A transfer deemed void under section 54 of the Provincial Insolvency Act is not necessarily void ab initio, and is merely voidable, thereby not rendering the transferee liable for mesne profits.

Polloc, A J C—On 6th February 1928. Jiwaji defendant 2 sold a house and field to Balkrishna defendant 1. On 16th June 1928 on the day the Civil Courts reopened after the vacation, Digambardas the plaintiff filed a petition of insolvency against Jiwaji, and Jiwaji was subsequently adjudicated insolvent. The plaintiff then applied to have the above sale annulled under section 53 section 54, Provincial Insolvency Act. The consideration for the sale consisted partly of money due on a mortgage of a field and partly of money alleged to be due on account of other debts. Balkrishna stated that he would not oppose the application to have the transfer annulled provided that he could fall back upon his mortgage and prove the other debts. The Insolvency Court then annulled the sale on 17th April 1930, without stating whether it did so under section 53 or section 54, Provincial Insolvency Act. The suit giving rise to this appeal was filed by Digambardas to recover the mesne profits of the above house and the field for the years 1928-29 and 1929-30. The lower appellate Court has held that the sale was annulled under section 54, Provincial Insolvency Act, that the transfer was void ab initio, and that therefore Balkrishna was in wrongful possession throughout and liable for mesne profits.

2. It is not clear whether the sale was actually annulled under section 53 or section 54. If it was annulled under section 53, it was clearly voidable until annulled, and therefore Bal Krishna was not in wrongful possession and is not liable for mesne profits. If the transfer was annulled under section 54, the position is not so clear. Under that section a transfer that amounts to a fraudulent preference shall ''be deemed fraudulent and void as against the receiver and shall be annulled by the Court''. This section corresponds with section 44, Bankruptcy Act of 1914 (4 and 5 Geo. V, C. 59) which corresponded to section 48 of the Act of 1883 and section 92 of the Act of 1869. In the English Acts the word ''void'' is, I think, used throughout in preference to ''void able'', but it has been held that the meaning is voidable: see In re Brail, 1893 2 QB 381 and Halsbury's Laws of England,. In Marippa Pillai v. Rama a Chettiyar,1919 AIR(Mad) 161 it was held that the word void'' in section 36, Provincial Insolvency Act of 1907, which corresponds to section 53 of the Act of 1920, means ''voidable'', and the section has now been amended and the word ''voidable'' substituted for the word ''void.'' In section 54 however the word ''void'' continues to be used, but it had been previously held in Hemraj Champa Lal v. Ramakrishnan Ram,1916 AIR(Pat) 279 that the word ''void'' in section 37, Provincial Insolvency Act of 1907 meant voidable, and in spite of that decision the section has remained unamended in the Act of 1920.

3. It is clear from sub-section (2) of section 54 that a transfer that may be deemed void under this section is not necessarily void ab initio, and it is void only as against the receiver while remaining valid as between the parties to the transaction. From this it appears to me to follow that such a transfer is not void ab initio but is merely voidable, and I respectfully agree with the view to that effect expressed by Sir D. F. Mulla in para. 646-A in his Law of Insolvency. I therefore hold that the transfer was valid until set aside and that therefore the transferee was in lawful possession and is not liable for mesne profits.

4. It has been suggested that he was in possession as a mortgagee and is therefore liable to apply the profits towards the mortgage debt because he received these profits as a mortgagee. That is a question that ought to have been raised and decided in the suit on the mortgage and cannot afford a ground for holding him liable in this suit for mesne profits.

5. The appeal is therefore allowed and the suit is dismissed with costs throughout. The cross-objection is dismissed with costs.

Final Result : Allowed