- (1.) THE 3rd defendant is the- appellant herein. THE plaintiff filed a suit for-partition and separate possession of his share in the suit property. THE suit was resisted by the defendants, who are three in number. THE suit was decreed in favour of the plaintiff, granting the plaintiff a preliminary decree for partition and separate possession. THE 3rd defendant aggrieved by the said judgment and decree, preferred an appeal to the sub-Court. Tirupur, in A.S. No, 34 of 1986, and the judgment and decree of the trial court were confirmed by the sub-Judge, who dismissed the appeal. Hence, this second appeal by the 3rd defendant.
(2.) AT the time when the second appeal was admitted the following substantial questions of law were framed for consideration:- (i) Whether the suit for partition by the purchaser from the Official Receiver is maintainable when the settlement deed is in favour of the appellant which was long prior in point of time ie., before filing the insolvency petition and without setting aside the settlement deed under section 54 of the Provincial Insolvency Act" (ii) whether the lower appellate court is correct in granting a decree in favour of the 1 st respondent. The facts of the case lie in a narrow compass: The suit property is that comprised in Door No. 2/4 in T.S. No. 1203/30/2. Tirupur Town. The 1st defendant is entitled to half share in it. The other half share belonged to the 2nd defendant. The 2nd defendant filed an application in I.P. No. 19 of 1970 for adjudicating him as an insolvent. In the said application, the half share in the suit property was shown as an asset of the petitioning debtor. The 2nd defendant was adjudicated as an insolvent and the properties vested with the Official Receiver, Coimbatore. The Official Receiver sold the suit property in an auction and the same was purchased by the plaintiff on 30.3.1972, for a sum of Rs.l, 400, The sale was confirmed and a sale deed was executed in favour of the plaintiff. The plaintiff also filed an Execution Petition and obtained symbolic possession since the 1 st defendant is entitled to the other half share in the property. The 3rd defendant claimed that the 2nd defendant had executed a settlement deed in his favour on 17.9.1969. According to the plaintiff, the said settlement deed had not been accepted and acted upon. Further, as the property was shown to form part of the Estate of the petitioning debtor and was sold in auction by the Official Receiver, the 3rd defendant cannot claim any right in pursuance of the settlement deed. The plaintiff therefore sought partition and separate possession of his half share. Therefore what has to be decided in this case is whether the suit filed by the plaintiff for partition without any declaration regarding the settlement, is maintainable in law. In other words, whether the plaintiff ought to have asked for the setting aside of the settlement deed or for a declaration that it is invalid and inoperative. Ex.A7 is the Insolvency Petition filed by the 2nd defendant, on the file of the sub-Court, Coimbatore. In the said petition, the petitioning debtor did not implead to settlee viz., the appellant herein as a party. In para-5, the petitioning debtor has simply averred that he had executed a settlement deed on 17-9-1979, in favour of K. Subramaniam. son of Getti Chettiar, Nallatti Palayam, Pollachi Taluk, and it is a nominal deed and that the property belongs to the petitioning debtor. Thus an unilateral statement has been made. But, the petitioning debtor viz., the 2nd defendant did not choose to implead the settlee. But, in the written statement now filed, it is the plea taken by the 2nd defendant that he had executed a settlement deed and the property belongs to the settlee. When the plaintiff herein-issued a notice, he has hot made mention of he settlement deed nor a notice has been issued to the 3rd defendant. Though the Order passed in the Insolvency Petition has not been produced, it is not in dispute that pursuant to the insolvency Petition filed by the petitioning debtor, the property vested with the Official Receiver. This Order has been passed on 2-9-1970, The application was filed into Court on 19-1- 1970. A xerox copy of the settlement deed is produced and marked as Ex.B.2. The settlement deed has been executed on 17.9.1969. within six months of-the execution of the settlement deed, the settlor had filed an application under section 10 of the Provincial Insolvency Act (herein after referred to as the Act) to adjudicate him as a insolvent. Section 4 of the Act confers complete and full powers on the Insolvency court to decide all questions of title of priority, or of any nature whatsoever, which may arise in any case of Insolvency. If a transfer is stated to be fictitious or sham, it may be said as there is no transfer in reality, they are not legally operative and hence need not be set aside under section 4. But section 53 of the Act provides that any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall if the transfer is adjusted insolvent on a petition presented within two years after the date of transfer, be voidable against the receiver and may be annulled by the court. Therefore, in order that a transfer maybe annulled under this section, the following conditions must be fulfilled. (a) that the transfer is not made before and in consideration of marriage; (b) that the transfer is not made to a purchaser or incumbrancer in good faith and for valuable consideration; (c) that the transferor has been adjusted insolvent on a petition presented within two years after the date of transfer. Here in this case, the settlement is of the year 1969, whereas the petition for adjudicating the settlor has been filed by the settlor in the year 1970 (January). The order of adjudication has been passed on 2.9.1970, within an year. Ofcourse, in the petition filled under section 10 of the Act, the petitioning debtor has stated that it is a nominal settlement deed. This property is set out in the schedule of properties, showing it is as an assets of the petitioning debtor. On and from 2.9.1970, the property has vested with the Official Receiver, Coimbatore. The Official Receiver had not taken any steps at all under section 53 of the Act to avoid the transfer. If section 53 is held inapplicable on the ground that it is a void transfer and not voidable transfer, then he ought to have moved under section 4 for a declaration.
(3.) IF the transaction is held to be not nominal or fictitious, but voidable then it would be fall within section 53 of the Act and if not challenged by the Receiver, it would hold good and valid. For when a person is adjudged insolvent and his entire estate vest with Official Receiver, the Receiver alone will be competent to take proceedings either under sections 4, 53 or 54 of the Act as the case may be. Section 54 of the Act provides that every transfer of property, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, with a view of giving that creditor a preference over the other creditors, shall, if such person is adjudged insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the receiver, and shall be annulled by the court. The object of Section 54 of the Act is to protect the interest of the whole body of creditors. Hence, on facts, Section 54 is not applicable as the 3rd defendant is not a creditor. I have already referred to the fact that the transaction is dated 17.9.1969. The application for adjudication has filed on 19.1.1970. It would follow that the petition has been filed only after four months of the transaction. Here, again it has to be pointed out that no application has been filed by the Receiver either for annulment of the transfer under Section 53 or for declaration under Section 4 of the Provincial Insolvency Act. As pointed out at the outset, the settlee was not made a party to the Insolvency petition. We do not have any material to show that nature of the publication made and how it was effected. There is nothing to show that the settlee had notice of the Insolvency proceedings. The property was an undivided one with the seller and his brother having equal share. Normally settlement would come into existence from the minute it is executed. Each co-owner was in possession for and on behalf of the other. The Official Receiver in whom the property vest did not choose to take action either under section 53 or 54 of the Act. It is stated that pursuant to sale by the Official Receiver, the property has been purchased by the plaintiff. In other words, whatever right and interest, the debtor had in the property, is claimed to have been purchased by the plaintiff. Any decision of the insolvency Court cannot have an effect upon the settlee. Even though the settlor had only stated that it was a nominal transaction, when the Official Receiver had not taken steps to have then said transaction set aside, or for declaration, the settlement will continue to be good and effective until it is set aside or so declared. In other words, the settlee under the document will be entitled to claim right, title an interest that was granted under the said document. It is also to be pointed out in this connection that when the 2nd defendant, the settlor filed a written statement singing a different song, stating that he executed a settlement deed and that the property belongs to the third defendant, whereby he means that it is a valid transaction. Therefore, if one is to rely upon the statement made in the petition, to hold that the transaction is not a genuine one, equally one must rely upon the statement now filed before the Court by the 2nd defendant stating that it is a valid transaction. Therefore, the very averment made by the petitioning debtor in the petition filed by him for adjudication without making the settlor a party, cannot be taken as a conclusive with reference to the transaction. ;