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2024 Supreme(Online)(MAD) 40742
HIGH COURT OF MADRAS
K.Murali Shankar, J
L.Arockiadoss – Appellant
Versus
J.Kannaperuman – Respondent
C.M.A.(MD)Nos.656 and 657 of 2018 | C.R.P.(MD)No.1940 of 2018
For the Appellants/Petitioners: Mr.T.C.S.Thillainayagam
For the Respondents: Mr.T.K.Gopalan for R.1, Mr.M.Rajaraman for R.2, Mr.M.R.Murugesan for R.4, R.3 and R.4 – dispensed with Memo filed
The Insolvency Court lacks jurisdiction to annul property transfers during pending insolvency petitions, emphasizing adherence to legal processes for valid annulments.
Headnote:(A) Provincial Insolvency Act, 1920 - Sections 4 and 53 - Jurisdiction of Insolvency Court to annul transfers - The Court ruled that the Insolvency Court lacks jurisdiction to annul sales during the pendency of the insolvency petition and highlighted the importance of the adjudication process in determining the legality of transfers. (Paras 8, 10, 21, 24)
(B) Fraud and Suppression of Facts - The Court found that the first respondent and the auction purchaser colluded to suppress material facts, constituting fraud against the claimants and the Court. (Paras 31, 32)
Facts of the case:
The case involves disputes over property sales linked to an insolvency petition, where the appellant, a court auction purchaser, challenged the annulment of sale deeds executed by the judgment debtor. The Executing Court allowed claim petitions, canceling the sale certificate and ordering deposits from the decree holder.
Findings of Court:
The Executing Court found that the insolvency court acted without jurisdiction and that the auction sale was tainted by fraud.
Issues: The main issues included the jurisdiction of the Insolvency Court to annul sales and the presence of fraud in the auction sale process.
Ratio Decidendi: The Court determined that the insolvency court's annulment of sales was void due to lack of jurisdiction, emphasizing that the insolvency process must be followed properly for annulments to be valid.
Result: Appeals dismissed; claim petitions upheld.
| Table of Content |
|---|
| 1. overview of the appeals and factual background. (Para 1 , 2) |
| 2. details of property transactions and insolvency claims. (Para 3 , 4 , 5 , 6) |
| 3. jurisdiction of the insolvency court and its implications. (Para 7 , 8 , 9 , 10) |
| 4. analysis of legal provisions related to insolvency and property transfers. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17) |
| 5. consideration of jurisdiction and authority of the insolvency court. (Para 18 , 19 , 20 , 21 , 22 , 23) |
| 6. findings on fraud and suppression in property transactions. (Para 24 , 25 , 26 , 27 , 28 , 29) |
| 7. conclusions regarding the execution proceedings and financial orders. (Para 30 , 31 , 32 , 33) |
| 8. final dismissal of appeals with directives for financial restitution. (Para 34 , 35) |
COMMON JUDGMENT
These two Civil Miscellaneous Appeals are directed against the common order passed in the claim petition in E.A.No.54 of 2012 in E.A.No.1 of 2012 in E.P.NO.4 of 2010 in O.S.No.240 of 2004 and the claim petition in E.A.No.57 of 2012 in E.P.No.4 of 2010 in O.S.No.240 of 2004 on the file of I Additional District Court, Madurai. The Civil Revision Petition is directed against the order passed in E.A.No.1 of 2012 in E.P.No.4 of 2010 in O.S.No.240 of 2004, on the file of I Additional District Court, Madurai, dated 21.12.2017, dismissing the petition filed under Order 21 Rule 95 C.P.C., for delivery of the property.
2. The factual aspects leading to the filing of the present appeals and the revision are as follows:
For the sake of convenience and brevity, the parties will hereinafter be referred as per their status/ranking before the Executing Court.
(a) The properties comprised in Survey No.2787/1A and the building bearing Door No.9B at Vallabai road, Madurai Town originally belonged to one Mrs.Saroja and her sons Mohan, Nirmal Kumar and Viswanath. They have partitioned their common properties on 27.02.1995 and the same was subsequently confirmed by a partition list dated 27.03.1995. In Ex.B.2 – rough sketch marked in E.A.No.57 of 2012, the portion shown as ABCDHIA was alloted to the said Viswanath and the portion shown as HDEFG was allotted to the said Saroja. The said Viswanath through his Power of Attorney – P.Nataraj (3rd Respondent) sold his property ABCI to one S.Mohandoss and his wife Dakshayini, vide two sale deeds dated 12.11.1999, who in turn sold the same to Selvi Joy Jayantha vide two sale deeds dated 13.06.2001 and 21.06.2001. The said Selvi Joy Jayantha through his power of attorney S.Raviraj sold the said property to the claim petitioner Dr.J.Kannaperuman vide sale deed dated 01.12.2006. The said Viswanath sold his remaining property ICDH to one P.Kalyanasundaram vide sale deed dated 24.11.1999, who in turn sold the same to the claim petitioner in E.A.No.57 of 2012 - Sigappi. The claim petitioner Sigappi has also purchased the portion shown as HDEFG from Viswanath's mother Saroja, vide sale deed dated 16.03.2000.
(b) The first respondent in both claim petitions – M.Kamaraj entered into a sale agreement with the said Viswanath on 19.06.1997 in respect of 19 cents of land and he had paid an advance of Rupees Five Lakhs on the date of agreement. Since the said second respondent- Viswanath pleaded his inability to conclude the same on the ground that that was opposed by his family members and also lodging of criminal complant against the said Kamaraj, the said Kamaraj and Viswanath have agreed to give up the sale agreement and the said second respondent Viswanath agreed to pay the advance amount with interest at the rate of 24% p.a., within six months from 01.12.1999. Since the said second respondent – Viswanath has failed to pay the said amount as agreed, the first respondent Kamaraj has filed a suit in O.S.No.240 of 2004 for recovery of Rs.5,75,000/- with interest and costs against the said second respondent-Viswanath and his Power of Attorney Nataraj, on the file of the Subordinate Court, Madurai. The first respondent Kamaraj has also filed an application seeking attachment bef
