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Raoji Bapuji Pandarkar Vs. K.L. Bawachekar - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case Number Second Appeal No. 540 of 1932
Judge
Reported inAIR1935Bom316; (1935)37BOMLR478; 157Ind.Cas.680
AppellantRaoji Bapuji Pandarkar
RespondentK.L. Bawachekar
Excerpt:
.....sections 4, 53 - sham and colorable transaction' by insolvent of more than two yews' duration-jurisdiction of insolvency court to set it aside.;an insolvency court has jurisdiction, under section 4 of the provincial insolvency act, 1920, irrespective of section 53, to set aside a sham and colorable transaction by an insolvent even if it is entered into by him more than two years before the date of his insolvency.;maharana kunwar v. e. v. david (1923) i.l.r. 46 all. 16, hari chand rat v. moti ram (1926) i.l.r. 48 all. 414, anwar khan v. muhammad khan (1929) i.l.r. 51 all. 550, ramaswami chettiar v. ramaswami iyengar (1921) i.l.r. 45 mad. 434, chittanimal v. ponnuswami naicker (1925) i.l.r. 49 mad. 762, the official receiver, west godavari, ellore v. sagiraju subbayya (1933) 64 m.l.j...........framed in this case in the court of the district judge were incorrect. section 4 gives a court of insolvency jurisdiction to decide all questions of title, but there is nothing in the act outside sections 53 and 54 to empower it to annul a genuine transfer after title has passed. it is the function of the court to collect and distribute the insolvent's property ; and the proviso to section 56 (3) expressly forbids interference with property to which the insolvent has no present claim : chittammal v. ponnuswami naicker i.l.r. (1925) mad. 762. but when an insolvent has executed a sham deed of transfer, the transferee is a mere benamidar, who holds the property in trust. the title is in the insolvent ; there is no necessity to annul the transfer and the court under section 55(3) can remove.....
Judgment:

Murphy, J.

1. These are three second appeals, all made against orders of the First Class Subordinate Judge of Sholapur in the insolvency of Hirachand Gangaram of Pandharpur, and under Section 4 of the Provincial Insolvency Act. This insolvent filed his petition on June 7, 1926, and was adjudicated on June 25, 1927. A pleader Mr. Bawachekar was appointed Receiver in the matter. In that character Mr. Bawachekar tried to obtain possession of a warehouse and its contents, which had belonged to the insolvent, and also of the insolvent's house. Objection to the Receiver's action was taken by Mangle-appellant in Appeal No. 686 of 1932. The objection was based on an allegation that the insolvent had sold him the warehouse on May 26, 1923.

2. Another objector was Premchand, the insolvent's son. He claimed to have been given in adoption to another family, and that the greater part of the contents of the warehouses-including a quantity of ungianed cotton-was his, in the other family. He is not an appellant,: but the questions he raised are the subject-matter of Appeal No. 631 of 1932 by Anna Bapu Gadam.

3. The third objector was R. B. Pandarkar, who set up a sale to him on July 27, 1923, by purchaser, Paraswar, from the insolvent on May 26, 1923. Pandarkar is appellant in second appeal No. 540 of 1932.

4. These claims were all enquired into by the learned Subordinate Judge, and have been rejected, and his orders have been confirmed in appeal by the learned District Judge. The findings on the fatts of these two Courts are final. They are, put broadly, that the sale-deeds in favour of Mangle and Paraswar were fictions, never intended to be realized, and entered into for no consideration, and with intent to defeat and delay the transferor's creditors in the embarrassed circumstances which ended in the insolvency.

5. As to the cotton, the finding is that it belonged to the insolvent, who was trading in it under the cloak of his son's and other's names.

6. The points of law argued before us have been several, but one of them is common to two of the appeals and it will be convenient to take this on first, and then to deal with the ones on the separate facts of each of the appeals.

7. Under Section 53 of the Provincial Insolvency Act, it is competent to an insolvency Court to annul any transfer made by the insolvent within two years of the date of presentation of the petition, on the ground that it is voidable against the Receiver, if the transfer is not within the exceptions set out in the section. The transfers here were in 1923 and the insolvency in 1926, more than three years later, so that Section 53 of the Provincial Insolvency Act cannot apply. Both the lower Courts have, however, held that they had jurisdiction to go into questions involving the fictitious or genuine character of these sales, and into the questions whether they were intended or not to defeat creditors under Section 53 of the Transfer of Property Act, conferred on them by the terms of Section 4 of the Provincial Insolvency Act, and whether they are right or not in so holding is the first issue we have to decide.

8. There is no reported case on the point in Bombay. The law has, however, been settled for other High Courts by full bench and division bench decisions of the Allahabad, Calcutta, Madras, Lahore and Patna High Courts, and what the appellants have urged before us is, practically, that we should differ from the conclusions reached in these authorities, mainly on the grounds stated in two dissenting judgments of the Allahabad High Court : one being that of Mukherji J. and the second that of Sen J. of that Court. The Allahabad decisions are Maharana Kunwar v. E.V. David I.L.R. (1923) All. 16 and Hari Chand Rai v. Moti Ram I.L.R. (1926) All. 414 Anwar Khan v. Muhammad Khan I.L.R. (1929) All 550 The Madras decisions are : Ramaswami Chettiar v. Ramaswami Iyengar I.L.R. (1921) Mad. 434 Chittammal v. Ponnuswami Naicker I.L.R. (1925) Mad. 762 and The Official Receiver, West Godavari, Ellore V. Sagiraju Subbaya : AIR1933Mad527 . The Calcutta ruling is Shree Shree Radhakrishna Thakur V. The Official Receiver I.L.R. (1932) Cal. 1135 the Patna one, Biseswar Chaudhuri v. Kanhai Singh I.L.R. (1931) Pat. 9 and the Lahore one in an unofficial series, Budha Mal v. Official Receiver A.I.R. [1930] Lah. 122.

Section 4 of the Provincial Insolvency' Act was enacted in the Provincial insolvency law comparatively recently, and is as follows :-

Subject to the provisions of this Act, the Court shall have full power to decide all questions, whether of title or priority, or of any nature whatsoever and whether involving matters of law or of fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case.

9. The main argument is that since Section 53 of the same Act makes certain transfers voidable at the instance of a receiver and liable to be annulled by the Court, the words of exception at the beginning of Section 4 have reference to Section 53, and it is only cases of transfers within two years of the application -in insolvency which are within the jurisdiction of the insolvency Court.

10. The argument has been supplemented by Mr. O'Gorman from the sections of the Act relating to appeals, his own client being here by these provisions debarred from coming in first appeal to this Court, and being limited to a second appeal, while had the question decided been raised in an ordinary suit, there would have been possible a first appeal to this Court.

11. I think there is some inconsistency between Section 4 (which does not, however, refer to void and voidable transfers in so many words but merely confers a very wide jurisdiction) and Section 53, the impression it gives me being that there was no need to include in Section 53 a class which by necessary implication is within Section 4. But this argument cannot be conclusive.

12. As to the argument for the right of appeal, that is a right conferred by statute, and it may well have been thought that where the parties submitted to the jurisdiction of the insolvency Court-which need not, after all, decide such matters but can refer the parties to a regular suit-their rights of appeal should be regulated as set out in the sections dealing with appeals in this Act.

13. Be all this as it may, it is clear that the consensus of judicial opinion 'is against the argument put forward by the appellants and that the reasons given in the many judgments quoted on the other side and very clearly set out in' Biseswar Chaudhari v. Kanhai Singh must prevail. On the common question in the two appeals we must, therefore, decide against the appellants.

14. The grievances in the appeals separately were as under :- Mr. Coyajee's special points in Appeal No. 686 of 1932 were :-

(1) that there had not been an application by the Receiver to initiate the proceedings,

(2) that the sale-deed to Mangle had been executed by the insolvent and his brother, who had just before separated from the other members of the family, and since the brother has not been adjudicated insolvent, his share at least could not be touched.

15. On the first point he relied for authority on the case of Chittammal v. Ponnuswami Naicker, where it was held that any title however flimsy must be respected by the Receiver before taking possession and be investigated by the Court. Here, he' has urged, the Judge raised an issue under Section 53 of the Transfer of Property Act, six years after the sale and found against his client. In the Madras case, however, the. action taken purported ;to be under Section S6 of the Insolvency Act. This complaint really is of an irregular procedure and Mr. Coyajee's contention is that the proceedings should be quashed on this ground, But in this case the Receiver took possession apparently on the ground that there had been no sale at all but only the superficial semblance of one, and the proceedings were initiated by the vendee in the form of a claim, which was replied to by the Receiver, issues were then raised, and were tried out to a conclusion. It is true that the learned District Judge has referred to Section 53 of the Transfer of Property Act, and that he raised issue No. 2 under that Act and section ; but his third issue was-

Is Mangle a transferee in good faith and for consideration ?

and the finding was 'no'. The learned District Judge's discussion shows that his conclusion was that there was actually no sale intended.

16. In the original Court there was a third issue-Is it proved that the sale was sham and colourable and without any consideration And the finding was 'Yes'. We think there is no substance in these contentions.

17. As to the second objection it is a fact that the vendors of the warehouse purported to be the insolvent and his jointly interested brother, but this point was never taken in the Courts below and has first been raised by the appellant,, Mangle, here, at the hearing, not even being mentioned in the memorandum of appeal to this Court.

18. This was clearly an objection which should have been taken in the trial Court, and was not taken. An application on the point was made by Pandarkar in the case of the house (exhibit 16) to the District Judge and was decided against him in the Judge's order of April 11, 1932 : the main grounds of the finding being that the plea was belated, and that had it been raised in the proper Court, the Receiver might have proved that the insolvent was the manager of the family and acting as such. Be this as it may, we think that appellant cannot now be heard on the point.

19. Appeal No. 540 of 1932 relates to the insolvent's house sold to Paraswar, and . then to Pandarkar, on May 26, 1923, and July 27, 1923, respectively, at the same price in each case. Here again two brothers sold and the argument I have just discussed has again been raised, and must be decided in the same sense-otherwise this appeal was mainly on the question of jurisdiction which I have already discussed.

20. Appeal No. 631 of 1932-When the warehouse referred to in Appeal No, 686 of 1932 was sealed by the Receiver, it contained some property which he claimed as belonging to the insolvent, and part of this consisted of a quantity of unginned cotton. Several grounds of claim were made to this cotton., Premchand, the insolvent's youthful son, laid claim to it as being his property,, in a family to which he had been given in adoption. The story of his adoption by Jivubai, a widow, has been disbelieved by both the Courts, and his claim has been rejected and he has not appealed. The other claim was put in by Anna Bapu Gadam now appellant. His contention was that he rented a portion of the warehouse and that the unginned cotton belonged to constituents of his, or of a person called Mahimkar. These claims have been held to be untrue, or at least unproved.

21. Mr. Jayakar's argument has been that Gadam was at any rate a bailee of the cotton, and can only be made to surrender to the true owner. In the opinion of the Courts below Gadam was not really a bailee at all, but a mere cloak for the insolvent, who was trading in cotton at the time and to whom the cotton in question belonged-and if as found he was the real owner, it follows the Receiver, in his place, could call upon Gadam to deliver it.

22. We think that there is no substance in any of these separate contentions. We confirm the appellate Court's decrees and dismiss all three appeals with costs,

Barlee, J.

23. In this case, there is a concurrent finding of fact that the sales under which Mangle and Pandarkar claim were, in the words of the trial Judge, sham and colourable and without consideration. The findings of the learned District Judge, it is true, were that they were intended to defeat or delay creditors and that neither vendee was a transferee in good faith and for consideration. But in the body of his judgment he has expressed the view that the sale-deed to Mangle was not intended to be acted on and that by the insolvent to Pandarkar and the latter's to Paraswar were both sham and colourable.

24. In these circumstances the question whether the Insolvency Court had jurisdiction to authorise the Receiver to take possession of the immoveable property covered by the sale-deeds must be answered in the affirmative. On behalf of the appellants, Mangle and Pandarkar, learned counsel relies on the minority judgment of Sen J. in the Allahabad full bench case of Anwar Khan v. Muhammad Khan I.L.R. (1929) All. 550 that an insolvency Court cannot try a question of title relating to transfer which has taken place more than two years before the order of adjudication. At page 563 of the Report the learned Judge expresses the view that, although a Court of Insolvency has ordinarily a jurisdiction under Section 4 of the Act to decide matters affecting a claim between an insolvent and his creditors, the opening words of the section 'Subject to the provisions of the Act' have been deliberately introduced to indicate and define the extent of the jurisdiction. In his opinion, these words, read with Sections 53 and 54, restrict the jurisdiction of an insolvency Court to cases which fall under Sections 53 and 54, transfers made less than two years before the date of adjudication. Were we dealing with real transfers in this case, I should be inclined to accept this view, as I can find no section of the Act which empowers a Court to annul transfers made more than two years before adjudication. And for this reason I think that the issues framed in this case in the Court of the District Judge were incorrect. Section 4 gives a Court of Insolvency jurisdiction to decide all questions of title, but there is nothing in the Act outside Sections 53 and 54 to empower it to annul a genuine transfer after title has passed. It is the function of the Court to collect and distribute the insolvent's property ; and the proviso to Section 56 (3) expressly forbids interference with property to which the insolvent has no present claim : Chittammal v. Ponnuswami Naicker I.L.R. (1925) Mad. 762. But when an insolvent has executed a sham deed of transfer, the transferee is a mere benamidar, who holds the property in trust. The title is in the insolvent ; there is no necessity to annul the transfer and the Court under Section 55(3) can remove the benamidar. This is the view of the majority in the Allahabad full bench case and it has been adopted by the Calcutta and Patna Courts' Shree Shree Radhakrishna Thakur V. The Official Receiver I.L.R. (1932) Cal. 1135 and Biseswar Chaudhari v. Kanhai Singh I.L.R. (1931) Pat. 9 For these reasons I agree with my learned brother that the Nos. 540 and 686 must fail. I agree also with what he has said on the third appeal and have nothing to add.


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