Johri Lal Soni vs Bhanwari Bai - 1977 Supreme(SC) 252

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1977 Supreme(SC) 252

SUPREME COURT OF INDIA
N.L. UNTWALIA AND S. MURTAZA FAZAL ALI, JJ.
Johrilal Soni, Appellant
Versus
Smt. Bhanwari Bai, Respondent.
Civil Appeal No. 149 of 1976,
D/- 1-8-1977.
Advocates Appeared
Mr. Badri Das Sharma and Mr. S. R. Srivastave Advocates for Appellant; Mr. O. P. Verma Advocate, for Respondent.

Advocates:
Badri Das Sharma, O.P.Varma, S.R.SHRIVASTAVA

Headnote:
Provincial Insolvency Act, 1920 – Section 4 – Claim of compensation - Title of a property transferred - Jurisdiction of Insolvency Court - Whether an insolvency Court can try a question of title raised on basis of a transfer which took place more than two years prior to adjudication having regard to provisions of Section 53 Insolvency Act - Whether or not an Insolvency Court could determine a question of title regarding a transfer made by insolvent - Whether of title or priority or of any nature whatsoever and whether involving matters of law or of fact which may arise in any case of insolvency coming within cognizance of Court or which Court may deem it expedient or necessary to decide for purpose of doing complete justice or making a complete distribution of property in any such case - High Court was of opinion that in view of express provision of S. 53 of Act Insolvency Court had no jurisdiction to determine question of title nor could it go into question of validity of a transfer which was made more than two years before Insolvency proceedings had started - According to High Court while Section 4 of Act undoubtedly conferred a power on Insolvency Court to decide questions of title but this power could not be exercised in respect of transfers made during a period beyond two years of insolvency proceedings - In support of appeal learned counsel for appellant submitted that High Court had taken an erroneous view of law and had misconstrued scope and ambit of S. 53 of Act - Learned counsel for respondent however supported stand taken by High Court and submitted that as gift was made before proceedings began Insolvency Court could not examine question of title - A number of authorities have been cited by counsel for parties in support of their respective submissions but court think question lies within a very narrow compass - It would appear that Section 4 of Act was not there in Insolvency Act of 1907 but was introduced for first time by Act 5 of 1920 - Before Provincial Insolvency Act did not contain any such provision as a result of which there was a serious divergence of judicial opinion on question as to whether or not an Insolvency Court could determine a question of title regarding a transfer made by insolvent - Act 5 of 1920 however set at rest this controversy and gave wide powers to Insolvency Court to determine question of title – Held, Court do not consider that where in Section 53 which is governed by this heading the Act gives Court power to annul transactions entered into within two years court should go out of court way to find that a general section in same Act gives power to Court to annul transactions which may have been entered into at any time and which are voidable under ordinary law under Section 53 T. P. Act - In court opinion transactions of this nature must be challenged if at all in an ordinary civil Court and not in insolvency Court - With due respect however court are unable to agree with view expressed by learned Judges of Chief Court Oudh because they seem to overlook distinction made by Section 53 between a void and avoidable transaction – Moreover Oudh Chief Court was concerned with a benami transaction and it is not necessary for court to say anything about such a transaction because in instant case court are concerned with a transfer which was sought to be challenged on ground that it was nominal and sham transaction and thus a void transaction which clearly falls within four corners of Section 4 of Act and is not covered by Section 53 of Act so as to deprive Insolvency Court of its jurisdiction to determine question of title of transfer - For these reasons therefore court are clearly of opinion that in present case Additional District Judge was right in holding that Insolvency Court had complete jurisdiction to decide validity of transfer when it was challenged on ground that it was a sham and a fictitious transaction which need not have been set aside and a declaration that transfer was void was sufficient - View taken by High Court is legally erroneous and is not in consonance with correct interpretation of Ss. 4 and 53 of Act - Appeal allowed

Judgment

FAZAL ALI, J. - To what extent is S. 4 of the Provincial Insolvency Act. 1920 controlled by S. 53 of the said Act in the matter of determination of the question of title of a property transferred by the insolvent before he was declared insolvent is the serious question of law which is involved in this appeal by certificate. The insolvent Pyarelal Gupta appears to have executed a deed of gift in favour of his wife on November 7, 1961. About seven years later i. e. on April 1, 1968 an application under S. 10 of the Provincial Insolvency Act - hereinafter to be referred for short as "the Act" - was made for adjudging Pyarelal as insolvent. On April 5, 1968 the appellant Johri Lal Soni an Advocate was appointed receiver by the Court. On October 15, 1968 Pyarelal was on his own application adjudged as an insolvent by the Additional District Judge, Jodhpur. On January 4, 1969 the appellant who was the receiver moved the Court under S. 4 of the Act for declaring the deed of gift dated November 7, 1961 as void and inoperative inasmuch as it was a sham transaction. On March 3, 1972 the Insolvency Court of the Additional District Judge, Jodhpur, after making an inquiry, upheld the plea of the receiver appellant and declared the deed of gift dated November 7, 1961 as being void and inoperative. Thereafter the respondent Smt. Bhanwari Bai (donee) went up in appeal to the High Court assailing the judgment of the Insolvency Court on the ground that it was legally erroneous. The plea of the respondent Bhanwari Bai seems to have found favour with the High Court of Rajasthan which allowed the appeal and set aside the judgment of the Insolvency Court declaring the deed of gift as void by its judgment dated September, 26, 1973. The appellant thereafter applied for grant of certificate of fitness for leave to appeal to this Court which was granted by the High Court on October 27, 1975, and this is how the appeal has been brought to this Court.

2. The High Court was of the opinion that in view of the express provision of S. 53 of the Act, the Insolvency Court had no jurisdiction to determine the question of title, nor could it go into the question of the validity of a transfer which was made more than two years before the Insolvency proceedings had started. According to the High Court, while S. 4 of the Act undoubtedly conferred a power on the Insolvency Court to decide questions of title, but this power could not be exercised in respect of transfers made during a period beyond two years of the insolvency proceedings.

3. In support of the appeal, learned counsel for the appellant submitted that the High Court had taken an erroneous view of the law and had misconstrued the scope and ambit of S. 53 of the Act. Learned counsel for the respondent, however, supported the stand taken by the High Court and submitted that as the gift was made about 6 1/2 years before the proceedings began, the Insolvency Court could not examine the question of title. A number of authorities have been cited by counsel for the parties in support of their respective submissions, but we think question lies within a very narrow compass. It would appear that S. 4 of the Act was not there in the Insolvency Act of 1907, but was introduced for the first time by Act 5 of 1920. Before 1920, the Provincial Insolvency Act did not contain any such provision as a result of which there was a serious divergence of judicial opinion on the question as to whether or not an Insolvency Court could determine a question of title regarding a transfer made by the insolvent. Act 5 of 1920, however, set at rest this controversy and gave wide powers to the Insolvency Court to determine question of title.

4. We now proceed to interpret the provisions of S. 4 itself, the relevant part of which may be extracted thus :

"4. (1) Subject to the provisions of this Act, the Court shall have full power to decide all questions whether of title or priority, or of any nature whatsoever and whether involvin

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