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Chidambaram Chettiar (Died) and ors. Vs. Sellakumara Goundan and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1941Mad903; (1941)2MLJ684
AppellantChidambaram Chettiar (Died) and ors.
RespondentSellakumara Goundan and ors.
Cases ReferredVasudeva Kamath v. Lakshminarayana Rao
Excerpt:
- - 3. section 53 of the transfer of property act states that every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of a creditor defeated or delayed......of, all the creditors. section 17 of the presidency towns insolvency act and section 28 of the provincial insolvency act vest the property of the insolvent in the official assignee or the official receiver as the case may be and these sections prohibit, without the leave of the insolvency court a creditor of the insolvent filing a suit against the insolvent during the pendency of the insolvency proceedings. all matters regarding the insolvent's estate have to be decided by the insolvency court in proceedings contemplated by the act.4. property which the insolvent has transferred in fraud of his creditors is not his property. the transaction is voidable, but until it has been set aside the transferee has a valid title. therefore, where property has been transferred by a deed which.....
Judgment:

Alfred Henry Lionel Leach, C.J.

1. The question which has been referred is this:

Is a suit by a creditor under S. S3 of the Transfer of Property Act to set aside an alienation made by the debtor before he is adjudged an insolvent maintainable without the leave of the Insolvency Court?

2. In Vasudeva Kamath v. Lakshminarayana Rao (1918) 36 M.L.J. 453 : I.L.R. Mad. 684 a Bench of this Court (Wallis, C.J., and Ayling, J.,) held that such a suit could not be instituted without the leave of the Insolvency Court and this decision was accepted as being correct by the Rangoon High Court in Mohamed Adjim Nacoda v. E.M. Chettyar Firm I.L.R.(1930) Rang. 7 and by the Lahore High Court in Din Mohammad v. Mt. Walait Begum A.I.R. 1938 Lah. 856. The decision was, however, strongly criticised by another Bench of this Court (Wallace and Thiruvenkatachariar, JJ.,) in Subramanyam v. Narasimham (1928) 56 M.L.J. 489. We consider that there is full justification for the criticism.

3. Section 53 of the Transfer of Property Act states that every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of a creditor defeated or delayed. Before 1929 a creditor could bring a suit under this section in his individual capacity, but in that year the section was amended and there is now a specific direction that the suit shall be instituted on behalf of, or for the benefit of, all the creditors. Section 17 of the Presidency Towns Insolvency Act and Section 28 of the Provincial Insolvency Act vest the property of the insolvent in the Official Assignee or the Official Receiver as the case may be and these sections prohibit, without the leave of the Insolvency Court a creditor of the insolvent filing a suit against the insolvent during the pendency of the insolvency proceedings. All matters regarding the insolvent's estate have to be decided by the Insolvency Court in proceedings contemplated by the Act.

4. Property which the insolvent has transferred in fraud of his creditors is not his property. The transaction is voidable, but until it has been set aside the transferee has a valid title. Therefore, where property has been transferred by a deed which falls within the mischief of Section 53 and the transferor becomes insolvent, the property does not form part of his estate and come within the purview of Section 17 of the Presidency Towns Insolvency Act or Section 28 of the Provincial Insolvency Act. Of course, it comes within the purview of these sections when the Official Assignee or the Official Receiver or a creditor, obtains a declaration that the transaction offends against Section 53.

5. In Vasudeva Kamath v. Lakshminarayana Rao (1918) 36 M.L.J. 453 : I.L.R. Mad. 684 certain creditors filed a suit for a declaration that an alienation of immoveable property by an insolvent was void under Section 53 of the Transfer of Property Act. They did not ask for the leave of the Insolvency Court, notwithstanding that the Official Receiver was made a party to the suit. The Court held that the effect of an adjudication under Section 16 (1) of the Provincial Insolvency Act, Act III of 1907 (which corresponds to Section 28 (2) of the present Provincial Insolvency Act) was to prohibit a creditor bringing a suit under Section 53 of the Transfer of Property Act without the consent of the Insolvency Court. The learned Judges who decided that case overlooked the fact that a suit under Section 53 of the Transfer of Property Act is not a suit in respect of the property of the insolvent, but is a suit in respect of property which had been the property of the insolvent and which he had transferred in fraud of his creditors. Such a suit does not fall within the prohibition of the Insolvency Act. Moreover, the very definite right given by Section 53 of the Transfer of Property Act to a creditor cannot be taken away without an express provision by the Legislature to this effect and there is nothing in the Presidency Towns Insolvency Act or the Provincial Insolvency Act which can be read as taking away his right. This was pointed out in Subramaniam v. Narasimham (1928) 56 M.L.J. 489. The learned Judges who decided that case also pointed out that a suit to set aside a transfer because it offends against the provisions of Section 53 of the Transfer of Property Act is not a suit respecting the property of the insolvent. As already indicated once a declaration has been obtained, the property does become the property of the insolvent and automatically vests in the Official Assignee or Official Receiver as the case may be. A creditor can get no personal advantage out of it, as the section now stands.

6. A creditor who brings a suit under Section 53 of the Transfer of Property Act may desire to make the Official Assignee or the Official Receiver a party, but he can only do so with the consent of the Insolvency Court. This is quite a different matter from saying that the Insolvency Court must give its consent before a suit can be instituted under Section 53 of the Transfer of Property Act when the representative of the insolvent's estate is not made a party.

7. It follows from what we have said that we are in full agreement with the decision in Subramaniam v. Narasimham (1928) 56 M.L.J. 489 and that Vasudeva Kamath v. Lakshminarayana Rao (1918) 36 M.L.J. 453 : I.L.R. Mad. 684 was wrongly decided. Consequently the answer to the question referred will be in the affirmative.

8. The costs of this reference will be costs in the appeals.


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