Insolvent's post-adjudication mortgage cannot bind vested property, and ostensible ownership will not protect the mortgagee.

After adjudication in insolvency, the insolvent loses title to deal with vested property, so an equitable mortgage created thereafter is invalid and unenforceable. The doctrine of ostensible ownership does not protect the mortgagee where the insolvency scheme places the property in the receiver or court, the adjudication is published, and there is no legal duty on the receiver to take possession or mutate records. Acceptance of a composition scheme or alleged annulment does not by itself revest the property or validate the later mortgage. A plea that the receiver's purchaser was a benamdar also fails without affirmative proof.

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Issues: (i) Whether an equitable mortgage created by an undischarged insolvent after adjudication was legal and valid; (ii) whether the doctrine of ostensible ownership protected the mortgagee; (iii) whether acceptance of a composition scheme or subsequent events displaced the vesting of the property in insolvency or validated the mortgage; and (iv) whether the purchaser from the receiver held the property as a benamdar bound by the mortgage.

Issue (i): Whether an equitable mortgage created by an undischarged insolvent after adjudication was legal and valid.

Analysis: On adjudication, the insolvent's property vests in the court or receiver, and the insolvent loses title to deal with it. The protection for bona fide dealings under the insolvency law applies only to transactions before adjudication and does not extend to transactions entered into after the order of adjudication, even if the transferee acted without notice. A mortgage created after adjudication by the insolvent therefore could not confer enforceable rights against the property.

Conclusion: The equitable mortgage was invalid and unenforceable.

Issue (ii): Whether the doctrine of ostensible ownership protected the mortgagee.

Analysis: The doctrine of ostensible ownership was held inapplicable because there was no legal duty on the receiver to take physical possession or effect mutation in the municipal records, and the receiver's failure to do so could not make the insolvent an ostensible owner for dealings with immovable property. Publication of the adjudication order in the Official Gazette also negatived the claim of lack of notice. The statutory scheme governing insolvency displaced reliance on ostensible ownership in this setting.

Conclusion: The mortgagee could not invoke ostensible ownership to uphold the mortgage.

Issue (iii): Whether acceptance of a composition scheme or subsequent events displaced the vesting of the property in insolvency or validated the mortgage.

Analysis: Acceptance of a composition scheme did not automatically annul the adjudication order. Even on annulment, the record did not show any order revesting the property in the insolvent so as to validate an intervening mortgage. The sale by the receiver under the scheme did not assist the mortgagee, and the attempt to rely on an unverified copy of the insolvency order was rejected.

Conclusion: Neither the composition proceedings nor the asserted annulment validated the mortgage or displaced the receiver's title.

Issue (iv): Whether the purchaser from the receiver was a benamdar bound by the mortgage.

Analysis: Benami character had to be proved by affirmative evidence. No evidence was produced to show that the purchase from the receiver was benami, and the purchaser was under no obligation to disclose the source of her funds. Mere assertion of low price or absence of testimony did not raise a presumption of benami ownership.

Conclusion: The plea of benami purchase failed.

Final Conclusion: The challenged mortgage could not be enforced against the property, and the decree dismissing the suit was affirmed.

Ratio Decidendi: After adjudication in insolvency, the insolvent cannot create a valid transfer or mortgage of vested property, and the doctrines of bona fide purchase and ostensible ownership do not protect transactions entered into thereafter.

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