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2009 DIGILAW 359 (AP)

G. Raju Krishna v. P. Rama Devi

2009-06-08

L.NARASIMHA REDDY

body2009
Judgment :- Respondents 1 to 4 filed I.P.No.77 of 2003 in the Court of Principal Senior Civil Judge, Kurnool, against the appellant and respondents 5 and 6, under Sections 6, 9, 11 and 13 of the Provincial Insolvency Act (for short 'the Act'), with a prayer to adjudge the 5th respondent, as insolvent. It was stated that the 5th respondent borrowed substantial amounts from respondents 1 to 4, and to avoid the payment, he has executed a collusive sale deed, dated 23.08.2003, in favour of the appellant herein, in respect of Item (i) of B-Schedule and another sale deed in favour of the 6th respondent, in respect of Item (ii) of B-Schedule. Reference was made to various proceedings. The petitioner and respondents 5 and 6 oppose the petition. Through its order, dated 21.03.2006, the trial Court allowed the I.P. and adjudged the 5th respondent, as insolvent. As a consequence, it appointed the Official Receiver to administer the schedule properties. The appellant and the 6th respondent filed A.S.No.42 of 2006 in the Court of VI Additional District Judge, Kurnool. The appeal was dismissed through judgment, dated 17.10.2008. Hence, this Second Appeal, under Section 100 C.P.C. Learned counsel for the appellant submits that his client is a bona fide purchaser for valuable consideration, of an item of property, from the 5th respondent, and that even assuming that there existed circumstances to adjudge the 5th respondent as insolvent, the property purchased by the appellant ought not to have made the subject-matter of the proceedings. He also contends that the appellant was not aware of the indebtedness of his vendor and he cannot be penalized. It is further contended that respondents 1 to 4 did not even file a suit for recovery of the amount and the filing of I.P., was untenable in law. Heard Sri G.Raju Krishna, learned counsel for the appellant, and Sri K.Somakonda Reddy, learned counsel for respondents 1 to 4. It was a creditors I.P., that was filed against the 5th respondent, the appellant and the 6th respondent. Respondents 1 to 4 no doubt did not file a suit against the 5th respondent to recover the amount, borrowed from them. That, however, does not make any difference, as long as the 5th respondent did not dispute his liability. It was a creditors I.P., that was filed against the 5th respondent, the appellant and the 6th respondent. Respondents 1 to 4 no doubt did not file a suit against the 5th respondent to recover the amount, borrowed from them. That, however, does not make any difference, as long as the 5th respondent did not dispute his liability. Apart from adducing oral evidence of PWs.1 to 3, respondents 1 to 4 herein filed three promissory notes, dated 12.10.2000, as Exs.A.1 to A.3; payment endorsements, dated 06.07.2003, as Exs.A.4 to A.6 and two more promissory notes of July 2002, as Exs.A.7 and A.8. The certified copies of the sale deeds and the correspondence that ensued between the parties, was also filed. No evidence, either oral or documentary, was adduced by the appellant or respondents 5 and 6. For all practical purposes, the trial Court was left with no alternative, except to order the I.P., as prayed for, since virtually there was no resistance by the appellant and respondents 5 and 6. It may be true that by the date the sale of property in favour of the petitioner and the 6th respondent took place, there was no decree against respondent No.5. That, however, hardly makes any difference. The Act is a comprehensive enactment, aimed at mainly protecting the interests of creditors and for equitable distribution of resources that are available with an insolvent. The Act enables the Court to proceed against all the properties that are held by the insolvent or for fraudulently transferred. Apart from the provisions of the Act, Section 53 of the Transfer of Property Act aims at neutralizing the plans of fraudulent transfers that are brought into existence to defeat the claims of creditors. When the 5th respondent, who was sought to be adjudged as insolvent, or the appellant, who is beneficiary of a transaction that emanated from the 5th respondent, did not chose to deny any allegations made against them, the specific claims made by respondents 1 to 4, on the strength of promissory notes, cannot be ignored. The Courts below have appreciated the matter from the correct perspective and this Court is not inclined to take a different view. At any rate, no substantial question of law arises for consideration in this Second Appeal. The Second Appeal is accordingly dismissed. The Courts below have appreciated the matter from the correct perspective and this Court is not inclined to take a different view. At any rate, no substantial question of law arises for consideration in this Second Appeal. The Second Appeal is accordingly dismissed. It is, however, made clear that if the appellant clears the debts due to respondents 1 to 4, it shall be open to them to approach the trial Court to modify the decree passed by it, suitably. As and when such eventuality takes place, the trail Court shall pass appropriate orders in accordance with law. There shall be no order as to costs.