1. This is an appeal by the plaintiff under Section 5 of the High Court Act against the decision of a learned Judge in S. A. No. 128 of 1956-E reported in 1959 Ker LT 93.
2. The plaint property belonged to Eappen and Chacko who assigned it to their brother Koshy on 31-9-1105. In I. P. No. 21 of 1107 on the file of the Quilon District Court the vendors were adjudged insolvents by an order dated 30-11-1108. On 20-4-1115 the Official Receiver applied under Section 53, Insolvency Act, to annual the aforesaid assignment and it was ordered on 11-1-1116. Subsequent thereto, the Official Receiver sold the property to the plaintiff under Ext. E on 14-6-1120.
Even before the motion to annul the assignment to Koshy, he had assigned the property on16-12-1111 to the defendant as per Ext. VI andthe defendant had come in possession thereof.But the defendant was not made a party to theannulment proceedings. As the defendant refusedto surrender the property to the plaintiff ondemand the latter has filed this suit for declaration of his title to and for recovery of the property from the defendant with mesne profits. TheMunsif, affirmed by the Additional District Judgeon appeal, found the defendant's purchase bonafide for value and without notice of the insolvencyproceedings, and the plaintiff's purchase benamifor the insolvents, but decreed the suit holdingthat the annulment proceedings bound the defendant as well.
3. In second appeal, the learned Judge has reversed that decree and dismissed the suit. Hence this appeal.
4. It has been held by the Supreme Court in Ramaswami Chettiar v. Official Receiver, Ramanathapuram at Madurai, AIR 1960 SC 70 that even if it be assumed that on the passing of an order of annulment the transfer stands annulled as from its date, it 'remains a perfectly valid transfer till it is annulled' and that therefore 'the transferee has all the rights in the property transferred' and is 'competent to exercise them' till annulment. It then follows that transfer to the defendant made by Koshy in 1111 is perfectly valid in law and cannot be affected by the motion made by the Official Receiver in 1115 to annul the title of Koshy to which proceedings the defendant was made no party. A proceeding under Section 53 of the Insolvency Act relates to title to property and it cannot be of any effect unless the person, in whose name the property stands at the time, is made a party thereto. See Ahmir Ahmed v. Syed Masan, AIR 1935 All 671 and AIR 1960 SC 70.
It has also been held by the Supreme Court in Subramonia Iyer v. Official Receiver, AIR 1958 SC 1 that the onus in an annulment proceeding under Section 53 to prove want of bona fides on the part of the transferee in the impugned transfer is on the Official Receiver, and the transferee is entitled to defend his title against the Official Receiver's impugnment. The transferee is a necessary party to the proceedings. If before the initiation of the proceedings the transferee himself has assigned the property to another so as to vest the title on his transferee, the latter must be on the record in order that the annulment may bind him. Under Section 55 a bona fide purchaser for value is entitled to protection in a proceeding under Section 53 of the Insolvency Act. The transfer to the defendant has been found to be bona fide for value and without notice of the insolvency proceedings against Eappen and Chacko. The title of the defendant was not affected by the annulment proceedings had against Koshy who at the time of the motion for annulment had no title to the property. It then follows that the plaintiff is not entitled to any relief against the defendant and that the dismissal of his suit by the learned Judge has to be affirmed.
5. The appeal fails and is dismissed withcosts.