Sarvathada Iswarayya vs Kurubasubbanna and Another

Madhavan Nair, J.—The petitioning creditor, who sought to get respondent 1 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 respondent 1 in favour of respondent 2 Ex. C. The

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

1930, on the re-opening day after the midsummer vacation. If the three months'' period is calculated from 10th January 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 13th February 1930, he will be in time on 23rd June 1930, the three months'' period from 13th February 1930,

having expired during the midsummer holiday. 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 10th January 1930, or from the date of its registration, 13th February 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 13th February 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, T.P. 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, 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 to have been made only when the

document was registered on 13th February 1930. In our opinion therefore the act of insolvency can be considered to have taken place on 13th

February 1930.

The above view is supported by a decision of this Court in Muthiah Chettiar v. Official Receiver, Tinnevelley 1933 Mad. 185. 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, 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, T.P. 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

respondent 1 on 13th February 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 respondent 1 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 Court below.