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Chaman Lal Vs. Sudhir Chandra and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal Nos. 9 of 1970 and 21 of 1969
Judge
Reported inAIR1972All229
ActsProvincial Insolvency Act, 1920 - Sections 9
AppellantChaman Lal
RespondentSudhir Chandra and ors.
Appellant AdvocateH.S. Joshi, Adv.
Respondent AdvocateGopal Behari and ;Sirish Pd., Advs.
DispositionAppeal dismissed
Excerpt:
civil - locus standi of transferee of debtor - section 9 of provincial insolvency act, 1920 - request for impleading as a party in insolvency proceedings - rejected - no locus standi - appeal - allowed - transferees are proper parties if voluntarily participating in proceedings. - - under that rule the court has jurisdiction to implead necessary as well as proper parties to the insolvency proceedings. in order to defend such an attack a transferee can well choose to appear and participate in the proceedings......the same power and shall follow the same procedure as ^ it follows in exercise of the original civil jurisdiction. it will be seen that the insolvency jurisdiction is conferred on existing civil 'courts. section 5 only clarifies that the existing jurisdiction possessed by the civil courts will continue to be available to it while exercising jurisdiction under the provincial insolvency act. the procedure provided for in the civil p. c. which is applicable to the civil courts when exercising original civil jurisdiction will equally be applicable to those courts while exercising functions under the provincial insolvency act. order 1, rule 10, civil p. c. would hence equally be applicable to the proceedings under the provincial insolvency act. under that rule the court has jurisdiction.....
Judgment:

Satish Chandra, J.

1. These two appeals arise out of insolvency proceedings and have been filed by the petitioning creditor.

2. It appears that certain transferees of the debtor applied for being impleaded as party to insolvency proceedings before an adjudication order was made. The learned Insolvency Judge rejected the application on the ground that the transferees have no locus standi for appearing in the proceedings at that stage. The purchaser can be made a party only in proceedings under Section 53 of the Insolvency Act. The learned Judge observed that from a perusal of Sections 7, 9 and 10 of the Provincial Insolvency Act. it would be apparent that a purchaser is not interested either in the allowing or dismissal of the application. His remedy is under Section 53 of the Insolvency Act which will not be barred by any order that may be passed under Section 9.

3. The transferees went up in appeal and succeeded. The learned District Judge held that Section 5 of the Provincial Insolvency Act makes the provisions of Civil P. C. applicable to the proceedings under that Act. Consequently Order 1. Rule 10, Civil P. C, was applicable. He held that it will be necessary to implead the transferees to enable the court effectually and completely to adjudicate upon and settle the question invovled in the proceedings. The transferees were in any event, proper parties to the petition. The appeal was allowed and the transferees were directed to be impleaded as opposite parties to the insolvency petition.

4. When the present appeals came up for hearing reliance on behalf of the petitioning creditor was placed on a Single Judge decision in Chanda Lal v. Ram Charan in Civil Revn. No. 178 of 1969, D/- 27-1-1969 (All). That Civil Revision was directed against an order refusing an application for implead-ment of a transferee of the debtor. The learned Judge observed that under Section 9 of the Act what has to be seen is the conduct, of the debtor and whether the debtor has committed any act of insolvency. Once the order has been passed under Section 9 of the Act adjudging the debtor an insolvent, it will always be open to a transferee to plead in proceedings under Sections 53 and 54 of the Act that the transfer was valid. The learned Judge relied upon aDivision Bench case. Ram Lakshman v, J. K. Kapoor, 1963 All LJ 623 - (AIR 1965 All 80) and observed that he was bound by this Division Bench decision which has specifically overruled another single Judge decision. Sheoraj Bahadur Mathur v. Abdul Aziz, AIR 1956 All 68. The learned Judge hearing the present appeals felt that the decision in Chanda Lal's case requires reconsideration and so he referred the appeals to a larger Bench. That is how these cases has come before this Bench.

5. Section 5(1) of the Provincial Insolvency Act provides that subject to the provisions of this Act the court in regard to the proceedings under the Act shall have the same power and shall follow the same procedure as ^ it follows in exercise of the original civil jurisdiction. It will be seen that the insolvency jurisdiction is conferred on existing Civil 'Courts. Section 5 only clarifies that the existing jurisdiction possessed by the Civil Courts will continue to be available to it while exercising jurisdiction under the Provincial Insolvency Act. The procedure provided for in the Civil P. C. which is applicable to the Civil Courts when exercising original civil jurisdiction will equally be applicable to those courts while exercising functions under the Provincial Insolvency Act. Order 1, Rule 10, Civil P. C. would hence equally be applicable to the proceedings under the Provincial Insolvency Act. Under that rule the court has jurisdiction to implead necessary as well as proper parties to the insolvency proceedings. Ex hypothesi persons who feel that they are either necessary or proper parties will have to validly approach the Insolvency Judge for being impleaded as party to the proceedings before it. The learned Judge deciding Chanda Lal's case. Civil Revn. No. 178 of 1969, D/-27-1-1969 (All) admitted that the Bench in Ram Lakshman's case 1963 All LJ 623 = (AIR 1965 All 80) took a contrary view. In Ram Lakshman's case the dispute for adjudication was whether a decision as to the validity of a transfer rendered in proceedings under Section 9 operates as res judicata. The Division Bench answered this question in the negative. It gave several reasons for holding that the orders in proceedings under Section 9 in relation to the validity of a transfer were not strictly necessary for adjudging a debtor an insolvent under Section 9. and so they would not operate as res judicata. There is nothing in that judgment from which it may be inferred that the Bench was of opinion that the transferees have no locus standi in proceedings under Section 9. or that the courthas no jurisdiction to implead parties under Order 1. Rule 10, Civil P. C. Ram Lakshman's case is therefore not an authority for the proposition that the court has no jurisdiction to implead transferees in proceedings under Section 9 of the Provincial Insolvency Act. It is true that Ram Lakshman's case overruled the decision in Sheoraj Bahadur's case in which the question of res judicata was also decided. These two decisions are in our opinion distinguishable from the present case. The implication in Chandu Lal's case that the court has no jurisdiction to implead transferees in proceedings under Section 9 does not, with respect, represent a correct view of law. Under Section 9 the insolvency petition can be presented by a creditor on three grounds mentioned in it.

6. Under Section 5, a debtor commits an act of insolvencv if he makes a transfer of all or substantially all his property to a third person for the benefit of his creditors or if he makes a transfer of his property or any part thereof with the intent to defeat or delay his creditors or if he makes a transfer which would be void as a fraudulent preference. If such an act of insolvency is committed any creditor can move an, insolvency petition under Section 9. The ground of attack in an insolvency peti-tion is directed against the transfer made by the debtor. In order to defend such an attack a transferee can well choose to appear and participate in the proceedings. A transferee who so volunteers could legitimately be treated as a proper party to the proceedings. The debtor after having transferred a substantial portion of his property may not feel interested enough to adequately defend the insolvency petition. The interests of a transferee are in that situation bound to suffer. It cannot hence be gainsaid that the transferees respondents in the present case who wanted to appear in order to show that the insolvency petition was itself not maintainable and not made bona fide were proper parties to the proceedings. The learned District Judge was right in permitting them to participate in these proceedings. One of the grounds upon which the insolvency petition filed by the appellant proceeded was the invalidity of the transfer made by the debtor in favour of the respondents. The respondents were therefore interested in contesting the application. They were rightly held to be proper parties.

7. For the appellant reliance was placed upon AIR 1968 Mad 287. Mahadeo Rice and Oil Mills v. Chennimalal Gounder. There it was held that the court has no jurisdiction to add a partyunless It Is necessary to add a proper party. There can be no quarrel with the proposition. But the jurisdiction Under Order 1. Rule 10. Civil P. C. extends to proper parties also. Reliance was also placed upon M. A. Jaleel Sahib v. Seeniappa Ramaswami Mudaliar and Co., AIR 1951 Mad 665. There it was held that a creditor who had a grievance of his own against the conduct of the petitioning creditor can come by way of an application for being substituted and not for being added as an additional party and so he could not take advantage of Order 1. Rule 10. Civil P. C. No such factual situation arises in the present case. The respondents 'wanted to participate in the proceedings in order to defend the transfers in their favour and contest the insolvency petition filed on a ground affecting the transfer in their favour. That case is not applicable.

8. In this view it is not necessary to decide the other technical questions as to whether the appeal was maintainable.

9. In the result the appeal fails and is accordingly dismissed with costs.


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