Andhra HC (Pre-Telangana)
Pragallapati Gangaraju vs K. Satyanarayana And Ors. on 20 October, 2005
Equivalent citations: 2006(1)ALT467
ORDER A. Gopal Reddy, J.
1. The petitioner invoked the supervisory jurisdiction of this Court under Article 227 of the Constitution of India for setting aside the order, dated 16-9-2005, passed by the learned Senior Civil Judge, Kovvur, in dismissing I.A. No. 1425 of 2005 filed in I.P. No. 31 of 2004, by the petitioner to stay the proceedings of the Official Receiver pending disposal of the application filed by him under Order IX Rule 13 CPC.
2. The facts, which are not in dispute, are as under:
The vendor of the revision petitioner filed I.P. No. 13 of 2002 before the learned Senior Civil Judge, Kowur, showing the suit schedule property as schedule 'A' property and subsequently, he filed a memo, dated 28-7-2004, not pressing the I. P. and therefore, the lower Court dismissed the said I.P. In the meantime, it appears that he transferred the schedule 'A' property in favour of the revision petitioner. Thereafter, respondents 1 to 3/ creditors filed I.P. No. 31 of 2004 before the same Court against the vendor of the petitioner and the petitioner herein, contending that the vendor of the petitioner committed an act of insolvency by executing a sale deed on 19-7-2004 fraudulently in favour of the petitioner herein. In the said I.P., the lower Court passed an ex parts decree, dated 20-6-2005, which is to the following effect:
Affidavit of P.W.1 filed. Exhibits A-1 to A-7 marked. Petition claim is proved. The 1st first respondent shall be declared as Insolvent. Time for discharge 6 months. The petition schedule property shall vest with official Receiver.
3. On coming to know of the said order, the petitioner filed I.A. under Order IX Rule 13 CPC for setting aside the ex parte decree, along with an application to condone the delay. He also filed I.A. No. 1425 of 2005 to stay the proceedings of the Official Receiver pending disposal of the application filed under Order IX Rule 13 CPC for setting aside the ex parte decree.
4. The lower Court by the impugned order dismissed the said I.A. observing that the Court already passed an order on 20-6-2005 while adjudicating the debtor as insolvent and the property was also vested with the Official Receiver and therefore, it cannot be said that the Official Receiver had taken possession of the property without authority.
5. Two contentions were raised by the learned Counsel for the petitioner. The foremost contention is that the Official Receiver had taken possession of the property without authority. Unless an order is passed appointing the Official Receiver by the Court, the Official Receiver cannot take possession of the property as contemplated under the provisions of Section 56 of the Provincial Insolvency Act, 1920 (for short "the Act"). Therefore, the Official Receiver cannot take possession of the property from the petitioner and the learned Counsel placed reliance on the Division Bench judgment of Madras High Court in Vythilinga Padayachi v. Ponnuswami Padayachi AIR 1921 Mad. 642 (D.B.). The second contention of the learned Counsel is that unless an order is passed appointing the Official Receiver as contemplated under Rule 11 of the Andhra Pradesh Provincial Insolvency Rules, the property does not vest in the Official Receiver as per the order passed. Therefore, the lower Court is not justified in dismissing the I .A. stating that the order, dated 20-6-2005, is an order appointing the Official Receiver.
6. Per contra, the learned Counsel for the respondents supported the impugned order contending that when the vendor of the petitioner filed I.P. No. 13 of 2002 and the same was dismissed as not pressed, any transfer made within two years is a void transfer. Therefore, respondents/creditors filed I.P. No. 31 of 2004 to set aside the sale deed executed in favour of the petitioner. The lower Court accordingly granted six months time to discharge the debt bearing by the vendor of the petitioner and vested the property in the Official Receiver. He further contends that as per Sub-section (2) of Section 28 of the Act, on making an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as provided under the Act and shall become divisible among the creditors. As per Sub-section (7) of Section 28 of the Act, an order of adjudication shall relate back to take effect from the date of the presentation of the petition on which, it is made. Once the Court passed an order adjudicating the vendor of the petitioner as an insolvent on 20-6-2005, the property vests in the Official Receiver, who took possession of the said property.
7. The submissions made by the learned Counsel for the petitioner have to be considered in the light of Section 56 of the Act, which reads as under:
56. Appointment of receiver:
(1) The Court may, at the time of the order of adjudication, or at any time afterwards, appoint a receiver for the property of the insolvent, and such property shall thereupon vest in such receiver.
(2) Subject to such conditions as may be prescribed the Court may:
(a) require the receiver to give such security, as it thinks fit duly to account for what he shall receive in respect of the property; and
(b) by general or special order, fix the amount to be paid as remuneration for the services of the receiver out of the assets of the insolvent.
(3) Where the Court appoints a receiver, it may remove the person in whose possession or custody any such property as aforesaid is from the possession or custody thereof;
8. Further, it is appropriate to notice Sub-sections (1) and (2) of Section 57 of the Act. The same reads as follows:
57. Power to appoint Official Receivers:
(1) The Provincial Government may appoint such persons as it thinks fit (to be called "Official Receivers") to be receivers under this Act within such local limits as it may prescribe.
(2) Where any Official Receiver has been so appointed for the local limits of the jurisdiction of any Court having jurisdiction under this Act, he shall be the receiver for the purpose of every order appointing a receiver or an interim receiver issued by any such Court, unless the Court for special reasons otherwise directs.
Further, Rule XI of the Andhra Pradesh Provincial Insolvency Rules (for short "the Rules") contemplates appointment of and security from Receiver and Interim Receiver, which reads as under:
(1) Every appointment of Receiver or Interim Receiver shall be by order in writing signed by the Court. Copies of this order sealed with the seal of the Court shall be served on the debtor and forwarded to the person appointed.
(2) Every Receiver or Interim Receiver other than Official Receiver shall be required to give such security as the Court thinks fit.
(3) The Official Receivers having furnished security in pursuance of the special rules for the Madras Judicial Subordinate Service, the Court shall not require any other security from them.
(4) In case where the Official Receiver is empowered to make order of adjudication, he shall send a copy of every order of adjudication made by him to the Court in which the proceedings are pending, and may apply that he may be appointed Receiver for the property of the insolvent.
(5) The Court may thereupon appoint the Official Receiver to be, receiver for the property of the insolvent and, unless it seems fit to do so, it shall not be necessary to give notice of the application to any person.
Provided that any party to the proceedings may apply to the Court, upon notice to the Official Receiver and the insolvent that the appointment of the Official Receiver may be set aside and a special receiver may be appointed in his place.
Any such appointment should be in Form No. 15 as appended to the Rules.
9. The Division Bench of Madras High Court in Vythilinga Padayachi's case (1 supra), after considering the provisions of Sections 18 and 19 of the Provincial Insolvency Act, 1907, held that the property of a person adjudicated as insolvent under the Act does not ipso facto vest in the Official Receiver who may have been appointed for the local area in which the insolvent is residing, that it is necessary that an order would have been passed appointing a Receiver before the property would vest in the local Official Receiver. That is how the phrase "he shall be the receiver for the purpose of every order appointing a receiver issued by any such Court" has been construed by two Benches of the same High Court, earlier, in Official Receiver of Trichinopoly v. Somasundara Chettiar (1916) 30M.LJ. 415 and Muthusami Samiar v. Somoo Kandiar (1920) 43 Mad. 869. In another Division Bench judgment of Madras High Court reported in The Official Receiver v. B.S. Nataraja Sastrigal AIR 1923 Mad. 355 (D.B.) it was held as under:
...that an official receiver becomes in virtue of his holding that office, a receiver of the property of the insolvent, if a Receiver for the property is appointed.
10. A combined reading of the provisions of Sections 56 and 57 of the Act together with Rule XI of the Rules will make it abundantly clear that the Court at the time of the order of adjudication or at any time after adjudication, may appoint a receiver for the property of the insolvent and any Official Receiver so appointed for the local limits of the jurisdiction of the Court under the provisions of the Act, shall be the Receiver for the purpose of every order appointing a Receiver or an interim Receiver issued by any such Court, unless the Court for special reasons otherwise directs.
11. In the order, dated 20-6-2005, passed by the learned Senior Civil Judge, Kovvur, the vendor of the petitioner was adjudicated as insolvent and he was granted six months time for discharge of the debt and the petition schedule property was vested with the official I receiver. Unless a Receiver for the property is appointed as contemplated under the provisions of the Act, no orders could be passed vesting the property in the official receiver. Since the lower Court has not appointed the receiver for the purpose of vesting the property, the Official Receiver cannot resume possession of the said property. The possession, if any, taken by the official receiver is not a valid possession.
12. Against any order of the learned Senior Civil Judge, an appeal lies to the District Court under Section 75 of the Act. Normally, this Court shall discourage resorting to revisional jurisdiction under Article 227 of the Constitution of India (see Shyam Kishore v. Municipal Corporation of Delhi ).
13. It is well settled that a mere wrong decision, without any thing more, is not enough to attract the jurisdiction under Article 227 of the Constitution of India. Once an appeal lies against the order of the learned Senior Civil Judge to the District Judge, the jurisdiction of the High Courts under Article 227 of the Constitution of India is not attracted (see ).
14. If that be the case, the petitioner can either file an appeal against the impugned order passed by the learned Senior Civil Judge or can move the same Court for setting aside the adjudication, if any, made by the Official Receiver on the objection made by the petitioner that the Official Receiver cannot take possession of the property without there being any appointment to the said effect. After such adjudication, it is open for the Official Receiver to move the said Court under the provisions of Sub-rule (4) of Rule 11 of the Rules as referred to above, for appropriate directions in that regard. In view of the said fact, this Court cannot entertain any revision under Article 227 of the Constitution of India, since the petitioner can avail alternative remedies as available to him in accordance with law.
15. For the aforesaid reasons, the Civil Revision Petition is disposed of directing the lower Court to dispose of the I.A. filed under Order IX Rule 13 CPC as expeditiously as possible, after giving due opportunity to the petitioner to raise all his objections. However, any observation made hereinabove will not preclude the lower Court to appoint a receiver/ Official Receiver and entrust the property to his custody, pending adjudication of the I.A. filed under Order IX Rule 13 CPC. There shall be no order as to costs.