Report No. 26

18. Reputed ownership.-The doctrine of reputed ownership embodied in section 52(2)(c), Presidency Act, and section 28(3), Provincial Act, applies only when an insolvent is not the true owner of the goods in his possession. It is highly immoral and inequitable that the true owner should lose his title to the goods merely because for some presumably good reason he allows his goods to remain in the possession of the insolvent. In the present economic conditions, the doctrine of reported ownership appears to be outmoded and should in our opinion be abolished. The doctrine is based on the assumption that the true owner of the goods, by allowing the goods to remain in the apparent ownership of the insolvent, enables the insolvent to obtain false credit. Credit is at present obtained through banks, and banks usually insist upon the pledge of goods or some other security before allowing credit. Few persons now-a-days give credit merely on the strength of the quantity of goods lying in the shop of the borrower. Mulla makes the following observations on the doctrine of reputed ownership1:-

"The doctrine of reputed ownership has operated very harshly in several cases and has worked greater evil than good. It is not recognised in several systems of bankruptcy law. If, however, that clause is to stand in the Statute Book of India as a living clause the whole section should be recast. The section as it now stands is like a cheap Jack's shop packed with a variety of clothes some of which are for mere show."

In our opinion it is not possible to recast the clause without affecting the very fundamental principle on which the doctrine of reputed ownership is based. We, therefore, think that the better course would be to omit altogether from the new law the provisions relating to reputed ownership. We may point out, that the Blagden Committee has also recommended the abolition of the doctrine of reputed ownership2. While omitting the provisions of reputed ownership3, we think that there should be some machinery by which persons who claim property in the possession of the insolvent may be able to establish their claim. We have, accordingly, added a new provision4 on the lines of section 50 of the Canadian Bankruptcy Act, which will enable a person claiming property in the possession of the insolvent, to lodge such claim before the Official Assignee. If the Official Assignee does not accept the claim, provision is made for an appeal to the court. If no claim is made within a specified time, the property shall be deemed to have been relinquished in favour of the Official Assignee.

1. Mulla Law of Insolvency in India, (1958), p. 573, para. 578.

2. Report of the Committee on Bankruptcy Law etc. Amendment, (1957) Cmd. 221, p. 37, para. 110.

3. See App I, clause 48.

4. See App I, clause 51.