Nanjappan vs Cauvery Gounder and others

The above C.M.S.A. is directed against the order passed in C.M.A.NO. 10 of 1985, on the file of the learned II Additional District Judge,

Salem.

The appellant herein was adjudicated as insolvent in I.P.No.3 of 1980. The properties of the appellant were brought to sale by the Official

Receiver, who is the II respondent herein, on the basis of the details given by one of the creditors. After publication of proclamation of sale on

31.3.1981, the second respondent conducted the sale of the properties of the insolvent on 25.8.1981 in which items 1 and 3 of the petition

schedule properties were sold. The first respondent, one of the creditors of the insolvent, was the successful bidder. The insolvent filed an

application in I.A.No. 295 of 1981 for setting aside the sale held by the second respondent. The lower court dismissed the same on the ground

that the petition was barred by limitation. As against the said order, the appellant filed appeal in C.M.A.No.22 of 1983 on the file of the learned

District Judge, Salem, who also concurred with the findings of the lower court and dismissed the same. Aggrieved against the same, the appellant

has filed the Revision in C.R.P.No. 535 of 1985. The learned Judge in the order dated 15.2.1988 dismissed that Revision, the order of which has

been reported in Nanjappan Vs. Cauvery Gounder (Purchaser) and Another, . Meanwhile, the sale deed was executed on 25.3.1983 and the

same was registered on 1.6.1983. It is not in dispute that the document was presented for registration by the second respondent on 25.5.1983

before the Registrar.

Now the appellant filed an application in I.A.No.182 of 1983 on 18.6.1983 to set aside the sale held on 25.8.1981. According to the appellant

he filed the present petition within 21 days from the date of registration, namely, 1.6.1983. The learned Sub-Judge, Salem dismissed the

application as not maintainable in view of the order passed in I.A.No.295 of 1981. Aggrieved against the same, he filed appeal in C.M.A.No.10

of 1985 on the file of the District Judge, Salem, who also dismissed the same on the ground that the petition was filed long after the execution of

the sale deed by the second respondent and so it is hopelessly barred by limitation. Still aggrieved, the appellant has filed the above appeal.

The only question that arises in this case for consideration is whether the application in I.A.No.182 of 1983 is in time as contemplated u/s 68 of

the Provincial Insolvency Act 1920.

To appreciate the scope of Section 68 of the said Act it is necessary to extract the said Section, which runs as follows:-

Appeal to court against receiver:- If the insolvent or any of the creditors or any other person is aggrieved by any act or decision of the receiver, he

may apply to the court, and the court may confirm, reverse or modify the act or decision complained of, and make such order as it thinks fit:

provided that no application under this section shall be entertained after the expiration of twenty-one days from the date of the act or decision

complained of

As per the proviso to Section 68 of the said Act, an application challenging the Act or decision of the receiver complained of cannot be

entertained, after the expiration of 21 days from the date of the said act or decision. The learned counsel appearing for the appellant has submitted

that the act of the Receiver in executing the sale deed would be completed only on registration of the same. According to him only on

registration,the party can have statutory notice and from that date he will get cause of action for filing the application. If any other meaning is given

to the said Section, according to the learned counsel, the parties will lose their opportunity to challenge the act or decision of the Receiver, as there

is no chance for the insolvent to know abut the execution of the sale deed so as to enable the insolvent to file application within 21 days. The

learned counsel relying on Section 9(1)(c) of the said Act, which deals with the act of insolvent, by the debtor, has submitted that the courts have

taken the view while construing the act of insolvency, that the act of insolvency under the said provision gets completed only if the document is

registered. In support of his submission, the learned counsel has relied on the decisions in M.G. Sundaragiriraja Ayyangar and Others Vs. D.

Balasubramania Ayyar and Another, . I find it difficult to accept the said contention.

Before appreciating the decisions relied on by the learned counsel, we have to understand the scope of Section 9 of the said Act. u/s 9(1)(c) of

the said Act, unless the conditions mentioned therein are established, the creditors are not entitled to present an insolvency petition. One of the

conditions as mentioned in sub-section 1(c) of Section 9 of the said Act, is that the act of insolvency which the petition is grounded, has occurred

within three months before the presentation of the petition. The act of insolvency has been categorised u/s 6 of the said Act. The said Section deals

with the transfer of property by the debtor. u/s 2(1)(f) of the said Act, ''transfer of property'' has been defined. On a cumulative reading of these

provisions it is clear that mere execution of a document cannot be construed as an act of insolvency, and, only when it is transferred in favour of a

third person, it can be construed that a debtor has committed an act of insolvency. For such transfer, the sale deed has to be registered. Unless

and until the said document is registered, it cannot be said that the debtor has transferred his rights and interests in the property to the third party,

because, without registration, the rights could not be transferred. In view of the abovesaid legal position, the learned Judges in the decisions

referred to above by the learned counsel appearing for the appellant, have come to the conclusion that the act of insolvency would occur only on

registration of the document and the limitation starts from that date for the purpose of presentation of the petition as contemplated u/s 9(1)(c) of the

said Act.

It will be forcing to apply the said principle while construing the scope of Section 68 of the said Act. Section 59 of the Act enumerates the

various duties and powers entrusted to the receiver in connection with the administration of the insolvent''s estate. Section 80 of the Act provides

delegation of certain other powers to the receivers. Section 68 of the said Act extends to all acts and decisions of the Receiver under both the

abovesaid provisions. So the insolvent can get cause of action on the basis of the act or decision of the Official Receiver, to file a petition to set

aside the sale.

In the present case, the present petition is filed, u/s 68 of the said Act on the basis of the date of registration of the document, namely, 1.6.1983.

So it has to be found out whether the said date, namely, 1.6.1983 gives any cause of action to file the petition to set aside the sale u/s 68 of the

said Act, and, whether the registration can be construed as an act, by the Official Receiver. As stated, already, according to the learned counsel

appearing for the appellant, the execution of the sale deed on 25.3.1983 is the act of the Official Receiver, since such a sale gets completion only

on registration, and the registration also has to be construed as the act of the Receiver. I am not able to accept the said convention.

In Ramaswami Reddiar Vs. The Official Receiver of South Arcot and Another, , the Bench has held that the date of sale by the Official

Receiver, the date of confirmation of such sale and the date of execution of the sale deed are relevant dates, because, each one gives cause of

action to file the petition to set aside the sale. Challenging all these acts of the Official Receiver, an application can be filed u/s 68 of the said Act,

since, by the said acts of the Official Receiver, the insolvent was aggrieved. Applying the abovesaid principle, Sivasubramaniam, J., in the decision

Nanjappan Vs. Cauvery Gounder (Purchaser) and Another, , rejected the case of the appellant. So, the Division Bench had held only the

abovesaid three acts, as acts of the Receiver.

The act of the Receiver must mean an act which is for the Receiver to perform and not an act of the court or agency. So, Registration cannot

be construed as an act of the Receiver. As and when the document is presented for registration, the role of the Receiver is over. Thereafter it is for

the Registrar to deal with the document in accordance with the Registration Act. So, the Registration cannot be construed as an act of the

Receiver. An act has to be interpreted to mean a positive or distinct act of the Receiver. Merely because the sale can be given effect to and

enforced only on Registration, the incident of Registration cannot be construed as an act of the Receiver and it cannot be compared with the act of

insolvency by the debtor, in view of the reasons stated supra. As and when the document is presented before the Registrar by the Receiver, the

role of the Receiver comes to an end in that regard. Thereafter it is for the Registrar to proceed with the Registration. So, as held by the Division

Bench in Ramaswami Reddiar Vs. The Official Receiver of South Arcot and Another, , stated supra, the act of Receiver ends with the execution of

the sale deed for the purpose of Section 68 of the said Act.

In the present case, the petitioner has filed the application beyond 21 days, from 25.3.1983. Hence the courts below are correct in rejecting

the same. I do not find any merits in this appeal. Accordingly, this C.M.S.A. is dismissed. No costs.