Provincial Insolvency Act, 1920 – s.37 – Proceedings on annulment – By way of the impugned judgment, High Court inter alia held that all the acts done by the official receiver between the declaration of the appellant’s insolvency and the annulment of the adjudication of insolvency were saved u/s.37(1) and that, notwithstanding the annulment of insolvency against the appellant and his mother, the sale deed executed on 11.03.1983 was valid:
Held: 1.1 It is only upon a conclusion that the transactions and orders of the court and the receiver are valid and attained finality that the property shall not revert to the debtor upon annulment of adjudication u/s.37. [Para 18]
1.2 Documents in Ex.P.4, the alleged offer and Ex. P.6, the alleged acceptance were fabricated as there were significant contradictions in the said documents – The fact that the documents were fabricated was further strengthened by the failure of the Partner to produce the original correspondence of offer and acceptance despite the Notice from the official receiver for the production of the same. [Para 21]
1.3 The transaction covered by Ex.P.4 and Ex.P.6 were not protected u/s.55 of the Act, as the provision is applicable only to protect bonafide transaction earlier to the adjudication of insolvency – Ex.P.4 was not in existence on 08.05.1975, the date of initiation of the insolvency proceedings. [Para 21]
1.4 The deposits of Rs. 35,000/- on 19.04.1981, Rs 60,000/- on 25.05.1981, and Rs. 69,955/- on 07.02.1983 by the Respondent No.
1 as consideration for share acquisition were inconsequential as the transfer deed dated 11.03.1983 was not to survive at all. [Para 21]
1.5 For operation of s.37, there must in fact be a finality of transactions – There must be conclusion of sales, dispositions of property and/or the payments made in that regard – s.37 proceedings cannot partake the character of a civil court deciding a suit for specific performance of an agreement. [Para 22]
1.6 Transfer deed dated 11.03.1983 was executed on the basis of the order passed by the District Court on 04.01.1983 – When the said order dated 04.01.1983 is set aside and the matter is remanded back to the District Court for reconsideration in view of the subsequent annulment order dated 20.04.1996, the High Court was not justified in reversing the findings of the District Court on the ground that the transfer deed remained unchallenged – High Court committed a serious error in drawing these conclusions – It also committed a jurisdictional error in not reappreciating the evidence adduced before the trial court, which as an appellate court the High Court was bound to undertake. [Paras 23, 24]
1.7 High Court committed a serious error in reversing the findings of the District Court – If the judgment of the District Court is upheld, the appeals filed by the purchaser does not survive –Appeals filed against the judgment and order passed by the High Court in M.F.A No. 2873 of 2004 c/w M.F.A No. 2706/2004 dated 25.02.2011 are allowed and the judgement and order passed by the Additional Judge in I.A.NO. XV in I.C. No 2/75 c/w Ms. C.NO.5 /2000 dated 16.02.2004 is restored. [Paras 23, 24, 27]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey See, Sarju Pershad Ramdeo Sahu v. Jwaleshwari Pratap Narain Singh, AIR 1951 SC 120.. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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