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2011 DIGILAW 419 (AP)

Sama Venkata Kutumba Rao v. Official Receiver

2011-06-08

L.NARASIMHA REDDY

body2011
Judgment : 1. The case presents an example as to how the provisions of the Provincial Insolvency Act, 1920 (for short ‘the Act’), were put to gross misuse by the deceased - 11th respondent, who is just said to have lent a sum of Rs.20,000/- to the deceased – petitioners 1 and 2. The conduct of the lender of the said amount was worse than that of a shylok. Unfortunately, various courts, which dealt with the matter, have proceeded mostly on technicalities and blinked at the realities. 2. Petitioners 3 and 4 are the children of petitioners 1 and 2. A sum of Rs.20,000/- was borrowed by deceased-petitioners 1 and 2 from one Maheshwaram Nagabushanamdeceased 11th respondent, whose legal representatives are added as respondents 12 to 18. Instead of realizing the said amount by filing a simple suit for recovery, the 11th respondent filed I.P.No.7 of 1988, alleging that the petitioners have created equitable mortgage in respect of certain items of property in favour of others. The amounts due to other persons also shown in the I.P. The petitioners pleaded that they are solvent enough to discharge the debts and at one stage of proceedings, expressed their willingness to discharge debt to the 11th respondent. The trial Court allowed the I.P. through order dated 05.08.1997. A.S.No.1 of 1999 filed by the petitioners in the Court of VI Additional District Judge (FTC), Krishna at Machilipatnam was dismissed on 27.08.2004. 3. As many as six items of petition ‘A’ schedule, some of which are valuable immovable properties, were brought under the purview of the Official Receiver. The total amount adjudged as due from the petitioners was Rs.1,49,815/-. The Official Receiver is said to have conducted auction of the first item of property, which is a tiled house. It fetched Rs.8,06,000/-. Any sensible person would have stopped there, adjusted the debts and refunded the excess amounts to the petitioners. However, he has proceeded to sell another item, namely, Item No.5 - a vacant site, for a sum of Rs.7,06,000/-. 4. Feeling aggrieved by those outrageous acts of the Official Receiver, the petitioners filed A.S.No.64 of 2006 in the Court of I Additional District Judge, Krishna at Machilipatnam. The appeal was dismissed on 01.02.2010. Hence, this revision. 5. However, he has proceeded to sell another item, namely, Item No.5 - a vacant site, for a sum of Rs.7,06,000/-. 4. Feeling aggrieved by those outrageous acts of the Official Receiver, the petitioners filed A.S.No.64 of 2006 in the Court of I Additional District Judge, Krishna at Machilipatnam. The appeal was dismissed on 01.02.2010. Hence, this revision. 5. Sri T. Durga Prasad Rao, learned counsel for the petitioners, submits that the Official Receiver as well as the 11th respondent have acted in a gross illegal and unjust manner and that the petitioners were deprived of the valuable properties. He contends that though the petitioners offered to repay the debt, without reference to the attached properties, the sale was affected. He submits that the view taken by the lower Appellate Court, as to the maintainability of the appeal, is untenable. 6. Though the Official Receiver was served with notice, he has not chosen to enter appearance. 7. The order passed by the trial Court in I.P.No.7 of 1988 has assumed finality with the dismissal of A.S.No.1 of 1999. It was open to the petitioners herein to pay the debts and it is only in default of such payment, that the Official Receiver could have brought the properties to sale. As mentioned above, one after the other, valuable items of property were sold unmindful of the actual obligation under the order passed in the I.P. 8. Section 68 of the Act provides for relief against the acts and omissions on the part of the Receiver. The provision reads as under: “68. Appeals 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 just: 9. 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.” 10. The heading of the section does not accord with the body of the Section. In the heading it is mentioned that an “appeal” would lie, whereas in the body of the section, it is stated, aggrieved party is conferred with the right to “apply”. The application filed by the petitioners clearly fits into this provision. The heading of the section does not accord with the body of the Section. In the heading it is mentioned that an “appeal” would lie, whereas in the body of the section, it is stated, aggrieved party is conferred with the right to “apply”. The application filed by the petitioners clearly fits into this provision. Obviously because the heading refers to ‘appeals’, petitioners mentioned the same in the application. The Appellate Court also entertained the application filed under Section 68 of the Act and proceeded to adjudicate. In case the Appellate Court felt that appeal is not the remedy, it ought to have returned the papers for being presented before the proper Court. Instead, it has dismissed the appeal, leaving the petitioners without any remedy. The judgment rendered by the lower Appellate Court is totally untenable in law and hyper-technical in its approach. 11. This Court is of the view that the application contemplated under Section 68 of the Act must be made to the Court, which passed the order in the I.P. and that the word “appeal” mentioned in the heading of the section, is inappropriate. Even now the appeal presented by the petitioners can be treated as the application under Section 68 of the Act and transmitted to the trial Court. The trial Court has to examine the matter carefully with reference to the record and plea raised by the petitioners. 12. Hence, the C.R.P. is allowed and the order under revision is set aside, directing that, a) A.S.No.64 of 2006 on the file of the I Additional District Judge, Krishna, at Machilipatnam, shall be treated as the application under Section 68 of the Act and the entire file shall be transmitted to the Court of Senior Civil Judge, Machilipatnam and it shall be treated as an interlocutory application in I.P.No.7 of 1998. b) The trial Court shall accept the offer, if any, made by the petitioners herein to clear the debts adjudicated in the I.P. within a stipulated time. c) In case the petitioners deposit the amount adjudicated in the I.P., the attachment or distraint order vis-à-vis the properties, together with the sales effected thereof, shall stand set aside. d) In the event of their failure, the Official Receiver shall be directed to conduct the sale of an item of property, which would approximately fetch the amount due from the petitioners. d) In the event of their failure, the Official Receiver shall be directed to conduct the sale of an item of property, which would approximately fetch the amount due from the petitioners. e) The trial Court shall carefully assess the fee or charges claimed by the official Receiver and shall disallow all the claims, which are found to be unwarranted or unnecessary. 13. There shall be no order as to costs.