Report No. 26
General.-This is based generally on section 51 of the Provincial Act, the corresponding provision in the Presidency Act being section 53.
Sub-clause (1).-Needs no special comments. "Orders" have been added.
Sub-clause (2).-This is new, and provides that when an execution has issued but the assets have not been realised before the day of the admission of the petition, the decree-holder should have a first charge for the costs incurred by him in the execution. Under sections 51 and 52 of the Provincial Act (as they now stand), the position shortly is, that when a creditor executes his decree, if assets have been realised before the date of the admission of the petition, they will wholly be available to him, under section 51; if no sale has taken place before the petition is admitted, then, under section 52; the court, if informed of the petition, is to take possession of the property sought to be sold and put it in the possession of the receiver, the execution creditor, however, being given a charge for the costs of the suit in which the decree was passed, and of the execution.
But where the sale has already taken place in execution of the decree before the date of admission of the petition but assets have not been realised in full before the date of the admission of the petition, the case remains uncovered. Similarly, where the property is sold subsequent to the admission of the petition, but the court is not notified and a move made to stay the sale, the case is uncovered. In both the cases, there is no provision giving the creditor a charge for the costs incurred in the execution.
This is rather harsh. There is no reason why the execution creditor, at whose instance the property has been brought to sale, should not be given a charge for his costs. That was the view taken in Official Receiver v. Sambasiva Aiynr, ILR 1942 Mad 757: AIR 1943 Mad 118, differing from the decision in Balarami Reddi v. Official Receiver, LLR 1939 Mad 343: AIR 1939 Mad 291. The Bill has adopted the former view as just1.
Sub-clause (3).-In place of the words "in all cases", the words "if such sale is held before the making of an order of adjudication" have been introduced. It was held in some cases, on the strength of the words "in all cases", that a sale held even after adjudication would pass good title to a bona fide purchaser. See Khurshid All v. Thakur Rachman Singh, ILR 1949 All 508: AIR 1949 All 660; Katyani Devi v. Haridas Addhya, 53 CWN 304; Motilal Dhannalal v. Nathu, ILR 1942 Nag 377: AIR 1942 Nag 414. The contrary view has been taken in Guravaiah v. Rangiah, ILR 1942 Mad 614: AIR 1942 Mad 415(1); Thiruvaraya Mathu Pillai v. Official Receiver, AIR 1951 TC 193 (Discussed case-law); Chunilal Bhwanidas v. Vithal Balaji, AIR 1933 Nag 28; and that seems to be correct, and has been adopted2. The order of adjudication vests the title in the Official Receiver, and a sale thereafter of the "right", title and interest, of the debtor should convey no title.
It may be noted that the Privy Council3 has held that an attachment in execution does not invalidate an alienation by operation of law effected by a vesting order under the Indian Insolvency Act, 1848, and that after such vesting order the judgment-debtor has no right, title or interest which could be sold to or vested in an auction-purchaser, and consequently the auction purchaser in execution would not acquire any title to the property.
Sale before adjudication.-Where the sale takes place after presentation of the petition but before adjudication, the position is different. It is only by virtue of the doctrine of relation back that the debtor ceases to have title, and it is but right that the retrospective operation of the order should not affect titles of purchasers who had in the meantime purchased property bona fide.
There is no reason why the clause under discussion should not apply to the execution of "orders". The necessary change has been made accordingly4.
Sub-clause (4).-This has been placed at the end, as it is in the nature of a saving. The Provincial Act speaks of "the decree" and "creditor" while the Presidency Act speaks of "debtor". The former is more precise and has been adopted.
1. Cf. Mulla, (1958), p. 586, middle.
2. Cf discussion in Mulla, (1958), pp. 251-252.
3. Raghunatn Das v. Sundar Das, 1915 ILR 42 Cal 72 (83) PC.
4. Cf changes made in existing sections by clauses 6 and 53.