D. Soundararajan v. B. S. Gopalakrishnan and others
1991-02-04
BELLIE
body1991
DigiLaw.ai
Judgment :- The 10th defendant is the appellant. 2. The facts of the case are: The plaintiff who obtained a money decree against Guruswamy and Venkatesan in O.S.No.18 of 1972 on the file of the District Court Dharmapuri, execution thereof, attached the whole of the suit properties and brought them to E.P.No.13 of 1974. While so, defendants 1 to 9 filed O.S.No.64 of 1974 and got a declaration that they had title to 2/3rd share in the property and that suit was decreed. Therefore, E.P.No.44 of 1974 the plaintiff reattached 1/3rd share alone as belonging to the debtors and he himself purchased it in court-auction held on 20.4.1977. While one judgment-debtors, viz., Venkatesan filed I.P.No.5 of 1974 on 20.6.1974 and was adjudged insolvent on 23.7.1975. In the insolvency proceedings the 10th defendant purchased share of Venkatesan in item 2 of the suit properties on 31.1.1977. 3. Now the plaintiff filed the suit for partition of l/3rd share of the suit properties belonging to both Guruswamy and Venkatesan. Defendants 1 to 9 filed written statement, but, for the purpose of this appeal, we are not concerned with that. The 10th defendant a written statement contending that by virtue of the purchase of l/12th share of Venkatesan in the 2nd item in the insolvency proceedings, he is entitled to that share. 4. The trial Court, on consideration of the issues framed in the suit, held that because attachment of l/3rd share of both the judgment-debtors in E.P.No.44 6f 1974 on the subsequent purchase of l/12th share of Venkatesan in the 2nd item by defendant on 31.1.1977 is hit by the principle of lis pendens. It further held purchase by the plaintiff in the court auction on 20.4.1977 is binding on the 10th who purchased the 1/12th share of Venkatesan in the 2nd item on 31.1.1977. On findings the trial Court rejected the contention of the 10th defendant and in the decreed the suit holding that the plaintiff is entitled to 1/3rd share of the suit properties. 5. The two points that arise for consideration in this appeal are: (1) Whether the court-auction sale held on 20.4.1977 is unaffected by the insolvency proceedings and that sale is binding on the 10th defendant who has purchased l/12th of Venkatesan in the 2nd item in the insolvency proceedings on 31.1.1977?
5. The two points that arise for consideration in this appeal are: (1) Whether the court-auction sale held on 20.4.1977 is unaffected by the insolvency proceedings and that sale is binding on the 10th defendant who has purchased l/12th of Venkatesan in the 2nd item in the insolvency proceedings on 31.1.1977? (2) Whether by virtue of the attachment of the property prior to the adjudication 23.7.1975 the purchase by the 10th defendant in the insolvency proceedings is hit pendens and, therefore, that purchase is invalid? 6. It is argued on behalf of the appellant/10th defendant that since Venkatesan has adjudged insolvent on 23.7.1975 and his share in the property got vested in the Receiver under Sec.28 of the Provincial Insolvency Act (hereinafter referred to as the subsequent Court auction sale on 20.4.1977 in favour of the plaintiff is invalid. As this, it is contended on behalf of the plaintiff that he was not aware of the insolvency proceedings and he has purchased the property in court-auction in good faith and, therefore under Sec.51(3) of the Act he has acquired good title as against the Receiver and, therefore, his purchase in the Court auction must prevail over the sale by the receiver in favour of 10th defendant. Both sides before me argued on this point citing some decisions. But, in of the Division Bench decision of this Court in Poongavanammal v. Chinnathambi Gounder, 93 L.W. 675, which has considered all the decisions touching the point, it is sufficient to this decision alone. No decision subsequent to this has been brought to my notice. Division Bench categorically held as follows: “We are of the opinion that having regard to this decision we have to simply follow the earlier views of this Court and held that the execution sale in favour of the appellant, which admittedly took place after the adjudication of Dandapani Reddi as an insolvent cannot prevail and Sec.51(3) of the Act will have no application in the case of the appellant herein. It is, therefore, clear that a court-auction sale held subsequent to the adjudication insolvent, will be of no effect, and to such a sale, Sec.51 (3) of the Act will have application. Mr.Selvaraj, learned counsel for the plaintiff/1st respondent herein would pray that the matter may be referred to a Full Bench in view of the conflicting decisions referred to in the said Division Bench judgment itself.
Mr.Selvaraj, learned counsel for the plaintiff/1st respondent herein would pray that the matter may be referred to a Full Bench in view of the conflicting decisions referred to in the said Division Bench judgment itself. But, in the very same Division Bench judgment itself, the learned Judges have stated that a request was made for referring point to a Full Bench, but they did not think it necessary to do so. This being the case, I do not think the request of Mr.Selvaraj can be acceded to. 7. Corning to the second point, Mr.Selvaraj would contend that since the property has attached on 8.8.1974 itself and the order of adjudication was only on 23.7.1975 and the in the insolvency proceedings in favour of the 10th defendant was subsequently 31.1.1977, this sale in favour of the 10th defendant is hit by lis pendens and, therefore, void under Sec.52 of the Transfer of Property Act. 8. A reading of Sec.52 of the Transfer of Property Act would show that during the pendency of a suit or proceeding any party thereto cannot transfer or otherwise deal with any property in respect of which any right directly and specifically is in question so as to affect any party in the suit or proceeding under any decree or order which may be made therein, under the authority of the Court and on such terms as it may impose. The sale in question by the Official Receiver and it was in the insolvency proceedings and the Official Receiver not a party to the suit O.S.No.18 of 1972 or in any execution proceedings of the passed therein. Therefore, the sale by the Official Receiver will not come within the purview of Sec.52 of the Transfer of Property Act, Mr.Selvaraj submits that the Official Receiver with the property of the insolvent, who is a party to the suit and, therefore, he (Official Receiver) must also be deemed to be a party to the suit. I am unable to agree. Under of the Provincial Insolvency Act, on adjudication the property of the insolvent vests Official Receiver. Therefore, it is by operation of law the insolvent ceases to be the owner the property gets vested in the Official Receiver and, therefore, it cannot be said that Official Receiver is only a representative of the insolvent.
I am unable to agree. Under of the Provincial Insolvency Act, on adjudication the property of the insolvent vests Official Receiver. Therefore, it is by operation of law the insolvent ceases to be the owner the property gets vested in the Official Receiver and, therefore, it cannot be said that Official Receiver is only a representative of the insolvent. The learned counsel in support his contention, cites Kulandaivelu Pillai v. Sowbagiam-mal, (1945)1 M.L.J. 261 , out that in this decision it has been held that a sale by the Official Receiver is a private and it is hit by the principal of lis pendens. But the facts of that case show that the Receiver himself has been made a party to that suit in the place of insolvents. Further, that case, there was a charge decree, whereas in our case, there is only an attachment. Thus, there is much difference between the facts in that case and our case and hence decision will not help the plaintiff. On the side of the appellant/ 10th defendant a decision the Division Bench of Nagpur High Court in Laxminarayan v. Dinaker Shankerrao, A.I.R. Nagpur 101, was brought to my notice wherein it has been held that Sec.28(2) Provincial Insolvency Act read with Secs.51 and 52 of the said Act indicates that an attaching creditor of the insolvent’s property, has no priority over the Receiver in insolvency. respect, I agree with this. Therefore, I hold that because of the attachment of the property O.S.No.18 of 1972, the sale by the Official Receiver to the 10th defendant, is not hit principal of lis pendens. 9. Mr.Selvaraj next submits that under Sec.64 of the Civil Procedure Code, the sale Official Receiver is void. This section reads thus: “64. Private alienation of property after attachment to be void: Where an attachment been made, any private transfer or delivery of the property attached or of any therein and any payment to the judgment-debtor of any debt, dividend or other contrary to such attachment, shall be void as against all claims enforceable under attachment.” Under this section, a private transfer of the property attached shall be void as against claims enforceable under that attachment. This section will apply only to voluntary transfers and not to any involuntary transfers.
This section will apply only to voluntary transfers and not to any involuntary transfers. It must be remembered that an attachment has the effect of preventing private alienation to the prejudice of claims under that attachment must also, be remembered that an attachment does not convey title, charge, lien or in favour of the attaching creditor. It merely disables a debtor from transferring the property and not any transfer by operation of law such as involuntary sale under a decree of Court enforced execution. Under Sec.28 of the Act, on the date of adjudication, by operation the property of the insolvent vests in the Official Receiver and for rateable distribution the creditors he (Official Receiver) sells the property. Therefore, in my view, it cannot be said that a sale by an Official Receiver is a sale coming within the purview of Sec.64, Civil Procedure Code. 10. Thus, I find that the sale by the Official Receiver has to prevail over the execution sale in which the plaintiff has purchased l/12th share of Venkatesan along with others share. Hence, the 10th defendant will be entitled to the said l/12th share. 11. Hence, the appeal is allowed and the decree passed by the trial Court is modified so as to read that the 10th defendant would be entitled to l/12th share in item 2 of the suit properties and the plaintiff will be entitled to the balance share after deducting the said l/12th share from l/3rd share purchased by him and also to the 1st item. Considering the circumstances, there will be no order as to costs. B.S. -- Appeal allowed.