property which had been sold by the Official Receiver. In the course of the decision of the full Bench a suggestion was made that the legislature should step in and bring the provisions of the Provincial Insolvency Act in the relevant respect in line with those of the Presidency Towns Insolvency Act.
  • The new provision makes it clear that the law is and has always been that upon the father’s insolvency his disposing power over the interest of his undivided sons in the joint family property vests in the Official Receiver and that consequently the latter has a right to sell that interest. The-provision is thus declaratory of the law and was intended to apply to all cases except those covered by the two provisos. The court observed here only with the first provision. This proviso excepts from the operation of the Act a transaction such as a sale by an Official Receiver which has been the subject of a final decision by a competent Court.
  • The short answer to the reason given by the High Court is that even a money decree passed in a suit would cease to be a final decision because if the judgment- debtor against whom the decree is pawed does not pay the amount voluntarily execution proceedings will have to be taken for re-‘ covering the amount from him. It would thus lead to an absurdity if the test adopted by the High Court is accepted. In support of the High Court’s view a few decisions were cited at the bar but as they are of no assistance we have not thought it fit to refer to them.
  • The court however, refer to a decision of this court upon which reliance was placed by the respondents. That is the decision in Vakalapudi Sri Ranga Rao and others V. Mutyala Ammanna (1) in which it was held that a particular order was not a final decision within the meaning of the first proviso to S. 28-A.
  • There, in a suit for partition and another suit for possession of the suit property and arrears of rent, it was contended that upon the father’s insolvency the Official Receiver was in- competent to sell the son’s interest in the joint family property. The contention was negatived by the trial court but upheld in appeals by the Subordinate judge who remanded the suits to the trial court with certain directions. Appeals preferred against his decision were dismissed by the High Court. Before the decision of the suits after remand, the Amending Act, XXV of 1948 came into force and it was contended before the trial court that in view of the new provision the sale by the Official Receiver must be held to be good even so far as the sons’ interest was concerned. This contention was negatived by the trial court on the ground that the decision of the High Court on the point was a “final order’ within the meaning of the proviso. The District judge, before whom appeals were preferred, however, negatived the contention and held that there was no final order with regard to the sale by the Official Receiver.
  • The sale made by the Official Receiver during the insolvency of the appellants’ father was the subject of a final decision by a competent court inasmuch as that court decided that the sale was of no avail to the purchaser at the Official Receiver had no power to effect that sale.. Since they have established what was required to be established by them, they are entitled to a final decree and the High Court was in error in dismissing their application in that behalf.
  • DECISION HELD BY COURT:
  • The judgement of this case was given by JUSTICE MUDHOLKAR stated that in this case. In the result the court allows the appeal, set aside the judgment and decree of the High Court and restore that of the trial court as affirmed in appeal by the learned Subordinate judge.
  • Costs in this court and in the High Court will be borne by the present respondent. The remaining costs will be home as ordered by the first appellate court. Appeal allowed.

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