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Smt. Bhanwari Bai Vs. Joharilal Soni - Court Judgment

LegalCrystal Citation
Overruled ByJohri Lal Soni Vs. Smt. Bhanwari Bai
SubjectCivil
CourtRajasthan High Court
Decided On
Case NumberD.B. Civil Insolvency Appeal No. 50 of 1972
Judge
Reported in1973()WLN703
ActsProvincial Insolvency Act, 1920 - Sections 4 and 53
AppellantSmt. Bhanwari Bai
RespondentJoharilal Soni
Advocates: M.B.L. Bhargava and; R.I. Purohit, Advs.
DispositionAppeal allowed
Cases ReferredSee Kasturi & Sons v. Salivateswaran.
Excerpt:
.....sections 4 & 53--section 4 is subject to limitations imposed by section 53--transfer ab initio void--held, jurisdiction of civil court is not barred.;section 4, therefore, is subject to the limitations imposed by section 53 of the act and if there is a tranfer which is void ab initio for any reason and which does not fall within the ambit of section 53 then it is not the court of insolvency which would decide the dispute but the ordinary civil court. the firm rule of interpretation is that the exclusion of jurisdiction of civil courts is not to be readily inferred. - - 4. this appeal raises an interesting question regarding the effect of sec-lion 53 on section 4 of the act. ' section 53. any transfer of property not being a transfer made before and in consideration of marriage or..........forward a claim to it is not really entitled to it. this by no means implies an annulment of a voidable transfer within the meaning of section 53 of the provincial insolvency act. the limitation of two years, prescribed under section 53, is applicable to all cases where the transfer, when originally made was a good transfer of property though it was subject to an option of avoiding it to be exercised by the receiver. but such a transfer is only voidable and not void and remains good so long as it is not annulled by the court. on the other hand, a transfer which is wholly fictitious from the very beginning, is of no effect and does not require to be annulled. all that the court has to do in such a case is to decide that it is void, which decision will bind the claimant to the property.....
Judgment:
Beri, C.J.

1. Pyarelal executed a deed of gift on November 7, 1961 in favour of his wife Smt. Bhanwari Bai. On October 15, 1968. upon his own application. Pyarelal was adjudged as an insolvent. On behalf of the receiver the deed of gift in favour of Smt. Bhanwari Bai was challenged on January 4. 1968. The learned Additional District Judge No. 1. Jodhpur, upheld the objection of the receiver and declared the deed of gift as void. Smt. Bhanwari Bai has now come up in appeal.

2. Mr. Mukat Behari Lal Bhargava appearing for the appellant has urged that Section 4 of the Provincial Insolvency Act (hereinafter called 'the Act') is subject to the other provisions of the Act as the opening words of Subsections (1) and (2) indicate. Therefore, the deed of gift which was executed two years before the date of the adjudication of the insolvent could not be enquired into by the Insolvency Judge in exercise of his powers under section 4 of the Act. He urged that the Full Bench decision reported in Haji Anwar Khan v Md. Khan, AIR 1929 All 105 (FB) contained a dissenting judgment of Sen J. the reasoning whereof has been accepted in Amjad Ali v. Nandlal Tandon, AIR 1930 Oudh 314. This question also received a close consideration by the learned Judges of the Nagpur High Court in G. N. Godbole v. Mt. Nanibai. AIR 1938 Nag 546. Mr. Bhargava urged that whatever' might have been the divergence of opinion between different High Courts with regard to the powers conferred by Section 4 of the Act the matter has now b'een set at rest by the decision of the Supreme Court in Hansraj v. Rattan Chand, AIR 1967 SC 1780 wherein the view expressed by the learned Judges of the Rangoon High Court in Ma Sein Nu v. U. Mg. Mg. AIR 1934 Rang 97, has received full approval. This is to the effect that the jurisdiction conferred under Section 4 is controlled inter alia by the provisions of Section 53 of the Act. The last case he cited was Gangadhar Revappa Umbaranikar v. Shanker Vithoba Gholasgaonkar (1971) 73 Bom LR 461.

3. Mr. U. L. Gupta appearing for the respondent supported the judgment of the learned Additional District Judge and reiterated the authorities contained in that judgment, namely. Harichand v. Motiram AIR 1926 All 470. Raoji Bapuji v. K. L. Bawachekar AIR 1935 Bom 316. Padamsi Premchand v. Laxman Vishnu AIR 1949 Bom 129 (FB). Chinnaturai Muthiriyan v. Official Receiver. AIR 1943 Mad 252 and Official Receiver Ellore v. Subbayya, AIR 1933 Mad 527. His emphasis was that the crucial word employed in Section 53 is 'voidable' as distinguished from the word 'void.' That the deed in this casewas void ab initio and, therefore. Section 53 would not regulate the exercise of jurisdiction under Section 4 of the Act.

4. This appeal raises an interesting question regarding the effect of Sec-lion 53 on Section 4 of the Act. The view taken by the learned Additional District Judge is, to put it briefly, that Section 53 does not circumscribe the wide ambit of Section 4 as has been held in some decided cases and it was open to him to set aside the deed of gift made seven years before the adjudication of the insolvent. In order to appreciate the nature of the controversy it will be profitable to reproduce the two sections. Sections 4 and 53 read as under:--

'Section 4. 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.

(2) Subject to the provisions of this Act and notwithstanding anything contained in any other law for the time being in force, every such decision shall be final and binding for all purposes as between, on the one hand the debtor and the debtor's estate and, on the other hand, all claimants against him or it and all persons claiming through or under them or any of them.

(3) Where the Court does not deem it expedient or necessary to decide any question of the nature referred to in Sub-section (1), but has reason to believe that the debtor has a saleable interest in any property, the Court may without further enquiry sell such interest in such manner and subject to such conditions as it may think fit.'

'Section 53. Any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent on a petition presented within two years, after the date of the transfer, be voidable as against the Receiver and may be annulled by the Court.'

5. The 1907 Indian Insolvency Act did not contain any provision corresponding to Section 4. It came to be added for the first time in the Act of 1920 and Sub-section (1) of Section 4 is substantially the same as Section 105 of the Bankruptcy Act 1914 of England.

6. The view which has been taken by the learned AdditionalDistrict Judge and supported by Mr. U. L. Gupta is as contained in. Harichand's case AIR 1926 All 470 where Sulaiman, J., as he then was, observed, to quote the head-note,--

'The Insolvency Court has full power to declare, even though it be at the instance of the receiver, that certain property belongs to the insolvent and that any other person, who is putting forward a claim to it is not really entitled to it. This by no means implies an annulment of a voidable transfer within the meaning of Section 53 of the Provincial Insolvency Act. The limitation of two years, prescribed under Section 53, is applicable to all cases where the transfer, when originally made was a good transfer of property though it was subject to an option of avoiding it to be exercised by the receiver. But such a transfer is only voidable and not void and remains good so long as it is not annulled by the Court. On the other hand, a transfer which is wholly fictitious from the very beginning, is of no effect and does not require to be annulled. All that the Court has to do in such a case is to decide that it is void, which decision will bind the claimant to the property as if it were by an ordinary Civil Court.'

When the question arose in AIR 1929 All 105 (FB) the Full Bench referred to Harichand's case. AIR 1926 All 470, and the majority expressed the view that Section 4 dealt with the jurisdiction and it was to be circumscribed only by such subsequent sections which deal with the subject of jurisdiction of the Court. Since Sections 53 and 54 did not deal with the jurisdiction of the Insolvency Court but only laid down rules as to the manner in which evidence should be considered in certain cases arising in that Court those sections did not control the provisions of Section 4 though Section 56 did. The minority view expressed by Sen. J. was that the Court of insolvency was a creature of statute and its jurisdiction was limited by the boundaries set out by the statute which created it and unless the Insolvency Act took away expressly or by necessary implication the powers of the Civil Court to adjudicate the validity or otherwise of certain transfers which were sought to be impugned, the jurisdiction of the Civil Courts was not affected.

7. The Madras High Court examined the question in AIR 1933 Mad 527, and held that the Insolvency Court had power to go into the question whether a transfer was voidable under Section 53 T. P. Act 'and added that Sections 53 and 54. Insolvency Act are only rules of evidence. The view taken in the 1928 and 1929 Allahabad cases was followedby the Madras High Court. Another case of the Madras High Court which examined the matter is AIR 1943 Mad 252. It laid down that it was no impediment to the reception of the application by the Court under Section 4 even if the alienation in question was more than two years before the insolvency. It also adopted the view taken in 1926 and 1929 Allahabad (FB).

8. AIR 1949 Bom 129 of the Bombay High Court is another Full Bench case in which Chagla, C. J., observed that under Section 4 the Insolvency Court had jurisdiction to decide questions' of title affecting strangers in cases which are not covered by Section 53 and the 'reason given was that nominal and fictitious transfers did not fall under Section 53 as such transfers are void at the inception and are not voidable. If they were real transfers they would fall within the ambit of Section 53 but if they had been entered beyond the period of two years they could be avoided by the receiver. They approved of the decision in AIR 1935 Bom. 316.

9. Those decisions proceed on thereasoning that whale Section 4 confers jurisdiction Section 53 is merely procedural. The other ground is that if a transaction is void ab initio and not voidable the immunity conferred by Section 53 would not be available.

10. The other line of cases is AIR 1930 Oudh 314, which lays down that Section 4 was to be read subject to the provisions of the Act and therefore it did not give to the Insolvency Court any power wider than that which was indicated in Section 53 to annul transfers executed more than 2 years before the date of adjudication on the ground of their being benami executed to defraud creditors. Transactions of sudh a nature must be challenged if at all in an ordinary Civil Court. The Oudh case. AIR 1930 Oudh 314 did not follow AIR 1929 All 105 (FB) but preferred the view contained in AIR 1926 Mad 363 and AIR 1927 Cal 474.

11. A question arose before the Rangoon High Court in AIR 1934 Rang 97, with regard to the power under Section 4 of the Act. The learned Judges observed,--

'Now, Section 4 defines the powers of the Insolvency Court to decide questions of law and fact arising in insolvency proceedings, but it does not lay down how the Court is to be moved to exercise those powers. .................. ofcourse, the powers of the Court in deciding such an application are defined in Section 4, but this does not mean that the application itself is made under Section 4, and clearly it cannot be for Section 4 contains no provision as tohow the Court is to be moved to exercise its powers, and for the mode of invoking the authority of the Court other provisions of the Act such as Sections 53, 54 and 68 have to be consulted.'

This passage has been quoted with approval by their Lordships of the Supreme Court in AIR 1967 SC 1780 to which we shall presently refer.

12. The Nagpur High Court in AIR 1938 Nag 546 laid down that Sections 53 and 54 do not merely lay down a rule of procedural law or a rule of evidence favouring the Official Receiver but also conferred jurisdiction upon a Court of Insolvency and hence limit the operation of Section 4, The learned Judges of the Nagpur High Court held that Section 4 of the Insolvency Act does not empower the Insolvency Court to annul transactions entered into more than 2 years prior to the application for insolvency, which are voidable under the ordinary law under Section 53 of the T. P. Act. Such transactions must be challenged, if at all by separate proceedings in a Civil Court and not in an Insolvency Court under the Insolvency Act.

13. In AIR 1967 SC 1780 the matter came to be examined but somewhat indirectly, B and H were two brothers. An application having been made by the creditors of B in the year 1949 he was adjudged as an insolvent on 23rd November, 1954 and a receiver was appointed. He was directed to take possession of the property of the insolvent. He took possession of various properties and attached some urban property and agricultural lands. H filed an objection petition on 21st December. 1954 alleging that the property detailed therein belonged to him and was exclusively in his possession. He prayed for release of the property from attachment and restoration of its possession to him. The receiver pleaded that he had taken possession thereafter at the instance of the two creditors. The Insolvency Judge framed two issues and eventually the High Court held that the property in dispute must be deemed to be the separate property of H and held that the application was within time. The dispute before the Supreme Court, therefore, was on a construction of Sections 4 and 68 of the Act. In the course of the judgment, however, their Lordships observed in para 5 as follows:--

'It will be noted from the above that Section 4 Sub-section (1) lays down the ambit of the powers of the Court exercising insolvency jurisdiction. Its primary object is to empower such courts to decide all questions whether of title or priority or of any nature whatsoever and whether involving matters of lawor fact which may arise in any case of insolvency coming within the cognizance of the court. In other words, the aim of this provision is that all questions of title or priority arising in insolvency should primarily be disposed of by the insolvency courts so as to achieve expedition. It will be noted at, once that resort to ordinary courts of law is not proscribed and at the same time the legislature provided that a person could resort to the insolvency court if the matter arose in insolvency proceedings. Under Sub-section (2) however every such decision arrived at by the insolvency court was to be final and binding for all purposes as between on the one hand, the debtor and the debtor's estate, and on the other hand, all claimants against him or it and all persons claiming through or under them or any of them. This provision is however subject to the other provisions of the Act and notwithstanding anything contained in any other law for the time being in force. It is also to be noted that this section does not lay down what procedure or what steps should be taken by any person who is aggrieved by any order of the insolvency court or of any act of omission or commission of the receiver.'

The aforesaid is an authoritative and exhaustive exposition of the intention of Section 4 of the Act. The question Which calls for our determination is whether the expression 'subject to the provisions of this Act' is a limitation on the powers of the Insolvency Court and whether Section 53 is one such limitation.

14. In Harichand's case AIR 1928 All 470 Sulaiman, J. observed that Section 53 of the Act was applicable to all eases where the transfer, when originally made, was a good 'transfer of property though it was subject to an option of avoiding it to be exercised by the receiver and such a transfer was only voidable and not void. He added that Section 53 would not apply to cases which related to transfer which were wholly fictitious from the very beginning, All that a court has to do in such cases is to decide that it is void and such decision will bind the claimant to the property as if it was given by an ordinary civil Court. The distinction between void and voidable on which this Allahabad judgment revolves deserves to be examined. In Wharton's Law-Lexicon void and voidable have been distinguished thus:

'There is this difference between these two words: void means that an instrument or transaction is so nugatory and ineffectual that nothing can cure it; voidable, when an imperfection or defect can be cured by the act or confirmation of him who could take advantage of it. Thus, while acceptance of rent will make gooda voidable lease it will not affirm a voidlease.'

(See Whar ton's Law-Lexicon. EditionNinth p. 773).

15. Section 53 of the Act is contained in Part III thereof. The sub-heading under which Section 53 falls is 'Effect of Insolvency on Antecedent Transactions'. Before Section 53 comes into operation there must be a transfer of property. But it does not apply to transfers made before and in consideration of marriage or made in favour of a purchaser or incurnbrancer in good faith and for valuable consideration. It only applies to transfers if the transferor is adjudged insolvent on a petition presented within two years after the date of the transfer. It shall be voidable as against the Receiver and may be annulled by the Court. In other words, the Court may annul a transfer if it is made within two years from the date of the presentation of the petition for insolvency provided the Receiver refuses to recognize it and asks the Court to annul it. In our opinion voidable as employed in Section 53 merely confers an option on the Receiver subject to other conditions, which he may exercise provided the transfer had taken place within two years from the date of the presentation of the insolvency. The legislature did not employ the word Voidable' to distinguish it from the word Void'. Nor could it be the intention of the Legislature that a transfer, however, old in point of time from the date of the presentation of the petition for insolvency if made by an insolvent could be questioned in the course of an insolvency before the Insolvency Court on merely alleging that it was void ousting the jurisdiction of the ordinary civil courts of law. In Haji Anwar Khan's case AIR 1929 All 105 (FB) the Full Bench of the Allahabad High Court proceeded on another consideration. The learned Judges observed that Sections 53 and 54 did not deal with the jurisdiction of the Insolvency Court, but only laid down rules as to the manner in which evidence should be considered in certain cases arising in that Court and those sections did not control the provisions of Section 4. With great respect we are unable to agree with the view taken by the learned Judges and we agree with the view taken by Sen J. that the Court of Insolvency is a creature of statute and its jurisdiction was limited by the boundaries set out by the statute which created it and unless expressly or by necessary implication the powers of the civil court to adjudicate the validity or otherwise of certain transfers which were sought to be impugned were excluded the jurisdiction of the civil counts was not affected. Sections 3, 4 and 5 in Part I of the Act speak of the constitution and powers of the Court. Section 3 relates to insolvency jurisdiction, Section 4 is about the power of the court to decide all questions arising in insolvency proceedings and Section 5 lays down the general powers of the Court. Both Sections 4 and 5 of the Act are subject to the provisions of the Act. Section 53, in our opinion, is one of those sections which speaks of the effect of insolvency on antecedent transactions which could be enquired into by the Insolvency Court. All that it lays down is that if any person has transferred any property other than those mentioned in the section within two years of the presentation of the petition of the insolvency it will be open to the Receiver to get it annulled as it would be voidable against him. One of the objects of Section 53 is that all those transfers which are made by a person within 2 years of the date of the presentation of the insolvency are voidable as against the Receiver and he can ask the Court created under Section 4 to annul them presumably because a designing insolvent might transfer his property in anticipation of the step of seeking adjudication as an insolvent. We are of the view that the Legislature having regard to human behaviour was not prepared to extend the period of designing beyond two years. Section 4, therefore, is subject to the limitations imposed by Section 53 of the Act and if there is a transfer which is void ab initio for any reason and which does not fall within the ambit of Section 53 then it is not the Court of Insolvency which would decide the dispute but the ordinary civil court. The firm rule of interpretation is that the exclusion of jurisdiction of civil courts is not to be readily inferred. Such exclusion must be 'explicitly expressed or clearly implied.' (See Secretary of State v. Mask & Co., AIR 1940 PC 105; Magiti Sasmal v. Pandab Bissoi, AIR 1962 SC 547. Raja Soap Factory v. S. P. Shantaraj AIR 1965 SC 1449 at page 1451. As held by the House of Lords in Pyx Granite & Co. Ltd. v. Ministry of Housing and Local Govt. ((1959) 3 All ER 1 (HL) P. 6.)) 'It is a principle by no means to be whittled down' and has been characterised as a 'fundamental rule'. As a necessary corollary of this rule, provisions excluding jurisdiction of civil courts and provisions conferring, jurisdiction on authorities and tribunals other than civil courts are to be strictly construed. See Kasturi & Sons v. Salivateswaran. AIR 1958 SC 507.

16. On these principles we set aside the judgment of the learned Additional District Judge and accept this appeal with costs.


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