LAWS(PVC)-1943-11-80

GOLLAMUDI VENKATAPPAYYA Vs. OFFICIAL RECEIVER

Decided On November 04, 1943
GOLLAMUDI VENKATAPPAYYA Appellant
V/S
OFFICIAL RECEIVER Respondents

JUDGEMENT

(1.) This is an appeal by a person who purchased the properties of an insolvent under a sale deed executed subsequent to the filing of the petition to adjudge him an insolvent and prior to the passing of the order of adjudication, against the order on a petition filed under Section 1, Provincial Insolvency Act, for a declaration that he has a valid title to them. The properties which he purchased as well as other properties were brought for sale in execution of a decree obtained against the insolvent debtor before the petition to adjudge him an insolvent was filed. They were all sold in execution, but during the pendency of the insolvency proceedings, the debtor by selling the properties in dispute to the appellant for Rs. 1750 and by selling other properties for Rs. 4250 or so to another person, raised Rs. 6000 and directed the same to be paid into Court for getting the court sale set aside. The money was accordingly deposited by the appellant and the other purchaser and the sale was set aside. This was on 20 January 1935. Fifteen days later the order of adjudication was passed. Even before the appellant deposited the money into the executing Court, the insolvency Court was moved by a creditor to stop the sale in execution of that decree, but the insolvency Court passed an order directing the executing Court to proceed with the sale and deposit the sale proceeds to the credit of the insolvency petition. Accordingly the money paid by the appellant for setting aside the sale was credited to the insolvency proceedings. The Official Receiver applied to the insolvency Court for payment of the amount to him on the ground that the money belonged to the insolvent and that all the creditors were entitled to a share in it. It was stated then by the Official Receiver that the sale to the petitioner was for a fair price and that it was out of the sale proceeds the amount due under the decree was deposited into Court to avert the court sale. The insolvency Court overruling the objection of the decree-holder that he was entitled to be paid the entire amount directed the payment of the money to the Official Receiver and he received the amount for distribution to the general body of creditors. Subsequently after having had the sale proceeds paid over to him, the Official Receiver claimed a right to the properties as well and sold some of them at an auction sale held by him.

(2.) The appellant before this Court thereupon filed a petition out of which this appeal arises for a declaration that he is entitled to the properties. The first Court held that inasmuch as the appellant had notice of the insolvency proceedings before the date of the sale itself, the sale was not valid and that he had hence no valid title to the properties. On appeal, the learned District Judge of Guntur held that the sale was supported by consideration and that the sale was for the purpose of saving the properties of the debtor from being sold in execution of the decree, but held that it was invalid in view of the fact that the appellant had notice of the insolvency proceedings before the date of the sale itself. The appellant's claim accordingly was disallowed by both the Courts. Hence this appeal. Before this Court it is stated that even though the appellant had notice, in view of the fact that the Official Receiver applied for payment of the money to him on the ground that it was the money of the insolvent and elected to stand by the sale and received the sale proceeds, he cannot now go behind his election and claim a right to the properties. It is stated by both sides that there are no authorities of this Court on this point. As it is an important question of law, the papers may be placed before my Lord the Chief Justice for considering whether the appeal may be posted before a Bench. Judgment of Division Bench Leach, C.J.

(3.) This appeal discloses a position of hardship, but after a careful consideration of all the facts we have come to the conclusion that the order of the District Judge must be affirmed.