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2020 DIGILAW 2371 (KAR)

Raja Bakshi v. C. Jadappa Shetty

2020-12-21

HEMANT CHANDANGOUDAR

body2020
JUDGMENT : Hemant Chandangoudar, J. 1. M.F.A. No. 101445/2017 is filed as against the order dated 06.03.2017 in I.C. No. 10/2011, passed by the I Additional District and Sessions Judge at Ballari allowing the application filed by respondents No. 1 and 2 seeking for appointment of Official Receiver to take custody of the property mentioned in the 'B' Schedule of the main petition and distribute the 'B' Schedule of the main petition properties. 2. MFA No. 101471/2017 is filed against the Judgment and Order dated 9.6.2016 in I.C. No. 10/2011 passed by the I Additional District and Sessions Judge at Ballari, hereby adjudging the respondent No. 1 as an insolvent. 3. Respondents No. 1 and 2 filed a petition under Sections 9, 53 and 54 of the Provincial Insolvency Act, 1920 (for short 'Act') praying to adjudge the respondent No. 1 as an insolvent. The District Court passed an order dated 09.06.2016 allowing the petition adjudging the respondent No. 1 as an insolvent. Thereafter, application was filed under Section 56 read with Section 66 of Provincial Insolvency Act, 1920 seeking for appointment of an Official Receiver to take custody of the properties mentioned in the 'B' Schedule of the main petition. 4. Appellants who are transferees of Schedule 'B' Property from Respondent No. 3 are in appeal challenging the order passed by the District Judge adjudging the respondent No. 3 as an insolvent and also the order passed appointing an Official Receiver to take custody of the 'B' Schedule Property. 5. Learned Counsel for the appellants would submit that the 'B' Schedule Property was transferred in favour of the appellants by respondent No. 3 on 12.05.2011. However, the appellants were not made as parties to the proceedings initiated by Respondents 1 & 2 to adjudge Respondent No. 3 as an insolvent. He further submits that pursuant to the order passed by the District Court adjudging respondent No. 3 as insolvent, on an application filed under Sections 56 and 61 of the Act, the District Judge has passed an order for appointment of an Official Receiver to take the custody of the 'B' Schedule property which would adversely affect the rights of the appellants. Hence, he submits that order passed by the District Court, adjudging the respondent No. 3 as an insolent and also the order appointing an official receiver to take custody of the property requires to be set aside. Hence, he submits that order passed by the District Court, adjudging the respondent No. 3 as an insolent and also the order appointing an official receiver to take custody of the property requires to be set aside. 6. Learned Counsel for Respondents 1 & 2 submits that the appellants have no locus standi to challenge the order passed by the District Court adjudging the Respondent No. 3 as an insolvent, since their rights over the property alleged to have been transferred in their favour are not adversely affected. Hence, he submits that appeal filed by the transferees may be dismissed confirming the impugned order herein. He further submits that if the appellants are aggrieved by the impugned order appointing an Official Receiver to take custody of 'B' Schedule Property, they are always at liberty to file petition under Section 53 of the Act. He further submits that appeals cannot be maintained in so far it relates to adjudging respondent No. 3 as an insolvent and it is only respondent No. 3 who can maintain an appeal challenging the order adjudging him as an insolvent. 7. I have considered the submissions made by learned Counsel appearing for the parties and perused the material on record. 8. A reading of Section 75(3) of the Act, would indicate that any such person aggrieved by any other order of a District Court otherwise than in appeal from an order made by a subordinate Court may appeal to the High Court by leave of the District Court or of the High Court. In the present case, the appellants who are not parties to the proceedings before the District Court have-filed these appeals along with applications seeking leave of this Court to prefer these appeals. 9. In the instant case, the appellants claims to be the transferees of the properties having purchased the same from respondent No. 3 who is adjudged as an insolvent. The transfer took place prior to one week before the petition under Section 9 of Act was filed. The appellants were not made parties to the petition filed under Section 9 of the Act. Pursuant to the order passed by the District Court adjudging respondent No. 3 as an insolvent, the very same Court has appointed an Official Receiver to take custody of the properties mentioned in the Schedule 'B' of the main petition. 10. The appellants were not made parties to the petition filed under Section 9 of the Act. Pursuant to the order passed by the District Court adjudging respondent No. 3 as an insolvent, the very same Court has appointed an Official Receiver to take custody of the properties mentioned in the Schedule 'B' of the main petition. 10. If the possession of the property mentioned in the 'B' Schedule property is taken by the Official Receiver, the alleged rights of the appellant will be adversely affected. 11. Section 75(3) of the Act provides for filing of an appeal by a person who was not a party to the proceedings with leave of this Court. The appellants alleged rights will be adversely affected if custody of 'B' Schedule Property is taken by the official property (sic receiver). Hence, the submission of the learned Counsel appearing for the respondents No. 1 and 2 that the appeal is not maintainable is not acceptable in so far it relates to appointing an official receiver to take custody of the 'B' Schedule Property. 12. It is not in dispute that the transfer of 'B' Schedule Property in favour of the appellant was effected on 12.05.2011 and petition under Section 9 of the Act was filed by respondents No. 1 and 2 on 24.05.2011. The transfer of the 'B' Schedule property in question in favour of the appellant herein was made prior to the institution of the petition under Section 9 of the Act. The District Judge adjudged respondent No. 3 as an insolvent since he remained absent before the District Judge. Thereafter, petition was filed under Sections 56 and 61 of the Act so as to appoint an Official Receiver to take custody of the 'B' Schedule property. The rights of the appellants are adversely affected. Custody of the property in question cannot be taken from the appellants unless and until the official receiver establishes that the transaction made in favour of the appellants herein is not in good faith and for valuable consideration. Section 53 of the Act reads thus : "53. The rights of the appellants are adversely affected. Custody of the property in question cannot be taken from the appellants unless and until the official receiver establishes that the transaction made in favour of the appellants herein is not in good faith and for valuable consideration. Section 53 of the Act reads thus : "53. Avoidance of voluntary transfer.--Any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent within two years after the date of the transfer, be voidable as against the receiver and may be annulled by the Court". 13. A bare reading of Section 53 indicates that on an application filed by an official receiver, any transfer made within two years from the date of institution of the petition under Section 9 of the Act can be annulled if the transfer is not made in a good faith and for valuable consideration. 14. In the absence of any order annulling the transfer made in favor of the appellants herein, the order so far it to relates to authorising the official receiver to take custody of the 'B' schedule property is one without authority of law. 15. However, the appeal filed by the appellants challenging the order adjudging respondent No. 3 as an insolvent is not maintainable, since respondent No. 3 is alone the aggrieved person and not the appellants herein. 16. In view of the aforesaid discussion, the order dated 06.03.2017 passed in I.C. No. 10/2011, by the I Additional District and Sessions Judge at Ballari is modified. The order passed by the Learned District Judge appointing an Official Receiver is confirmed, However, the order passed by the District Court authorising the official receiver to take custody of the 'B' Schedule Property is set aside. 17. MFA No. 101471/2017 is dismissed as not maintainable. It is made clear that the order adjudging the respondent No. 3 as an insolvent will not give any right to the respondents 1 & 2 or the Official Receiver to take custody of the property transferred in favour of these appellants till the transfer made in favour of these appellants is annulled under Section 53 of the Act. 18. It is made clear that the order adjudging the respondent No. 3 as an insolvent will not give any right to the respondents 1 & 2 or the Official Receiver to take custody of the property transferred in favour of these appellants till the transfer made in favour of these appellants is annulled under Section 53 of the Act. 18. The Official Receiver is reserved with the liberty to file petition under Section 53 of the Act for annulling the transfer made in favour of the appellants. If such a petition is filed, the District Court to dispose of the petition within six months from the date of filing the petition in accordance with law after notifying the appellants herein. 19. All contentions available under law including maintainability of petition filed under Section 9 of the Act by the respondents 1 & 2 are kept open. 20. In view of disposal of the appeals, pending I.A. stands consigned to the record room.