Maturi Lakshmikantamma vs Motilal Kesarimal Firm and Another

Horwill, J.—The petitioner''s husband made a number of alienations just before he was adjudicated insolvent; and with regard to some of

them, the Official Receiver instituted proceedings under Sections 4, 5, 53 and 54-A of the Provincial Insolvency Act to have them set aside. With

regard to the one with which we are concerned, however, he took no action. One of the creditors then applied to the Insolvency Court u/s 54-A

of the Insolvency Act for permission to institute proceedings under Sections 4, 53, and 54; and the Court accorded that sanction. The application

was heard; and the Court found that it was a genuine transaction fully supported by consideration and not made in fraud of creditors. An appeal

filed by the aggrieved creditor was allowed. During the pendency of the appeal, however, the Insolvency Court annulled the adjudication, though it

does not appear that the appellate Court was aware of this. The question is whether on account of the annulling of the adjudication, the appellate

Court ceased to have jurisdiction to hear the appeal. If so, the order of the District Judge is void.

It has now been conclusively decided by Bhadramma v. Parvateesam Ayyavaru (1939) 63 M.L.J. 414 Jethaji Peraji Firm Vs. Tirupuramallu

Krishnayya (dead) and Others, . and Moturi Veerayya Vs. Rao Bahadur P.V. Srinivasa Rao, The Official Receiver and Others, , that upon the

annulling of adjudication, the insolvency proceedings cease, except in so far as the Insolvency Court may order or Section 43 of the Act which

says that "" all acts theretofore done, by the Court or receiver, shall be valid,"" may permit.

If we were dealing merely with an application under Sections 53 and 54, the position of the respondent might be a little difficult. It is true that the

Court accorded sanction to the creditor to institute proceedings under Sections 53 and 54; but the actual initiation of proceedings was not the act

of the Court. It was the act of the creditor, for which he had obtained the sanction of the Court. It has been held that the institution of proceedings

u/s 53 or any other section of the Act by the Receiver are acts of the Receiver and that therefore, the proceedings could be continued and

disposed of by the Court. The application was, however, also one u/s 4; and the Court has found in appeal that the transaction was a sham and

nominal one. u/s 4,

the Court shall have full power to decide all questions of any nature whatsoever which may arise in any case of insolvency coming within the

cognizance of the Court.

So that an inquiry u/s 4 may be considered to be an act of the Court, which u/s 43 may be continued. Moreover, as the Insolvency Court

ordered that the property of the insolvent should continue to vest in the Official

Receiver, it seems to me that the Insolvency Court has necessarily power to determine what property belongs to the insolvent and what does

not. If the transfer were merely voidable, then the property would continue to belong to the alienee until the alienation were set aside by the Court

u/s 53 or 54; but if the transaction was not a true one, then the property continued to belong to the insolvent, even though it might stand in the name

of the alienee.

The question is complicated somewhat by the fact that the insolvency was annulled during the pendency of the appeal and not during the

pendency of proceedings in the Insolvency Court; and I think Mr. Kameswara Rao is right in saying that the appellate Court is not the Insolvency

Court. It however seems to me a truism that the appellate Court has all the powers of the trial Court, unless the statute makes it appear otherwise.

So that if the trial Court would have had power to continue the proceedings it seems to me that the appellate Court had that power also.

Finally, it is pointed out by the learned advocate fow the respondent that this point was not taken in the lower appellate Court, which in itself

might be a sufficient reason for dismissing this revision petition.

For the above reasons, this petition is dismissed with costs.