PARAMATMUNI HANUMANTHA RAO Vs. OFFICIAL RECEIVER GUNTUR

JUDGEMENT

(1.) These appeals arise out of proceedings under section 4 of the Provincial Insolvency Act. One Paramatmuni Seshachalam settled his lands and house in favour of his sister's son, Nimmaraju Seetharamachandrarao, by a registered deed, dated 12th June, 1958. Janakiramarao, the brother of the settlee and another creditor of Seshachalam moved the Subordinate Judge, Ongole, in I.P. No. 21 of 1958 for the adjudication of Seshachalam as an insolvent treating the settlt ment made by him in favour of Seetharamachandrarao as an act of insolvency. Seshachalam was adjudged insolvent on 29th Srpttmber, 1959. On 17th March, 1960, Paramatmuni Hanumantharao purchased from Seetharamachandrarao the lands which the insolvent settled on him, for Rs. 600 under a registered sale deed, Exhibit A-1. On the same day, Seetharamachandra Rao sold the house, which is the only other item of property that was settled on him by the insolvent, to Appala Parameswarudu under Exhibit A-2. On 17th December, 1962, the Official Receiver, in whom the estate of Seshachalam vested consequent on his adjudication as insolvent, filed I.A. No. 351 of 1962 for annulment of the settlement made by the insolvent in favour of Seetharamachandrarao, under section 53 of the Provincial Insolvency Act. He did not however implead the vendees under Exhibit A-1 and A-2 as parties to this application though they purchased the properties from Seetharamachandrarao more than two years before then. This application was allowed and the settlement effected by Seshachalam in favour of his nephew was annulled on 17th December, 1963. When the Official Receiver thereafter commenced to take steps for bringing to sale, the properties which were the subject matter of the settlement in favour of Seetharamachandrarao, the vendees under Exhbits A-1 and A-2 moved the Subordinate Judge, Ongole, under section 4 of the Provincial Insolvency Act, in I.A. Nos. 1597 and 1599 of 1964 for declaration of their title to the properties and also for an injunction restraining the Official Receiver from interfering with their peaceful possession and enjoyment of the same. Those petitions were opposed by the Official Receiver who contended inter alia that the petitioners were -bound by the order of annulment passed in I.A.No.351 of 1962. The learned Subordinate Judge negatived this contention on the ground that the petitioners were not parties to I.A.351 of 1962 and that the transfers which they obtained under Exhibits A-1 and A-2 from Seetharamachandrarao, being only voidable, will continue to be valid till they are set aside and accordingly allowed I.A.Nos. 1597 and 1599 of 1964 observing at the same time that. "The Official Receiver is at liberty to file a petition under section 53 or section 4 of the Provincial Insolvency Act challenging these alienations in favour of the petitioners."

(2.) On appeal by the Official Receiver, the learned Additional District Judge, Guntur, held that the settlement effected by the insolvent in favour of Seetharamachandrarao was void and that the petitioners are therefore bound by the order which the Official Receiver obtained in I.A. No. 351 of 1962 though they were not eo nominee parties to that application. He accordingly allowed the appeals and dismissed I.A.Nos 1597 and 1599 of 1964. Aggrieved by this decision, the petitioners in I.A.Nos. 1597 and 1599 of 1964 have preferred these Civil Miscellaneous second Appells as, according to them, the finding arrived at by the lower appellate Court that the settlement effected by Seshachalam in favour of their transferor was void and that they are consequently bound by the order made in I.A. No. 351 of 1962 notwithstanding there not having been impleaded as parties thereto, is contrary to law. The points that therefore arise for consideration in these appeals are (1) whether the annulment of the transfer in favour of Seetharamachandrarao, in I.A.No. 351 of 1962, is binding on the appellants and (2) if not, whether they are entitled to the relief of declaration and injunction sought bv them.

(3.) The answer to point No.1 turns on the question as to whether the settlement by Seshachalam in favour of Seetharamachandrarao, from whom the petitioners purchased the properties, is void or only voidable. If it should transpire that the transfer is void, the appellants would necessarily be bound by the order of annulment made in I.A.No.351 of 1962 as they cannot get better rights than what their transferor himself had in the properties and as a void transfer is no transfer at all in the eye of law. If, on the other hand, the finding should be that the transfer was only voidable, implying that it is valid till it is avoided, the annulment order, which the Official Receiver obtained in I.A.No. 351 of 1962, would normally not bind the appellants who were admittedly not parties to it.