JUDGMENT

1. This is an appeal by defendants 1 and 2 in a suit for possession of a certain field, Survey No. 265 of Dongaon.

2. It is now accepted, because of the finding of the lower appellate Court, that this field belonged to Sitaram Balkrishna, the father of defendants 1 and 2. The defendants claim as Sitaram's heirs. The plaintiffs claim through Sitiyram's daughter-in-law Anusuya the following geneological tree will be of assistance.

3. Sitaram was adjudicated an insolvent on 6-3-1934 in pursuance of a creditors' petition filed in May 1931. The adjudication order is Ex. D-5.

4. According to the defendants, Sitaram applied to the Debt. Conciliation Board some time after the order of adjudication. That is not accepted by the plaintiffs, and so far as the record goes, all we know is that the application was made in 1934 because the case is numbered Revenue case No. 1251 of 1934. But that does not help us to determine whether the application was before or after 6-3-1934. However, this much is certain. It was made after the petition in the Insolvency Court, as the petition there was filed in May 1931.

5. The Debt. Conciliation Board effected a conciliation and an agreement was reached before the Board on 22-7-1935. The agreement is Ex. P-8. All it says is:

“…and it has been settled that the total amount of debts due to the ??? as shown in column 4 of Part I of the schedule overleaf, should be conciliated for the amounts shown in column 5 thereof and it is agreed that the amounts settled shall be paid in instalments as shown in column 8.…”

6. It is to be noted that there is nothing in the agreement to indicate how the instalments are to be paid, namely whether in cash or in kind, and there is nothing there about sale of the debtor's property.

7. Among the debts. settled was one due to Mt. Anusuya (Sitaram's daughter-in-law) on a mortgage dated 13-6-1931. It was settled for Rs. 1600 payable in 40 instalments of Rs. 40 a year. But despite this settlement Sitaram executed a sale-deed of survey no. 265 in favour of Anusuya a week later, namely on 29-7-1935 (Ex. P-15). The recital regarding the considertion is as follows:

“In order to settle your previous debts due on two mortgage deeds dated 22-5-1931 and 13-6-1931 I had applied to the Dobt. ??? Board, Mehkar, in Revenue Case No. 1251 of 1964. I have received the full amount of consideration of Rs. 3000, in coins of this sale deed, as the same is deducted from the dues payable to you by order of the Board.”

8. Now it will be observed that the agreement before the Debt. Conciliation Board included only one debt due to Anusuya on a mortgage of 13-6-1931 and that was settled for Rs. 1600. The other mortgage of 22-5-1931 was not included in the proceedings before the Board, and in any case the debt. of Anusuya, whatever it was, was settled for Rs. 1600 and not for Rs. 6000. In spite of this, however the Debt. Conciliation Board placed its seal on Ex. p. 15 and, apparently, authorised the sale.

9. The original agreement is torn, but I have pieced the portions together and am satisfied that nothing is missing regarding Anusuya. The agreement is confined to the mortgage of 13-6-1931 and does not refer to the one of 22-5-1931, and the sum settled was Rs. 1600 and not Rs. 3000. I am satisfied from the original that there could not have been any reference to the other mortgage in the torn portion of the deed.

10. As a consequence of this sale the Insolvency Court annulled the adjudication on 2-8-1935 (Ex. P-19) in the following terms:

“The claim of the applicant is settled by the Debt. Conciliation Board. The order of adjudication passed in favour of the insolvent is hereby annulled as all claims are settled.”

11. Some years later, namely on 30-8-1941, Mt. Anusuya sold the field to plaintiff 1. We are concerned here with his title as based on Anusuya's.

12. Defendants 1 and 2 are sons of Sitaram. They claim as Sitaram's heirs. Their contention is that Anusuya got no title and so was incompetent to pass on any to plaintiff 1. This is based on a number of grounds. The first is this.

13. It will be seen that the sale-deed Ex. P-15 was executed on 29-7-1935 while Sitaram was still an insolvent. It is contended that this made the sale wholly void. The plaintiffs on the other hand argued that the deed is not void because Section 21 of the Debt. Conciliation Act, ousts the jurisdiction of the insolvency Court. The section runs:

“… any Suit or other proceeding then pending before a civil Court in respect of any debt. for the settlement of which application has been made shall be suspended until the Board has disposed of the application.”

14. I need not, however, decide in this case, along the lines of Shriahar v. Ganesh, 1938 N.L.J 133 at p. 136 and Chhotetal v. Nathuram, I.L.R (1938) Nag. 165 : (A.I.R (24) 1937 Nag. 288), which of the two tribunals, namely, the Insolvency Court or the Debt Conciliation Board, obtains precedence when proceedings relating to the same debt and he same debtor are pending before both because, even if it be assumed that the Debt. Conciliation Board obtains precedence that does not abrogate the proceedings in the Insolvency Court. It merely “suspends” them. That does not have the effect of re-vesting the insolvent's property in the insolvent. The moment there is an adjudication all the insolvent's property vests in the Court or the receiver. The insolvent is completely divested until annulment, and an annulment can only be by order of the Insolvency Court see Sections 35 and 37 of the Provincial Insolvency Act. If the proceedings are “suspended” so also is the possibility of re-vesting. Therefore whatever the position may be vis-a-vis the two Courts the insolvent has no power to deal with the property qua insolvent.

15. We have next to examine the powers of the Debt. Conciliation Board. One thing is clear from S. 21, and that is that the suspension only operates “in respect of any debt. for the settlement of which application has been made”. There is nothing on record to show that the application to the Board included the debt. due on the mortgage of 22-5-1931, and reference to the agreement Ex. P-8 would appear to indicate that it was not included. Therefore the insolvency proceedings were not suspended so far as that is concerned. However that is not of much consequence because the ground on which I proceed is wider than this.

16. Section 12 Debt. Conciliation Act, requires that when a settlement is made

“such settlement shall forthwith be reduced to writing in the form of an agreement recording a list of immovable properties of the debtor with particulars of any mortgage, lien or charge subsisting thereon, the amounts payable to such creditors and the manner in which and the times at which they are to be paid. Such agreement shall be read out and explained to the parties concerned and shall be signed or otherwise authenticated by the Board and the parties.”

17. When this is done sub-s. (2) ??? that

“An agreement thus made shall… be registered … and it shall then take effect as if it were a decree of a civil Court.”

18. It will be seen from this that the only agreement which has the force of a decree is the one signed by the parties. In the present case the only agreement signed by the parties is Ex. P. 8 and that agreement, dots not provide for the alienation of any of the debtor's property. Therefore lit sale-deed Ex. P-15 is not in pursuance of the agreement. It is an independent transaction, and even though it bears the seal of the Board it does not attract any of the provisions of the Debt Conciliation Act.

19. The next question is whether a Board can embody a transfer of property in an agreement under S. 12. It was argued that it can because the section requires that the manner of payment should be set out.

20. I need not decide this question because the agreement here does not set out any such transfer or proposed transfer. But I draw attention in passing to Para 6 of Circular No. 1 issued by the Provincial Government among the notes and explanations to the Act.

“6.(1) A Board cannot embody a proposed transfer of immovable property in an agreement under S. 12 since, in the event of default (i.e if the debtor ???) payment cannot be enforced under S. 13(1). Section 130(1) also would be inoperative. But there is nothing to prevent the Board persuading the parties to make such a settlement and getting them to execute the transfer and register it. Such settlement would, however, but be under the Debt Conciliation Act….

It is therefore necessary when there is more than one creditor that all of them should agree to the arrangement.

(2) It is not a part of the business of a Board to settle debts by setting off property to creditors who agree to accept it in satisfaction of their claims…. There is, however, nothing to prevent a debtor from paying the agreed amount after reduction by the transfer or lease of some of his land or in any other way he may like to do with the concurrence of the creditor, subject to the provisions of S. 17 of the Act. There is also no objection to the good offices of the Board being available to the parties for carrying out any private agreement that might be arrived at.”

21. As I have said, I need not decide upon the power of the Board to incorporate such a transfer or proposed transfer in the agreement and to compel compliance under the Act because the agreement here does not in fact do this. What is evident from Exs. P-8 and P-15 is that the Board in this case did exactly what these instructions directed. It hardly matters whether the Board knew of these instructions or not (one is dated 2-3-1935 and the other 10-11-1935, so the Board could not have known about the latter) because with or without knowledge the Board followed exactly those lines. The sale Ex. P-15 is therefore a purely private transaction and is not covered by the Act even though it had the blessing of the Board. In any event a Division Bench of this Court holds that such a sale is voluntary, especially when the creditor, as here, is a secured creditor: Kashinathappa v. Ramji, I.L.R (1949) Nag. 625 at p. 629.

22. I have already pointed out that even if Section 21 of the Debt. Conciliation Act, can operate upon the insolvency proceedings it cannot do more than “suspend” them. It cannot abrogate them, nor can it restore the status quo. Therefore once the insolvent is divested of his property by the insolvency proceedings S. 21 does not have the effect of re-vesting it in him; all it does is to “suspend” the possibility of re vestment. It follows from this that the insolvent had no authority or power to sell and so Ex. P-15 conveyed no title. See as to this Raghunath Das v. Sundar Das, 42 Cal. 72 at p. 80; (A.I.R (1) 1914 P.C 129), Kala Chand v. Jagannath, 54 Cal. 595 : (A.I.R (14) 1927 P.C 108) and Chunmlal v. Vithal, 28 N.L.R 317 at p. 319 : (A.I.R (20) 1933 Nag. 28).

23. The next question is whether Section 43 of the Transfer of Property Act is attracted. This was not pleaded nor was it raised in the first Court, so I am not prepared to allow it to be raised here in second appeal as it depends upon a number of facts which have neither been pleaded nor tried.

24. It has been settled by numerous decisions, which are collected by Sir Dinshah Mulla at pp. 209 and 210 of Edn. 3 of his Transfer of Property Act and by B.B Mitra at p. 184 of the 9th Edn. of his book on the Act and is also suggested in Chandulal v. Raghunathdas, 1942 N.L.J 82 at p. 86, that S. 43 is a species of estoppel and so cannot be availed of by a person who knows the facts and was not misled, and, according to some of those decisions, it is necessary for the person wanting to take advantage of this section to plead and prove that he took the transfer in good faith believing in and being misled by the erroneous representations made by the transferor. I need not go as far as that, but it is evident that the questions of knowledge and belief are material and so the other side must be given a chance of raising these defences if and when S. 43 is pleaded. It is very unlikely that Mt. Anusuya did not know of the insolvency proceedings at the date of her purchase because she was Sitaram's daughter-in-law and it was the two mortgages to her which occasioned the insolvency.

25. The next question is: What is the effect of an order of annulment? Does it have the effect of reviving acts performed by the insolvent during the period of incompetency? It was urged that a transfer by an insolvent after adjudication is not void. It merely holds the title in abeyance and the transfer becomes operative the moment the incompetency is removed.

26. Such a conclusion is justified on the ratio decidendi of Ramasami Kottadiar v. Murugesa Mudali, 20 Mad. 452 : (7 M.L.J 229) and Kothaddaram Ravuth v. Murugesa Mudaliar, 27 Mad. 7 though it is possible to distinguish these cases on the ground that they were construing an earlier Insolvency Act which had the words “null and void” in the section corresponding to the present S. 37. It is also the ratio decidendi of Lingappa v. Official Receiver Bellary, A.I.R (24) 1937 Mad. 717 : (176 I.C 600). But with all respect I prefer to found wider and to hold that under the present Act one cannot “put the clock back as if the adjudication had never been made” to use the words of Reilly, J. in Jethaji Peraji Firm v. Krishnayya, 52 Mad. 648 at p. 668 : (A.I.R (17) 1930 Mad. 278) quoted by Venkataramana Rao, J. in Lakshmanan Chettiar v. Srinivasa Iyengar, I.L.R (1937) Mad. 203 at p. 209 : (A.I.R (24) 1937 Mad. 131). It is true that the property reverts to the debtor under S. 37 but that does not wipe out all the effects of the insolvency. The debtor gets his original title back and it is possible that one can place him as far as may be in the same position as he was on the date of the adjudication, but that does not mean that acts done by the insolvent while under an incompetency can be validated or can be regarded as if there had never been a disability. In this respect the insolvent can, I think, be regarded in the same light as a lunatic who has intervals of sanity, or as a minor.

27. It is, I think, beyond doubt that an order of adjudication denudes the insolvent of all right, title and interest to and in the property. In my opinion this continues during the whole period of the insolvency. It is as if the law had effected a transfer of title from the insolvent to the receiver. I think that follows from Section 28(2) of the Provincial Insolvency Act. In any case that is how I interpret the decisions of the Privy Council in Raghunath Das v. Sundar Das Khetri, 42 Cal. 72 at pp. 80, 82 and 83 : (A.I.R (1) 1914 P.C 129) and Kala Chand v. Jagannath, 54 Cal. 595 at p. 597 : (A.I.R (14) 1927 P.C 108. And that is how I interpreted these decisions in Chunnilal v. Vithal, 28 N.L.R 317 at p. 319 : (A.I.R (20) 1933 Nag. 28). In the first of these cases their Lordships said

“the judgment-debtors had at the time of the sale no right, title, or interest which could be sold or vested in a purchaser, and consequently the respondents acquired no title to the property.”

28. This was their Lordships' view with respect to an auction sale under an order of a Court. How much more must it be the case when there is a purely private sale.

29. If that is the effect of an order of adjudication, namely to divest the insolvent of all “right, title and interest” and transfer it to another (the receiver), then the re-vesting under S. 37 only transfers the title back again. That, in my opinion, stands on the same footing as the case of a man who transfers his title in property to another, say, by a sale with a right to repurchase, and then purchases it again. If in the interval he were to sell to a third party that would not have the effect of conferring a good title. The purchaser would get just nothing. It is true he might, in given circumstances, get a right to have the estoppel fed under Section 43 of the Transfer of Property Act, but that is another matter. That is the line of reasoning adopted in Diwan Chand v. Manak Chand, 16 Lah. 392 : (A.I.R (21) 1934 Lah. 809) and is the ground on which Rup Narayan Singh v. Har Gopal Tewari, 55 ALL. 503 : (A.I.R (20) 1933 ALL. 449) could be sup-ported though the learned Judges do not proceed on that basis.

30. But examining the position under S. 43 a little closer, it is evident from that when a man without title purports to sell to another and subsequently gets title to the property sold, that in itself does not pass any estate. The transferee is left with an option and he can, if he so chooses, decline to accept the property. I can see no reason why a man who buy from an insolvent should be placed in a worse position and be deprived of this option. But that is what would happen if the argument which I am now examining is sound. I hold therefore that an order of annulment does not have the effect of validating an alienation made by the insolvent during the pendency of the insolvency, and as I have excluded Section 43 of the Transfer of Property Act, in this Case for the reasons given above it follows that the plaintiffs have no title and so cannot maintain this suit.

31. The following cases were also cited, but they are, I think, distinguishable. In Dharmasamarajayya v. Sankamma, A.I.R (30) 1913 Mad. 453 : (213 I.C 110) the alienation was before the adjudication. It was set aside by the Insolvency Court but the property covered was not disposed of by the receiver. It was held that the order of annulment revived the alienation. That is understandable if the insolvent is restored to the position he occupied on the date of the adjudication but the case does not decide whether the insolvent can deal with his property while under a disability. Suleman v. Laxman, A.I.R (25) 1938 Nag. 312 : (I.L.R (1940) Nag. 204) is distinguishable along the same lines. The appeal is allowed. The decree of the lower appellate Court is set aside and that of the first Court restored. Costs here and in the lower appellate Court will be paid by the plaintiffs-respondents.

32. Appeal allowed.