Appana Veeraraghavamma vs Chandalada Padmaraju

Mack, J.—The appellants are three alienees from the insolvents. Their alienations have been set aside by the learned District Judge of East

Godavari as fraudulent preferences u/s 54 of the Provincial Insolvency Act, on applications filed by a decree-holder creditor, admittedly to the tune

of about Rs. 30,000. The Official Receiver declined to move the court to set aside the alienations, and the petitioner had no option but to apply to

the Insolvency Court. There were altogether six alienations set aside by the learned District Judge on six different applications filed, in a common

order.

The insolvents were adjudicated on 27-1-1947 on a creditor''s application filed on 5-11-1945. (After dismissing C. M. A. No. 234 of 1950 the

judgment proceeded):

C. M. A. No. 324 of 1950 raises an interesting point of law for determination. In this case the alienee appellant was a creditor under a pronote,

Ex. B. 24 dated 25-8-1943 for a sum of Rs. 2500. On 20-7-1945 he took a sate under Ex. B. 23 from the insolvent of 5-19 acres of dry land for

a consideration of Rs. 4400 made up as follows: (1) Rs. 2558-2-0 in settlement of his own pronote debt, (2) the discharge of a pronote debt

under Ex. B. 13 dated 1-6-1945 amounting to Rs. 1214-11-6 due to one Subba Rao (R. W. 10), (3) Rs. 320 to be paid to one

Adinarayanamurthi due under a pronote, the payment being evidenced by Ex. B. 25; (4) a balance of Rs. 307-2-6 paid before the Sub-Registrar.

The learned District Judge had no reason for doubting that Ex. B. 23, was executed for full consideration; and while setting aside this alienation,

directed the alienee to prove his debt in the insolvency.

Mr. Umamaheswaram contends that this alienee was a perfectly ''bona fide'' creditor who took the alienation to discharge genuine debts. There

can, however, be no doubt that this alienation would be a fraudulent preference within the scope of Section 54 of the Provincial Insolvency Act

and is for the reasons given by the learned District Judge, a fraudulent preference, the most cogent being that this decree-holder for Rs. 30,000

who had expended a great deal of money in obtaining decrees was rather blatantly disregarded and preference given to the simple creditors to pay

whom, Ex, B. 23 was effected by the insolvents. On its merits this appeal must also fail.

Mr. Natesan for the respondent has put forward a legal objection to this alienation not taken before the District Judge, which I think must also

prevail. He contends that it is void in any event under Sub-sections (2) and (7) of Section 28 of the Provincial Insolvency Act as a transfer which

was really effected subsequent to the filing of the insolvency petition on 5-11-1945, in that Ex. B. 23 which was executed on 20-7-1945 by the

four executants was registered only on 17-11-1945. The executants of Ex. B. 23 are the three brothers adjudged insolvents, and a stranger. The

registration of Ex. B. 23 was several days after the filing of the insolvency petition on 5-11-1943. Mr. Natesan relies on a Bench decision of this

Court in -- ""Venkatadri Somappa v. Official Receiver, Bellary'', AIR 1938 Mad 801 (A) by Madhavan Nair and Stodart JJ. which clearly lays

down that for the purpose of Section 54 of the Provincial Insolvency Act, the date of the transfer is the date of the registration of the document and

not the date of its execution, and the transfer cannot be ante-dated by the operation of Section 47 of the Registration Act which lays down that a

registered document shall operate from the time from which it would have commenced to operate if no registration thereof has been required or

made and not from the time of its registration. The view taken in that decision was that the transfers effected after the petition has been filed, if the

transferor is ultimately adjudged insolvent are void as against the Official Receiver in view of Sub-sections (2) and (7) of Section 28 of the

Provincial Insolvency Act. In another decision in -- M.G. Sundaragiriraja Ayyangar and Others Vs. D. Balasubramania Ayyar and Another,

Madhavaa Nair and Bardswell JJ. laid down that the three months'' period prescribed by Section 9(1)(c) of the Provincial Insolvency Act must be

calculated from the date of the registration of the deed and not from the date of its execution. My attention has been drawn to a recent decision of

Balakrishna Aiyar J. in -- In Re: Subbaraya Setty and Others, , where he took the view which appears to be in conflict with these two Bench

decisions, namely, that the time in such a case must be computed from the date of the presentation of the document for registration in view of

Section 47 of the Registration Act. With respect, I am unable to agree and I prefer to follow the law laid down in the two Bench decisions by

which also I am ordinarily bound. It is the registration of a sale deed which not only completes it and makes it valid, but also gives notice to the

alienees of the fact of the alienation. It would be manifestly inequitable and unjust to debar a creditor from founding a petition on an act of

insolvency alleged u/s 54 within three months of the registration of the document when alone he may have become aware of it, and to dismiss his

petition on the technical ground that the act of insolvency was not within three months of the date on which the I. P. was filed reckoning from the

date of the presentation for registration or date of execution.

Mr. Umamaheswaram has relied on a Full Bench decision of the Rangoon High Court in -- ''U. On Maung v. Maung Shwe Hpaung'', AIR 1937

Rang 446 (D) which took a different view and held that the period of threa months referred to in Section 54 would begin to run from the date of

the execution of the transfer provided if has been properly registered within the specified time and not from the date of the registration. With

respect, I am in complete agreement with the view taken by the Bench decision in -- Venkadari Somappa Vs. The Official Receiver of Bellary,

and hold that as Ex. B. 23 was registered after the insolvency petition was filed and the order of adjudication relates back to the date on which the

insolvency petition was presented the alienation is void as against the Official Receiver. On this legal ground also, the appeal must fail and is

dismissed with costs. (The rest of the judgment dealing with C. M. A. No. 203 of 1951 is not material to this report).