Report No. 26
General.-This is based on section 37 of the Provincial Act [and section 23(1), (2) and (3) of the Presidency Act].
Sub-clauses and (2).-Do not need any further comment. In sub-clause (1), the words "or other person acting under his authority" have been taken from the Presidency Act, as useful. The words "such terms", etc., occurring in the Presidency Act have been omitted, as the word "conditions" will suffice. It has also been made clear that the appointment can be made by a subsequent order. (The question of retrospective effect of subsequent appointment, it is considered, need not be dealt with).
Sub-clauses (3) to (5).-These are new. There has been a conflict of judicial opinion1 as to the status of an appointee under section 37, Provincial Act. In Panna Lal v. Official Receiver, ILR 53 All 313), the High Court of Allahabad has held that the purpose of vesting of assets under this section was not distribution among creditors, under the Act, but making them available to the creditors in the ordinary process of courts. The same view has been taken by the Rangoon High Court in Jaing Bir Singh v. Official Receiver, 1933 ILR 11 Rang 287 and by the Nagpur High Court in Sulaeman Latif v. Laxman, AIR 1938 Nag 312.
The contrary view was taken in a Full Bench decision of the Madras High Court in Veerayya v. Sreenivasa Rao, 1935 ILR 58 Mad 908 FB, wherein it was held that the properties of the insolvent are vested in an appointee under section 37 for the purpose of distribution among the general body of creditors and that the court has power to issue appropriate directions to him for that purpose. The same view has been taken (i) by the Calcutta High Court in Baikuntha Nath Haldar v. Kishori Mohan Banerji, ILR (1943) 1 Cal 5, Abdul Latif v. Percival, ILR (1937) 1 Cal 264, and in re Kashablal Dhar, 1933 ILR 60 Cal 259, (ii) by the Patna High Court in Atmakur Rama Rao v. Digamber Rath, ILR 25 Pat 286: AIR 1947 Pat 339; and (iii) by the Bombay High Court in Jagannath v. Babu Rao, AIR 1944 Bom 72. The clause adopts the latter view, as being more just.
A connected question on which there has been the same divergence of judicial opinion is, whether the appointee under section 37 of the Provincial Act can commence or continue proceedings with reference to the estate of the quondam insolvent. As regards properties which actually vest in him by reason of the order under this section, he is clearly entitled both to institute fresh proceedings and to continue those which are pending. But different considerations arise as regards properties which have been alienated by the insolvent. Until an order is made under section 53 or section 54 of the Provincial Act annulling a transfer, the properties vest not in the insolvent, but in the alienee, and therefore they cannot vest in the appointee under section 37 of the Provincial Act.
He cannot, therefore, commence fresh proceedings for annulling transfers under section 53 or section 54 of the Provincial Act. Where, however, proceedings under those sections have been commenced by the Official Receiver and are pending at the date of the annulment of the adjudication, the question has been discussed whether the appointee under section 37 of the Provincial Act can continue them. Consistently with the views expressed on the question already discussed as to the status of the appointee, the High Courts of Rangoon and Nagpur have held2 that the proceedings abate on the annulment of adjudication and could not be continued by the appointee, while the High Courts.
of Madras, Bombay and Lahore3 have taken the view that the institution of the proceeding by the Official Receiver is an act which is within the saving provision of section 37(1) of the Provincial Act, and that therefore they could be continued by the appointee for the benefit of creditors. With a view to settling this conflict, an express provision is proposed that proceedings already taken under sections 53 and 54 of the Provincial Act may be continued by the appointee.
To make the provision as comprehensive as possible, it is provided that the appointee shall have all powers of the Official Receiver relevant to the realisation of the property and distribution of the estate.
Sub-clause (6).-Is taken from section 23(2) of the Presidency Act. It is not found in the Provincial Act, [Section 43(2) of the Provincial Act deals with a different situation.] It has been adopted as a useful provision.
3. See Mulla, (1958), p. 329, and his suggestion to resolve the conflict, p. 339.
2. See AIR 1933 Rang 223 FS: AIR 1938 Nag 312.
3. See AIR 1930 Mad 278: AIR 1944 Born 72: AIR 1941 Lah 316.