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IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
M. Satyanarayana Murthy, J.
Tatiparthy Satyanarayana - Appellants
Vs.
Palacherla Vijayalakshmi and Ors. - Respondent
CMSA No. 39 of 2011
Decided On : 27.07.2015
Provincial Insolvency Act - Section 9 - Civil Procedure Code – Immovable property - Sale deeds – Convenience - Petitioner in IP on file of the Court of Additional Senior Civil Judge respondent in file of Court of District & Sessions Judge preferred this appeal challenging finding of appellate Court whereby finding of trial Court was reversed dismissing petition in IP - For convenience of reference ranks given to parties in before trial Court will be adopted throughout judgment petitioner claiming to be creditor filed petition of Provincial Insolvency Act to adjudge respondent as insolvents and to declare that sale deeds executed by respondent in favour of respondent conveying item of petition schedule property as void alleging that petitioner is a dealer in wholesale business of supplying readymade silver articles and gold jewellery to retailers for last years - Respondent who are permanent residents of having immovable property carrying on their business in name and style of Jewellery Mart in Main Road Near Road which in a plinth area of square feet – Held, In instant case by date of filing petition seeking annulment respondent were not even adjudged as insolvents - So first condition was not satisfied - Petitioner did not approach Official Receiver and proved his debt as contemplated Part Act and did not comply with Act - Therefore order of annulling sale deed passed by trial Court is erroneous ex facie and contrary to provisions of Act - Hence order of trial Court annulling is illegal and same is liable to be set aside - Therefore find that appellate Court did commit no error in reversing finding of trial Court - Hence Court find no ground to interfere with finding recorded by appellate Court - Accordingly finding of appellate Court is hereby confirmed holding this point in favour of respondent and against petitioner –Appeal dismissed(Para 28)
Key Points: - Appellate Court reversed trial Court’s dismissal of IP and the insolvency petition; the petitioner failed to establish subsisting creditor-debtor relationship (!) (!) - Section 9(1) requirements: debt amount, liquidated sum, and act of insolvency within three months; petitioner must prove creditor-debtor relationship and debt > Rs. 500; failure leads to dismissal (!) (!) (!) (!) (!) - Court discusses permissible grounds for dismissal under Section 25(1) and findings of abuse of process/collusion when petition is filed to harass or defeat purchasers; appellate Court's reasoning upheld (!) (!) - Section 53, 54, 54-A: annulment of transfers/fraudulent conveyances requires debtor to be adjudged insolvent and debt proved under Part III; petition filed prior to insolvency adjudication is improper; annulment of sale deeds reversed for non-compliance with Section 54-A (!) (!) (!) (!) (!) (!) (!) - Overall: appellate Court’s judgment affirming reversal and dismissing the insolvency petition is sustained; petition denied (appeal dismissed) (!) (!) (!) (!)
M. Satyanarayana Murthy, J.
1. The petitioner in IP No. 19 of 2001 on the file of the Court of II Additional Senior Civil Judge, Visakhapatnam (for short, 'the trial Court'), and the 1st respondent in AS No. 25 of 2009 on the file of the Court of VIII Additional District & Sessions Judge (FTC), Visakhapatnam (for short, 'the appellate Court'), preferred this appeal challenging the finding of the appellate Court, whereby the finding of the trial Court was reversed dismissing the petition in IP No. 19 of 2001. For convenience of reference, the ranks given to the parties in IP No. 19 of 2001 before the trial Court will be adopted throughout the judgment.
2. The petitioner, claiming to be the creditor, filed petition under Section 9 of the Provincial Insolvency Act, 1920 (for brevity, 'the Act of 1920'), to adjudge respondent Nos. 1 and 2 as insolvents and to declare that sale deeds dated 25.7.2001 and 1.9.2001 executed by respondent Nos. 1 and 2 in favour of respondent Nos. 3 and 4 conveying item Nos. 1 and 2 of petition schedule property as void alleging that the petitioner is a dealer in wholesale business of supplying readymade silver articles and gold jewellery to retailers for the last 15 years. Respondent Nos. 1 and 2, who are permanent residents of Visakhapatnam, having immovable property, carrying on their business in the name and style of Sri Kanaka Mahalakshmi Jewellery Mart in D. No. 26-15-16/B, Main Road, Near Kotha Road, Visakhapatnam, which is 10' x 20' in a plinth area of 200 square feet. The petitioner supplied gold and silver articles to respondent Nos. 1 and 2 and became indebted to a tune of Rs. 2,60,000/- altogether. Out of Rs. 2,60,000/-, the 1st respondent has to pay Rs. 1,60,000/- and the 2nd respondent has to pay Rs. 1,00,000/- by June, 2001, which represents the amount borrowed in cash and value of silver articles and gold jewellery supplied to them in retail business. Despite requests made by the petitioner, respondent Nos. 1 and 2 did not repay the amount due to the petitioner. Thereafter, the 2nd respondent nominally obtained a lease agreement in respect of schedule property from the 1st respondent, treating the amount due to him as interest free, on monthly rent of Rs. 1,700/- giving set off from the amount already lying with the 1st respondent. With the above understanding, the 1st respondent obtained lease agreement dated 28.7.2001 from the 2nd respondent in respect of ground floor of the building Bearing D. No. 26-15-16/B for a period of three years.
While the matter stood thus, the petitioner was roaming around the premises Bearing D. No. 26-15-16/B awaiting arrival of respondent Nos. 1 and 2 but, to the surprise of the petitioner, the premises was kept under lock guarded by a watchman who prevented the petitioner from approaching the premises. Again to the utter surprise of the petitioner, he received a copy of the caveat petition on 1.8.2001 filed by the 3rd respondent contending that she became owner of entire house having purchased the same under registered sale deed dated 26.7.2001. Thereafter, the petitioner made enquiry in Registrar's Office and came to know that respondent Nos. 1 and 2 have executed another sale deed on 1.8.2001 in respect of their residential house in Sopdar Gully, Town Hall Road. Thus, respondent Nos. 1 and 2 alienated one of their immovable assets even before executing the lease deed in favour of the petitioner but departed from their usual dwelling house and absented therefrom with intention to delay and defeat the claim of genuine creditors. Hence, sale deed dated 26.7.2001 in favour of the 3rd respondent and the other sale deed dated 1.8.2001 executed in favour of the 4th respondent are sham and nominal and they are in the course of screening the property of the petitioner out of the reach of creditors. Hence, respondent Nos. 1 and 2 are to be adjudged as insolvents and sought for annulling the two sale deeds.
3. Respondent Nos. 1 and 2 remained ex parte.
4. The
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