KADLESHAR RAM Vs. BHAWAN PRASAD

JUDGEMENT

(1.) THIS appeal arises out of an insolvency matter. It appears that one Kali Charan was adjudicated an insolvent on the 29th of September 1916. The Court fixed the 17th of November 1916 as the date for the creditors to come in and prove their debts. On that date one Sheo Prasad, a creditor, applied that the Court might take proceedings under Section 43 to punish the insolvent for concealing same part of his property. He also asked that the Court might take action under Section 36 to set aside a sale-deed in respect of two houses made in favour of Kauleshar Ram by the insolvent. No order was passed on that date but on the 22nd of November the Court made an order Put upon the 1st of December. The applicant will produce his evidence. On the 1st of December a number of creditors including Kauleshar Ram came forward to prove their debts and on the same day a Receiver was appointed. The Court then summarily began to deal with the application of Sheo Prasad and set aside the transfer in favour of Kauleshar Bam, holding it to be invalid having regard to the provisions of Section 36. It does not appear that Kauleshar Bam got any notice that the transfer in his favour was to be challenged on that date, nor is it shown that he had any notice of the grounds upon which Sheo Prasad intended to challenge its validity. It would almost seem that had it not been for the fact that he alleged himself a creditor be would probably have not been present at all. We think that this proceeding was quite irregular and calculated to work injustice. The setting aside of the transfer affects not only the judgment-debtor but also the transferee. The property may be valuable and the transferee is clearly entitled to the fullest notice not only that the transfer in his favour is being challenged but also of the grounds upon which it is challenged. If the transfer had keen challenged in any other way except in an insolvency matter, the question would be settled by a regular suit in which there would be a plaint, a written statement, the framing of issues and a day fixed for the trial. A Bench of this Court has suggested the procedure in such circumstances in the case of Chuunoo Lai v. Lachman Sonar 42 Ind. Cas. 841: 15 A. L. J. 279: 39 A. 391, We think that the proceedings to set aside the transfer ought to have been taken in the names of the Receiver and that no proceeding should have been commenced until after the appointment of a Receiver. No doubt the creditors (or any one of them) are entitled to furnish the Receiver with information and evidence and to be examined when the matter is tried out. We allow the appeal, set aside the order of the District Judge and remand the case to him with directions to proceed in the manner indicated above after giving due notice to the parties. The costs of this appeal including fees in this Court on the higher scale will be in the discretion of the Court.