N. M. JAKIRIA SAHIB, BY HIS POWER OF ATTORNEY AGENT, A. MOHAMAD MUSTAFA Vs. THE OFFICIAL RECEIVER, WEST TANJORE

JUDGEMENT

(1.) This Letters Patent Appeal is preferred against the judgment of Kailasam, J, in A.A.A.O. No. 1 of 1960, arising out of an application made by the Official Receiver of West Tanjore in I.P. No. 7 of 1956 questioning a sale deed dated 27th August 1956, executed by the insolvent Balakrishna Naidu. The Official Receiver in his petition asked for the annulment of the said sale deed in favour of the appellant herein (purchaser) in respect of the property described in the schedule to the petition. The contentions of the Official Receiver were the following. The property was easily worth Rs. 40.000, but it was sold for Rs. 32,000. The purchaser knew fully the involved circumstances of Balakrishna Naidu. The transaction is liable to be impugned and set aside under Ss. 53 and 54 of the Provincial Insolvency Act. The appellant opposed this petition by alleging that when he purchased this property the proceedings in insolvency were closed and contending that the petition was barred by res judicata by virtue of the decision in O.S. No. 140 of 1957, which arose out of execution proceedings in E.P. No. 107 of 1956 and that the sale was bona fide, made in good faith and for valuable consideration and it was not open to question. The learned Subordinate Judge who tried this interlocutory application (I.A. No. 178 of 1958) and the learned District Judge and Kailasam J. who heard the appeals C.M.A. No. 15 of 1959 and C.M.S.A. No. 1 of 1960. respectively, gave concurrent findings that the property is admittedly worth over Rs. 40,000 and in fact one of the creditors P.W. 3 offered to purchase the property for Rs. 45000 and that the property was not sold for proper consideration. They further held that it was not a bona fide transaction as it was brought about with a view to defeat and delay the creditors of Balakrishna Naidu, the insolvent, that the petition of the Official Receiver is maintainable as the proceedings in insolvency had not terminated and that the petition is not barred by res judicata as in the previous proceedings the Official Receiver was neither represented nor given any notice of the same. Kailasam J., agreeing with the findings of the Courts below confirmed the order setting aside the sale in favour of the appellant. It is against this judgment the purchaser has preferred this Letters Patent Appeal. Learned Counsel for the appellant advanced before us the same arguments that were addressed before Kailasam, J. Taking the first question about the value of the property, admittedly, the property is situate in the heart of Kumbakonam opposite to Gandhi Park and the Town High School. It has been established that the value of the property would be much more than the price mentioned in the sale deed. Oralevidence of P.Ws. 1 to 3 has been let in to prove that the property could be sold for Rs. 45,000. The Subordinate Judge of Kumbakonam who tried the petition of the Official Receiver observed that these witnesses were men of substantial worth and one of them offered to pay Rs. 45,000. Kailasam, J. accepted their evidence and confirmed the finding that the property was worth over Rs. 45,000.

(2.) In regard to the transaction itself before deciding whether it is bona fide or not, we have to consider in detail the circumstances under which the sale deed was executed in favour of the appellant. The insolvent Balakrishna Naidu and his minor brother Kannan were running a coffee hotel in the property that was sold. The transaction was brought about through a broker and erstwhile vakil gumastha. He was examined as R.W. 1 in the application and he gave the necessary details connected with the sale. His evidence was not believed by the learned Subordinate Judge. The intrinsic evidence furnished by the sale deed itself, throws some doubt about the consideration for the sale deed. In the deed the purchaser was directed to discharge several mortgage debts and decree debts. It has been found by all the Courts that the purchaser paid about Rs. 8000, towards these decrees and mortgage debts and the other debts mentioned in the sale were not at all discharged. The purchaser was also directed to return the advance taken by the insolvent from the tenants in the house. But the purchaser did not return the amounts and the receipts obtained by him, namely, Exs. B -8 to B. 10, only show that he had appropriated the amounts by way of advance. The balance of Rs. 3235 is said to have been paid in cash to the insolvent Balakrishna Naidu, but it was observed by the Subordinate Judge that the evidence adduced on this aspect of the case is so flimsy and meagre that it is not worthwhile to act upon it. Another direction given in the sale deed is that a sum of Rs. 15,000 should be deposited in the Indian Batik in the name of the minor Kannan as representing his share. Admittedly, the purchaser did not deposit this sum in the name of the minor. But it is seen from Ex. B -17 that the deposit was made in the name of his power agent Mohammed Mustafa, "Rahman House" Vadakkari, Post, in the Indian Bank Ltd., Mayuram:

(3.) Though the consideration for the sale deed is Rs. 32,000, the actual amounts the purchaser parted with were only the following, namely, Rs. 4000 deposited by him to the credit of O.S. No. 59 of 1956 as per orders of the High Court, Rs. 2175, paid for discharging a Small Cause Court decree debt and another sum of Rs. 1650 paid in discharge of the decree in O.S. No. 192 of 1954, on the file of the District Munsif's Court, Kumbakonam. The rest of the sale price was not paid by the purchaser, but on the other hand, directly or indirectly the purchaser, retained the balance of the sale price with himself. Therefore, the finding that not only the sale is for an inadequate price, but the transaction is not bona fide finds ample support for the evidence and the circumstances. It has also been found that the property was sold when Balakrishna Naidu, the vendor, was heavily indebted.