Sarvathada Iswarayya vs Kuruba Subbanna and Another

The petitioning creditor, who sought to get the 1st respondent adjudicated an insolvent, is the appellant before us. His petition was dismissed on

the ground that the Act of insolvency on which the petition was grounded, did not occur within three months before the presentation of the petition.

The act of insolvency consisted in the execution of a sale deed by the 1st respondent in favour of the 2nd respondent Ex. C. The document was

executed on January 10, 1930 and it was registered on February 13, 1930. The petition for adjudication was filed on June 23, 1930, on the

reopening day after the mid-summer vacation. If the three months'' period is calculated from January 10, 1930, it is obvious that the petition was

presented more than three months after the act of insolvency and the petitioner had therefore no locus standi to present the petition. But if the time

is calculated from February 13, 1930, he will be in time on June 23, 1930, the three months'' period from February 13, 1930, having expired

during the mid-summer holidays. So, the short question for determination in this case is whether the three months'' period should be calculated from

the date of the execution of the document, that is, on January 10, 1930, or from the date of its registration February 13, 1930. The lower Court

held that the period should be calculated from the date of execution and hence dismissed the petition.

In appeal, Mr. Srinivasa Rao argues that the date should be calculated from February 13, 1930, the date of the registration, his argument being

that the document will be an effective sale-deed only when it is registered and not when it is merely executed, Section 54 of the Transfer of

Property Act is relied on in support of this contention. Under that section, a sale-deed dealing with property over the value of Rs. 100 to be valid

requires registration. No doubt, u/s 47 of the Registration Act, once a document is registered, the effect begins to commence from the date of

execution but if the document is not registered, it can never have any legal effect as a sale deed. Therefore, Ex. C in the present case cannot be

considered to be an act of insolvency unless a valid transfer of property was made by that document and such a valid transfer could be said have

been made only when the document was registered on February 13, 1930. In our opinion, therefore, the act of insolvency can be considered to

have taken place on February 13, 1930.

The above view is supported by a decision of this Court in N.R.M.M.M. Muthiah Chettiar Vs. The Official Receiver of Tinnevelly District and

Another, The question there arose in different circumstances and with reference to a mortgage deed but the point decided was the same. That

question was whether the three months'' period u/s 54 of the Insolvency Act should be said to commence from the date of the execution of the

document or from the date of its registration. It was held having regard to Section 59 of the Transfer of Property Act, which made registration

compulsory, to give validity to a mortgage, that the period should be calculated from the date of registration. On a similar reasoning we hold in this

case that the act of insolvency was committed by the 1st respondent on February 13, 1930. It follows therefore that the appellant has locus standi

to present the application.

The order of the lower Court is set aside. As the lower Court has found that the sale under Ex. C is fraudulent, we hold that an act of insolvency

has been committed by the 1st respondent and he is therefore adjudicated an insolvent. The petition will be remanded to the lower Court for taking

the necessary steps subsequent to adjudication and for fixing a time in which he may apply for discharge. The appellant is entitled to his costs both

here and in the lower Court below.