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2012 DIGILAW 3516 (MAD)

D. J. Rajendran v. K. Kathirvel

2012-08-08

R.S.RAMANATHAN

body2012
Judgment :- 1. The second respondent in I.P.No.63 of 2009 on the file of the Sub Court, Salem is the revision petitioner. 2. The first respondent-creditor filed I.P.No.63 of 2009 against the second respondent-debtor and the revision petitioner to adjudicate the second respondent herein as insolvent. In that petition, the first respondent filed I.A.No.103 of 2009 for the appointment of interim receiver under section 20 of the Provincial Insolvency Act and that application was allowed and the Official Receiver, Salem is appointed as Interim Receiver to take immediate possession of the petition mentioned property belonging to the insolvent and that order is challenged in this revision by the second respondent. 3. Learned Senior Counsel Mr.S.V.Jayaraman appearing for the revision petitioner submitted that even according to the petitioner, the second respondent-debtor had sold the property to the revision petitioner, who is the second respondent in the Insolvency Petition filed by the first respondent herein, on 9.10.2009 and the Insolvency Petition was filed by the first respondent herein on 8.12.2009. He, therefore, submitted that even before filing of the petition to adjudicate the second respondent herein as insolvent, the debtor-second respondent sold the property to the revision petitioner and the revision petitioner also purchased the property for a valuable consideration and therefore, he is a bona fide purchaser for value and he should be heard before passing of order of adjudication and the court has no power to appoint interim receiver to take possession of the property and the court below also failed to consider the provisions under sections 53 to 55 of the Provincial Insolvency Act and erred in appointing the interim receiver and therefore, the order of the court below is liable to be set aside. 4. 4. On the other hand, learned counsel for the first respondent submitted that admittedly the property was sold on 9.10.2009 two months prior to the filing of the Insolvency Petition by the first respondent herein to adjudicate the second respondent herein as insolvent and the second respondent herein owes a sum of Rs.75,00,000/= to the first respondent herein and with an intention to defeat the rights of the first respondent, the second respondent herein sold the property to the revision petitioner two months prior to the date of filing the Insolvency Petition and therefore, the second respondent has committed act of insolvency as per the provisions of section 6 of the Provincial Insolvency Act and as per section 28(7), the order of adjudication shall relate back to the date of filing the petition and therefore, when the debtor-second respondent fraudulently sold the property to defeat the rights of the creditor-first respondent herein, he has committed the act of insolvency and therefore, the sale is liable to be set aside and to protect the property, the application was filed for appointment of interim receiver which is permissible under section 56 and under section 20 also receiver can be appointed and considering all these aspects, the court below has rightly appointed Official Receiver, Salem as interim receiver and therefore, there is no need to interfere with the order passed by the court below. 5. I am unable to accept the contention of the learned counsel for the first respondent. I have gone through the order passed by the learned Principal Sub Judge and according to me, the learned Sub Judge, without properly appreciating sections 53 to 56 of the Provincial Insolvency Act and the other provisions, erred in appointing the interim receiver to take possession of the property which is in the hands of third party viz., the revision petitioner herein. 6. As stated supra, the second respondent is the debtor, who was sought to be declared as insolvent by the first respondent for committing the act of insolvency. As per section 28(7), only after the order of adjudication is passed, the said order relates back to the date of filing of the application and till such time, it cannot be stated that the second respondent is an insolvent and till the order of adjudication is passed, the second respondent remains only as a debtor. As per section 28(7), only after the order of adjudication is passed, the said order relates back to the date of filing of the application and till such time, it cannot be stated that the second respondent is an insolvent and till the order of adjudication is passed, the second respondent remains only as a debtor. Further, as per the provisions of sections 53 to 55 of the Provincial Insolvency Act, even assuming that the sale by the second respondent-debtor in favour of the revision petitioner is a fraudulent sale, as the same has been made within two months prior to the date of presentation of the petition, till the sale is set aside by virtue of section 53 or 54 of the Provincial Insolvency Act, the sale is valid and therefore, the revision petitioner, who has purchased the property cannot be deprived of possession of the property. 7. According to me, only after the order of adjudication is passed and the official receiver is appointed to take the charge of the properties of the insolvent, the official receiver has to apply to the court to annul the sale of properties and only after the annulment order is made, the property will vest with the Official Receiver and till such time, the property remains the property of the debtor. Further, it is also open to the revision petitioner to contend that no such annulment order shall be made and he is the bona fide purchaser for valuable consideration. 8. Therefore, having regard to the above provisions, it cannot be stated that the court has got any power to appoint any interim receiver to take possession of the property which is admittedly sold to the third party viz., the revision petitioner. Hence, the court below has miserably failed to exercise its powers and the court below also, without properly appreciating the provisions of sections 28 and 53 to 55, erred in appointing the interim receive. Further, section 56 of the Provincial Insolvency Act cannot be applied and a reading of section 56 makes it clear that a court has got power to appoint a receiver either at the time of order of adjudication or at any time afterwards. 9. Admittedly, the order of adjudication is not made and therefore, there is no question of appointing the receiver as per section 56 of the Provincial Insolvency Act. 9. Admittedly, the order of adjudication is not made and therefore, there is no question of appointing the receiver as per section 56 of the Provincial Insolvency Act. Similarly, under section 20 of the Act, a power is given to the court to appoint interim receiver when application is filed to declare himself as insolvent and the purpose of appointing interim receiver is to protect and preserve the properties of the debtor. Admittedly, the creditor has filed the petition to declare the second respondent herein as insolvent. The provisions of section 20 will not be applicable to the facts and circumstances of the present case. Considering the provisions under sections 53 to 55 and the fact that the revision petitioner already purchased the property prior to the filing of the application filed by the second respondent, the court below erred in passing an order of adjudication. The order of the court below is set aside. In the result, the civil revision petition is allowed. No costs. The connected miscellaneous petition is closed.