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2015 DIGILAW 371 (AP)

Gounda Mohammed Yousuf v. Shaik Saheb

2015-06-10

M.SATYANARAYANA MURTHY

body2015
JUDGMENT M. Satyanarayana Murthy, J. 1. Aggrieved by the Judgment dated 29.10.2010 passed by the IV Additional District Judge, Kurnool in A.S. No. 124 of 2007, the present appeal is preferred by the respondents in I.P. No. 8 of 2006, wherein the 1st respondent was adjudged as an insolvent having found that he had committed an act of insolvency under Section 6(1)(b)of the Provincial Insolvency Act (for short 'the Act'). 2. For convenience, the parties to the appeal will hereinafter be referred to as appellants and respondents. 3. The respondents claiming to be creditors of the 1st appellant filed petition under Section 9 of the Act to adjudge him as insolvent on the ground that he alienated his substantial part of his property to defeat and delay the claims of creditors, alleging that the 1st appellant herein borrowed an amount of Rs. 1,25,000/- for construction of building agreeing to repay the same with interest, but failed to pay the same due to the 1st respondent herein. On 03.08.2002, on enquiry, the 1st respondent came to know that the 1st appellant with a view to defraud the creditors executed a sham and nominal document i.e. gift settlement deed in favour of appellants 2 and 3 on 22.06.2002 vacating the schedule property and practically disappeared from his ordinary place of residence. Thus, the 1st appellant allegedly committed act of insolvency under Section 6(1)(b) of the Act and the debt of the respondents is more than Rs. 500/-. 4. Before the trial Court, appellants 1 and 2 herein filed common counter and the same was adopted by the 3rd appellant herein by filing a memo. The appellants herein denied the material allegations of the petition while contending that the property was gifted to appellants 2 and 3 without any intention to defraud or delay the creditors and that the 1st appellant is able to discharge the debt and prays to dismiss the insolvency petition. 5. Originally, IP was filed before the Senior Civil Judge, Nandyal, and the same was returned for presentation before a proper Court on the ground that the Senior Civil Judge, Nandyal, had no jurisdiction. On its return, IP was represented before the Senior Civil Judge, Atmakur, and proceeded with the enquiry. 6. 5. Originally, IP was filed before the Senior Civil Judge, Nandyal, and the same was returned for presentation before a proper Court on the ground that the Senior Civil Judge, Nandyal, had no jurisdiction. On its return, IP was represented before the Senior Civil Judge, Atmakur, and proceeded with the enquiry. 6. During the course of enquiry, the respondents herein were examined as PWs.1 to 3 and marked Exs.A1 to A4 and that appellants herein were examined as RWs1 to 3 and marked Exs.B.1 to B.6. 7. The Senior Civil Judge, Atmakur, after considering oral and documentary evidence, adjudged the 1st appellant as insolvent declaring Ex. A.4-Gift Deed as null and void and directed the Official Receiver, Kurnool, to take the property for administration. 8. Aggrieved by the order passed by the Senior Civil Judge, Atmakur, the appellants herein preferred an appeal before the District Court, Kurnool and that the IV Additional District Judge, Kurnool, confirmed the said order though the plea of limitation was raised on account of return of the petition by the Senior Civil Judge, Nandyal, and its representation before the Senior Civil Judge, Atmakur. But in para 13 of its judgment, the appellate Court discussed about the limitation and ultimately concluded that the petition is in time. 9. Indisputably, IP was filed before the Senior Civil Judge, Nandyal, on 12.08.2002 and the same was registered as I.P. No. 44 of 2002, but it was returned by the Senior Civil Judge, Nandyal, for want of territorial jurisdiction on 28.02.2006 and the same was represented before the Senior Civil Judge, Atmakur on 08.02.2006. 10. The main contention of the learned counsel for the appellants is that the time spent in wrong Court not having jurisdiction is saved under Section 14 of the Limitation Act, but the delay in representing the same is 11 days i.e. after its return is not saved under the said Section and in such a case, the representation is deemed to be a fresh presentation of IP before the Senior Civil Judge Court, Nandyal. 11. As seen from the decretal order in I.P. No. 8 of 2006 dated 29.08.2007 the same was registered on 28.10.2002. Subsequently, on the point of jurisdiction vide orders dated 28.10.2006, the insolvency petition was returned before the Court having jurisdiction. Thereupon, the returned insolvency petition was presented before the Senior Civil Judge, Atmakur, on 08.02.2006. 11. As seen from the decretal order in I.P. No. 8 of 2006 dated 29.08.2007 the same was registered on 28.10.2002. Subsequently, on the point of jurisdiction vide orders dated 28.10.2006, the insolvency petition was returned before the Court having jurisdiction. Thereupon, the returned insolvency petition was presented before the Senior Civil Judge, Atmakur, on 08.02.2006. Taking advantage of this delay in representation, learned counsel for the appellants contended that on account of delay in representation, the petition presented before the Senior Civil Judge, Atmakur, cannot be treated as continuation of the proceedings after its return by the Senior Civil Judge, Nandyal. The said contention was raised before the appellate Court. In para 13 of the judgment under challenge, the appellate Court held that the Gift Deed was executed on 22.06.2002 and IP was returned on 28.01.2006 for want of jurisdiction and it was represented on 08.02.2006 after 11 days. Therefore, it is in time. 12. Now the question is: "whether the said representation after 11 days from the date of order before the competent Court having jurisdiction saved the limitation or not?" 13. As per Section 14 of the Limitation Act when a party prosecuted any proceedings with due diligence in a wrong Court having no jurisdiction, the period of pendency of the matter in a wrong Court is saved and it is in dispute. When IP was returned on 28.01.2006, the respondents are at best entitled to represent the same on the same day or on the next day after excluding the time taken for journey i.e. from Nandyala Court to Atmakur Court which is less than 100 kms. But, obviously for different reasons, the respondents did not represent IP on the same day when it was returned by the Senior Civil Judge, Nandyal or at least on the next day so as to claim exclusion of time taken for journey, but represented after 11 days. Therefore, it is deemed to have been presented as fresh petition before the Senior Civil Judge, Atmakur. When the similar question came up before this Court in J. Venkataramana Reddy v. Kanakagari Bhakthavatsalaiah and another 2003(4) ALT 16 in para 56 of the judgment this Court held as follows: "56. Therefore, it is deemed to have been presented as fresh petition before the Senior Civil Judge, Atmakur. When the similar question came up before this Court in J. Venkataramana Reddy v. Kanakagari Bhakthavatsalaiah and another 2003(4) ALT 16 in para 56 of the judgment this Court held as follows: "56. The above legal position makes it crystal clear that the period from the date of return of the plaint by the wrong Court till the date of presentation to the proper Court cannot be excluded for the purpose of computation of limitation and the Court which returned the plaint has no power to grant time. Even if the wrong Court grants time for representation of the plaint before a proper Court, it will not save the period of limitation. Therefore the period from the date of return of the plaint by the wrong Court till the date of presentation of the plaint to the proper Court is not liable to be excluded under Section 14 of the Limitation Act and the Court has no power to grant time for representation of the plaint when it was presented to the Court of first instance on the last date of limitation. " 14. In another judgment of this Court reported in K. Laxminarayan v. V. Gopalaswami and another AIR 1973 AP 439, this Court in para 5 of the judgment held as follows: "So far as the question of limitation is concerned, it is no doubt true that the plaint as originally presented within the time has been returned under Order 7 Rule 10, CPC for presentation in the proper Court in which the suit should have been instituted. But, what were the grounds on which the suit was originally filed in the Munsifs Court and what were the pleas taken and on what grounds it was returned, the material on record is too barren to disclose. There is no reference in the judgment either. If there was material, it would have been properly decided whether Section 14 of the Limitation Act has any application to the case or not. Section 14 has to be liberally construed. That is not to say that it can be construed without regard to the actual words of the section. If the proceedings instituted were bona fide Section 14 would have its application. The term 'bona fide' further cannot be too narrowly construed. Section 14 has to be liberally construed. That is not to say that it can be construed without regard to the actual words of the section. If the proceedings instituted were bona fide Section 14 would have its application. The term 'bona fide' further cannot be too narrowly construed. A reasonable construction has to be placed on it, and the question has to be decided having regard to the particular circumstances of the case. In the absence of the relevant data and having regard to the fact that immediately after the plaint was returned it was presented on the same day and the plaint as originally filed was within time, I do not think the plea of limitation is sustainable." 15. As seen from the principle laid down in the above judgments, though there is no data before the Court, the time spent in a wrong Court having jurisdiction is saved subject to proof of the conditions laid down under Section 14 of the Limitation Act. In the present case, there is sufficient data to decide the time spent in a Court having no jurisdiction by the 1st respondent while prosecuting the proceedings diligently. The petition was presented before the Senior Civil Judge, Nandyal on 12.08.2002 and the same was returned on 28.01.2006 as per the orders in I.A. No. 44 of 2002 and the same was represented before the Senior Civil Judge, Atmakur, on 08.04.2006. In view of this data, this Court is required to examine whether the time consumed by respondents 1 to 3 in representation of the insolvency petition before the Senior Civil Judge, Atmakur, after its return by Senior Civil Judge, Nandyal, is to be excluded or not while saving the time spent in a wrong Court having no jurisdiction, by exercising powers under Section 14 of the Limitation Act. 16. In another judgment of this Court reported in Sajjanam Wadla China Rajayya v. Chappal Venkateshwar Rao AIR 1959 AP 349 , wherein a similar question came up, this Court held that the time spent in a wrong Court having no jurisdiction can be saved, if it is proved that the 1st respondent prosecuted the proceedings with due diligence. In para 7 it is held as follows: "Now it is to be seen how far the provisions of Section 14 of the Limitation Act would benefit the plaintiff. In para 7 it is held as follows: "Now it is to be seen how far the provisions of Section 14 of the Limitation Act would benefit the plaintiff. The promise in the suit bonds is that the sum borrowed would he paid before the Ugadi of 1950. In another words, the payment at the most ought to have been made on 18.03.1950. O.S. No. 102 of 1952-53 was instituted on 18.03.1953 which was the last date for filing the same." The names of the defendants 1, 3 and 4 were struck off on 9.7.1953, and the present plaints were filed on 11.7.1953. If the period between 18.3.1953 and 9.7.1953 is excluded under Section14 of the Limitation Act, two days have to be accounted for. The act that the Court has given three days' time for presenting fresh plaints would be of no avail to the plaintiff because the Court has no jurisdiction to fix any time for filing suits or presenting fresh plaints. As these three days cannot be excluded from computation, the suits would obviously be time-barred." 17. In view of the law laid down by this Court in various judgments referred to above, the time spent only in a Court having no jurisdiction alone can be saved and the time spent after return of the insolvency petition cannot be saved. 18. In the present case, I.A. No. 44 of 2002 was filed on 28.01.2002 questioning the territorial jurisdiction of the Senior Civil Judge, Nandyal, and the same was allowed by an order dated 28.01.2006 and it is not known whether the Senior Civil Judge, Nandyal, granted any time for representation of the returned insolvency petition before a competent Court having jurisdiction. Even assuming for a moment that the Senior Civil Judge, Nandyal, granted any time, the time granted by him had no power to grant such time for presentation in the Court having proper jurisdiction. 19. In the present case, the Gift Deed was executed on 22.06.2002 by the 1st appellant in favour of the appellant Nos. 2 and 3 and it is 'transferred' within the definition under Section 2(f) of the Act. Transfer of property includes transfer of any interest in property and the creation of any charge upon property. 19. In the present case, the Gift Deed was executed on 22.06.2002 by the 1st appellant in favour of the appellant Nos. 2 and 3 and it is 'transferred' within the definition under Section 2(f) of the Act. Transfer of property includes transfer of any interest in property and the creation of any charge upon property. The definition of "transfer of property" under the Act is wider than the definition of "Transfer of Property" under Section 5 of the Transfer of Property Act. Therefore, execution of Gift Deed is a transfer within the meaning of Transfer of Property under Section 2(f) of the Act. 20. As per Section 9 (c) of the Act, the insolvency petition shall be presented within three months from the date of such transfer of property. Here, the Gift Deed was executed on 22.06.2002 and the petition was presented before the Senior Civil Judge, Nandyal, on 12.08.2002 and the said Court had no territorial jurisdiction. However, it was returned on 28.10.2006 for presentation before appropriate Court by which time three months as contemplated under Section 9(c) of the Act has already expired. Moreover, the petition was represented before the Senior Civil Judge, Atmakur, on 08.02.2006 i.e., almost after lapse of 11 days from the date of passing of order dated 28.01.2006 in I.A. No. 44 of 2002 on the ground of territorial jurisdiction for presentation before appropriate Court. 21. Even if the time spent in a wrong Court having no jurisdiction is excluded under Section 14 of the Limitation Act, failure to represent the petition on the same day when it was returned within the reasonable time after excluding journey period for representation can be considered as filing of fresh application. Therefore, the said representation is not within three months period prescribed under Section 9 (c) of the Act. When the petition is deemed to have been presented after three months in view of the order passed in I.A. No. 44 of 2002 such representation of petition cannot be construed as prosecution within the time and on this ground alone, the petition is liable to be dismissed. 22. The trial Court did not decide anything about the limitation, but the appellate Court held that representation of the returned insolvency petition on 08.02.2006 is sufficient. 22. The trial Court did not decide anything about the limitation, but the appellate Court held that representation of the returned insolvency petition on 08.02.2006 is sufficient. In view of the law laid down by this Court in the decisions referred supra, the finding of the appellate Court is ex facie erroneous. Hence, by applying the law laid down by this Court and the delay of 11 days in representation of the returned petition by the Senior Civil Judge, Nandyal, I am of the considered view that the petition is barred by limitation. Hence, the order passed by the Appellate Court is erroneous and the same is hereby set aside. 23. Curiously, the respondents herein sought for the relief of annulling original of Ex. A.4-Gift Deed dated 22.06.2004, but there are pre-conditions to be satisfied for annulling the said document by the insolvency Court. A perusal of language used under Sections53, 54, 54-A and the mode of proof of debt under Part-III of Insolvency Act (From Secs.45 to 50), it is clear that before moving an insolvency court to annul transfer of property by a creditor has o satisfy the following conditions: "1) The debtor must be adjudged as insolvent. 2) The creditor should prove his debt by following the procedure contemplated under Part-III of Insolvency Act. 3) He should have made a request to the Official Receiver for moving insolvency court for annulling fraudulent transaction and that the Official Receiver refused to move such petition for annulment." 24. According to Section 54A of the Act when a document is required to be annulled, the debtor must be adjudged as insolvent by the date of moving an application under Sections 53 and 54 read with Section 4 of the Act and apart from that the Official Liquidator alone is competent to file the application under Sections 53 and 54 of the Act to avoid such transfers. If for any reason, the Official Receiver did not come forward to file an application for annulment, the creditor may file the application after prior permission of the insolvency Court on the ground that the Official Receiver declined to file application under Sections 53 and 54 read with Section 4 of the Act. But the trial Court exercised its jurisdiction to annul the original of Ex. But the trial Court exercised its jurisdiction to annul the original of Ex. A.4-Gift Deed simultaneously, along with adjudging the 1st appellant herein as insolvent while deciding the petition filed under Section 9 of the Act without any application under Section 53, 54 read with 4 of the Act, the question of filing application by the Official Receiver will also arise only when the creditors whose debts as per the procedure in Part III and Section 54A of the Act. However, the trial Court simultaneously passed an order annulling the transaction covered by original of Ex. A.4 without complying the procedure contemplated under Section 54A of the Act. Therefore, the order passed by the trial Court, confirmed by the appellate Court regarding annulment of original of Ex. A.4 is erroneous on the face of it and in view of the law laid down by this Court and other Courts. The order passed by the trial Court annulling the original of Ex. A.4 is erroneous and the same is liable to be set aside. 25. In view of the foregoing discussion, the trial Court and the appellate Court committed an error in adjudging the first appellant as insolvent and in annulling the transaction covered by original of Ex. A.4 and consequently, the orders passed by both the Court are hereby set aside holding that the petition filed by respondents herein under Section 9read with Section 6 of Act is barred by time under Section 9(c) of the Act and that the annulment of transaction covered by Ex. A4 is against the procedure prescribed under Chapter 3 and Section 54A of the Act. 26. Therefore, the appeal is allowed by setting aside the order dated 29.08.2007 passed by the Senior Civil Judge, Atmakur, in I.P. No. 8 of 2006 as well as the order dated 29.10.2010 passed by the IV Additional District Judge, Kurnool, in A.S. No. 124 of 2007. There shall be no order as to costs.