KALYANI AMMAL Vs. THE OFFICIAL RECEIVER OF NORTH ARCOT AND ANR.

JUDGEMENT

(1.) THESE two revision petitions are filed by the second respondent in I.A. No. 68 of 1970 in Insolvency Petition No. 11 of 1968 on the file of the Court of the Subordinate Judge, Vellore. The first respondent to that application was adjudged insolvent in I.P. No. 11 of 1968 on 6th April, 1970. The Official Receiver, in whom the insolvent's properties came to be vested, filed I.A. No. 68 of 1970 for setting aside two alienations made by the insolvent, under Section 53 of the Provincial Insolvency Act, hereinafter referred to as the Act, one in favour of the second respondent therein and the other in favour of the third respondent therein. The first respondent to the application is the insolvent. Both those alienations were within two years prior to the presentation of the insolvency petition. The Insolvency Court (Subordinate Judge's Court, Vellore) allowed the said application in respect of both the alienations. The third respondent to the application did not file any appeal. Only the second respondent to the said application filed C.M.A. No. 109 of 1972 on the file of the District Judge of North Arcot at Vellore. He also filed I.A. No. 317 of 1973, in the said civil miscellaneous appeal for reception of certain documents as additional evidence. The appellate Judge dismissed the civil miscellaneous appeal as well as the said application for reception of additional evidence. Hence the second respondent i n the application under Section 53 of the Act, has filed the present two revision petitions, one against the dismissal of her civil miscellaneous appeal and the other against the dismissal of the application for reception of additional evidence. These two revisions are under the proviso to Section 75 of the Act.

(2.) THE point taken by Mr. V. Ratnam, the learned Counsel for the revision petitioner second respondent in I.A. No. 68 of 1970 on the file of the Insolvency Court is that on the finding of the Insolvency Court and that of the appellate Judge who heard the civil miscellaneous appeal, I.A. No. 68 of 1970 is not maintainable. It is pointed out that the Courts below have held that the alienation which is a sale dated 2nd August, 1968 in favour of the revision petitioner is a sham and nominal one, and that being so, there is no transfer of property as contemplated under Section 53 and that therefore the question of setting aside the transfer as one being in fraud of creditors does not arise. The learned Counsel is right in his contention that when a transaction is declared as sham and nominal there is no transfer of property under the transaction, and that therefore there is no need to set aside the same, and Section 53 of the Act would not apply. However, the question is whether the application filed by the Official Receiver should not have been entertained by the insolvency Court. Under Section 4 of the Act it is provided that the Court shall have full power to decide all questions whether of title or priority, or of any nature whatsoever and sub -section (2) thereof provides that such decision of the Court shall be final and binding for all purposes as between the debtor and the debtor's estate on the one hand and all claimants against him OP the other. However, the section makes it clear that the power of the Court to decide the questions mentioned therein is subject to the other provisions of the Act. The question whether a sale deed executed by the insolvent is sham and nominal is certainly a matter which would be covered by Section 4. In fact such a position is not disputed by the learned Counsel for the revision petitioner. However, the contention is that there is no provision in the Act for the Official Receiver to file an application to the Insolvency Court for declaring a sale transaction to be a sham and nominal one, that Section 4 itself does not contemplate the filing of an application by either the Official Receiver or any other person, that the said section only defines the Jurisdiction of the Court and that, therefore, the Insolvency Court is not entitled to give a decision regarding the sham and nominal nature of the transaction on an application which was purported to be under Section 53 of the Act. As noticed earlier, the Official Receiver filed the application under Section 53 contending that the transfer in question is in fraud of creditors. But in the said application there are also averments that the transaction is a sham and nominal one. Of course, the two averments, namely that the sale is a transfer in fraud of creditors and that the sale is only a sham and nominal one cannot stand, together. Though the Official Receiver has pleaded both the grounds, the Insolvency Court and the appellate Judge have held that the sale is not a real sale and that the same is a sham and nominal one. The question is whether under an application which purported to be under Section 53 of the Act, the Courts below are entitled to decide that the transaction is a sham and nominal one.

(3.) A perusal of Section 75 of the Act goes to show that the Act contemplates an application to be filed under Section 4 of the Act. The second proviso to Section 75(1) of the Act speaks of decision of a Subordinate Court under Section 4 of the Act. Under that proviso, an aggrieved person is entitled to file an appeal to the High Court on any of the grounds mentioned in Sub -section (1) of Section 100 of the Code of Civil Procedure, 1908 against the decision of the District Court on appeal from a decision of a Subordinate Court under Section 4 of the Act. With regard to matters not falling under Section 4, there is no second appeal (as in the case of the second proviso), but under the first proviso to Section 75(1), the Court has jurisdiction to call for the records and interfere if an order made in any appeal decided by the District Court was not according to law.