NARAYANAN Vs. KANNABIRAN MUDALIAR AND ANR.

JUDGEMENT

(1.) THE appellant is the purchaser of certain properties from the Official Receiver of Chingleput who held on 16th April, 1968 an auction sale of the properties of the insolvent in I.P. No. 1 of 1953 on the file of the Sub -Court, Chingleput. The first respondent herein, who is the son and legal representative of one of the petitioning creditors (since dead), filed a petition under Sections 4 to 6 and 68 of the Provincial Insolvency Act to set aside the sale. This was opposed by the Official Receiver and by the appellant, the purchaser. The learned Subordinate Judge, Kanchipuram, after an elaborate discussion of the evidence adduced by the parties, set aside the sale on the ground that the auction sale had been conducted by the Official Receiver without any notice to the petitioning creditor and that the price fetched at the Official Receiver's auction was unduly low. Against the order of the Subordinate Judge, the appellant preferred C.M.A. No. 41 of 1970 on the file of the District Judge, Chingleput. The learned District Judge, upon a review of the evidence held that the trial Court was perfectly justified in setting aside the sale, inasmuch as no notice of auction had been issued by the Official Receiver to the creditors and the price fetched at the auction for the properties and that, too, in favour of the husband of the grand -daughter of the insolvent was too very low. Upon this finding, the first appellate Court dismissed the appeal with costs. It is against that judgment that the present appeal has been filed.

(2.) BEFORE going into the merits of the case, I think it right to refer to the ruling of the Supreme Court reported in Srinivasa Naicker v. Engammal : AIR1962SC1141 in which the power of the Court under Section 68 of the Provincial Insolvency Act and the limitations upon that power have been discussed. Their Lordships observed at page 1143 as follows:

(3.) NOW , in this case, the properties sold constituted the insolvent's 7/12th share in a house bearing Door No. 9, Apparao Mudali Street, Kanchipuram, and in the land measuring 23 acres 52 cents in Koneri Kuppam Village. The house is said to have fetched a price of Rs. 4,060 and the land, a sum of Rs. 5,550. It is significant that the purchaser of these two properties was no other than the husband of the grand -daughter of the insolvent himself. He lives 50 miles away from Kanchipuram and it is intriguing that while the petitioning creditors were not apprised of the auction held by the Receiver, this man, who lives 50 miles away from Kanchipuram, should have got scent of this sale and offered bid at the auction. It has been alleged in the petition that the sale itself is the result of fraud and collusion between the insolvent and the purchaser and that the sale has been effected solely to benefit the insolvent. This allegation appears to have been substantiated by proof of the close relationship between the purchaser and the insolvent and the failure on the part of the Receiver to give due publicity to the sale. One other circumstance, which has weighed with both the Courts below, is that the auction has fetched not even half the market value of the properties. According to R.W. 1, the purchaser himself, the prevailing market value of the land is between Rs. 30 and Rs. 40 per cent. P.W. 1's evidence is that there is a well and pump set worth Rs. 5,000 in this land and that at the time of the sale, the 7/12th share of the insolvent in the land would be worth Rs. 12,000. If we take the valuation given by R.W. 1, it would come to much more than Rs. 12,000. As for the house, the total extent of the site upon which the house stands is 38' X 200' and the built -in area is 38' X 120'. In the petition, it has been alleged that the house is worth not less than Rs. 7,500. Both these properties together have been sold for Rs. 9,500 in favour of the appellant. Having regard to the context in which, and the person to whom, the sale had been effected both the Courts below held that the price fetched at the auction held by the Official Receiver was excessively low. In fact, the petitioner before the first Court offered to purchase the properties for Rs. 20,000, that is to say, for more than double the amount for which the Official Receiver has actually sold the same to the appellant. In these circumstances, I do not think that the concurrent judgments of the Courts below can be regarded as being contrary to law. On the other hand, I think the grounds upon which the Courts below decided to set aside the sale are quite sound and acceptable.