Karutha Syed Muhammad Rowthar vs Official Receiver and Another

Pandrang Row, J.—This is an appeal from the decree of the District Judge of Coimbatore dated 13th March 1935, reversing on appeal, the

order of the Additional Subordinate Judge of Coimbatore, dated 28th April 1934, on an application made Under Sections 53 and 4, Provincial

Insolvency Act, 5 of 1920. That application was made by the Official Receiver of Coimbatore in respect of the insolvency of E.M. Muhammad

Ismail Saheb alias Mudali who was adjudicated an insolvent on 8th December 1927 on a petition for adjudication made by one of his creditors

who was his own brother on 24th August 1927. The present application related to two transfers of Immovable property made by the insolvent on

17th July 1926: one was a sale deed for Rs. 22,000 and the other was a usufructuary mortgage for Rs. 4,000, in favour of one Karutha Syed

Muhammad Rowther, the appellant in the present appeal, and who is the son-in-law''s sister''s husband of the insolvent. It was alleged that these

transfers were without consideration and were made in bad faith with the object of cheating the creditors of the insolvent. It was also alleged that

even otherwise the transfers did not take effect actually as the deeds of transfer had not been validly registered under the Registration Act, the

Official Receiver accordingly prayed that the deeds in question should be declared void and annulled.

The Subordinate Judge after hearing the evidence came to the conclusion that the transfers had been made bona fide and for valuable

consideration. As regards the other question of the validity of the registration of the deeds of transfer, he was of opinion that if the Insolvency Court

could decide the question, then the registration was not invalid under the law relating to registration of documents. The application was accordingly

dismissed with costs. The Official Receiver appealed to the District Judge and in appeal it would appear that the question whether the transfers

were made for valuable consideration and in good faith was not actually argued and the only point argued before the District Judge was whether

the learned Subordinate Judge''s interpretation of the law regarding the jurisdiction of the Insolvency Court and the validity of the registration of the

deeds in question was correct. On these points the learned District Judge differed from the Subordinate Judge and he was of the opinion that the

Insolvency Court has jurisdiction to decide the matter and that under the latest decision of the Judicial Committee reported in AIR 1934 157 (Privy

Council) the registration must be held to be invalid as neither party intended that certain items included in the deeds of transfer should really pass

from one to the other and the inclusion of those items was only to enable the documents to be registered by the Sub-Registrar of Aravakkurichi

instead of by the Sub-Registrar at Erode who would otherwise have had the jurisdiction to register them.

In this appeal by the transferee, one main question has been argued and that is the question of jurisdiction. If as a matter of fact the Insolvency

Court has jurisdiction to decide the validity or otherwise of the registration of these deeds, then it is not seriously attempted to be argued that the

finding of the learned District Judge is not right, for apart from the decision of the Judicial Committee relied upon by the learned District Judge,

there is a subsequent decision of the Judicial Committee reported in AIR 1936 91 (Privy Council) , in which the previous decisions on the validity

of registration have been reviewed and it has boon clearly laid down that where the vendor neither intends to sell nor the purchaser intends to buy

any particular item of property included in the deed of transfer and the inclusion of such property in the deed of transfer is a mere device to evade

the provisions of the Registration Act, there can be no effective registration of the deed of transfer at all. The question of jurisdiction mainly turns on

the correct interpretation of Section 4, Provincial Insolvency Act. It is argued by the learned advocate for the appellant that the jurisdiction

conferred by this section on the Insolvency Court so far as the annulling of deeds of transfer is concerned is limited to cases which are provided by

Sections 53 and 54 of the Act, and that a general power of annulling transfers not falling within Sections 53 and 54 of the Act cannot be exercised

by the Insolvency Court u/s 4 of the Act.

No doubt this view has some arguments to support it and it found favour with Son, J. in Haji Anwar Khan Vs. Mohammad Khan and Others ,

but he was in a minority, and the view of the majority of the Bench was otherwise, namely that Section 53, Provincial Insolvency Act, does not

limit or restrict the jurisdiction conferred upon the Insolvency Court by Section 4 to decide all questions of title which arise in cases of insolvency.

The majority view has been followed in The Official Receiver Vs. Sagiraju Subbayya and Another, and it was assumed in a previous case, namely

Chittammal and Another Vs. Ponnuswami Naicker and Another, , that it is open to the Insolvency Court u/s 4, Provincial Insolvency Act to try the

question whether the insolvent is entitled to certain property or not when there is a dispute about the title to it. The language employed in Section 4

is very wide, and though there is the proviso that the powers given by that section are subject to the provisions of the Act, there is no reason to

suppose that where the Act does not expressly limit those powers, the very wide powers given by that section were intended by the legislature to

be cut down by mere implication, that is to say, that because express powers are given to annul certain transfers by Sections 53 and 54, the power

to annul all other transfers must be deemed to be withheld from the Court, in spite of the wide powers conferred by Section 4, which says that 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 which the Insolvency Court might deem it expedient or necessary to decide for the purpose of

doing complete justice or making a complete distribution of property in such a case.

In this particular case certain very valuable items of property which belonged to the insolvent till July 1926 were transferred to the appellant and

the question which the Insolvency Court was asked to decide was whether these properties were still the properties of the insolvent and could be

made available for the benefit of the creditors. It was certainly within the competence of the Court to decide this question as that question had to

be decided for making a complete distribution of the insolvent''s property in the insolvency proceedings. In fact it would appear as if the bulk of the

property of the insolvent was the subject matter of the application before the Insolvency Court, and I am of opinion that the Insolvency Court

exercised its discretion properly in deciding the matter itself instead of referring the Official Receiver to the ordinary civil Court. The question of

jurisdiction being thus decided against the appellant, there is really nothing more left in the appellant''s case. For, the question as to what was the

intention of the parties in including certain items of property in the deeds of transfer is a question of fact, and the finding of the lower appellate

Court on this question of fact is final. There is certainly sufficient evidence to support that finding. As regards the question whether particular items

were not the property of the transferor at the time, the findings of the Courts below are concurrent, and the correctness of these concurrent findings

has not been questioned before me. The appellant set up a case of oral transfer of these items to the insolvent sometime before the deeds were

executed, but this story was not believed by either the trial Judge or by the lower appellate Court. The inclusion of these items in the deeds of

transfer was thus a more cloak or device, the object of which must have been only to evade registration of the deeds at Erode, where but for the

inclusion of those items they must have been registered. It was only by including them that it was possible to get the deeds registered at

Aravakkurichi. The case therefore comes directly within the ambit of the latest decision of the Judicial Committee in AIR 1936 91 (Privy Council)

and therefore the finding of the learned District Judge that the registration was inoperative must be upheld. The appeal therefore fails and is

dismissed with costs of the Official Receiver. Leave to appeal is refused.