BERI, C. J. - (1.) PYARELAL executed a deed of gift on November 7, 1961 in favour of his wife Smt. Bhanwari Bai. On October 15, 1968, upon his own application, Pyare Lal was adjudged as an insolvent. On behalf of the receiver the deed of gift in favour of Smt. Bhanwari Bai was challenged on January 4, 1968. The learned Additional District Judge No. l,jodhpur, upheld the objection of the receiver and declared the deed of gift as void. Smt. Bhanwari Bai has now come up in appeal.
(2.) MR. Mukat Beharilal Bhargava appearing for the appellant has urged that sec. 4 of the Provincial Insolvency Act (hereinafter called "the Act") is subject to the other provisions of the Act as the opening words of sub-sec. (1) and (2) indicate. Therefore, the deed of gift which was executed two years before the date of the adjudi-dation of the insolvent could not be enquired into by the Insolvency Judge in exercise of his powers under sec. 4 of the Act. He urged that the Full Bench decision reported in Haji Anwar vs. Kd. Khan (l) contained a dissenting judgment of Sen J. the reasoning whereof has been accepted in Amjad Ali vs. Nandlal Tandon (2 ). This question also received a close consideration by the learned Judges of the Nagpur High Court in G. N. Gadbole vs. Mt. Nanibai (3), MR. Bhargava urged that whatever might have been the divergence of opinion between different High Courts with regard to the powers conferred by sec. 4 of the Act the matter has now been set at rest by the decision of the Supreme Court in Hansraj vs. Rattan Chand (4), wherein the view expressed by the learned Judge of the Rangoon High Court in Ma Sein Nu vs. U. Mg. (5) has received full approval. This is to the effect that the jurisdiction conferred under sec. 4 is controlled inter alia by the provisions of sec. 53 of the Act. The last case he cited was Gangadhar Revappa Umbaranikar vs. Shanker Vithoba Gholasgaonkar (6 ). Mr. U. L. Gupta appearing for the respondent supported the judgment of the learned Additional District Judge and reiterated the authorities contained in that judgment, namely, Herichand vs. Motiram (7), Paoji Papuji vs. K. L. Bawachekar (8), Padamsi Premchand vs. Laxman Vishnu (9), Chennalurai Muthiriyan vs. Official Receiver (10) and Official Receiver Ellore vs. Subbayya (ll ). His emphasis was that the crucial word empolyed in sec. 53 is "voidable" as distinguished from the word "void". That the deed in this case was void ab initio and, therefore, sec. 53 would not regulate the exercise of jurisdiction under sec. 4 of the Act. This appeal raises an interesting question regarding the effect of sec. 53 on sec. 4 of the Act. The view taken by the learned Additional District Judge is to put it briefly, that sec. 53 does not circumscribe the wide ambit of sec. 4 as has been held in some decided cases and it was open to him to set aside the deed of gift made seven years before the adjudication of the insolvent. In order to appreciate the nature of the controversy it will be profitable to reproduce the two sections. Secs. 4 and 53 read as under : "s. 4. Subject to the provisions of this Act, the Court shall have full power to decide all questions whether of title or priority, or of any nature whatsoever, and whether involving matters of law or of fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case. (2) Subject to the provisions of this Act and notwithstanding anything contained in any other law for the time being in force, every such deci-sion shall be final and binding for all purposes as between, on the one hand, the debtor and the debtor's estate and, on the other hand, all claimants against him or it and all persons claiming through or under them or any of them. (3) Where the Court does not deem it expedient or necessary to decide any question of the nature referred to in sub-sec. (1), but has reason to believe that the debtor has a saleable interest in any property, the Court may without further enquiry sell such interest in such manner and subject to such conditions as it may think fit. " "s. 53. 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 transferor is adjudged insolvent on a petition presented, within two years, after the date of the transfer, be voidable as against the Receiver and may be annulled by the Court. " The 1907 Indian Insolvency Act did not contain any provision corresponding to sec. 4. It came to be added for the first time in the Act of 1920 and sub-sec. (1) of sec. 4 is substantially the same as sec. 105 of the Bankruptcy Act 1914 of England. The view which has been taken by the learned Additional District Judge and supported by Mr. U. L. Gupta is as contained in Harichand's case (7) where Sulaiman, J. , as he then was, observed, to quote the head-note - 'the Insolvency Court has full power to declare, even though it be at the instance of the receiver, that certain property belongs to the insolvent and that any other person, who is putting forward a claim to it, is not really entitled to it. This by no means implies an annulment of a voidable transfer within the meaning of sec. 53 of the Provincial Insolvency Act. The limitation of two years, prescribed under sec. 53, is applicable to all cases where the transfer, when originally made was a good transfer of property though it was subject to an option of avoiding it to be exercised by the receiver, But such a transfer is only voidable and not void and remains good so long as it is not annulled by the Court. On the other hand, a transfer which is wholly fictitious from the very beginning, is of no effect and does not require to be annulled. All that the Court has to do in such a case is to decide that it is void, which decision will bind the claimant to the property as if it were by an ordinary civil court. " When the question arose in Haji Anwar Khan vs. Mohammed Khan (l) the Full Bench referred to Harichand's case (7) and the majority expressed the view that sec. 4 dealt with the jurisdiction and it was to be circumscribed only by such subsequent sections which deal with the subject of jurisdiction of the Court. Since secs. 53 and 54 did not deal with the jurisdiction of the Insolvency Court but only laid down rules as to the manner in which evidence should be considered in certain cases arising in that Court those sections did not control the provisions of sec. 4 though sec. 56 did. The minority view expressed by Sen, J. was that the court of insolvency was a creature of statute and its jurisdiction was limited by the boundaries set out by the statute which created it and unless the Insolvency Act took away expressly or by necessary implication the powers of the civil court to adjudicate the validity or otherwise of certain transfers which were sought to be impugned, the jurisdiction of the civil courts was not affected. The Madras High Court examined the question in Official Receiver vs. Sagiraju Subbeya (ll) and held that the Insolvency Court had power to go into the question whether a transfer was voidable under sec. 53 T. P. Act, and added that sec. 53 and 54, Insolvency, Act, are only rules of evidence. The- view taken to the 1926 and 1929 Allahabad cases was followed by the Madras High Court. Another case of the Madras High Court which examined the matter is of Chinnaturai Muthiryan vs. Official Receiver (lo ). It laid down that it was no impediment to the reception of the application by the Court under sec. 4 even if the alienantion in question was more than two years before the insolvency. It also adopted the view taken in 1926 and 1929 Allahabad (F. B.) Padamsi Premchand vs. Laxman Vishnu Deshpande of the Bombay High Court is another Full Bench case in which Chagla, C. J. , observed that under sec. 4 the Insolvency Court had jurisdiction to decide questions of title affecting strangers in cases which are not covered by sec. 53 and the reason given was that nominal and fictitious tranfers did not fall under sec. 53 as such transfers are void at the inception and are not voidable. If they were real transfers they would fall within the ambit of sec. 53 but if they had been entered beyond the period of two years they could be avoided by the receiver. They approved of the decision in 1935 Bombay (8 ). These decisions proceed on the reasoning that while sec. 4 confers jurisdiction sec. 53 is merely procedural. The other ground is that if a transaction is void ab initio and not voidable the immunity conferred by sec. 53 would not be available.
(3.) THE other line of cases is Amjad Ali vs. Nandlal Tandon (2) which lays down that sec. 4 was to be head subject to the provisions at the Act and, therefore, it did not give to the Insolvency Court any power wider than that which was indicated in sec. 53 to annual transfer executed more than 2 years before the date of adjudication on the ground of their being benami executed to defraud creditors. Tiansactions of such a nature must be challenged if at all in an ordinary civil court. THE Oudh case (2) did not follow 1929 Allahabad (J) but preferred the view contained in 1926 Madras 869 and 1927 Calcutta 474. A question arose before the Rangoon High Court in Ma Sain Mu vs. U Mg Mg (5) with regard to the power under sec. 4 of the Act. The learned Judges observed - "now, Sec. 4 defines the powers of the Insolvency Court to decide questions of law and fact arising in insolvency proceedings, but it does not lay down how the Court is to be moved to exercise those power. . . . . . . Of course, the powers of the Court in deciding such an application are defined in sec. 4, but this does not mean that the application itself is made under sec. 4. and clearly it cannot be for sec. 4 contains no provision as to how the Court is to be moved to exercise its powers, and for the mode of invoking the authority of the Court other provisions of the Act, such as secs. 53, 54 and 68, have to be consuited. " This passage has been quoted with approval by their Lordships of the Supreme Court in Hansraj vs. Rattanchan (4) to which we shall presently refer. The Nagpur High Court in G. N. Gondbole vs. Mt. Nani Bai (3) laid down that secs. 53 and 54 do not merely lay down a rule of procedural law or a rule of evidence favouring the Official Receiver but also conferred jurisdiction upon a Court of Insolvency and hence limit the operation of sec. 4. The learned Judges of the Nagpur High Court held that sec. 4 of the Insolvency Act does not empower the Insolvency Court to annul transactions entered into more than 2 years prior to the application for insolvency, which are voidable under the ordinary law under sec. 53 of the T. P. Act. Such transactions must be challenged, if at all, by separate proceedings in a Civil Court and not in an Insolvency Court under the Insolvency Act. In Hansraj vs. Rattanchand (4) the matter came to be examined but somewhat indirectly. B and H were two brothers. An application having been made by the creditors of B in the year 1949 he was adjudged as an insolvent on 23rd November, 1954 and a receiver was appointed. He was directed to take possession of the property of the insolvent. He took possession of various properties and attached some urban property and agricultural lands. H filed an objection petition on 21st December, 1954 alleging that the property detailed therein belonged to him and was exclusively in his possession. He pra\ed for release of the property from attachment and restoration of its possession to him. The receiver pleaded that he had taken possession thereafter at the instance of the two creditors. The Insolvency Judge framed two issues and eventually the High Court held that the property in dispute must be deemed to be the separate property of H and held that the application was within time. The dispute before the Supreme Court, therefore, was on a construction of secs. 4 and 68 of the Act. In the course of the judgment, however, their Lordships observed in para 5 as follows : "it will be noted from the above that sec. 4 sub sec (1) lays down the ambit of the powers of the court exercising insolvency jurisdiction. Its primary object is to empower such courts to decide all questions whether of title or priority or of any nature whatsoever and whether involving matters of law or fact which may arise in any case of insolvency coming within the cognizance of the court. In other words, the aim of this provision is that all questions of title or priority arising in insolvency should primarily be disposed of by the insolvency courts so as to achieve expedition. It will be noted at once that resort to ordinary courts of law is not prescribed and at the same time the legislature provided that a person could resort to the insolvency court if the matter arose in insolvency proceedings. Under sub-sec. (2) however every such decision arrived at by the insolvency court was to be final and binding for all purposes as between on the one hand, the debtor and the debtor's estate, and, on the other hand, all claimants against him or it and all persons claiming through or under them or any of them. This provision is however subject to the other provisions of the Act and notwithstanding anything contained in any other law for time being in force. It is also to be noted that this section does not lay down what procedure or what stept should be taken by any person who is aggrieved by any order of the insolvency court or of any act of omission or commission of the receiver. " The aforesaid is an authoritative and exhaustive exposition of the intention of sec. 4 of the Act, The question which calls for our determination is whether the expression "subject to the provisions of this Act" is a limitation on the powers of the Insolvency Court and whether sec. 53 is one such limitation. ;