2016 Supreme(AP) 305
IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
B. Siva Sankara Rao, J.
Chadalawada Laxmi Prasanna - Petitioner
Vs.
Vangeti Krishnamurthy and others - Respondents
Civil Revision Petition Nos. 2216 of 2006 & 4864 of 2008
Decided On : 29-07-2016
For the Petitioner: Sri. B. Nalin Kumar & B. Harinatha Rao
For the Respondents: Sri. M. Rama Krishna, A. Prakasa Rao, G. Anandam, K.V.R Prasad & A. Prabhakara Rao
Headnote:
Provincial Insolvency Act, 1920 – Section 52 – Mortgage – Auction – Preliminary decree against that property which is item No. 2 of Schedule D of debtor I.P petition in deleting same – In fact, the item if at all in the mortgage of Bank, Bank is entitled to have preferential right, subject to any other preferential debts like that of the crown, to proceed for realization of the mortgage decree debt against that property with or without any personal decree, with right of obtaining final decree in the event of failure to pay the preliminary decree amount within the time stipulated for redemption – However, that does not entitle bank to ask for totally delete that item to which when debtor is owner undisputedly from the array of the schedule of the properties of the debtor insolvent as any management by receiver by taking possession of property and even for alienation after adjudged as insolvent, for distribution of the assets of the insolvent-debtor among creditors by preference to secured creditors is at best subject to satisfaction of the mortgage debt to bring property to sale and only subject to that mortgage to liquidate by any purchaser through official receiver by public auction – It is duty of trial Court even in insolvency proceedings pending if any party to the lis or any person affected, bring to the notice of the Court to recall its order when per se unsustainable within its inherent power which inheres from its constitution, and also by virtue of this order – Held, once there are insolvency proceedings and property is entrusted to the receiver, civil Court could not have been proceeded with against property by virtue of Section 52 of Act, 1920 – It is nothing but fraud on Court by the decree holder also though he is one of respondents to debtor I.P, where debtor was adjudged as insolvent in showing the property by not bringing to the notice of Court, factum of its part of I.P schedule and receiver was entrusted with management of property to distribute to creditors of adjudged insolvent along with his other properties – The auction sale taken place by non-disclosure of the fact and if at all disclosed, the Court could not have been proceeded and thereby no way sustainable and the same is liable to be set aside as contrary to Section 52 of the Provincial Insolvency Act and accordingly set aside by left open to the auction purchaser to make a claim from the receiver appointed to manage the properties, for what he deposited the amount if lying in fixed deposit to take back by filing cheque petition by virtue of this order and for the balance which represents the deposited amount with interest at 18% p.a till date to claim from the receiver to pay out of the proceeds of realization of his management of the properties as a first preference before distribution from any of the assets of the debtor after other secured debtors and before other unsecured debtors as the case may be – Revision Petition is allowed (Paras 9 and 10)
B. SIVA SANKARA RAO, J.
C.R.P No. 2216 of 2006:
1. The revision petitioner is the unsuccessful petitioner in I.A No. 1144 of 2003 in I.P No. 9 of 2001 on the file of III Additional District Judge, Warangal. He was the 30th respondent in the I.P proceedings, maintained by the debtor in I.P No. 9 of 2001 and the name of the debtor is one V. Krishna Murthy who is no other than 1st respondent among 62 respondents to the impugned order of the lower Court dated 08.12.2005 in I.A No. 1144 of 2005 in I.P No. 9 of 2001. In the debtor I.P there are more than 60 respondents, who are the several creditors which include the State Bank of Hyderabad, Narsampet as 22nd respondent. It appears said Bank maintained earlier I.A No. 1044 of 2003 against the insolvent secured debtor and though he appeared through advocate, he did not oppose the application muchless by filing counter and the Court rightly or wrongly, accepted the contention of the Bank which obtained a mortgage preliminary decree against that property which is item No. 2 of Schedule D of the debtor I.P petition in deleting the same. In fact, the item if at all in the mortgage of the Bank, the Bank is entitled to have the preferential right, subject to any other preferential debts like that of the crown, to proceed for realization of the mortgage decree debt against that property with or without any personal decree, with right of obtaining final decree in the event of failure to pay the preliminary decree amount within the time stipulated for redemption. However, that does not entitle the bank to ask for totally delete that item to which when the debtor is owner undisputedly from the array of the schedule of the properties of the debtor insolvent as any management by receiver by taking possession of the property and even for alienation after adjudged as insolvent, for distribution of the assets of the insolvent-debtor among the creditors by preference to secured creditors is at best subject to the satisfaction of the mortgage debt to bring the property to sale and only subject to that mortgage to liquidate by any purchaser through the official receiver by public auction. Thereby, at the cost of repetition it has to say that the said order of the learned III Additional District Judge in I.A No. 1044 of 2003 dated 27.08.2004 is unsustainable on its face. Leave it as it is for no revision against that order, muchless a review and needless to say it is the duty of the trial Court even in the insolvency proceedings pending if any party to the lis or any person affected, bring to the notice of the Court to recall its order when per se unsustainable within its inherent power which inheres from its constitution, and also by virtue of this order.
2. Needless to say it is pursuant to which the 30th respondent, who is the petitioner in I.A No. 1144 of 2005 maintained the petition impugning the entrustment of the properties of the debtor/insolvent to the official receiver by including this deleted item also from the schedule at the instance of bank pursuant to the order in I.A No. 1044 of 2003 supra. The lower Court after hearing dismissed the same.
3. The reasons assigned by the lower Court impugned in the grounds of the revision, no way sustainable as once that item of property is deleted from the means and properties of the debtor insolvent, the question of appointing a receiver to that property also does not arise. However, the fact remains as stated supra, if at all to include that property the Court can say it was deleted inadvertently earlier and thereby it has to be included to bring the property also to sale subject to the mortgage debt of the bank and with such an order for entrusting this item also to the receiver.
C.R.P No. 4864 of 2008:
4. The receiver appointed in the debtor I.P No. 9 of 2001 filed the revision impugning the docket order of the executing Court dated 23.01.2008 in E.P No. 53 of 2005 in O.S No. 33 of 2001 on the file of Junior Civil Judge, Narsampet of Warangal Dist