Jamuna Prasad and Another vs Ram Adhar and Others

B.N. Sapru, J.—On an application filed by Ram Kripal and others, Ram Adhar and Sheo Adhar were declared insolvents by an order dated 19-10-1965.

Thereafter the creditors filed an application to annul the two sale deeds-one by Sheo Adhar, insolvent, and Nanhi in favour of Suraj Narain and other by Ram Adhar in favour of Jamuna Prasad executed in the year 1965-which had been executed during the pendency of the insolvency petition. The application was allowed by the Insolvency Judge.

The Appellants filed an appeal u/s 75 of the Provincial Insolvency Act, 1920 which had been dismissed.

Aggrieved, the Appellants have filed the instant appeal.

The learned Counsel for the Respondent has contended that no second appeal from order lay in this Court u/s 75 of the Act. It is clear that under the proviso to Section 75(1) no second appeal lies. The order questioned was an appellate order of the District Judge and no appeal lies under the first proviso to Section 75(1) of the Act. In case of an order made in an appeal by the District Judge, the High Court has the power to call for the records of the case and pass such orders in respect thereto as it thinks fit. The scope of the order under the proviso is narrower than the main part of the section. Nevertheless the Court can go into the matter to see whether the order of the District Judge was legal.

In this case, admittedly, no receiver was appointed and the annulment has been made on an application filed by the creditors. Sri. G.P. Bhargava has urged that in view of the provisions of Section 54A of the Act it was not open to the creditors to file the application for annulment as they had not proved their debts.

An identical situation arose in the case of Mt.Bechni, and Others Vs. Sheikh Sadique and Others, . In that case, it had been held that the restriction contemplated u/s 54A on the right of a creditor to move an application for annulment of the sale deed, did not apply, where no receiver had been appointed and the Court was summarily administering the estate, u/s 58 of the Provincial Insolvency Act. The relevant part of the judgment is reproduced below:

It is argued in the second place that the effect of the provisions of Section 54A Provincial Insolvency Act is to vitiate the proceedings of the learned District Judge. Section 54A lays down that a petition for annulment of a transfer can only be made by a creditor with the leave of the Court, and after he has satisfied the Court that the receiver was requested to make the petition, and has refused to do it. In the present case no receiver had been appointed because the petition in bankruptcy indicated that there was no property of which a receiver could take charge. It is argued that the Court could not take action u/s 53 because no receiver had been appointed. But u/s 58 Provl. Inso. Act, where no receiver is appointed, the Court has the rights of a receiver and exercises his powers. It is clear that the restriction placed by Section 54A on the powers of a creditor to move the Court to take action u/s 53, apply only where a receiver has been appointed. Where the Court is summarily administering the estate, any creditor may move the Court to take action u/s 53 of the Act.

In this situation the argument of the learned Counsel for the Appellants that the annulment application was incompetent, has no force.

It is next submitted by Sri. Bhargava appearing on behalf of the Appellants that there is no finding of the two Courts below that the transactions of the Appellants were fraudulent, i.e. in order to defeat and delay the claim of the creditors. It is submitted by Sri. Bhargava that the transfers were made in good faith and valuable consideration.

In the case of Mt. Bechni (supra) this argument was urged and the Court repelled the contention and held that the good faith and valuable consideration must be proved by the alienee or the person who supports the transaction. The Appellants have not discharged the burden of showing that the transactions in their favour were affected in good faith and were for valuable consideration.

The Patna High Court relied upon a decision of the Madras High Court in the case of Official Receiver Tanjore v. Veddappa Mudaliar AIR 1924 Madras 865 in support of its view that the burden is on the alienee. I am in respectful agreement with the view of the Madras and Patna High Courts. The submission of Sri. G.P. Bhargava in this regard cannot be accepted.

In the result, the appeal fails and is dismissed with costs. The interim order dated 27-10-1975 as confirmed by order dated 12-10-1979 shall stand vacated.