Paritala Narasimham v. Ayinampudi Venkayya And Another

(1) The civil revision petition arises out of an application filed by the creditor (petitioner herein) for adjudicating the 2nd respondent herein as an insolvent. The 1st respondent herein is a purchaser of the entire properties belonging to the insolvent under a registered sale daed dated 27th december, 194. 9 for rs. 22,500. The alienation was alleged as constituting an act of insolvency. The subordinate judge of vijayawada adjudicated him as an insolvent; but on appeal the district judge of krishna at masulipatnam reversed the judgment and dismissed the petitioner's application. The civil revision petition is consequently filed against the order of the district judge.

(2) The questions that arise for consideration in the civil revision petition are (i) whether the petitioner is a creditor entitled to file the application for adjudicating the 2nd respondent as an insolvent ? (ii) whether the act of insolvency occurred within three months before the presentation of the petition ? (iii) whether the 2nd respondent has committed an act of insolvency?

(3) On the first question, both the courts held that the petitioner was entitled to file the application. The petitioner obtained a decree against the 2nd respondent on a promissory note endorsed in his favour by macha yellamandayya. The petitioner being the holder of a negotiable instrument in respect of which he obtained a decree is a creditor within the meaning of the act, though the promissory. Note was endorsed in. His favour for collection. No authority was cited in support of the proposition that an endorsee for collection has no locus standi to present the' petition as a creditor.

(4) The sale deed in favour of the ist respondent was executed on 27th december, 1949. It was presented for registration on 28th december, 1949 and the document was actually registered on 19th january, 1950. The application was filed more than three months from a8th december, 1949 but within three months from 19th january, 1950. The question that arises is, when was the act of insolvency committed - on the date of registration or on the date of presentation before the sub - registrar. Section 6 of the provincial insolvency act defints acts of insolvency. Clause (a) refers to a transfer of all or substantially all his property to a third person for the benefit, of his creditors generally. Clause (b) deals with a transfer of the debtor's property or any part thereof with intent to defeat or delay his creditors. Section 9 (1) (c) provides that the act of insolvency on which the petition is grounded should have occurred within three months before the presentation of the petition. Section 47 of the registration act enacts that once a document is registered, the effect begins to commence from the date of execution. On the strength of section 47 of the registration act it was contended in venkatadri somappa v. Official receiver of bellary, (1938) 2 m. L. J. 362. That the date of transfer challenged under section 54 of the provincial insolvency act, was the date of its execution and not the date of registration of the document.

(5) It was held that as the transfer was not effective till the document was registered, the date of registration should be regarded as the date of transfer. The conclusion arrived at by the division bench is at page 367 and is in tht following terms :

"after mature consideration we have come to the conclusion that the date of the transfer is the date of registration and that for the purpose of this section (section 54) the transfer cannot he ante - dated by the operation of section 47 of the indian registration act."

Following this decision hold that the date of registration should be regarded as the date of transfer.

(6) The next question is, whether the date of presentation of the document for registration should be regarded as the date of transfer as contended by sri g. Venkataramasastry, the learned advocate for the respondent. His argument was mainly based on the provisions of section 75 (3) of the registration act which provides that in the case of tompulsorily registerable document the registration takes effect as if the document had been registered when it was first duly presented for registration. Section 75 (3) occurs in part xii and sub - section (3) of section 75 commences with the words "such registration". The registration referred to in the sub - section is in regard to compulsory registration of documents. The terms of sction 75 (3) do not therefore apply to the facts of the present case. In the decision in narayanaswami v. Narayanaswami, (1953) 1 m. L. J. 465. The document had to be compulsorily registered as one of the executants did not admit execution and balakrishna ayyar, j. , held that the terms of section 75 (3) applied to the facts of that case. That decision has therefore no application to this case. It is unnecessary for me to consider whether that decision is rightly decided or whether the view taken by mack, j. , in veeraraghavamma v. Padma raju, (1953) 2 m. L. J. 308. Dissenting from chat decision is correct.

(7) Though the document was presented for registration on 28th december, 1949, the registration cannot be regarded as complete until the procedure laid down in sections 60 and 61 of the registration act is complied with. Section 60, sub - section (1) enacts that after such of the provisions of sections 34, 35, 55 and 59 as applied to any document presented for registration have been complied with, the registering officer shall endorse thercn a certificate containing the word "registered" together with the number and page of the book in which the document has been copied. Sub - section (2) provides that such certificate shall be signed, sealed and dated by the registering officer. In the instant case, the certificate of registration bears the date 19th january, 1950. Section 61 provides that the endorsements and certificates referred to and mentioned in sections 59 and 60 shall thereupon be copied into the margin of the register book and the registration of the document shall thereupon be deemed to be complete. Having regard to the terms of sections 60 and 61, i hold that the registration was complete only after the certificate of registration was signed, sealed and dated by the registrar on 19th january, 1950. I do not agree that the registration dates back to the date of the presentation of the document.

(8) The last question that remains to be considered is, whether the 2nd respondent has committed an act of insolvency by transferring the entire property to the 1st respondent. As i propose to remand the case to the subordinate judge for the determination of this question, i do not wish to express my opinion. In the application filed by the petitioner for adjudication of the respondent as an insolvent, there is no specific allegation that the alienation was effected with intent to defeat or delay his creditors so as to attract the terms of section 6 (4). In the evidence, p. Ws. 1 and 2 deposed that the transfer was effected without the knowledge or consent of the creditors and that the 1st respondent herein was closely related to the 2nd respondent herein. Unfortunately no evidence was let in on behalf of the respondents. The subordinate judge accepted the evidence of the petitioner's witnesses and adjudged the 2nd respondent as an insolvent. On appeal the district judge held that the transfer of all the properties of the debtor could not be regarded as being for the benefit of the creditors generally. As the parties have not placed the entire evidence bearing on this point, viz. , as to whether the allegation amounts to an act of insolvency undei sections 6 (a) and/or 6 (d) of the act, i think it is just and necessary to remand this petition to the subordinate judge, vijayawada.

(9) In the result, the civil revision petition is allowed and the orders passed by the district judge and the subordinate judge are set aside and the subordinate judge is directed to dispose of the application in the light of the observations aforesaid. Costs will abide the result. Revision allowed. Application remanded.