Paritala Narasimham vs Ayinampudi Venkayya and Another

Umamaheswaram, J.—The Civil Revision Petition arises out of an application filed by the creditor (Petitioner herein) for adjudicating the 2nd Respondent herein as an insolvent. The 1st Respondent herein is purchaser of the entire properties belonging to the insolvent under a registered sale deed dated 27th December, 1949 for Rs. 22,500. The alienation was alleged as constituting an act of insolvency. The Subordinate Judge of Vijayawada adjudicated him as an insolvent; but on appeal the District Judge of Krishna at Masulipatimm reversed the judgment and dismissed the Petitioner''s application. The Civil Revision Petition is consequently filed against the order of the District Judge.

The questions that arise for consideration in the Civil Petition are:

(i) Whether the Petitioner is a creditor entitled to file the application for adjudicating the 2nd Respondent as an insolvent?

(ii) Whether the act of insolvency occurred within three months before the presentation of the petition?

(iii) Whether the 2nd Respondent is committed an act of insolvency?

On the first question, both the Courts held that the Petitioner was entitled to file the application. The Petitioner obtained a decree against the 2nd Respondent on a promissory note endorsed in his favour by Macha Yeliamandayya. The Petitioner being the holder of a negotiable .instrument in respect of which he obtained a decree is a creditor within the meaning of the Act, though the promissory note was endorsed in his favour for collection. No authority was cited in support of the proposition that an endorsee for collection has no locus standi to present the petition as a creditor.

The sale deed in favour of the 1st Respondent was-executed on 27th December, 1949. It was presented_for registration on 28th December, 1949, and theT Ticument was actually registered, on 19th January, 19B(). The application was filed more than three months from 28th December, 1949 bit within three months from 19th January, 1950. The question that arises is, when was the act of insolvency committed-on the date of registration or on the date of presentation before the sub-n gislrar. Section 6 of the Provincial Insolvency Act defines acts of insolvency. Clause (a) refers to a transfer of all or substantially all h!s property to a third person for the benefit of his Creditors generally. Clause (b) cioals with a transfer of the debitor''s property or any part thereof with intent to de-leat or delay his creditors. Section 9 (1) (C) provide.''-, that tile act of insolvency on which the petition is wounded should have occurred within three months before the presentation of the petition. Section 47 of the Registration Act enacts that once ii, document is registered, the effect begins to commence from the date of execution. On the strength of Section 47 of the Registration Act it. was contended in Venkadari Somappa Vs. The Official Receiver of Bellary, (A), that the date of transfer challenged u/s 54 of the Provincial Insolvency Act, was the date of its execution and not the date of registration of the document. It was held that as the transfer was not effective till the document was registered, the date of registration should be regarded as the date of transfer. The conclusion arrived at by the Division Bench is at page 367'' (of Mad LJ): (at p. 803 of AIR) and is in the following terms:

After mature consideration we have come to the conclusion that the date of the transfer is the date of registration and that for the purpose of this section (Section 54) the transfer cannot be ante-dated by the operation of Section 47 of the Indian Registration Act.

Following this decision I hold that the date of registration should be regarded as the date of transfer.

The next question is, whether the date of presentation of the document. for registration should be regarded as the date of transfer as contended by Sri G. Venkataramasastry, the learned advocate for the Respondent. His argument was mainly based on the provisions of Section 75 (3) of the Registration Act which provides that in the case of compulsorily registrable document the registration takes effect as if the document had been registered when it was first duly presented for registration. Section 75 (3) occurs in Part XII and Sub-section (3) of Section 75 commences with the words "such registration". The registration referred to in the Sub-section is in regard to compulsory registration of documents. The terms of Section 75 (3) do not therefore apply to the facts of the present case. In the decision in M. Narayanaswami Kone Vs. Arigonda Narayanaswami Mudaliar and Others, B), the document had to be compulsorily registered as one of the executants did not admit execution and Balakrishna Ayyar, J., held that the terms of Section 75 (3) applied to the facts of that case. That decision has there-lore no application to this case. It is unnecessary for me to consider whether that decision is rightly decided or whether the view taken by Mack, J., in Appana Veeraraghavamma Vs. Chandalada Padmaraju, (C) dissenting from that decision is correct.

Though the document was presented for registration on 28th December, 1949, the registration cannot be regarded as complete until the procedure laid down in Sections 60 and 61 of the Registration. Act is complied with, Section 60, Sub-section (1) enacts that after such of the provisions of Sections 34, 35, 55 and 59 as applied to any document presented for. registration have been complied with, the registering officer shall endorse thereon a certificate containing the word "registered" together with the number and page of the book in which the document has been copied. Sub-section (2) provides that such certificate Khali be signed, sealed and dated by the registering officer. In the instant case, the certificate of registration bean; the date 19th January, lf 0. Section 1l provides that the endorsements and certificates referred to and mentioned in SCCI/''MIS ''and 00 shall thereupon be copied into the /ue:vin of the register book and the registration of the document shall thereupon be deemed to be complete. Having ltjard to the terms of Section, I hold that the registration was complete only after the certificate of registration was sealed and dated by the Registrar on 19th January. 1050, I do not agree that the registration dates back to the date of the presentation of the document.

The last question that remains to be considered is. whether the 2nd Respondent has committed an act of insolvency by transferring the entire property to the 1st Respondent. As I propose to remand the case to the . Subordinate Judge the determination of this question; do not ''wish to express my opinion. In the application filed by the Petitioner for adjudication of the Respondent as an insolvent, there is no specific allegation that the alienation was effected with intent,'' U, defeat or delay his creditors so a,s t,o attract the terms of Section G (b). In the evidence, f''. Ws. 1 and 2 deposed that the transfer was ed''eeled without, l.hc knowledge or consent of the credite,,; anil (hat the 1st Respondent herein was closely related to the 2nd Respondent herein. Unfortunately the evidence was let in on behalf of the Respondents. The Subordinate Judge accepted the evidence, of the Petitioner''s witnesses and adjudged the Hud Respondent as an insolvent. On appeal the District Jud"e held that the transfer of all the priorities of the debtor could not be regarded a.:; bfinj.-. for the benefit of the creditors generally. As the parties have not placed the entire evidence, bearing on this point, viz., as to whether the alienation amounts to an act of insolvency under Sections 0 (a) and/or 6 (d) of the Act, I think if is just and necessary to remand this'' petit''on to the Subordinate Judge, Vijayawada.

In the result, the Civil Revision Petition is allowed and the orders passed by the District Judge and the Subordinate Judge are set aside and the Subordinate Judge is directed to dispose of the application in the light of the observations aforesaid.