KROWIDI SATYANARAYANA Vs. MESSRS MOTU INDUSTRIES PVT LTD

JUDGEMENT

(1.) This is an appeal by the and defendant against the Decree and Judgment of the District Judge, Rajahmundry, in O.S. No. 39 of 1957. The facts relevant for the purpose of the appeal are as follows : The Godavari Central Co-operative Stores, Ltd., now in liquidation (first defendant), obtained a decree against C. Satyanarayanamurthy (the third defendant) before the Registrar of Co-operative Societies in Claim No. 432/52-53 on I4th November, 1952 on the ground that a sum of Rs. 7,261 was due on 4th April, 1952 with interest at 9 percent, per annum on account of khata dealings. In execution of that decree, the first defendant brought the house belonging to the judgment-debtor (third defendant) to sale at which the second defendant, K. Satyanarayana, purchased it. The Motu Industries Private Ltd., the plaintiff in the action, is one of the several creditors of the third defendant.

(2.) The plaintiff's case is that, the third defendant became indebted to the plaintiff in a sum of about Rs. 68,974, principal amount, for which he executed a promissory note, dated 23rd January, 1952, in favour of the company, agreeing to re-pay the same with interest at Re. 1-0-6 per mensem. The amount under the promissory note substantially remained unpaid. The plaintiff has also obtained certain decrees against the third defendant and others for recovery of other sums of money, and thus the plaintiff is a simple money creditor, as well as a judgment-creditor of the third defendant. As a result of his heavy indebtedness, the third defendant committed acts of insolvency, and pleaded inability to pay. He gave notice of suspension of payment to his creditors. Thereupon, the plaintiff filed a creditor's application on 23rd February, 1953, I.P. No. 4 of 1953 on the file of the District Judge's Court, Rajahmundry, to adjudicate the third defendant as an insolvent. When the plaintiff came to know that the first defendant, in collusion with the third defendant, was bringing the third defendant's house to sale, it filed an application and got impleaded the first defendant as a party to I.P. No. 4 of 1953 on 24th February, 1953. The plaintiff also filed I.A. No. 15 of 1953 in I.P. No. 4 of 1953 to restrain the first defendant from bringing the third defendant's house to sale. Though the order of injunction was communicated to the first defendant by a memo, dated 25th February, 1953, the Secretary of the first defendant, K. Ramasastry, in collusion with the Sale Officer of the Co-operative Department, got the sale adjourned to 27th February, 1953, and a sham sale in favour of the second defendant was got up by the third defendant in collusion with the officers of the first defendant and the Co-operative department, contrary to the said order. On an inspection of the concerned records in the office of the Deputy Registrar, the plaintiff learnt that the decree obtained by the first defendant against the third defendant in Claim No. 432 of 1952-53 was without jurisdiction, and, therefore, a nullity, apart from the claim being bogus and based on false allegations. The validity of the decree is attacked on grounds, inter alia, (1) that the third defendant was not a member or share-holder of the first defendant-society, nor its agent, (2) that the Deputy Registrar had no jurisdiction to pass the decree, and (3) that the decree was a result of the conspiracy and collusion between the officers of the first defendant and the third defendant, intended to defraud the plaintiff and the other creditors of the third defendant. According to the plaintiff, there was no amount due to the first defendant from the third defendant, and the Deputy Registrar did not have initial jurisdiction to entertain the claim, much less to pass a decree. The decree was, therefore, a nullity, and, consequently, the execution proceedings are without jurisdiction, and are vitiated by fraud. The sale officer, who was informed of the order of injunction on 25th February, 1953, originally adjourned the sale on the ground that injunction was granted, and made a note to that effect on the sale list, but later tampered with that list, and held a collusive sale on 27th February, 1963 at the instance of the third defendant and the officers of the first defendant and knocked down the sale in utmost secrecy in favour of the second defendant, for the benefit of the third defendant. The plaintiff urged that the third defendant supplied the funds for depositng the sale price of Rs. 10,250 and that the sale is thus the result of fraud. The plaintiff came to know of this fraud only after a long delay on 29th March, 1957. A petition filed by one of the creditors for setting aside the sale was rejected by the Deputy Registrar on 13th June, 1953, and the result of the appeal against that order was not known, but the plaintiff learnt that the sale was confirmed by the Deputy Registrar. For all these reasons, the conduct of the sale is vitiated by fraud, abuse of process, irregularity and collusion, and also by reason of its having been held under a decree which is void and a nullity. The plaintiff's case is that, the third defendant continued to have title to the plaint' A ' schedule house. The present suit was therefore, laid by the plaintiff on behalf of himself, and other creditors of the third defendant in a representative capacity for a declaration that the decree obtained by D-1 against D-3 in Claim No. 432 of 1952-53 is void and a nullity, and consequently the execution proceedings on the foot of the said decree by the sale of the house and purchase by the second defendant are void, and not binding on the plaintiff and other creditors.

(3.) The suit was resisted by all the defendants. The first defendant denied the allegations in the plaint, and contended, inter alia, that the suit is not maintainable under law, that there was no collusion between the first defendant and the third defendant, and that the sale conducted by the Deputy Registrar by which the second defendant became the purchaser of the third defendant's house is valid, and the allegations to the contrary are not tenable. The decree in Claim No. 432/52-53 was validly passed, and the procedure adopted by the Deputy Registrar upto and including the award and sale is perfectly intra vires, and within his jurisdiction. There was no collusion and conspiracy between the third defendant and the first defendant or its officers, the award passed by the Deputy Registrar is valid, and has the same effect as the decree of a civil Court. The first defendant realised its debt from the third defendant in full, and thereafter had gone into liquidation. There was no valid cause of action against the first defendant.