Report No. 27

Order XXI, rule 22 and Insolvency

1. The question whether the provisions of Order 21, rule 22 should be applied to the Official Assignee or Official Reviewer in insolvency, where the judgment-debtor has become insolvent, has been considered. The present position is as follows:-

(i) It was held by the Privy Council1 under the corresponding provision in the old Code, that the Official Assignee or Official Receiver under the Insolvency law was "a legal representative" within the meaning of section 248 of the old Code. In the old Code, however, there was no definition of the expression "legal representative". In the present Code, there is a definition which does not seem to include the Official Assignee or Official Receiver in the insolvency2. In a Calcutta case3, it seems to have been assumed that Order XXI, rule 22 applies to the Official Receiver in insolvency. Corresponding English rule is Order XLII, rule 23 (a), R.S.C., under which leave is necessary where any change has taken place "by death or otherwise in the parties entitled or liable to execution".

(ii) The Madras High Court has amended this rule so as to provide (inter alia) that when a party to the decree has been declared insolvent, notice shall be issued to the Official Assignee or Receiver in insolvency.

2. It seems advisable to adopt the Madras Amendment, which seem to be supported by the following reasons.

In the first place, upon an order of adjudication, the insolvent's property vests in the Official Assignee, and therefore it would be unrealistic to proceed with the execution without notice to him. In the second place, the order of adjudication may affect the very operation of the decree (in view of the doctrine of relation back and effect of insolvency on antecedent transactions, particularly fraudulent preferences). The issue of a notice would give the Official Assignee an opportunity to raise these objections. Thirdly, such an amendment is in conformity with the principle on which Order XXII, rule 10 is based, namely, the procedure to be followed on devolution of interest during pendency of the suit4.

In fact, all further proceedings (for example, appeal in execution), will have to be continued by the Official Assignee.5

Necessary amendment is proposed.

3. The proposed amendment will be in addition to any restrictions or formalities arising out of insolvency which may be necessary under the insolvency law6-7.

4. The Madras amendment was construed, in the under-mentioned case8.

1. Raghunath Das v. Sunder Das, 41 IA 251 (256): ILR 42 Cal 72 (82): AIR 1914 PC 129.

2. That the old Code did not contain this definition has been noticed by the Madras High Court in Kanchamalai v. Shahaji, ILR 59 Mad 461: AIR 1936 Mad 205 (207) (FB).

3. See Dinesh Chandra v. Jahan Ali, ILR 62 Cal 457: AIR 1935 Cal 503 (505) (Guha and Charles Bartley, JJ.).

4. See Mulla Civil Procedure Code (1953), p. 962, bottom, and Mulla Law of Insolvency in India (1958), p. 690, para. 700. See also Ammanna v. Ramakrishna Rao, ILR 1949 Mad 904: AIR 1949 Mad 886.

5. Cf. Muni Lal v. Bari Doab Bank Ltd., AIR 1936 Lah 368.

6. See Mulla Law of Insolvency in India (1958), pp. 250-252, para. 255 and p. 689, para. 698.

7. See also section 51(3) of the Provincial Insolvency Act and section 53(3) of the Presidency Act.

8. Official Receiver, Nellore v. Venkiah, AIR 1941 Mad 606.

Order XXI, rule 22A (Patna)

1. The Patna High Court has added rule 22A to the effect that where property is sold in execution, the sale shall not be set aside by reason only of death of the judgment-debtor between the date of issue of sale proclamation and date of sale, notwithstanding failure to substitute legal representatives. But, if the legal representative is prejudiced, the court may set aside the sale.

2. On this point, see the under-mentioned case1-2-3-4. The ordinary rule is, that sale of a judgment-debtor's property does not bind his representatives, at whatever stage the judgment-debtor might have died5.

3. It is considered unnecessary to adopt the Patna Amendment.

1. Ajab v. Han Charan, AIR 1945 Pat 1 (FB).

2. Ramlal v. Ramia, AIR 1947 Pat 454 (FB).

3. Kanchamalan v. Sahaji, AIR 1936 Mad 205 (FB) (reviews case-law).

4. Marotirao v. Narayan, AIR 1948 Nag 300.

5. Rajlakshmi v. Banamali, AIR 1955 Cal 573.

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