JUDGMENT
Janarthanam, J.
1. This is an application taken out by the Official Assignee, under Section 17 of the Presidency Towns Insolvency Act, 1908 (for short ‘the Act’) for a direction to the President, The Ideal Homes Co-operative Building Society Ltd., Bangalore, the respondent herein to execute a registered sale deed in his favour in respect of the property, viz., Plot No. 530, Ideal Homes Project Township, Kenchanahalli, Bangalore said to have been allotted, pursuant the lease-cum-sale agreement dated 14.7.1977 to one V. Parthasarathy, one of the partners of Vummidiar Bankers, which was subsequently adjudged as insolvent on 13.4.1983 on a creditor petition in I.P. No. 9 of 1983.
2. The two facets of opposition emerging from the respondent revolving on law and facts consist of the following:
(1) the interest stated to have been acquired by the insolvent in respect of the said plot of land prusuant to the lease cum sale agreeement entered into by him with the Society can, by no stretch of imagination, be stated to be a property right, in the sense of interest in the immovable property so as to make it vest in the Official Assignee on and from the date of the order of adjudication of the insolvent.
(2) Even otherwise, the said agreement had been determined long before and consequently no direction as sought for by the Official Assignee can be ordered.
3. Let me now engage my attention to the consideration of the first facet of the contention. No doubt true it is that the said agreement is described as a ‘lease-cum-sale agreement’. The question is what right is available to the insolvent under this document and whether it vested in the Official Assignee under Section 17 of the Act. The section inter-alia says that on making an order of adjudication, the property of the insolvent, wherever situate, shall vest in the Official Assignee, and become divisible among his creditors.
4. Section 52 of the Act deals with the description of the insolvent’s property divisible among creditors. Sub-section (1) of that section enumerates properties which would not vest in the Official Assignee and they are
(1) property held by the insolvent on trust for any other person; and
(2) tools of his trade and necessary wearing apparel, bedding, cooking vessels, etc.
Sub-section (2) is subject to Sub-section (1) and it says that the property of the insolvent shall comprise the particulars mentioned therein. Clause (b) of Sub-section (2), relevant for our purpose, is couched in the following terms
The capacity to exercise and to make proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the insolvent for his own benefit at the commencement of his insolvency or before his discharge.
5. Learned Counsel appearing for the respondent would vehemently contend that the right flowing under the lease-cum-sale agreement with the Society is a personal right and’ as such is not a property that would vest in the Official Assignee. To appreciate this contention, it is but necessary to refer to some of the clauses in the agreement. The agreement, as already noticed, is styled as ‘Lease-cum-sale agreement’. The insolvent is described as ‘lessee-purchaser’. Though the document refers to the parties as ‘lessor’ and ‘lessee’ the dominant intention underlying the document is to create a sale agreement providing for the payment of the price of the land in accordance with the terms stipulated therein. It is provided that until such time as the lessor conveys property to the lessee, the lessee shall occupy the property as lessee on terms and conditions mentioned therein. It is provided in Clause (12) that the lessor should sell the property to the lessee at the end of ten years as referred to in Clause (1), and the lessee is required to pay to the lessor the purchase price of the property and the incidental expenses such as stamp duty etc. Clause (10) provides that in case the lessee defaults in paying the amounts, as provided therein, “the lessor may determine” the lease, after giving him fifteen days notice ending with the month of the tenancy and take possession of the property. The phraseology “lessor may determine” is indicative of the fact that he is at liberty, but is not bound to determine the lease and take possession of the property.
6. Clause (5) interdicts the lessee from alienating the property in favour of third parties. But, it is to be noted here that apart from the salient provisions adumbrated in various clauses, there is no provision as to what will happen, if the lessee becomes insolvent during the currency of the agreement. Learned Counsel appearing for the respondent would, in this context, submit that it should be held that inasmuch as there is a prohibition against the alienation of the property by the lessee, the lessee does not acquire any right in the property, that the right to get an assignment on payment of the entire instalments in terms of the agreement is only personal, that therefore on the adjudication of the lessee, it is open to the Society to determine the agreement and lake possession; that what the insolvent has in the agreement is only a contingent right does not vest in the Official Assignee. I am afraid, to such an argument, I cannot affix my seal of approval, in the circumstances of the case.
7. The lessee insolvent has a right in the property and he is entitled to become full-owner on his fulfilment of the conditions stipulated in the agreement. If he complies with all the conditions, the Society has no option except to convey title. It as not as though discretion is vested in the Society so terminate the agreement, even if the lessee complies with the conditions. The right which the lessee, under such an agreement has, is in the nature of an agreement to get a conveyance on his fulfilling the obligations undertaken by him. It is, so to say, an agreement similar to an agreement to obtain a sale, with this difference that in such a case the person let into possession is required to discharge certain obligations spread over a certain period. This right is a right in immovable property. it cannot be disputed that the benefit of a contract for a sale of immovable property to the insolvent passes to the Official Assignee, and he is entitled to sue for specific performance of the contract.
8. It was held in Willingham v. Joyce, 30 E.R. 951 that the benefit of a contract for as lessee to the insolvent passes to the Official Assignee. It was held in Buckland v. Papillion (1866) L.R.2 C.A.67) that the benefit of an option to take a lease, passes to the Official Assignee. It is true that a lease entered into for personal accommodation of the insolvent would not be a right that will vest in the Official Assignee. Decree for specific performance can be passed against the Official Assignee, of a contract by the insolvent for the sale of his land. A contract by the insolvent to buy property or to take a lease cannot be specifically enforced against the Official Assignee, for such a contract is the subject of disclaimer. Still, whatever may be the nature of the contract, if the Official Assignee insists on the performance of the contract, he should, of course, perform the insolvent’s part of the contract to the same extent to which the insolvent should have done, had he remained solvent. Insolvency does not determine a contract. If the insolvency were to determine every contract, much hardship would ensue, for, if the insolvent had any beneficial contracts remaining, it would be unfair to him as well as to his creditors if they could not have the benefit of those contracts. If the contracts are such as could be performed on the part of the insolvent by the Official Assignee, the benefits under such contracts would accrue to the estate and such contracts would accrue to the estate and such benefit would vest in the Official Assignee. In this view of the matter, I am of opinion that the lessee-insolvent acquires an interest in the property and he is entitled to get conveyance from the society on his fulfilment of the obligations undertaken by him; that this right is in the nature of a right to get conveyance and that such a right is a property, which on the adjudication of the lessee as insolvent, vests in the Official Assignee and as such, the first facet of the contention bristles next to nothing.
9. The second facet of the contention that the lease-cum-sale agreement had been terminated long before the adjudication of the lease as an insolvent requires consideration on two aspects, viz.,
(1) whether the lessee in fact had sent any letter to the respondent-society praying for cancellation of the allotment made in his favour at any time prior to his being adjudged as an insolvent; and if so, whether the Society acted on such a letter; and (2) Even otherwise, whether he had committed any breach of the agreement which enabled the respondent-Society to determine the lease and if so, whether in fact the Society did make any order cancelling the allotment made in favour of the lessee.
10. On these aspects, both the sides did not opt to let in any evidence, but is rest content in making submissions on the materials already available on record in the shape of the correspondence exchanged between them. The edifice of factual foundation as reflected by those materials, if perused with a little bit of care, caution and circumspection, will have the effect of annihilating the living force of the second facet of the contention.
11. Admittedly, the lessee had been adjudicated as insolvent on 13.4.1983. The Official Assignee sent a letter dated 21.6.1983 to the President, the Ideal Homes Co-operative Building Society Limited, Bangalore intimating him about the adjudication of the lessee as an insolvent and the vesting of the property in him. He further requested as a consequence of such vesting to send the sale deed and other documents, if any, relating to the suit property. Since that letter did not elicit any reply, the Official Assignee again sent a reminder on 20.7.1983. This reminder elicited a reply dated 1.8.1983 and the first paragraph of the reply, which is relevant for our purpose is in the following terms:
With reference to your reminder letter, I am to inform you that plot No. 530 was allotted to Sri V. Parthasarathy by the society at its Board meeting dated 19.6.1977. He has deposited a sum of Rs. 11,440 towards the purchase of site. The said site was registered in his favour through Lease-cum-sale Agreement on 14.7.1977. The possession of the same has been handed over to him.
12. The respondent-Society sent a further communication to the Official Assignee by his letter dated 27.8.1983 requesting him to obtain consent letter from the lessee so as to enable it to execute a sale deed in his favour, besides stating that the requisite stamp duty for such purpose would be intimated to him. As requested for by the respondent-Society, the Official Assignee got the consent letter from the lessee and sent the same to the respondent-society along with his letter dated 3rd September, 1983, by way of abundant caution, though such a consent letter was not necessary.
13. The Official Assignee finding dilatory tactics adopted by the respondent filed Application No. 298 of 1984 praying for a direction to the respondent to execute and register the sale deed in his favour respecting the said property and the society entered appearance therein and resisted the application by filing a counter and this Court passed an order on 22nd July, 1985 dismissing the application on the ground that the petition filed was premature, since the agreement contemplated execution of sale deed in respect of the said property after a period of ten years in favour of the lessee.
14. Again on 1.8.1985, the Official Assignee sent a letter to the respondent requesting him to effect mutation of names in its registers and agreeing to comply with the requirement of necessary formality. The respondent on 7.11.1985 sent a letter stating that since the advocate, who was dealing with the case was out of station they were handicapped to give a reply and they would be in a position to send a suitable reply after their advocate returned to the station after 25th November, 1985. On 26.3.1987, the Official Assignee again sent a letter to the respondent intimating his intention of taking further action in the matter, if no reply is received from them on or before 15th April, 1987. On 4.8.1987, the Official Assignee sent a letter to the respondent requesting them to execute a sale deed in his favour representing the estate of Vummidiar Bankers in I.P. No. 9 of 1983. He has also intimated in that letter that if anything is to be done by him by way of payment of fees or charges or rent, he would be sending the same on receipt of the detailed information and so stating he requested the Society to complete the formalities and execute the sale deed on or before 31.8.1987, or otherwise, he will be compelled to take proper legal action in the competent forum, for the benefit of all the body of creditors and this has not elicited any effective reply from the respondent-Society. Consequently, the Official Assignee filed the present application on 6.10.1987.
15. The stand taken in the counter by the respondent – Society in the present application is that the order of allotment of the said property in favour of the lessee – insolvent had been terminated. The so-called termination made by the respondent as a result of the receipt of the letter from the lessee-insolvent earlier to his being adjudged as insolvent cannot at all be given any credence, in the circumstances of the case. Such a plea was not at all raised in the counter filed in the earlier Application No. 298 of 1984. If that were so, there could have been no occasion for the respondent-Society to have requested the Official Assignee to obtain a consent letter from the lessee so as to enable them to execute the sale deed in his favour. Further, only a xerox copy of such a letter stated to have been given by the lessee is produced before Court and the explanation offered for non-production of the original letter is so puerile and quixotic as cannot be countenanced. What is stated in the counter is that the original letter had been handed over to the advocate who was handling the case then and therefore, they were not able to file the original letter before this Court. If really the lesses had given such a letter, the respondent-Society could have taken action on the letter and cancelled the allotment made in his favour and records to that effect could have been available in their custody. All these records are not produced before Court and what is worse is such a stand was not at all divulged in the earlier proceedings and correspondence between the respondent – Society and the Official Assignee.
16. The other facet of the contention, as already referred to, that the termination of lease-cum-sale agreement had been effected by the society in the year 1984 consequent on the non-fulfilment of the condition of lease-cum-sale agreement by the lessee cannot also be acceded to, in the facts and circumstances of the case. If that were so, the Official Assignee could have been given notice, since he has stepped into the shoes of the lessee-insolvent on and from the date of the order of adjudication. Admittedly, no such notice had been issued to the Official Assignee by the respondent – Society.
17. The further correspondence exchanged between the Official Assignee and the respondent reveal in no uncertain terms that the respondent-Society kept the allotment made in favour of the lessee-insolvent alive all along and no order of termination had been effected by them, even assuming for argument’s sake that the lessee-insolvent had committed certain defaults or breach of lease-cum-sale agreement.
18. As adverted to earlier, the respondent-Society has an option to cancel or terminate the lease-cum-sale agreement, in case of default committed by the lessee, and there is nothing on record to show that such an option has been exercised till upto now, leave alone proof of any default or breach having been committed by the lessee-insolvent As such, the theory of cancellation of the lease-cum-sale agreement as put forward by the respondent-society cannot at all be given credence.
19. In view of what has been stated above, it goes without saying that the application deserves to be allowed.
20. In the result, the application is allowed as prayed for with costs.