MADAN KUMAR Vs. HARI NARAIN AGRAWAL

JUDGEMENT

(1.) THESE two appeals arise out of insolvency proceedings initiated by Vishnu Narain who made an application to the Insolvency Judge on 9-8-1966, for declaring him insolvent. The court by its order dated 15-1-1968 declared him insolvent. Respondents Nos. 1 to 5 in these appeals made applications under Section 4 of the Provincial Insolvency Act alleging that the disputed house and the shop were the assets of the insolvent and the transactions relating to them were sham and fictitious and hence void. It was alleged that on 16-4-1963 Vishnu Narain executed a gift deed in favour of his minor sons relating to the house in question. The mother of the minors, acting as their guardian, executed a sale deed dated 7- 9-1966 in favour of Madan Kumar, appellant in S. A. F. O. No. 1 of 1973 Vishnu Narain executed a sale deed in favour of his brother-in-law Hari Krishna, appellant in S. A. F. O. No. 2 of 1973, on 27-9-1965 covering the shop in question. According to the respondent-creditors both these transactions were entered into with a view to defeat the claims of the creditors. They prayed that the gift dead dated 16-4- 1963 and the two sale deeds be declared null and void. It was alleged that the insolvent continued to remain in possession of both the properties even after the sale deeds. It was also asserted that the fair market value of the house was Rs. 20,000.00 but the sale consideration was shown to be Rs. 4000.00 which further indicated the true nature of the transaction.

(2.) THE courts below have recorded concurrent findings that the gift deed in favour of the minors and the sale deeds relating to the two properties were sham and fictitious transactions. I have carefully considered the reasoning adopted by the learned Judge in arriving at the conclusion that these transactions were sham and fictitious and I am of the opinion that the findings arrived at are fully justified and they must be affirmed. The learned counsel in fact did not challenge these findings before me.

(3.) IT was next urged that the court had no jurisdiction to adjudicate on the validity of the gift deed on the ground that the gift deed was made more than two years prior to the date of declaration of Vishnu Narain as insolvent. Reliance was placed on Section 53 of the Act which provides for a period of two years within which a transfer of the nature referred to in that section may be declared voidable and be annulled by the court. As observed earlier, Section 53 refers to transfers which are only voidable and it does not cover a case where the transfer is claimed to be void since its inception. The bar of two years provided for in Section 53 should not therefore, apply to a transaction which is claimed to be void. This Court in Anwar Khan v. Mohammad Khan, (AIR 1929 All 105) (FB) laid down that Sections 53 and 54 do not deal with the jurisdiction of the insolvency court, but only lay down rules as to the manner in which evidence should be considered in certain cases arising in that court. These sections, therefore, do not control the provisions of Section 4 and the insolvency court is competent to try the issue whether the insolvent is entitled to the property or not even though the transactions complained of took place beyond two years of the declaration of insolvency. In Vinayak Shamrao v. Moreshwar Ganesh, (AIR 1944 Nag 44) (FB). Also the view taken was that Sections 53 and 54 empower the court to annul certain transfers which take place within a specified time but either section does not take away the general and wide power conferred by Section 4. Sections 53 and 54 are enabling sections. They confer certain additional powers on the insolvency court which an ordinary civil Court does not have. They are not restrictive and do not take away anything which is already there. Neither Section 53 nor Section 54 deal with sham transfers. For one thing such transfers do not require annulment, and for another they are not really transfers, they only pretend to be. They are matters relating to the property which the court can deal with apart from Sections 53 and 54. The same view was taken by the Bombay High Court in Padamsi Premchand's case (AIR 1949 Bom 129) (FB) (supra). On the principle laid down by these decisions it must be held that the insolvency court is competent to adjudicate upon the validity of the transfers made even prior to two years of the date of insolvency.