BHIKU APPA KURA Vs. DATTATRAYA CHANDRAYYA

JUDGEMENT

(1.) THIS is an appeal by the receiver of the estate of the insolvent Bhiku Appa Kura against the order of remand passed by the Assistant Judge of Sholapur under the following circumstances, Bhiku sold his shop to the respondent Dattatraya for Rs. 12,000 on December 15, 1930. The consideration was made up of Rs. 5,000 due as past debts after certain remission, and Rs, 7,000 paid in cash at the time of the execution of the sale deed. Within a week after the execution of the sale deed, an application for insolvency was made on December 23, 1930, and Bhiku was adjudged insolvent on June 27, 1931 The receiver of his estate made an application, under Sections 53 and 54 of the Provincial Insolvency Act to have the sale set aside on the ground that it was fraudulent and intended to give preference to the respondent. The sale was set aside on March 26, 1934, and the order was confirmed in appeal on August 5, 1935. The second appeal to the High Court was dismissed. Thereafter on August 28, 1939, the respondent made an application to have his name entered in the schedule of creditors for a sum of Rs. 15,355-10-6 out of which he claimed Rs. 7,000 as a charge on the insolvent's property. The receiver contended that the sale deed taken by the respondent was colourable and sham and without consideration, that the respondent's claim for Rs. 5,000 was time-barred and that as it had been held in the previous appeal that the amount of Rs. 7,000 had not been paid in cash, his claim for that amount was barred as res judicata. He also contended that as the amounts had been paid for obtaining a fraudulent sale deed the respondent was not entitled to be entered in the schedule of creditors. The Insolvency Court upheld these contentions and rejected the respondent's application. In appeal the learned Assistant Judge held that as the sale was voidable and was set aside at the instance of the receiver, the respondent was entitled to recover back his amounts under Section 65 of the Indian Contract Act. He, therefore, remanded the proceedings to the trial Court with a direction to allow the respondent to prove his claim in respect of both the past debt and the cash amount included as consideration in the sale deed. The receiver has presented this appeal against that order of remand, and it is contended that the plaintiff's claim cannot be recognised by the receiver either in respect of the cash amount of Rs. 7,000 or in respect of the amount of the past debt included in the consideration of the sale deed.

(2.) THE contention in the lower Court that the respondent should not be allowed to prove whether he had actually paid Rs. 7,000 in cash in view of the finding in the previous litigation is not pressed, since although it was then held that the amount of Rs. 7,000 was not proved to have been paid in cash, yet ultimately the case was decided on the ground of fraudulent preference. It was not then necessary to decide finally whether the consideration was paid in cash or not, and the finding does not operate as res judicata. .

(3.) THERE is a distinction between setting aside a transfer under Section 53 of the Transfer of Property Act and setting aside a transfer under Section 54 of the Provincial Insolvency Act. In the former case the transfer is voidable and can be avoided at the instance of a creditor if it is proved to have been intended to defeat or delay the creditor, whereas in the latter case, if an application for insolvency is made within three months after the transfer, such transfer is void, if it is intended to defeat or delay the creditor, and not merely voidable, and as soon as it comes to the notice of the receiver it shall be annulled. Hence a transfer under such circumstances cannot be said to be discovered to be void or said to become void within the meaning of Section 65 of the Indian Contract Act. I, therefore, hold that so far as Rs. 7,000 paid in cash at the time of the execution of the sale deed are concerned, the respondent cannot prove his debt and cannot seek to have his name entered for that amount in the schedule of creditors.