1982 Supreme(Bom) 207

IN THE HIGH COURT OF BOMBAY
Manohar Sujata J.
Babubhai Jadavji Thakkar and others …. Debtors.
Versus
Gangji Jesang Cheda …. Petitioning Creditor.
In Insolvency No. 16 of l969 decided on 09–08–1982.

A fraudulent transfer of property by an insolvent can be avoided by the Official Assignee under section 55 of the Presidency-Towns Insolvency Act, and the Official Assignee is entitled to the property transferred.

Headnote:

INSOLVENCY - FAMILY ARRANGEMENT - FRAUDULENT TRANSFER - ANNULMENT - RIGHTS OF BONA FIDE TRANSFEREES FROM FRAUDULENT TRANSFEREE - LIMITATION.

Fact of the Case:

The debtors, Babubhai Jadavji Thakkar, Mithabai Jadavji Thakkar, and Jayantilal Dwarkadas Thakkar, were adjudicated insolvents on 8–10–1971 on a petition dated 31–1–1969 filed by the petitioning creditor. One of the acts of insolvency alleged was a family arrangement of 30th October 1967 under which the insolvents purported to transfer their tenancy rights in Shop Nos. 4 and 5 situate on the ground floor of Ismail Dossa Building, 177/79, Dongri Street, Bombay-9 in favor of Bai Ratanbai Morarji Kanji, who is a grand-mother of two of the debtors. By its judgment and order dated 8–10–1971, this Court held that the so-called family arrangement under which the tenancy rights in respect of the said shops were transferred to Bai Ratanbai were fraudulent transfers and that those transfers themselves constituted an act of insolvency. The Court passed an order of adjudication upon the debtors. From this order, the transferee Bai Ratanbai preferred an appeal to a Division Bench of this Court. This appeal was dismissed by a judgment and order dated 13–1–1981.

Finding of the Court:

The court held that the family arrangement dated 30–10–1967, in so far as it declares that the tenancy in respect of shop Nos. 4 and 5 on the ground floor of the property bearing S. No. 177, Dongri Street, shall belong absolutely to Bai Ratanbai, is null and void as against the Official Assignee and the Official Assignee is entitled to the tenancy rights in respect of shop Nos. 4 and 5 situate at 177, Dongri Street, Bombay-9; the purported agreements made by Bai Ratanbai in favor of M/s Atul Doongarsi Co. and M/s Varsha Traders dated 11–4–1974 and 13–10–1978 respectively are null and void and of no effect as against the Official Assignee; under the Deed of Partnership dated 23–12–1968 the firm of M/s Mulraj Co. and/or Babubhai Govindji Thakkar have no right, title, or interest in the tenancy rights in respect of the said shop premises; and the Official Assignee is directed to take possession of the said shops from Bai Ratanbai Morarji, M/s Atul Doongarsi Co., Varsha Traders, Babubhai Govindji Thakkar and/or M/s Mulraj Co. for the benefit of the general body of unsecured creditors of the insolvents.

Issues: 1. Whether the family arrangement dated 30–10–1967 was a fraudulent transfer? 2. Whether the Official Assignee is entitled to the tenancy rights in respect of shop Nos. 4 and 5 situate at 177, Dongri Street, Bombay-9? 3. Whether the purported agreements made by Bai Ratanbai in favor of M/s Atul Doongarsi Co. and M/s Varsha Traders dated 11–4–1974 and 13–10–1978 respectively are null and void? 4. Whether under the Deed of Partnership dated 23–12–1968 the firm of M/s Mulraj Co. and/or Babubhai Govindji Thakkar have any right, title, or interest in the tenancy rights in respect of the said shop premises? 5. Whether the Official Assignee is directed to take possession of the said shops from Bai Ratanbai Morarji, M/s Atul Doongarsi Co., Varsha Traders, Babubhai Govindji Thakkar and/or M/s Mulraj Co. for the benefit of the general body of unsecured creditors of the insolvents?

Ratio Decidendi: 1. The court held that the family arrangement dated 30–10–1967 was a fraudulent transfer as it was made with the knowledge of the transferee with a view to shield the said property from the creditors of the insolvents. 2. The court held that the Official Assignee is entitled to the tenancy rights in respect of shop Nos. 4 and 5 situate at 177, Dongri Street, Bombay-9 as the transfer of tenancy rights by the insolvents in favor of Bai Ratanbai was held to be a fraudulent transfer. 3. The court held that the purported agreements made by Bai Ratanbai in favor of M/s Atul Doongarsi Co. and M/s Varsha Traders dated 11–4–1974 and 13–10–1978 respectively are null and void as Bai Ratanbai herself did not have any right, title, or interest in those shop premises. 4. The court held that under the Deed of Partnership dated 23–12–1968 the firm of M/s Mulraj Co. and/or Babubhai Govindji Thakkar have no right, title, or interest in the tenancy rights in respect of the said shop premises. 5. The court held that the Official Assignee is directed to take possession of the said shops from Bai Ratanbai Morarji, M/s Atul Doongarsi Co., Varsha Traders, Babubhai Govindji Thakkar and/or M/s Mulraj Co. for the benefit of the general body of unsecured creditors of the insolvents.

Final Decision: The court declared that the family arrangement dated 30–10–1967 is null and void as against the Official Assignee and the Official Assignee is entitled to the tenancy rights in respect of shop Nos. 4 and 5 situate at 177, Dongri Street, Bombay-9; the purported agreements made by Bai Ratanbai in favor of M/s Atul Doongarsi Co. and M/s Varsha Traders dated 11–4–1974 and 13–10–1978 respectively are null and void and of no effect as against the Official Assignee; under the Deed of Partnership dated 23–12–1968 the firm of M/s Mulraj Co. and/or Babubhai Govindji Thakkar have no right, title, or interest in the tenancy rights in respect of the said shop premises; and the Official Assignee is directed to take possession of the said shops from Bai Ratanbai Morarji, M/s Atul Doongarsi Co., Varsha Traders, Babubhai Govindji Thakkar and/or M/s Mulraj Co. for the benefit of the general body of unsecured creditors of the insolvents.