Nanjappan v. Cauvery Gounder and others — 1998 DIGILAW 110 (MAD)

Judgment : 1. The above C.M.S.A. is directed against the order passed in C.M.A.No. 10 of 1985, on the file of the learned II Additional District Judge, Salem. 2. The appellant herein was adjudicated as insolvent in I.P.No.3 of 1980. The properties of the appellant were brought to sale by the Official Receiver, who is the II respondent herein, on the basis of the details given by one of the creditors. After publication of proclamation of sale on 33. 1981, the second respondent conducted the sale of the properties of the insolvent on 28. 1981 in which items 1 and 3 of the petition schedule properties were sold. The first respondent, one of the creditors of the insolvent, was the successful bidder. The insolvent filed an application in I.A.No. 295 of 1981 for setting aside the sale held by the second respondent. The lower court dismissed the same on the ground that the petition was barred by limitation. As against the said order, the appellant filed appeal in C.M.A.No.22 of 1983 on the file of the learned District Judge, Salem, who also concurred with the findings of the lower court and dismissed the same. Aggrieved against the same, the appellant has filed the Revision in C.R.P.No. 535 of 1985. The learned Judge in the order dated 12. 1988 dismissed that Revision, the order of which has been reported in Nanjappan v. Cauvery Gounder, 1989 (1) M.L.J. 480 . Meanwhile, the sale deed was executed on 23. 1983 and the same was registered on 6. 1983. It is not in dispute that the document was presented for registration by the second respondent on 25. 1983 before the Registrar. 3. Now the appellant filed an application in I.A.No.182 of 1983 on 16. 1983 to set aside the sale held on 28. 1981. According to the appellant he filed the present petition within 21 days from the date of registration, namely, 6. 1983. The learned Sub-Judge, Salem dismissed the application as not maintainable in view of the order passed in I.A.No.295 of 1981. Aggrieved against the same, he filed appeal in C.M.A.No.10 of 1985 on the file of the District Judge, Salem, who also dismissed the same on the ground that the petition was filed long after the execution of the sale deed by the second respondent and so it is hopelessly barred by limitation. Aggrieved against the same, he filed appeal in C.M.A.No.10 of 1985 on the file of the District Judge, Salem, who also dismissed the same on the ground that the petition was filed long after the execution of the sale deed by the second respondent and so it is hopelessly barred by limitation. Still aggrieved, the appellant has filed the above appeal. 4. The only question that arises in this case for consideration is whether the application in I.A.No. 182 of 1983 is in time as contemplated under Section 68 of the Provincial Insolvency Act 1920. 5. To appreciate the scope of Section 68 of the said Act it is necessary to extract the said Section, which runs as follows:- Appeal to court against receiver:-If the insolvent or any of the creditors or any other person is aggrieved by any act or decision of the receiver, he may apply to the court, and the court may confirm, reverse or modify the act or decision complained of, and make such order as it thinks fit: provided that no application under this section shall be entertained after the expiration of twenty-one days from the date of the act or decision complained of" As per the proviso to Section 68 of the said Act, an application challenging the Act or decision of the receiver complained of cannot be entertained, after the expiration of 21 days from the date of the said act or decision. The learned counsel appearing for the appellant has submitted that the act of the Receiver in executing the sale deed would be completed only on registration of the same. According to him only on registration,the party can have statutory notice and from that date he will get cause of action for filing the application. If any other meaning is given to the said Section, according to the learned counsel, the parties will lose their opportunity to challenge the act or decision of the Receiver, as there is no chance for the insolvent to know abut the execution of the sale deed so as to enable the insolvent to file application within 21 days. If any other meaning is given to the said Section, according to the learned counsel, the parties will lose their opportunity to challenge the act or decision of the Receiver, as there is no chance for the insolvent to know abut the execution of the sale deed so as to enable the insolvent to file application within 21 days. The learned counsel relying on Section 9(1)(c) of the said Act, which deals with the act of insolvent, by the debtor, has submitted that the courts have taken the view while construing the act of insolvency, that the act of insolvency under the said provision gets completed only if the document is registered. In support of his submission, the learned counsel has relied on the decisions in AIR 1933 Mad. 185, AIR 1934 Mad. 637 , 1938 (II) M.L.J. 362 and 1963 Mysore 257. I find it difficult to accept the said contention. .6. Before appreciating the decisions relied on by the learned counsel, we have to understand the scope of Section 9(1 )(c) of the said Act. Under Section 9 of the said Act, unless the conditions mentioned therein are established, the creditors are not entitled to present an insolvency petition. One of the conditions as mentioned in subsection 1(c) of Section 9 of the said Act, is that the act of insolvency on which the petition is grounded, has occurred within three months before the presentation of the petition. The act of insolvency has been categorised under Section 6 of the said Act. The said Section deals with the transfer of property by the debtor. Under Section 2(1)(f) of the said Act, transfer of property has been defined. On a cumulative reading of these provisions it is clear that mere execution of a document cannot be construed as an act of insolvency, and, only when it is transferred in favour of a third person, it can be construed that a debtor has committed an act of insolvency. For such transfer, the sale deed has to be registered. Unless and until the said document is registered, it cannot be said that the debtor has transferred his rights and interests in the property to the third party, because, without registration, the rights could not be transferred. For such transfer, the sale deed has to be registered. Unless and until the said document is registered, it cannot be said that the debtor has transferred his rights and interests in the property to the third party, because, without registration, the rights could not be transferred. In view of the abovesaid legal position, the learned Judges in the decisions referred to above by the learned counsel appearing for the appellant, have come to the conclusion that the act of insolvency would occur only on registration of the document and the limitation starts from that date for the purpose of presentation of the petition as contemplated under Section 9(1)(c) of the said Act. 7. It will be forcing to apply the said principle while construing the scope of Section 68 of the said Act. Section 59 of the Act enumerates the various duties and powers entrusted to the receiver in connection with the administration of the insolvents estate. Section 80 of the Act provides delegation of certain other powers to the receivers. Section 68 of the said Act extends to all acts and decisions of the Receiver under both the abovesaid provisions. So the insolvent can get cause of action on the basis of the act or decision of the Official Receiver, to file a petition to set aside the sale. 8. In the present case, the present petition is filed under Section 68 of the said Act on the basis of the date of registration of the document, namely, 6. 1983. So it has to be found out whether the said date, namely, 6. 1983 gives any cause of action to file the petition to set aside the sale under Section 68 of the said Act, and, whether the registration can be construed as an act by the Official Receiver. As stated already, according to the learned counsel appearing for the appellant, the execution of the sale deed on 23. 1983 is the act of the Official Receiver, since such a sale gets completion only on registration, and the registration also has to be construed as the act of the Receiver. I am not able to accept the said convention. .9. 1983 is the act of the Official Receiver, since such a sale gets completion only on registration, and the registration also has to be construed as the act of the Receiver. I am not able to accept the said convention. .9. In Ramasami Reddiar v. Official Receiver of South Arcot, 1941(II) MLJ 382 , the Bench has held that the date of sale by the Official Receiver, the date of confirmation of such sale and the date of execution of the sale deed are relevant dates, because, each one gives cause of action to file the petition to set aside the sale. Challenging all these acts of the Official Receiver, an application can be filed under Section 68 of the said Act, since, by the said acts of the Official Receiver, the insolvent was aggrieved. Applying the abovesaid principle, Sivasubramaniam, J., in the decision Nanjappan v. Cauvery Gounder, 1989 (1) M.L.J. 480 , rejected the case of the appellant. So, the Division Bench had held only the abovesaid three acts, as acts of the Receiver. 10. The act of the Receiver must mean an act which is for the Receiver to perform and not an act of the court or agency. So, Registration cannot be construed as an act of the Receiver. As and when the document is presented for registration, the role of the Receiver is over. Thereafter it is for the Registrar to deal with the document in accordance with the Registration Act. So, the Registration cannot be construed as an act of the Receiver. An act has to be interpreted to mean a positive or distinct act of the Receiver. Merely because the sale can be given effect to and enforced only on Registration, the incident of Registration cannot be construed as an act of the Receiver and it cannot be compared with the act of insolvency by the debtor, in view of the reasons stated supra. As and when the document is presented before the Registrar by the Receiver, the role of the Receiver comes to an end in that regard. Thereafter it is for the Registrar to proceed with the Registration. So, as held by the Division Bench in Ramasami Reddiar v. Official Receiver of South Arcot, 1941(2) M.L.J. 382 , stated supra, the act of Receiver ends with the execution of the sale deed for the purpose of Section 68 of the said Act. Thereafter it is for the Registrar to proceed with the Registration. So, as held by the Division Bench in Ramasami Reddiar v. Official Receiver of South Arcot, 1941(2) M.L.J. 382 , stated supra, the act of Receiver ends with the execution of the sale deed for the purpose of Section 68 of the said Act. 11. In the present case, the petitioner has filed the application beyond 21 days, from 23. 1983. Hence the courts below are correct in rejecting the same. I do not find any merits in this appeal. Accordingly, this C.M.S.A. is dismissed. No costs.