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2016 DIGILAW 408 (AP)

Chadalawada Laxmi Prasanna v. Vangeti Krishnamurthy

2016-07-29

B.SIVA SANKARA RAO

body2016
ORDER : B. SIVA SANKARA RAO, J. C.R.P No. 2216 of 2006: 1. The revision petitioner is the unsuccessful petitioner in I.A No. 1144 of 2003 in I.P No. 9 of 2001 on the file of III Additional District Judge, Warangal. He was the 30th respondent in the I.P proceedings, maintained by the debtor in I.P No. 9 of 2001 and the name of the debtor is one V. Krishna Murthy who is no other than 1st respondent among 62 respondents to the impugned order of the lower Court dated 08.12.2005 in I.A No. 1144 of 2005 in I.P No. 9 of 2001. In the debtor I.P there are more than 60 respondents, who are the several creditors which include the State Bank of Hyderabad, Narsampet as 22nd respondent. It appears said Bank maintained earlier I.A No. 1044 of 2003 against the insolvent secured debtor and though he appeared through advocate, he did not oppose the application muchless by filing counter and the Court rightly or wrongly, accepted the contention of the Bank which obtained a mortgage preliminary decree against that property which is item No. 2 of Schedule D of the debtor I.P petition in deleting the same. In fact, the item if at all in the mortgage of the Bank, the Bank is entitled to have the preferential right, subject to any other preferential debts like that of the crown, to proceed for realization of the mortgage decree debt against that property with or without any personal decree, with right of obtaining final decree in the event of failure to pay the preliminary decree amount within the time stipulated for redemption. However, that does not entitle the bank to ask for totally delete that item to which when the debtor is owner undisputedly from the array of the schedule of the properties of the debtor insolvent as any management by receiver by taking possession of the property and even for alienation after adjudged as insolvent, for distribution of the assets of the insolvent-debtor among the creditors by preference to secured creditors is at best subject to the satisfaction of the mortgage debt to bring the property to sale and only subject to that mortgage to liquidate by any purchaser through the official receiver by public auction. Thereby, at the cost of repetition it has to say that the said order of the learned III Additional District Judge in I.A No. 1044 of 2003 dated 27.08.2004 is unsustainable on its face. Leave it as it is for no revision against that order, muchless a review and needless to say it is the duty of the trial Court even in the insolvency proceedings pending if any party to the lis or any person affected, bring to the notice of the Court to recall its order when per se unsustainable within its inherent power which inheres from its constitution, and also by virtue of this order. 2. Needless to say it is pursuant to which the 30th respondent, who is the petitioner in I.A No. 1144 of 2005 maintained the petition impugning the entrustment of the properties of the debtor/insolvent to the official receiver by including this deleted item also from the schedule at the instance of bank pursuant to the order in I.A No. 1044 of 2003 supra. The lower Court after hearing dismissed the same. 3. The reasons assigned by the lower Court impugned in the grounds of the revision, no way sustainable as once that item of property is deleted from the means and properties of the debtor insolvent, the question of appointing a receiver to that property also does not arise. However, the fact remains as stated supra, if at all to include that property the Court can say it was deleted inadvertently earlier and thereby it has to be included to bring the property also to sale subject to the mortgage debt of the bank and with such an order for entrusting this item also to the receiver. C.R.P No. 4864 of 2008: 4. The receiver appointed in the debtor I.P No. 9 of 2001 filed the revision impugning the docket order of the executing Court dated 23.01.2008 in E.P No. 53 of 2005 in O.S No. 33 of 2001 on the file of Junior Civil Judge, Narsampet of Warangal District. The factual matrix, necessary to mention which are mostly covered by the order supra of even date in C.R.P No. 2216 of 2006 for common disposal though earlier taken up together since requires separate disposal, disposing of separately herein, are that the 2nd respondent to this revision, V. Krishna Murthy, debtor/insolvent maintained the I.P No. 9 of 2001. The factual matrix, necessary to mention which are mostly covered by the order supra of even date in C.R.P No. 2216 of 2006 for common disposal though earlier taken up together since requires separate disposal, disposing of separately herein, are that the 2nd respondent to this revision, V. Krishna Murthy, debtor/insolvent maintained the I.P No. 9 of 2001. The 1st respondent to the revision V. Kishore @ Kishore Kumar was the 48th respondent in the very insolvency application and his decree debt in O.S No. 37 of 2001 was shown in the schedule of the creditors by the insolvent in I.P No. 9 of 2001 supra. However, it appears the creditor for recovery of the simple money debt maintained the suit and obtained decree in O.S No. 37 of 2001, in execution of the decree even party to the debtor I.P and having been known the proceedings including the appointment of the receiver to manage the properties and for bringing the property to sale which is part or full of item No. 2 of schedule D of the I.P schedule. 5. It is to mention that the D schedule contains two items. Item No. 2 is the landed property of an extent of about Ac.3.00 It is in that item No. 2 for a part, the 30th respondent to the debtor I.P by name Ch. Laxmi Prasanna claimed as bona-fide purchaser for about Ac.0-20 guntas. It is to say the debtor I.P 22nd respondent-Bank sought for in I.A No. 1044 of 2003 to delete the items 1 and 2 of the D schedule from the array of the properties of the debtor insolvent saying that were covered by mortgage in favour of the Bank and the Bank obtained a preliminary decree and is going to obtain a final decree to bring the property for sale and execution, that in the debtor I.P entrusting the same also to manage by receiver is unsustainable. As referred in the C.R.P No. 2216 of 2006 order supra, the order of the learned III Additional District Judge dated 27.08.2005 is no way sustainable as the Court at best could observe that the management by the receiver while holding good to bring the property to sale is subject to the mortgage decree debt and not for the deletion. As referred in the C.R.P No. 2216 of 2006 order supra, the order of the learned III Additional District Judge dated 27.08.2005 is no way sustainable as the Court at best could observe that the management by the receiver while holding good to bring the property to sale is subject to the mortgage decree debt and not for the deletion. It is pursuant to the deletion, questioning the management of this item by receiver, entrusted by the insolvency Court, I.A No. 1144 of 2005 is filed by the 30th respondent to the insolvency petition by name Ch. Laxmi Prasanna and having been unsuccessful by the impugned order in C.R.P No. 2216 of 2006, maintained the revision which is disposed of with the observations supra including against the order in I.A No. 1044 of 2003 supra. 6. It is in the factual scenario further to mention that the property in whose favour the insolvent/debtor prior to filing of the insolvency application created a mortgage for D schedule items 1 and 2, proceeded under the Act, 1993 pursuant to the mortgage decree in bringing the property to sale and having sold item No. 1 property realized the entire decree debt. Thereby, practically item No. 2 landed property of D schedule about Ac.3-00 no way requires to satisfy the debt of the I.P 22nd respondent-Bank, as it appears from the facts from the submissions across the bar and perusal of the record. 7. It is in the factual scenario, when part of the item No. 2 of the landed property out of Ac.3-00 in D schedule of the I.P schedule, the creditor of the simple money decree in O.S No. 37 of 2001 no other than 48th respondent to the debtor I.P No. 9 of 2001 supra when brought to sale, the receiver impugned the same. 8. Heard the learned counsel for the receiver. The debtor to the insolvency application and J.Dr, to the E.P No. 53 of 2005 and the 48th respondent to the insolvency application who is the plaintiff decree holder in O.S No. 37 of 2001 and E.P No. 53 of 2005 even served did not chose to appear, hence taken as heard. Perused the material on record. 9. The debtor to the insolvency application and J.Dr, to the E.P No. 53 of 2005 and the 48th respondent to the insolvency application who is the plaintiff decree holder in O.S No. 37 of 2001 and E.P No. 53 of 2005 even served did not chose to appear, hence taken as heard. Perused the material on record. 9. Once there are insolvency proceedings and the property is entrusted to the receiver, the civil Court could not have been proceeded with against the property by virtue of Section 52 of the Provincial Insolvency Act, 1920. It is nothing but fraud on Court by the decree holder also though he is one of the respondents to the debtor I.P, where the debtor was adjudged as insolvent in showing the property by not bringing to the notice of the Court, the factum of its part of the I.P schedule and receiver was entrusted with the management of the property to distribute to the creditors of the adjudged insolvent along with his other properties. It is by suppression of the material fact, the auction appears to have been taken place and the auction purchaser might have purchased the property and there is by order of the Court dated 26.02.2008 pursuant to the order of this Court in C.R.P No. 2216 of 2016 dated 28.04.2006 of ordering status-quo in relation to entire item No. 2 of about Ac.3-00 of the landed property of D schedule of the insolvency application, with that observation of by virtue of the status-quo the right to bring the property to sale needs to be verified thereby granted stay of all further proceedings of E.P No. 53 of 2005. Needless to say, it includes further steps for issuing sale certificate or confirmation of sale or delivery of possession to the auction purchaser etc. No doubt, the auction purchaser, in the event of sale being set aside, is entitled to refund of the amount which he deposited and poundage, if any, deposited with interest. In this regard the Apex Court under SARFAESI Act, 2002 in Mathew Verghese v. M. Amritha Kumar observed at para No. 70(2) that awarding 18% p.a interest to the auction purchaser while setting aside the sale is the reasonable rate. Needless to say if the sale is being set aside, remedy of the auction purchaser is only to claim refund with interest and nothing beyond as referred supra. Needless to say if the sale is being set aside, remedy of the auction purchaser is only to claim refund with interest and nothing beyond as referred supra. The auction sale taken place by non-disclosure of the fact and if at all disclosed, the Court could not have been proceeded and thereby no way sustainable and the same is liable to be set aside as contrary to Section 52 of the Provincial Insolvency Act and accordingly set aside by left open to the auction purchaser to make a claim from the receiver appointed to manage the properties, for what he deposited the amount if lying in fixed deposit to take back by filing cheque petition by virtue of this order and for the balance which represents the deposited amount with interest at 18% p.a till date to claim from the receiver to pay out of the proceeds of realization of his management of the properties as a first preference before distribution from any of the assets of the debtor after other secured debtors and before other unsecured debtors as the case may be. C.R.P No. 2216 of 2006: 10. In the result, the revision petition is allowed by setting aside the order dated 08.12.2005 in I.A No. 1144 of 2003 in I.P No. 9 of 2001 on the file of III Additional District Judge, Warangal and the matter is remanded back to the insolvency Court to hear both parties and dispose of the same afresh. There is no order as to costs. C.R.P No. 4864 of 2008: 11. Accordingly and in the result, the revision petition is allowed by setting aside the docket order dated 23.01.2008 passed in E.P No. 53 of 2005 in O.S No. 37 of 2001 on the file of Junior Civil Judge, Narsampet. There is no order as to costs. 12. Pending miscellaneous petitions, if any in both the revisions, shall stand closed.