SANKAR RAM AND COMPANY Vs. KASI NAICHER

JUDGEMENT

(1.) "Whether protection provided in the proviso to Section 55 of the Provincial Insolvency Act, 1920 is available to a bona fide transferee for valuable consideration after the presentation of any insolvency petition but before the date of passing of the order for adjudication without notice of the presentation of the insolvency petition by or against the debtor", is the short question that arises for consideration and decision in this appeal.

(2.) The appellant filed petition under Section 55 of the Provincial Insolvency Act, 1920 (for short the Act) for recovery of Rs. 25, 155.40 with interest from the Bank (respondent No. 2) on the grounds that it had paid the said amount on 24-8-1978 for purchase of shares belonging to the insolvent Kasi Naicker (respondent No. 1). Said Kasi Naicker had filed a petition to declare him as insolvent in I.P. No. 7/76 in 1976, which was dismissed on 25-10-1977 by the Subordinate Court, Tuticorin. He filed appeal in C.M.A. No. 116/77 before the District Court challenging the order of dismissal, which was allowed on 17-10-1978. The appellant purchased 249 shares of Rajapalayam Mills belonging to the debtor-Kasi Naicker by depositing the amount to get the shares released in its favour with the consent of the debtor. When the Bank neither released the share certificates nor returned the money deposited by it, the appellant filed I.A. No. 6/79 in I.P. No. 7/76 under Section 55 of the Act for declaration that 249 shares of Rajapalayam Mills belong to it or in the alternative to return the money with interest paid by it. The said petition was allowed by order dated 19-10-1984 directing the Bank to pay sum of Rs. 25, 155.40 with interest at 9% per annum from 24-8-1978 to the appellant. Kasi Naicker filed C.M.A. No. 40/84 aggrieved by the said order made in I.A.6/79 in I.P. 7/76 in the Court of District Judge, Tirunelveli. The appeal was allowed holding that the order of adjudication dates back to the date of filing of the petition and, therefore, any transaction by the insolvent thereafter would not bind the receiver and the appellant was not entitled to any relief. The appellant approached the High Court by filing revision petition in C.R.P. 6/92 in the High Court challenging the order passed by the learned District Judge. The High Court dismissed the revision petition. Hence the appellant has filed this appeal.

(3.) In the trial Court contentions were raised opposing I.A. No. 6/79. It was contended that the petition itself was not maintainable; that the amount was not paid by the appellant and the benefit of Section 55 of the Act was not available to it. Rejecting the contentions relief was granted to the appellant. The learned District Judge in the appeal set forth following three points for determination :-