The Official Receiver vs Sagiraju Subbayya and Another

Pakenham Walsh, J.—This is an appeal from an appellate order dismissing an application by the Official Receiver in I. P. No. 145 of 1925

to have two gift deeds, executed by the insolvent in favour of two counter-petitioners, declared fraudulent. The adjudication was on 6th January,

1926, on a petition dated 1st December, 1925. The two gift deeds are dated respectively 8th September, 1922 and 22nd March, 1922. The

donees are the two wives of the insolvent. Admittedly the deeds are dated more than two years before the date of adjudication. Consequently

Section 53 of the Provincial Insolvency Act does not apply, and the question is whether the petition u/s 53 of the Transfer of Property Act is

cognizable u/s 4 of the Provincial Insolvency Act. The learned District Munsif held that the petition was barred by Section 53 of the Provincial

Insolvency Act. There is no discussion of the matter in his judgment, but the Principal Subordinate Judge has written a fairly long judgment agreeing

with the view taken by the Court of First Instance. The main ground on which he decides the matter is, that while the petition might have been

cognizable if the original transfer of the property was a nullity, the Insolvency Act does not apply when it is only voidable. I am unable in the light of

the decisions of this Court to agree with his view.

The first case to be considered is Dronadula Sriramulu Vs. Ponakavira Reddi, . This was under Act III of 1907 which did not contain present

Section 4. The alienations there were more than two years old and the question was whether they were within the cognizance of the Insolvency

Court It was there held that the allegations in the petition were sufficient to make the application one to set aside documents as void even though

the word voidable was used. Applying this view as to void and voidable in the present case the allegations in the petition of the Official Receiver

amount, I consider, to a statement that the deeds are void. He says in paragraph 6:

In spite of the said gift deeds the insolvent continues to be in possession of the properties in the schedule.

He says in paragraphs 7 and 8 as follows:

The counter-petitioners being the wives of the insolvent, and the gift deeds having been executed with the object of keeping back the properties

from being available for creditors and thus defeating the claims of the creditors, the gifts are fraudulent and collusive and are therefore voidable as

against the Official Receiver.

The said alienations though made more than two years before the date of the presentation of the insolvency petition, they are not valid u/s 53,

Transfer of Property Act, and can therefore be annulled by this Court, u/s 4, Provincial Insolvency Act.

In spite of the use of the word voidable he has really said everything that can be said which would show that the deeds were sham and void. If

that view is correct, all the authorities are agreed that the Court could take cognizance of the matter. The question has been however argued on the

ground that, on the view taken by the learned Subordinate Judge, that the Official Receiver only treats the deeds as voidable yet the Insolvency

Court has jurisdiction. In the case quoted above, Dronadula Sriramulu Vs. Ponakavira Reddi, , Venkatasubba Rao, J., said that on a review of the

decisions it appeared that the preponderance of authority was in favour of holding that under Act III of 1907 the Court in the exercise of its

insolvency jurisdiction cannot decide questions relating to adverse claims by or against third parties. In that particular case, the learned Judges held

the matter was cognizable because the third party was a creditor and that the Court was entitled to go into the question as to whether his debt was

a genuine one u/s 24 of the Act. There are, however, in that case certain remarks about Sections 53 and 54 which are of great importance in

settling the matter now in issue seeing that we have now Section 4 of the Act which did not then exist. The learned Judges there state that Sections

53 and 54 only lay down rules of evidence and are not exhaustive.

The learned Subordinate Judge relies on a decision in Pirthiraj Singh Vs. Rukmin Kunwar and Others 5 , but there has been a more important

Full Bench decision of the same Court subsequently, Anwar Khan v. Muhammad Khan ILR (1929) All. 550 , where by a majority of two to one

the Full Bench held that the Insolvency Court has power to go into the question whether a transfer is voidable u/s 53 of the Transfer of Property

Act. They approve of the opinion expressed in Dronadula Sriramulu Vs. Ponakavira Reddi, that Sections 53 and 54 of the Insolvency Act are only

rules of evidence. With regard to the dissenting judgment in that case, which practically contains the arguments addressed to me on behalf of the

respondents, I may note that Sen, J., refused to follow the dictum of this Court approved of by the other Judges with regard to Sections 53 and

Since the reasoning of the majority of the Full Bench in Anwar Khan v. Muhammad Khan ILR (1929) All. 550 follows the view taken by this

Court as regards the scope of Sections 53 and 54, while the dissenting judgment refuses to follow it, there is no reason for my preferring the

dissenting, judgment. The view that Sections 36 and 37, now Sections 53 and 54, merely deal with evidence, had already been taken by this Court

in The Official Receiver, Tinnevelly v. Sankaralinga Mudaliar ILR (1920) Mad. 524 : 40 M.L.J. 219. Then we have another Madras case,

Chittammal v. Ponnuswami Naicker ILR (1925) Mad. 762 : 50 M.L.J. 180, in which it was held that acting u/s 56 of the Provincial Insolvency

Act, the Court cannot direct any person to deliver up any property in his possession to the Official Receiver, unless the insolvent is entitled, on the

date of the application under the section, to the immediate possession of the property; if a title, however flimsy, is set up by the person in

possession, the Court cannot act u/s 56. . But it. is open to the Court, on a proper application being made u/s 4 of the Act, to try the issue whether

the insolvent is entitled to the property or not. That case is an authority for the Appellant''s contention. So also is Fool Kumari Dasi Vs. Khirod

Chandra Das Gupta, , where it was held that the Insolvency Court has jurisdiction to decide questions of title, as between an Official Assignee and

a stranger with reference to property which is claimed by the Official Assignee as the insolvent''s and which, on the other hand, is claimed by the

stranger as his. Their Lordships say that the words of the statute seem to be perfectly plain, and where that is the case, it is not permissible to

speculate. I would therefore hold that even if the transaction is only regarded as voidable, the Insolvency Court has jurisdiction to entertain the

application. The appeal must therefore be allowed with costs and the petition restored for disposal according to law.