Bombay High Court
Smt. Yogini Chandrakant Mehta vs The Official Assignee, High ... on 24 February, 1999
Equivalent citations: 1999 (2) BomCR 719, (1999) 2 BOMLR 428, 1999 (2) MhLj 263
Bench: A Agarwal, A Savant
1. Heard both the learned Counsel; Mr. Doctor for the appellant (Original Claimant) and Mr. Jain for respondent No. 1-Official Assignee, High Court, Bombay.
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 Assignee. Specific contentions were raised that the transfer of the two flats by the husband to the wife was acted upon in the records of the Society and the name of the appellant stood in the Society's records as the owner of the said flats. A further contention was raised in the appeal that the Official Assignee had no jurisdiction to inquire into the question of ownership of flats and should have confined his inquiry only to the ownership of articles lying in the flats. This Appeal was heard by the Division Bench on 4th February, 1993 and while the order in respect of the movables was set aside since the appellant offered to deposit a sum of Rs. 25,000/ being the approximate value of the articles, the order in respect of the flats was not disturbed. We find it convenient to reproduce paragraph 6 of the order of the Division Bench which reads as under :--
"It is made clear that the order of the Official Assignee and learned Insolvency Judge is set aside only in respect of moveables and the decision in respect of the flats is not disturbed."
There is no further Appeal against the said order passed by the Division Bench.
6. In the report dated 18th of March, 1995, on which the impugned order has been passed, the Official Assignee has referred to the developments from 12th November, 1972, the date of the alleged gift of the movables and immovables, the passing of the order of adjudication on the 7th September, 1977 and the fact that the claim made by the appellant in the past was considered and rejected by the Official Assignee in his order dated 4th June, 1990. The Official Assignee also referred to the fact that Notice of Motion No. 70 of 1990 taken out by the appellant was dismissed by the learned Single Judge on 7th of August, 1990, which order was confirmed by the Appeal Court on 4th of February, 1993 in so far as the immovable properties were concerned. The Official Assignee considered the submissions made by the rival parties including the Petitioning Creditor respondent No. 2. He perused the evidence produced by the parties and their statements and then recorded his opinion that the transfer made by the insolvent respondent No. 4-Chandrakant to his wife Yogini, the present appellant, was in collusion and connivance with his wife and was made with a view to avoid the said flats from being attached by his genuine creditors. He further recorded his opinion that the Gift Deed dated 12th November, 1972, made by respondent No. 4 insolvent Chandrakant in favour of his wife, was void ab initio and was bad in law as the same was not witnessed by the minimum required two witnesses and was not registered as required by the provisions of sections 122 and 123 of the Transfer of Property Act, 1882. In this view of the matter, the Official Assignee sought directions from the Court (a) that this Court may be pleased to set aside the Gift Deed dated 12th November, 1972 made by the husband in favour of his wife the present appellant and that the writings dated 12th November, 1972, executed by Chandrakant in favour of his wife, were sham and bogus and (b) in the event of prayer (a) being granted, the Official Assignee be authorised to take forcible and vacant possession of the two flats. There are other consequential reliefs prayed for.
7. We may, at this stage, mention that as far as the dues of the creditors are concerned, the record of the Official Assignee shows that on the date of adjudication viz. 7th September, 1977, the total liability of the insolvent was Rs. 3,16,45,814.50.
8. When the report of the Official Assignee was considered by the learned Single Judge, he came to the conclusion that the transfer of the flats in favour of the appellant was void ab initio and, therefore, the appellant was liable to deliver possession of the flats in question. In the result, the learned Single Judge made the report of the Official Assignee absolute in terms of prayers (b) and (d) excluding the bracketed portion. Prayer (b) (excluding the bracketed portion) and prayer (d) read as under :--
" (b) The Official Assignee be authorised to take forcible and vacant possession of the said flat No. B/28-29 situate at Vellard View Premises Co-operative Society Ltd., 3rd floor, "B" Wing, 14, Tardeo Road, Bombay 400 034 from the said Smt. Yogini Chandrakant Mehta and/or from any person or persons whomsoever found in possession of the said flat with Police Assistance, if necessary, and by breaking open the lock/s, if any, on the said flat and thereafter to proceed to sell the said flat together with the benefits attached to the shares issued by the said Society in respect of the said flat on "AS IS WHERE IS" basis by Public Auction on such terms and conditions as the Official Assignee may deem fit and proper.
(d) That Vellard View Premises Co-operative Society Ltd. be ordered to transfer the share certificate in respect of the said flat in the name of "The Official Assignee of Bombay and assignee of the estate and effects of the Insolvent Chandrakant Ratilal Mehta (Insolvency No. 84 of 1977) and to issue the duplicate share certificate to the Official Assignee if necessary."
It is this order passed by the learned Single Judge which is challenged in appeal before us.
9. Mr. Doctor, the learned Counsel appearing for the appellant, contended that, in the first place, in view of the provisions of section 7 of the Presidency-Towns Insolvency Act, 1909, the questions of title to the said flats could not have been decided by the Insolvency Court. Secondly, it was contended that in view of section 55 of the said Act, the transfer of the fiats being effected on the 12th November, 1972 and the adjudication of insolvency being on the 7th of September, 1977, the Court had no jurisdiction to declare the transfer as void against the Official Assignee since it was beyond the period of two years prior to the date of adjudication. It was contended that the transaction was a genuine transaction and was not a sham and bogus transaction. Even assuming that the transaction was fraudulent and was with a view to defeating the claims of the genuine creditors, inasmuch as the transaction was genuine and not sham or bogus, the Insolvency Court had no jurisdiction to summarily reject the claim of the appellant in respect of the two flats. It was lastly contended that the orders passed by the learned Single Judge on 7th August, 1990, while dismissing Notice of Motion No. 70 of 1990 as also the order dated 4th February, 1993, passed by the Division Bench in Appeal No. 1127 of 1990 in so far as the immovable properties viz, two flats are concerned, are null and void and this Court should not hesitate to declare the said orders as null and void.
10. On the other hand, Mr. Jain, the learned Counsel appearing for the Official Assignee, contended that the Insolvency Court was competent to decide the question of validity of the said transactions and the provisions of sections 7 and 55 of the said Act did not preclude such an inquiry by the Insolvency Court. It was further contended that the transactions entered into between the Insolvent-husband and his wife, the present appellant, were sham and bogus apart from the same being fraudulent. It was contended that at any rate, the findings recorded by the learned Single Judge in Notice of Motion No. 70 of 1990 in so far as the two flats are concerned, would be binding on this Court and the same operate as res judicata.
11. Coming to the first contention raised by Mr. Doctor, section 7 of the Presidency Act reads as under:-
"7. Power of Court to decide all questions arising in Insolvency. Subject to the provisions of this Act, the Court shall have full 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, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case:
(Provided that, unless all the parties otherwise agree, the power hereby given shall, for the purpose of deciding any matter arising under section 36, be exercised only in the manner and to the extent provided in that section) 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. We 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 himself 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.
12. In this behalf, we may refer to the decision of Mrs. Justice Sujata Manohar (as the learned Judge then was) in the case of Babubhai & others., Debtors v. Gangji Jesang Cheda, Petitioning Creditor, . An argument was advanced before the learned Judge that having regard to the difference in the language of section 4 of the Provincial Insolvency Act, as compared to the language of section 7 of the Presidency Act, the Insolvency Court, under section 7 of the Presidency Act, does not have jurisdiction to investigate the questions of title. The contention has been specifically negatived in paragraph 16 of the judgment at page 59 of the report. It has been held that the language of section 7 was wide enough to include all questions whatsoever whether of law or fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making complete distribution of the property. It was then held that the Presidency Act was an earlier enactment of 1909 whereas the Provincial Insolvency Act was a later enactment of 1920 and it was not permissible to interpret the wordings of an earlier enactment with reference to the wordings of a later enactment. In this view of the matter, we reject the first contention raised by Mr. Doctor.
13. Even the second contention, based on section 55 of the Presidency Act, does not impress us. Section 55 of the Presidency Act reads as under:-
"55. Avoidance of voluntary transfer. Any transfer of property, not being a transfer made before and in consideration of marriage, or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration, shall if the transferor is adjudged insolvent within two years after the date of the transfer, be void against the official assignee."
It is true that on a prima facie reading of the section, it only covers transfers which have been effected within two years prior to the transferor being adjudged insolvent. Such transfers may be declared to be void against the official Assignee. However, the findings recorded by the learned Single Judge, show that the transfer was void ab initio. The appellant-wife has gone to the extent of saying that there were some matrimonial disputes between her husband, the insolvent and her since 1969 which had reached a climax by the middle of November 1972 and she was about to file a divorce petition. The aspect has been considered by the learned Single Judge in paragraph 3 of his order. However, there is nothing on record to substantiate to allege discord between the husband and the wife and having regard to the relevant circumstances, which are considered by the learned Single Judge, it is difficult to hold that the transfer of the two flats by the husband to the wife was genuine transfer.
14. In this behalf, we may refer to the decision of the Full Bench of this Court in the case ofPadamsi Premchand & others v. Laxman Vishnu Deshpande & others, reported in A.I.R. 1949(36) Bom. 129. The Full Bench has observed that the Receiver could challenge the transactions if they were nominal and fictitious and were not intended to be real. The Full Bench was dealing with the case where one Keshavji was adjudicated an insolvent on 24th August, 1940. The Receiver in insolvency filed applications for setting aside three transfer deeds viz. 25th January, 1935, 30th January, 1935 and 30th March, 1932. Since the matter arose under theProvincial Insolvency Act, 1920, it was contended that in view of section 53 of the Provincial Insolvency Act, which is similar to section 55 of the Presidency Act, the transfers, which were prior to two years of the date of adjudication, could not be questioned. The Full Bench rejected this contention in paragraph 6 of its judgment at page 130 and observed that the transactions were not voidable but were void. At no point of time, did they transfer any title to the transferee. The limitation imposed, under section 53, would not apply if the transactions were fictitious or nominal. In other words, if the transactions were not fictitious and were not nominal but were real transactions, they would be subject to the limitation imposed by section 53 of the Provincial Insolvency Act. In view of the above, it is clear to us 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. There is thus no merit in the contention of Mr. Doctor that the findings are hit by the provisions of section 55 of the Presidency Act.
15. It was then contended by Mr. Doctor that neither the learned Single Judge while passing the order dated 7th August, 1990 in Notice of Motion No. 70 of 1990 nor the Division Bench while deciding Appeal No. 1127 of 1990 on 4th February, 1993, was really called upon to decide the question of the validity of the transfer of the said two flats. The inquiry by the Official Assignee was limited to only gift deed in respect of the movables. It is contended that there were no pleadings in respect of the immovable property viz. two flats and the question relating to the title to the two flats could not be investigated in a summary manner, as has been done in the present case. We find no merit in the contention raised by Mr. Doctor. In the first place, when the Official Assignee recorded his findings on 4th of June, 1990, he considered the entire material that was placed before him. He considered the fact that the gift deed was not attested by two witnesses nor was it registered as required by law, He came to the conclusion that the gift was void ab initio. The inquiry by the Official Assignee was in respect of gift of both, the movables as also the immovables, under the deed dated 12th November 1972. The learned Single Judge, who decided Notice of Motion No. 70 of 1990 considered the contentions of the appellant. The Notice of Motion was taken out specifically agitating the claim that in respect of the immovables, the Official Assignee has no jurisdiction to investigate since the transaction was nearly five years prior to the date of adjudication. This contention was considered by the learned Single Judge and was rejected by a speaking order passed on the 7th of August, 1990. The learned Judge came to the conclusion that there was no reliable document to hold that the immovable property was transferred in the name of the wife in accordance with law. He even rejected the claim of the transfer of movables. It is true that in Appeal No. 1127 of 1990, this Court accepted the suggestion of the appellant that she would deposit Rs. 25,000/- with the Official Assignee since she wanted the movables to be released. It was on this gesture of the appellant that the Appeal was allowed only in so far as the movables were concerned. It is not as if that the claim of the appellant in respect of the movables was accepted as genuine on the basis of the gift deed dated 12th November, 1972. This Court has not opined that the gift deed dated 12th November, 1972 was valid even in respect of the movables,. That apart, this Court has specifically made it clear in paragraph 6 of its judgment, which is reproduced in paragraph 5 above, that the decision of the learned Insolvency Judge in respect of the flats was not disturbed. It is relevant to bear in mind that in the Appeal filed by the appellant, the same specific contentions were raised which are now raised before us, namely, that the flats were transferred nearly five years before the date of adjudication and the provisions of section 55 impose a bar on any inquiry into a transaction which was more than two years prior to the date of the order of insolvency. The perusal of the grounds of Appeal would show that all the contentions, which have now been raised before us, were raised before the Division Bench. The Division Bench has rejected the said contentions when the Appeal in respect of the immovable properties was dismissed. In the circumstances, it is not possible for us to accept the contention of Mr. Doctor either that the Division Bench was not called upon to consider the question or that the observations of the Division Bench are in the nature of were obiter dictum and cannot operate as res judicata.
16. On the question as to whether the Insolvency Court could investigate the question of title, Mr. Doctor has placed reliance on the decision of the learned Single Judge of the Madras High Court in the matter of A Narayan Nair, an Insolvent, The Official Assignee, Madras v. Kochamma Amma & others reported in 1980 Madras Law Journal Reports page 455. Reliance was placed on the observations in paragraph 11 of the judgment which appear on page 462 of the Report, to contend that the Insolvency Court cannot decide the validity of the transfers which had taken place more than two years before the date of adjudication on the ground that it has been made with a view to defeat or delay the creditors having regard to the provisions of section 53 of the Provincial Insolvency Act or section 55 of the Presidency Town Insolvency Act. As we have indicated earlier, the Full Bench of this Court in Padamsi Premchand's case reported in A.I.R. (36) 1949 Bom. 129 (supra) has laid down that nominal and fictitious transfers do not fall undersection 53 of the Provincial Insolvency Act corresponding to section 55 of the Presidency Act. Where, therefore, the Official Assignee alleges that certain transfers were made by the insolvent, though beyond two years prior to the relevant date, but the same were nominal and fictitious transfers, the Insolvency Court would have jurisdiction under section 4 of the Provincial Insolvency Act and section 7 of the Presidency Act to decide the validity of the said transactions as was done by the Full Bench where the adjudication of insolvency was of 24th August, 1940 and the transactions questioned were of 25th January, 1935, 30th January, 1935 and 30th March, 1932. We are bound by the Full Bench decision of this Court. We are also in respectful agreement with the view expressed by Mrs. Justice Sujata Manohor (as the learned Judge then was) in Babubhai's case (supra). The view expressed in Babubhai's case makes it clear 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 it expedient or necessary to decide for the purpose of doing complete justice or making complete distribution of the property in an Insolvency matter. We have 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 our view, were nominal transfers; were sham and bogus 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.
17. In the result, there is no merit in any of the contentions raised by Mr. Doctor. The same are rejected. We are in agreement with the reasons and the conclusions recorded by the learned Single Judge in the impugned order dated 15th January, 1999, which has been passed on the report dated 18th March, 1995 submitted by the Official Assignee. There is thus no merit in the appeal which is accordingly dismissed. No order as to costs.
18. At this stage, Mr. Doctor prays for the stay of the operation of this order. He prays of an injunction attains the Official Assignee from executing the impugned order dated 15th January, 1999. The prayer is for 8 weeks stay. Mr. Jain appearing for the Official Assignee opposes the prayer and makes a statement that the Official Assignee will not execute the impugned order dated 15th January, 1999 for a period of 4 week from today. However, we direct that the Official Assignee will not act on the impugned order dated 15th January, 1999 for a period of 6 weeks from today.
19. Issuance of certified copy of this order is expedited.
20. Appeal dismissed.
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