OFFICIAL RECEIVER OF SOUTH ARCOT Vs. KVMPKTALAGAPPA CHETTIAR

JUDGEMENT

(1.) This is an appeal by the Official Receiver of South Arcot from the decree and judgment of the Subordinate Judge of Cuddalore dismissing the suit instituted by him for a declaration that the deed of mortgage executed by the insolvent one Kadiresan Chettiar in favour of defendants 5 to 8 on 29 January, 1932, in respect of properties mentioned in the plaint schedule is a sham and nominal transaction, or, in the alternative, for a declaration that the said deed of mortgage is not binding on the plaintiff or any of the creditors under Section 53 of the Transfer of Property Act. Defendants 1 to 3 are the sons of Kadiresan Chettiar who died in March, 1940, before the institution of the suit. Defendant 4 is a creditor of the insolvent who claims to have purchased the interests of the sons in item 1 of the plaint schedule. Defendant 9 is a subsequent purchaser from the fourth defendant. Defendant 10 is the Official Receiver of Pudukottah, made a party because of an insolvency petition filed against the same Kadiresan Chettiar in the Chief Court, Pudukottah. The suit has been dismissed on the preliminary point of limitation and oral and documentary evidence was confined to the issue of limitation.

(2.) The mortgage in question was for a sum of Rs. 52,101-1-7 and this sum was alleged to be the total amount of debts due by the insolvent to the four mortgagees severally. This sum was secured on the residential house of the insolvent in Kottaiyur of considerable value and a small piece of land at Chidambaram apparently added to enable the deed of mortgage to be registered at Chidambaram. The mortgagees were closely related to the insolvent. The fifth defendant was the father-in-law of one of his sons (defendant 2). The sixth defendant was the elder sister and the seventh defendant was the daughter of the sixth defendant. The eighth defendant was the elder brother of the insolvent in the family in which he was born (he had been adopted). Kadiresan Chettiar appears to have been in involved circumstances at about this time. Soon after this deed, one K.M.C. Chinnayya Servai filed a petition, I.P. No. 8 of 1932, on 20 June, 1932, in the Court of the Subordinate Judge of Devakottah to adjudge Kadiresan Chettiar as an insolvent and among the acts of insolvency alleged to have been committed, the mortgage in question was one. It was alleged that" the said document is a sham and nominal transaction and in any event a fraudulent preference intended to defeat and delay the petitioner and other creditors." This petition was, however, dismissed on 9th April, 1934. Another petition by one Muthukaruppan Chettiar (I.P. No; 20 of 1932, Sub-Court, Devakottah) to adjudicate Kadiresan Ghettiar an insolvent shared the same fate by its dismissal on 24 January, 1933.

(3.) On 8 July, 1935, Kadiresan Ghettiar himself filed a petition in the Court of the Subordinate Judge of Cuddalore to be adjudged an insolvent and on 14 July, 1936, an order of adjudication was passed. It appears however, that the Official Receiver had been appointed an interim receiver even on the 17 July, 1935. There was a change in the personnel of the Official Receiver and the present appellant took charge on 5 September, 1938. There was a public examination of the insolvent in 1939. On 18 October, 1940, the Official Receiver prayed for sanction to file a petition under Section 4 of the Provincial Insolvency Act impeaching the mortgage. But the Subordinate Judge refused to accord sanction mainly on the ground that the matter was too complicated. It is unfortunate that the Subordinate Judge refused sanction as we consider that it was proper for him to have enquired into the matter and if such an enquiry had been made at that stage, this litigation could have been avoided. After this order, one of the creditors, Muthukaruppan Chettiar, attempted to induce the Official Receiver to file a suit. But naturally the Official Receiver was unwilling to file a suit after the above order of the learned Subordinate Judge. Sanction was, however, accorded to the creditor himself to file a suit at his own risk. But subsequently on the creditor undertaking to finance the litigation, sanction was accorded to the Official Receiver himself to institute the present suit.