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IN THE HIGH COURT OF BOMBAY
A.C. Agarwal A.V. Savant, JJ.
Smt. Yogini Chandrakant Mehta..... Appellant.
Versus
The Official Assignee, High Court, Bombay others ..... Respondents.
Appeal No. 197 of 1999 in Report Dated 18-3-1995 of The Official Assignee in Insolvency Petition No. 84 of 1977, decided on 24-2-1999.
Advocates appeared :
S.H. Doctor with V.J. Shah i/by L.C. Tolat Co., for appellant.
Kishore Jain, for respondent No. 1.
K.B. Poojari, Official Assignee.
Section 7-Insolvency court has under Section 7 jurisdiction to decide all questions of priorities, and all other questions whatsoever, whether of law or fact, which may arise in any case of insolvency coming within the cognizance of the Court. Similarly, the Insolvency Court has power to decide all questions which it may deem expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in an insolvency matter. 1983 Mh LJ 107 : AIR 1983 Bom 54, Relied on.
Sections 7 and 55-Bar under Section 55 of Act whether applicable -Husband transferring property to wife by way gift-Gift of both movables and immovables was not registered nor attested by two witnesses- Thus such transfer being nominal transfer, sham and bogus and made with view to defeating claims of creditors-This was found by Insolvency Court in exercise of its wide power under Section 7 of Act-Held, when transfer found bogus, bar of Section 55 of Act not applicable.- That the powers under Section 7 of the Presidency Act are wide enough to decide all questions of priorities and all other questions whatsoever whether of law or fact, which may arise in the case of insolvency coming within the cognizance of the Court or which the Court may think expedient or necessary to decide for the purpose of doing complete justice or making complete distribution of the property in an insolvency matter. Court has indicated earlier that the claims of the creditors, on the date of the order of adjudication, were over Rs. 3 crores. The transfers, made by the husband in the name of his wife, in Courts view, were nominal transfers, were sham and hogus and were made clearly with a view to defeating the claims of the genuine creditors. The said transfers being fraudulent, the validity of the same could be investigated by the Insolvency Court by virtue of the powers under Section 7 of the Presidency Act. The bar contained in Section 55 of the Presidency Act would, therefore, not come in the way.
Sections 7 and 55-Insolvency case--Insolvency Court having powers to decide all questions of priorities as well as questions of law and facts-If transactions are void ab initio limitation of Section 55 of Act would not apply.-A perusal of the said section shows that the Insolvency Court has the power to decide all questions of priorities, and all other questions whatsoever, whether of law or fact, which may arise in any case of insolvency coming within the cognizance of the Court. Similarly, the Insolvency Court has power to decide all questions which it may deem expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in an insolvency matter. Court were dealing with a case where the claims of the creditors are over Rs. 3 crores. The husband who has been adjudged insolvent claims to have transferred two flats by an unregistered document. The document is not signed by two witnesses. The observations of the learned single Judge, in the impugned order, show that the insolvent husband himse1f was the Chairman of the Society. The transfer forms are blank in many columns. The share certificate has been signed by the insolvent husband himself in his capacity as the Chairman of the Society. That apart, the wide amplitude of the provisions of Section 7, make it clear that the insolvency Court will have jurisdiction to decide the question which arose before it and was thought expedient or necessary to decide for the purpose of doing complete justice or making complete distribution of the property. It is clear to Court that if the transactions are void ab initio, the limitation under Section 55 of the Presidency Act would not apply. The result, therefore, would be that even if the alleged transfer is of 12th November, 1972 and the adjudication of insolvency is of 7th September, 1977 in view of the wording of Section 7 of the Presidency Act, the insolvency Court would be competent to decide the questions.
Section 55-Bar of limitation under Section 55 does not apply if the transactions are void ab illitio.-If the transactions are void ab initio, the limitation under Section 55 of the Presidency Towns Insolvency Act would not apply. (1980) Mild LJ 455; AIR 1949 (36) Bom 129; 1983 Mh LJ 107 : AIR 1983 Bom 5o1, Relied on.
2. The appeal is against the order dated 15th January, 1999 passed by the learned Single Judge on the report made by the Official Assignee on 18th March, 1995, in Insolvency Petition No. 84 of 1977 which was filed by the Petitioning Creditors M/s. Cable Corporation of India Ltd., respondent No. 2, for a declaration that respondent Nos. 3, 4 and 5 were insolvents. The appellant (Original Claimant) Smt. Yogini Mehta is the wife of respondent No. 4 Chandrakant Mehta. By an order passed on 7th September, 1977 in Insolvency Petition No. 84 of 1977, respondent Nos. 3, 4 and 5 were adjudged insolvents. The inventory of the movables was prepared on 17th October 1977.
3. The appellant made a claim in respect of two flats viz. flats Nos. B/28-29 situated at Vellard View Premises Co-operative Society Ltd., 3rd floor, "B" Wing, Tardeo Road, Bombay, and the movables in the said flats on the basis of the gift of the said property to her by respondent No. 4 her husband on 12th November, 1972. Admittedly, there is no registered document in respect of the gift of the said two flats. The Official Assignee considered the claim made by the appellant and by his Order dated 4th June, 1990, came to the conclusion that the Gift Deed dated 12th November, 1972 was neither registered nor attested by two witnesses as was required by law. The Gift Deed pertained to both movables as well as immovable properties and, therefore, was required to be attested by two witnesses and was also required to be registered. In the result, the Official Assignee came to the conclusion that the gift and the transfer of the movables as well as immovables was void ab initio. Consequently, a finding was recorded that the said properties, both movables as well as immovable, would continue to be the properties of the insolvent respondent No. 4 and would vest in the Official Assignee. In the result, the claim of the appellant to the said properties, both movable and immovable, was rejected by the Official Assignee.
4. Against the aforesaid order dated 4th June, 1990, Notice of Motion No. 70 of 1990 was taken out by the appellant. In the Affidavit in support of the said Notice of Motion, a contention was raised that the gift by the husband to the wife present appellant - was a valid transaction and that the wife had acted upon the gift and exercised her ownership rights on the properties gifted to her. When this Notice of Motion No. 70 of 1990 was heard by the learned Single Judge on 7th of August, 1990, on a consideration of the relevant material, he came to the conclusion that there was no justification to interfere with the findings recorded by the Official Assignee. In respect of the transfer of the flats, the learned Single Judge concurred with the view of the Official Assignee that there was no reliable document to hold that the immovable property was transferred in the name of the wife in accordance with law. Even in respect of the movables gifted by the husband to the wife, the learned Single Judge rejected the claim of the wife present appellant. In the result, the Notice of Motion was dismissed on the 7th of August, 1990.
5. Being aggrieved by the said order, the appellant preferred Appeal No. 1127 of 1990. In the said appeal, specific contentions were raised that the transfer of the flats was approximately five years before the date of the passing of the order of adjudication which was passed on 7th September, 1977 (wrongly mentioned as 17th September, 1977) and the gift was made on 12th November, 1972. Reliance was placed on the provisions of section 55 of the Presidency-Towns Insolvency Act, 1909 (for short "Presidency Act") to contend that if the transferor was adjudged insolvent within two years after the date of transfer, the transfer could be avoided being void against the Official A
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