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Mt. Lilawati Vs. B. Moti Ram, Official Receiver and anr. - Court Judgment

LegalCrystal Citation
Subject Civil
CourtAllahabad
Decided On
Reported inAIR1939All431
AppellantMt. Lilawati
RespondentB. Moti Ram, Official Receiver and anr.
Excerpt:
.....v usha devidas dongre, 1993 mah.lj 74; 1993 lab ic 1858 overruled]. - in this case the official receiver clearly admits in his application that rup chand, and, after him, mt. in view of the decisions of this court to which i have already referred, i think it is perfectly clear that the official receiver's petition was maintainable under section 4, provincial insolvency act, and the learned civil judge erred in rejecting it summarily as he did. i am entirely unable to agree with this contention and as i have pointed out above they clearly lay down that the insolvency court has the widest powers conferred upon it by section 4, provincial insolvency act to deal with any question of title or priority or of any nature whatsoever which might arise for consideration in the case...........insolvency court under section 4, provincial insolvency act. the matter came up before the second civil judge of saharanpur in the exercise of insolvency jurisdiction and he dismissed the official 'receiver's application summarily on a round which it is not easy to understand from the order passed by him. i would therefore state the ground in his own words as follows:under section 4, provincial insolvency act, this court can make an enquiry with a view to find out what are the assets of the insolvent. in this case the official receiver clearly admits in his application that rup chand, and, after him, mt. lilawati are the purchasers of the property. it is not alleged that the sale in favour of any one of them was benami on behalf of the debtor. the sale being admitted the court cannot,.....
Judgment:

Mulla, J.

1. This is a second appeal from an order of remand passed by the learned District Judge of Saharanpur in an insolvency case. It arises in the following circumstances : The dispute in this case relates to a house which was originally owned by two brothers Moti Ram and Atma Ram. Moti Ram was adjudged an insolvent on 1st May 1936. It appears that he had executed a promissory note in favour of one Lala Rup Chand on 4th April 1930. Lala Rup Chand brought a suit on the basis of that promissory note and obtained a decree which was put into execution in due course with the result that the half share of Moti Ram in the house in dispute was put to sale and purchased by Lala Rup Chand himself on 4th November 1932. On 28th November 1932, Lala Rup Chand transferred all his rights and interests which he had thus acquired to the present appellant Mt. Lilawati. It appears that the present appellant started another litigation against the insolvent Moti Ram and his brother Atma Ram which ended in a decree in her favour and she attached Atma Ram's share in the house in dispute on 6th March 1934 and purchased it herself. The appellant thus claims to be the owner of the whole house in dispute. On 30th July 1936, the Official Receiver appointed by the Court in respect of the estate of Moti Ram, insolvent, made an application under Section 4, Provincial Insolvency Act, praying for a declaration that the house in dispute was really the property of the insolvent in spite of the transfers referred to above and did not belong to the appellant. This application obviously raised a question of title which had to be decided by the Insolvency Court under Section 4, Provincial Insolvency Act. The matter came up before the second Civil Judge of Saharanpur in the exercise of insolvency jurisdiction and he dismissed the Official 'Receiver's application summarily on a round which it is not easy to understand from the order passed by him. I would therefore state the ground in his own words as follows:

Under Section 4, Provincial Insolvency Act, this Court can make an enquiry with a view to find out what are the assets of the insolvent. In this case the Official Receiver clearly admits in his application that Rup Chand, and, after him, Mt. Lilawati are the purchasers of the property. It is not alleged that the sale in favour of any one of them was benami on behalf of the debtor. The sale being admitted the Court cannot, in proceedings under Section 4, ignore or set it aside. For setting side transfers which are fraudulent the Official Receiver has to come under Sections 53 and 54, Provincial Insolvency Act, and this application is not maintainable.

2. Two points apparently arise from this order of the learned Civil Judge, firstly that he was of the opinion that an Insolvency Court exercising its powers under Section 4, Provincial Insolvency Act, can never net aside a sale unless it is alleged that the sale was bonami on behalf of the insolvent and secondly, that the Official Receiver in this case should have made an application under Sections 53 and 54 of the Act and not under Section 4. On both these points the learned Civil Judge was, in my opinion, wholly wrong. Section 4, Provincial Insolvency Act, confers the widest powers on an Insolvency Court and there can be no justification for holding that it cannot set aside a sale which is challenged by the Official Receiver unless it is specifically alleged that the sale was benami on behalf of the insolvent. As regards the other point, it is enough to say that the Official Receiver was not putting forward the case that the transfers which he challenged and by which the house in dispute had passed to the appellant were voluntary transfers made by the insolvent within two years of the date of the petition in insolvency or that they involved a fraudulent preference of one creditor over the others. It was not therefore incumbent upon the Official Receiver to make an application either under Section 53 or Section 54, Provincial Insolvency Act. There is no warrant for the proposition which seems to be implied in the order passed by the learned Civil Judge that an Official Receiver cannot challenge a sale or transfer unless it happens to fall within the purview either of Section 53 or Section 54, Provincial Insolvency Act. If the Official Receiver claims that the property which is the subject of a sale or transfer is still the property of the insolvent in the eye of the law in spite of those transactions there is nothing to prevent him from moving the Insolvency Court under Section 4, Provincial Insolvency Act, to have the rights of the insolvent declared in the property which is the subject of sale or transfer and the Insolvency Court has the same power in dealing with that question as any other Civil Court has. The learned Civil Judge seems to be of the opinion that the powers of the Insolvency Court under Section 4, Provincial Insolvency Act, are limited by Sections 53 and 54 of the Act. This view is erroneous and it has been finally repelled by this Court in the Full Bench case in Anwar Khan v. Mohammad Khan : AIR1929All105 . The decision of the majority of the Judges in that case has been correctly summarized in the head-note which runs as follows:

The intention of the Legislature in enacting Section 4(1) seems to have been to confer upon the Insolvency Court full powers of deciding all questions of title that arise for decision in cases of insolvency so that there should be no necessity for having recourse to the ordinary Civil Courts and the wide jurisdiction conferred by Section 4(1) is not restricted by Sections 51 to 55 of the Act which do not deal with the jurisdiction of the Insolvency Courts.

3. This case was followed by a Division Bench of this Court in the later case in Amir Ahmad v. Syed Hassan : AIR1935All671 . The relevant portion of the judgment of Sulaiman C.J. in this later case which bears upon the case now before me runs as follows:

Sections 53 and 54 as laid down by the majority of the Full Bench in Anwar Khan v. Mohammad Khan : AIR1929All105 do not deal with the jurisdiction of the Insolvency Court but only lay down rules as to the manner in which evidence should be considered in certain cases arising in that Court and in no way control the provisions of Section 4.... When property has been transferred by the transferee of an insolvent to a third party and the Receiver is aware of the transfer the dispute is really between the Receiver on the one hand and the subsequent transferee on the other and not between the Receiver and the first transferee who has no longer got any interest in the property loft. In order to start a proceeding under Section 4 the application should therefore be by the receiver against the person who is now claiming title to the property and an adjudication by the Court on such dispute would be final and would bar a second suit and would be binding on the parties to the proceeding.

4. From this it is evident that the application made by the Official Receiver in this case could not be validly thrown out as not maintainable under Section 4, Provincial Insolvency Act. The learned Civil Judge did not consider the application upon the merits and I do not therefore propose to say anything on the question as to whether any valid pleas are open to the appellant or not. The simple question with which I am concerned in this case is whether the Civil Judge was right in throwing out the Official Receiver's petition as not maintainable under Section 4, Provincial Insolvency Act. The learned District Judge of Saharanpur has held that the learned Civil Judge was wrong in throwing out the Official Receiver's petition summarily and has remanded the case for decision on the merits, hence the present appeal. In view of the decisions of this Court to which I have already referred, I think it is perfectly clear that the Official Receiver's petition was maintainable under Section 4, Provincial Insolvency Act, and the learned Civil Judge erred in rejecting it summarily as he did. I do not think that any valid objection can be taken to the order of remand passed by the learned District Judge. The substance of the argument of the learned Counsel for the appellant is that the cases of this Court which have been cited above do not apply to the present case because they deal only with colourable transactions which fall either under Section 53 or Section 54, Provincial Insolvency Act. I am entirely unable to agree with this contention and as I have pointed out above they clearly lay down that the Insolvency Court has the widest powers conferred upon it by Section 4, Provincial Insolvency Act to deal with any question of title or priority or of any nature whatsoever which might arise for consideration in the case. The provisions contained in Sections 53 and 54 on the one hand and those in Section 4 of the Act on the other are not mutually exclusive. Questions arising under Sections 53 and 54 of the Act might well fall within the ambit of Section 4 of the Act. The result therefore is that I see no reason to interfere and dismiss this appeal with costs.


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