HAJI ANWAR KHAN Vs. MOHAMMAD KHAN

JUDGEMENT

(1.) This reference to a full Bench raises the question of jurisdiction of the insolvency Court. The questions submitted to us for decision are; (1) Whether an insolvency Court can try a question of title raised on the basis of a transfer which took place more than two years prior to the adjudication, having regard to the provisions of Section 53, Insolvency Act? (2) Would it make any difference if the receiver alleges that no transfer had been intended from the very beginning and no title had passed, the transaction being a mere paper transaction and void?

(2.) If the answer to the first inquiry is in the affirmative the second question will not arise.

(3.) Every Judge of this Court except one who had to consider the point has decided in favour of jurisdiction of the insolvency Court, that is, the first question has been answered by him in the affirmative. The present Section 4, Insolvency Act (No. 5 of 1920) is an addition to the previous insolvency statute law as laid down in Act No. 3 of 1907. The present Act came into force on 25 February 1920, and on 18 July 1921 a Bench of two Judges, Walsh and Wallach JJ., had occasion to consider the scope of Section 4 of the new Act. The case before the Court was one of a sale by the insolvent more than three years before the insolvency with intent to defraud and delay his creditors. The learned Judges observed: The District Judge has held, rightly, that it does not come within any of the express provisions of the insolvency law, and he has gone on to hold, erroneously, that a transaction cannot be attacked under the provisions of the Transfer of Property Act or under general provisions of the law in the insolvency Court. Here he is wrong. The insolvency Court has to administer the law under its own procedure and to decide questions arising in insolvency which are covered by special provisions of the Insolvency Act, where, for example, a trustee is given a higher title than the original debtor. But the insolvency Court also has to apply, and to decide, all questions of general law, including such questions as are raised by Section 53, T.P. Act. That is one reason why the administration of insolvency is so onerous and imposes a very heavy burden on the District Courts. If the receiver is right in fact, clearly this transaction was void under Section 53, T.P. Act, and the property attached by the receiver ought to be distributed as a part of the estate among the creditors... There ought to be a full inquiry between the receiver and the creditor on one hand, and the debtor and his family on the other, as to the bona fides of this transaction. Whether you call it summary or not, it ought to follow the ordinary course of a suit. In the main, the provisions of the Civil P. C. are applicable to such inquiry, and there ought to be sworn testimony and the same care used with regard to documents, and the admission or rejection of documentary evidence, as in a suit: Shikri Prasad V/s. Aziz Ali A.I.R. 1922 All. 196.: