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IN THE HIGH COURT OF JUDICATURE AT MADRAS
R. SUBRAMANIAN, J.
Official Assignee, High Court, Madras 104, Rep. Estate of S.Shanmugam - Appellant
Versus
Mr. S.Shanmugam – Respondent
Application Nos.27, 28, 29 and 30 of 2021 in IP No.8 of 2019
Decided on : 25-08-2021
Presidency Towns Insolvency Act, 1909 - Section 9(2)(b), 9(5), 51, 55 - Applications have been taken out by Official Assignee to nullify alienation made by debtor for consequential injunctive reliefs and to permit sale of property treating it as part of insolvent's estate - Alienee would submit that 35 day period prescribed in notice would expire on 18.09.2018 - Application filed by debtor was dismissed on 10.12.2018 - Date of commission of act of insolvency in terms of Section 9(2)(b) of Act is 10.12.2018 - Alienation in question having taken place two year period prescribed under Section 55 cannot be said to be bad or cannot be avoided by Official Assignee invoking power of Insolvency Court under Section 55 of Act - What is date of commission of Act of insolvency – Held, once an order of adjudication has been made on basis of an act of insolvency and it is found that said transfer was made with an intention to delay rights of creditor, alienation will have to go and there is no question of any further adjudication on validity or otherwise of alienation - Division Bench had made it very clear that if an order of adjudication is based upon a transfer, it is unnecessary for Official Assignee to prove that transfer was with intent to delay or defeat creditors - Transfer is a gratuitous transfer and protection that is available to a bona fide purchaser for value without notice is not available to alienee - If at all objections of alienee or insolvent ought to be upheld Court must record a finding that alienation is two years prior to date of commission of act of insolvency - Application allowed.
ORDER :
1. All these applications have been taken out by the Official Assignee to nullify the alienation made by the debtor on 08.09.2016, for consequential injunctive reliefs and to permit the sale of the property treating it as part of the insolvent's estate.
2. The fact that the debtor viz., the first respondent in all these applications was adjudicated as an insolvent on 18.03.2020 is not in dispute. The Original Insolvency Petition in IP No.8 of 2019 was filed by the petitioning creditor/the second respondent herein seeking adjudication of the first respondent as an insolvent claiming that he has committed an act of insolvency inasmuch as, he has not complied with the Insolvency Notice issued to him in I.N. No.24 of 2018. The petitioning creditor, who had obtained a decree against the insolvent in OS No.1074 of 2012, which was confirmed by this Court in AS No.399 of 2016 had filed execution proceedings in EP No.375 of 2018 for realisation of the decree amount of Rs.21,21,835.50.
3. In the interregnum, the Special Leave Petition filed by the debtor in Special Leave Petition (Civil) No.2825 of 2017 also came to be dismissed by the Hon’ble Supreme Court on 25.04.2017. During the course of the execution proceedings, according to the petitioning creditor, she came to know about the alienation made by the judgment debtor in favour of his wife by way of a Settlement Deed on 08.09.2016. Claiming that the alienation itself was with an intention to deny the fruits of the decree, the petitioning creditor sought issuance of an Insolvency Notice in I.N. No.24 of 2018. By order dated 11.08.2018, this Court had ordered issuance of notice on the first respondent.
4. An Application in Application No.269 of 2018 filed by the debtor under Section 9(5) of the Presidency Towns Insolvency Act, 1909, seeking to set aside the Insolvency Notice was dismissed by this Court on 10.12.2018. The notice of the insolvency was served on the debtor on 27.08.2018. Upon dismissal of the application, to recall the insolvency notice the creditor filed the instant Insolvency Petition in IP No.8 of 2019 on 27.02.2019. Eventually, the debtor was adjudicated as an insolvent in IP No.8 of 2019 on 18.03.2020. After the adjudication, the Official Assignee had come up with the instant applications seeking the prayers stated supra. According to the Official Assignee, in view of the adjudication made on 18.03.2020 on the basis of the insolvency notice that was served on 27.08.2018, the alienation dated 08.09.2016 being a gratuitous transfer is invalid in view of Section 55 of the Presidency Towns Insolvency Act, 1909.
5. These applications are resisted by the insolvent and the alienee contending that the debtor was adjudicated as an insolvent on the basis of an act of insolvency, said to have been committed by him on 17.10.2018 in IP No.30 of 2018, filed by one V.K.Smeer Ahmed. The said adjudication having taken place on 20.01.2019, there cannot be a second adjudication of the same person as an insolvent in IP No.8 of 2019 on 18.03.2020. It is the further contention of the respondents 1 and 3, namely the insolvent and the alienee that, as per Section 9(2)(b) of the Presidency Towns Insolvency Act, an act of insolvency is deemed to have been committed by the debtor on the date of the rejection of the application filed under Section 9(5) or the expiry of the period specified in the Insolvency notice for its compliance whichever is later. Therefore, according to them the date of dismissal of the application to set aside the insolvency notice viz. 10.12.2018 is the date on which the debtor could be said to have committed an act of insolvency. The alienation having taken place on 08.09.2016 which is prior to the two year period contemplated under Section 55 of the Act, the same cannot be set aside by the Insolvency Court invoking Section 55 of the Act.
6. Mr.R.Thiagarajan, learned counsel appearing for the alienee would further contend that whether the alienation was with an inte
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