ULHANNAN VARGHESE Vs. OFFICIAL RECEIVER

JUDGEMENT

(1.) THE appellants in these two Second Appeals are alienees certain properties from one Thommi Mathew who has been adjudicated insolvent by an order dated 26th November,1965,in I.P.No.7 of 1964.The properties of the insolvent now vest in the official receiver.The official receiver filed two petitions I.A.2968/66 and I.A.2869/66 for declaration that two documents of sale Ext.P -1 dated 17th May 1961 and Ext.P -2 dated 9th January 1961 executed by Thommi Mathew are sham documents and that the properties covered by them belonged to the insolvent.The vendees under the documents contested the claim.The insolvency court as also the District Judge,Kottayam in appeal overruled the objections and held that the documents did not convey title to the vendees.These Second Appeals are preferred against the above decision.

(2.) THE insolvent Thommi Mathew was a chitty foreman.In the petition field on 16 th September 1964 for adjudicating him as insolvent he mentioned 19 items of debts which came to a total of Rs.41,350.The debts included 5 decrees obtained against him,one of them being O.S.198/1123(M.E.) The other decrees are of the years 1961,1962 and 1963.The remaining items of debts are amounts due to the subscribers under chitty.The only item of property mentioned in the petition is a purayidom having an extent of 27 cents and valued by him at Rs.1,500.After the vesting order the official receiver filed the above petitions alleging that Exts.P -1 and P -2 are sham transactions and that title and possession of the items mentioned therein were retained by the insolvent.The vendee under Ext.P -1 is the husband of the insolvent's wife's sister,while the vendee under Ext.P -2 is the brother of the insolvent's wife.Ext.P -1 mentions a consideration of Rs.3,000 and states that Rs.2,500 has been received by the insolvent from the vendee on previous occasions and that Rs.500 was paid in cash on the date of the document.The whole of the consideration under Ext.P -2 namely,Rs 2,000 is made up of amounts which the insolvent is alleged to have borrowed from the vendee on previous occasions.The main conten­tion put forward on behalf of the appellants is that the applications were not maintainable as they were filed beyond two years of the dates of the documents.According to the appellant the documents could be challenged only under section 53 of the Transfer of Property Act.The courts below however held that the transactions came under the purview of section 4 of the Insolvency Act and that petitions were therefore maintainable.

(3.) THE question has been raised in a number of cases as to whether in the case of a document of transfer which apparently conveys title but where the transferor retains possession and control over the property and the parties never intended that the document should be acted upon,it is necessary to avoid the transfer by filing a suit under section 53 of the Transfer of Property Act and whether the court has power to decide the real character of the docu­ment in a petition filed under section In Muthiriyen v. Official Receiver, A.I.R.1943 Mad.252 the Madras High Court while considering the question observed: ˜˜The law is fairly clear that in matters of this kind section 53 is not exhaustive and that applications can be made under section 4 where the petitioner asserts that the transaction which he wishes to set aside is a sham and nominal one.It is therefore no impediment to the reception of this application by the court under section 4 that the alienation in question was more than two years before the insolvency.