# '959 Babulal Parate v. The State of Bombay and Another

- **Citation:** [1960] 1 S.C.R. 616
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Case number:** Civil Appeal No. 207of1955
- **Bench:** S. K. DAs, A. K. Sarkar, K. SuBBA RAo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/959-babulal-parate-v-the-state-of-bombay-and-another-1801
- **Pages:** 31

## Headnote

Insolvency--Decree-holder assigning decree-Adjudication as
insolvent on ground of assignment being fraudulent preference-Whether upon adjudication decree vests in Official Receiver-Order
annulling assignment-If relates back to date of assignment-Execution applications made by assignee before annulment order, whether
incompetent-Official Receiver making application for execution
after annulment order-Limitation- -Whether limitation saved by
applications made by assignee-Indian Limitation Act, r908 (V of
r908)--Provinciat Insolvency Act r920 (V of r920), ss. 28 and 54.
On May 9, 1935, one V obtained a decree against R and
later assigned the same in favour of his mother M. M made an
application for an order recognising her as the assignee and for
S.C.R.
SUPREME COURT REPORTS
617
execution which was disposed of on September 27, r937.
In
z959
1939, V was adjudicated an insolvent on the ground that the
f
1
f
Th
f
M
d
Ramaswami
assignment was a raudu ent pre erence.
erea ter
ma e a
.
second application for execution which was disposed of on
Cihettiar
September 30, 1940. The Official Receiver who had been ap~oint-
:·
.
ed receiver in insolvency applied under s. 54 of the Provincial The Official Receiver
Insolvency Act and on April, 9, 1943 obtained an order annulling
the assignment. On September 27, 1943, the Receiver applied
for execution of the decree relying upon the applications made
by M to save limitation under art. 182, Limitation Act. The
judgment debtor objected that the execution application was
time barred because, in view of the orders in the insolvency
proceedings, M was not entitled to the decree on the dates she
applied for execution and her applications were incompetent and
could not save limitation. The judgment debtor contended that
(i) the order of annulment related back to the date of assignment
and consequently M had never been entitled to the decree, (ii)
the order of adjudication had the effect itself of annulling the
assignment and vesting the decree in the receiver from the date
of presentation of the application for adjudication, and (iii) the
receiver was not entitled to take advantage of the applications
made by M as he was not claiming through her but against her.
Held, (per curiam) that the application for execution made
by the receiver was within time as the previous applications
made by M were competent and saved the limitation. The
assignment in favour of M stood till it was annulled and till then
M had the right to execute the decree. Even if the annulment
related back to the date of assignment, it did not make illegal the
exercise of the rights under the assignment made prior to the
annulment. Sub-sections (2) and (7) of s. 28 of the Provincial
Insolvency Act which provided that upon adjudication all the
assets of the insolvent vested in the receiver with effect from
the date of the application for adjudication, could not have the
effect of vesting the decree in the receiver. The order of adjudication, though it was based on the ground that the assignment
was a fraudulent preference amounting to an act of insolvency,
did not itself annul the assignment and the assignment stood
till it was annulled by an order under s. 54. As such M was
competent to execute the decree and the applications made by
her were in accordance with law and could be relied upon by the
receiver to save the limitation for the application made by him.
The fact that the receiver did not claim through M did not
disentitle him from taking advantage of the applications made
by M.
Article 182, Limitation Act, merely required the application for execution of a decree to be made within three years of
the final order on a previous application made in accordance
with law for the execution of the same decree.
Mahomed Siddique Yousuf v. Official Assignee of Calcutta,
(1943) L.R. 70 I.A. 93; Ex parte Learoyd, (1878) 10 Ch. D. 3,
distinguished.
x959
618
SUPREME COURT REPORTS [1!!60(1)]
Subba Rao ].-The order of adjudication did not by its ow

## Text

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'959
Babulal Parate
v.
The State of
Bombay
and Another
S. K. Das ].
I959
August 28.
616
SUPREME COURT REPORTS [1960(1)]
the Bill that it was in reality a new bill and therefore
a fresh reference was necessary.
It is advisable, perhaps, to add a few more words
about Art. 122( 1) of the Constitution. Learned counsel
for the appellant has posed before us the question as
to what would be the effect of that Article if in
any Bill completely unrelated to any of the matters
referred to in Cls. (a) to (e) of Art. 3 an amendment
was t!l be proposed and accepted changing (for example)
the name of a State. We do not think that we need
answer such a hypothetical question except merely to
say that if an amendment is of such a character that
it is not really an amendment and is clearly violative
of Art. 3, the question then will be not the validity of
proceedings in Parliament but the violation of a consitutional provision. That, however, is not the position
in the present case.
For these reasons, we hold that there was no violation of Art. 3 and the Act or any of its provisions are
not invalid on that ground.
The appeal accordingly fails and is dismissed with
costs.
Appeal dismissed.
RM. NL. RAMASW AMI CHE1'TIAR AND OTHERS.
v.
THE OFFICIAL RECEIVER,
RAMANATHAPURAM AT MADURAI & OTHERS
(S. K. DAs, A. K. SARKAR and K. SuBBA RAo, JJ.)
Insolvency--Decree-holder assigning decree-Adjudication as
insolvent on ground of assignment being fraudulent preference-Whether upon adjudication decree vests in Official Receiver-Order
annulling assignment-If relates back to date of assignment-Execution applications made by assignee before annulment order, whether
incompetent-Official Receiver making application for execution
after annulment order-Limitation- -Whether limitation saved by
applications made by assignee-Indian Limitation Act, r908 (V of
r908)--Provinciat Insolvency Act r920 (V of r920), ss. 28 and 54.
On May 9, 1935, one V obtained a decree against R and
later assigned the same in favour of his mother M. M made an
application for an order recognising her as the assignee and for
S.C.R.
SUPREME COURT REPORTS
617
execution which was disposed of on September 27, r937.
In
z959
1939, V was adjudicated an insolvent on the ground that the
f
1
f
Th
f
M
d
Ramaswami
assignment was a raudu ent pre erence.
erea ter
ma e a
.
second application for execution which was disposed of on
Cihettiar
September 30, 1940. The Official Receiver who had been ap~oint-
:·
.
ed receiver in insolvency applied under s. 54 of the Provincial The Official Receiver
Insolvency Act and on April, 9, 1943 obtained an order annulling
the assignment. On September 27, 1943, the Receiver applied
for execution of the decree relying upon the applications made
by M to save limitation under art. 182, Limitation Act. The
judgment debtor objected that the execution application was
time barred because, in view of the orders in the insolvency
proceedings, M was not entitled to the decree on the dates she
applied for execution and her applications were incompetent and
could not save limitation. The judgment debtor contended that
(i) the order of annulment related back to the date of assignment
and consequently M had never been entitled to the decree, (ii)
the order of adjudication had the effect itself of annulling the
assignment and vesting the decree in the receiver from the date
of presentation of the application for adjudication, and (iii) the
receiver was not entitled to take advantage of the applications
made by M as he was not claiming through her but against her.
Held, (per curiam) that the application for execution made
by the receiver was within time as the previous applications
made by M were competent and saved the limitation. The
assignment in favour of M stood till it was annulled and till then
M had the right to execute the decree. Even if the annulment
related back to the date of assignment, it did not make illegal the
exercise of the rights under the assignment made prior to the
annulment. Sub-sections (2) and (7) of s. 28 of the Provincial
Insolvency Act which provided that upon adjudication all the
assets of the insolvent vested in the receiver with effect from
the date of the application for adjudication, could not have the
effect of vesting the decree in the receiver. The order of adjudication, though it was based on the ground that the assignment
was a fraudulent preference amounting to an act of insolvency,
did not itself annul the assignment and the assignment stood
till it was annulled by an order under s. 54. As such M was
competent to execute the decree and the applications made by
her were in accordance with law and could be relied upon by the
receiver to save the limitation for the application made by him.
The fact that the receiver did not claim through M did not
disentitle him from taking advantage of the applications made
by M.
Article 182, Limitation Act, merely required the application for execution of a decree to be made within three years of
the final order on a previous application made in accordance
with law for the execution of the same decree.
Mahomed Siddique Yousuf v. Official Assignee of Calcutta,
(1943) L.R. 70 I.A. 93; Ex parte Learoyd, (1878) 10 Ch. D. 3,
distinguished.
x959
618
SUPREME COURT REPORTS [1!!60(1)]
Subba Rao ].-The order of adjudication did not by its own
force divest the title of M and vest it in the Official Receiver. An
Ramaswami
assignment made before the filing of the application for adjudiCheltia,.
cation was binding on the Official Receiver until it was annulled
v.
und<'t ss. 53, 54 or 54-A of the Act.
The Official Receirer
Sarkar J.
Mahomed Siddique Yousuf v. Official Assignee of Calcutta,
(1943) LR. 70 I.A. 93 and Ex parte Learoyd, (1878) IO Ch. D. 3,
distinguished.
Official Receiver, Guntur v. Narra Gopala Krishnayya I.LR.
1945 Mad. 541 and D. G. Sahasrabudhe v. Kala Chand Deochand G
Co., Bombay, 1.1,.R. 1947 Nag. 35, approved.
(r) A transfer by a debtor before insolvency with a view to
give fraudulent preference conveyed a valid title to the transferee; (2) such a transfer was voidable against the Official
Receiver in circumstances mentioned in s. 54 of the Act; (3) when
the transfer was annulled· the property vested in the Official
Receiver who could administer it in the interest of the creditors;
and (4) even after annulment the transfer stood as between the
transferor and the transferee and the transferee was entitled to
the balance of the sale proceeds remaining after satisfying the
creditors.
Official Receiver, Coimbatore v. Palaniswami Chetti, (1925)
I.L.R. 48 Mad. 750, Amir Hasan v. Saiyid Hasan, (1935) I.LR. 57
All. goo, and Rukhmanbai v. Govindram l.L.R. 1946 Nag. 273,
relied on.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
207of1955.
Appeal by special leave from the judgment and
order dated the 6th December 1950, of the Madras
High Court in C.M.A. No. 332 of 1945, arising out of
the judgment and order dated the 17th January 1945,
of the Subordinate Judge, Devakottai in E. P. No. 90
of 1944 in 0. S. No. 14 of 1926.
M. S. K. Iyengar, for the appellants.
A. V. Viswanatha Sastri and T. R. V. Sastri for
respondent No. I.
1959. August 28. The judgment of S. K. Das and
A. K. Sarkar JJ. was delivered by Sarkar, J. Subba
Rao, J. delivered a separate judgment.
SARKAR J.-This appeal arises out of an application
for execution of a decree for money and the only
question is whether the application was made within
the time prescribed by the Limitation Act.
S.C.R.
SUPREME COURT REPORTS
619
'fhe decree was passed in favour of one Venkatar959
chalam Chettiar on May 9, 1935, against the appellants
Ramaswami
and certain other persons. On :February 3, 1936,
Chettiar
Venkatachalam Chettiar transferred the decree to his
v.
mother, Meenakshi Achi, by an assignment in writing The Official Receiver
never having tried to execute it himself. Soon thereafter, namely, on March 26, 1936, a creditor of
Sarkar J.
Venkatachalam Chettiar presented a petition under
the Provincial Insolvency Act (hereinafter referred to
as the Act) for adjudicating him an insolvent on the
ground that the transfer of the decree to Meenakshi
Achi was a fraudulent preference and as such an act
of insolvency. This petition remained pending for
a considerable time and ultimately on January 7, 1939,
an order was made on it adjudicating Venkatachalam
Chettiar an insolvent. By that order respondent No. 1,
the Official Receiver of Ramanathapuram, was appointed the receiver in insolvency and the insolvent's
estate vested in him. This order was based on the
finding that the transfer of the decree by Venkatachalam Chettiar to Meenakshi Achi was a fraudulent
preference and an act of insolvency. On January 26,
1942, the receiver made an application in the insolvency proceedings for an order annulling the transfer
of the decree by the insolvent to Meenakshi Achi and
on this application an order was made on April 9,
1943, under s. 54 of the Act annulling that transfer.
In the meantime, Meenakshi Achi had made two
applications for execution of the decree as the assignee
of it and a reference to them is necessary. The first
of these applications was made on December 14, 1936,
for an order recognising her as the assignee of the
decree and for its execution against some of the judgment-debtors. This application was disposed of by an
order made on September 27, 1937, recognising her
right to execute the decree as the assignee and directing a certain compromise made presumably with the
judgment debtors concerned, to be recorded. The
terms of this compromise a.re not relevant for the
purpose of the appeal. Thereafter, on August 2, 1940,
Meenakshi Achi as the assignee of the decree made
another
a.pplication
for its execution and this
620
SUPREME COURT REPORTS [1960(1)]
1959
application was disposed of by an order made on
September 30, 1940, dismissing it for default of prose-
. Rama.~u1ami
Chettiar
cution. It will be remembered that it was after these
v.
applications and the orders thereon had been made
The Official Receiver that the order annulling the assignment of the decree
to Meenakshi Achi was passed.
Sarkar J.
After the order annulling the transfer of the decree
to MeeBakshi Achi had been made, the receiver considering himself then entitled to the decree, made an
application for its execution on September 27, 1943.
It is this application which has given rise to the
present appeal.
The executing court dismissed the application as
having been made beyond the time prescribed by the
Limitation Act. On appeal, the High Court at Madras
set aside the order of the executing court and held
that the application was within time. Some of the
judgment-debtors have now come up in appeal to this
Court. The appeal is contested by the receiver, the
respondent No. 1.
The other respondents among
whom are the remaining judgment-debtors or their
successors in interest, have not appeared.
Applications for execution like the present one are
governed by art. 182 of the Limitation Act. That
article provides a period of three years within which
the application must be made. The article prescribes·
different points of time for different cases from which
the period is to commence running. The first point of
time so prescribed is the date of the decree. The fifth
point of time prescribed is expressed in these words :
(Where the application next hereinafter mentioned
has been made) the date of the final order passed
· on an application made in accordance with law to
the proper court for execution .....
The question for determination is whether the fifth
point of time applies to the receiver's application for
execution. If it does not, the application must be held
to have been made out of time, while if it does, the
application would not be barred by limitation.
The receiver contends that the two applications by
Meenakshi Achi were "applications made in accorda.nc11 with la.w to th11 proper court for ex11cution "
S.C.R.
SUPREME COURT REPORTS
621
within the meaning of the article and his application
x959
was within time as it had been made within three years
Ramaswami
of the date on which the final order on Meenakshi
Chettiar
Ac.hi's last application was made.
v.
It is said on behalf of the appellants that in view The Official Receiver
of the orders in the insolvency proceedings it must be
5 -k-J
held that she was not entitled to the decree on any of
ar ar ·
the dates on which she applied for its execution and
that her applications were therefore incompetent ·and
not in accordance with law.
The appellants put their contention in several ways.
It is first said that the order annulling the assignment
of the decree to Meenakshi Achi related back to the
date of the assignment with the result that it has to be
deemed as if she had never been entitled to the decree
and that, therefore, the applications for execution by
her were not competent and hence were not in accordance with law.
We think this contention is wholly unfounded. We
will assume for the purpose of the present case that
when an order is made under s. 54 of the Act annulling a transfer, the transfer stands annulled as from
the date it was made. But even so, the transfer stands
till it is annulled and therefore, till then, the transferee
has all the rights in the property transferred. So long
as the transferee had such rights he was competent to
exercise them and such exercise would be legal and
fully in accordance with law .. The fact, if it be so,
th'at the transfer on annulment, become!'! void as from
the date of the transfer cannot turn the exercise of a
right under the transfer, made prior to the annulment
and which was legal when made, illegal.
Meenaksh~
Achi had hence full legal competence to execute the
decree, till the transfer of it to her was annulled. Her
two applications for execution of the decree were, therefore, fully in accordance with law when they had been
made ana that is all that art. 182 requires.
Next, it is said that the provisions of sub-ss. (2) and
(7) of s. 28 of the Act make Meenakshi Achi's two
applications for execution incompetent in law. These
provisions have now to be considered. Sub-section (2)
79
622
SUPREME COURT REPORTS [1960(1)]
'959
says that upon the making of an order of adjudication
Ramaswam;
the whole of the property of the insolvent shall vest
Chettiar
in the receiver and sub-s. (7) says that an order of
v.
adjudication shall relate back to and take effect from
TheOf/irial Receiver the date of the presentation of the petition on which it
is made. It is said that under these provisions, the
Sarkar J.
assets of the insolvent in this case, including the decree
under execution, became vested in the receiver on
March 26, 1936, when the petition for adjudicating him
an insolvent had been presenterl, and consequently,
the two applications for execution by Meenakshi Achi
which had been made after that date were incompetent
and not in accordance with law.
It seems to us that this <;ontention also is fallacious.
These sub-sections cannot have the effect of vesting
the decree in the receiver till its transfer to Meenakshi
Achi had been annulled. Till then it was not a part
of the insolvent's estate. The annulment, as we have
earlier pointed out, was made under s. 54 of the Act.
That section provides that certain transfers of property
by the insolvent would be deemed fraudulent and void
as against the receiver in insolvency and shall be
annulled by court. It is obvious that a transfer liable
to be annulled under this section remains a perfectly
valid transfer till it is annulled. If it had become
void automatimilly on an rm\or for adjudication being
made, there would be 110 need to provide for its
annulment by court. It wou Id follow that Meenakshi
Achi was legally posRes>;.:d of the rlecrce and competent
to apply for its execution till the transfer of the decree
to her was annullerl under s. 54.
It is then said that though it may generally be that
a transfer !iabk to be annulled unrler s. 54 remains
valid till it is anrn,!led, that is not so where the transfer is the act of insolvency upon which the order of
adjudication is founded, for, in such a case the order
itself annuls the transfer. So, it is said that as the
order of adjudication in this case was founded upon
the transfer of the decree to Meenakshi Achi, that
transfer became annulled on the order being made on
January 7, 1939, and the second application for
execution by Meenakshi Achi was incompetent. It is
S.C.R.
SUPREME COURT REPORTS
623
true that if this in the correct view, then the receiver's
r959
application for execution must be held to have been
made beyond the time allowed, for; it had been
Ramaswmni
Chelliar
made more than three years after the final order on
v.
the first application for execution by l\feenakshi which The Official Receiver
is the only order on which the receiver can on this
basis rely for resorting to the fifth point of time fixed
Sarkar J.
by art. 182.
Now this argument is based solely on the decision of
the Judicial Committee in .llf ahomed Siddique Yousuf v.
O.fficial Assignee of Oalcutta(1) which it is said held that
where a transfer is the act of insolvency on which the
order of adjudication is founded, that order itself has
the effect of annulling the transfer.
We think this case has been misunderstood. We find
nothing in it to lead to the view that an order of
adjudication founded on an act of insolvency constituted by a transfer of property amounting to a fraudulent
preference, itself and without more annuls that transfer. That was a case decided under the Presidencytowns Insolvency Act. In that case one of the acts of
insolvency on which the order of adjudication had
been founded was a transfer by the insolvent of a
certain decree in his favour to the appellant, which
was held to have been a fraudulent preference. The
transferee was not a party to the order of adjudication.
The official assignee, that is, the receiver in insolvency,
applied to have that transfer annulled, It was contendPd on behalf of the official assignee before the
judge in insolvency in the High Court that the oeder
of adjudication holding the transfer to be a fraudnlent
preference was conclusive and binding on the transferee
though he was not a party to the insolvency petition.
It was said that thitt had been held in Ex parte
Learoyd(") which turned on the English Bankruptcy
Act, 1869, the terms of which were similar to the
relevant provisions in the Presidency-towns Insolvency Act. The learned judge felt some difficulty in
view of a decision of the ~fadras High Court to which
it is unnecessary to refer, whether the principle of the
(I) (x943) L. R. 70 I.A 93·
(2) (1878) IO Ch. D. 3·
624
SUPREME COURT REPORTS [1960(1)]
z959
English decision applied to a case under the Presidencytowns Insolvency Act. He, therefore, went into the
R•masw•mi
facts and came to the conclusion that the transfer
Chetliar
v.
amounted to a fraudulent preference and thereupon
TheOffe;ialReceiuermade an order annulling it. On appeal the appellate
Judges of the High Court "expressed some doubt
Sarkar J.
whether the intent to prefer was in fact proved ; but
they were both of opinion (following Ex parte
Learoyd (') that the order of adjudication was conclu.
sive and could not be disputed." They held that this
was so though the transferee was not a party to the
order of adjudioation. In that view of the matter the
appellate Judges felt that there was a decision binding
on the transferee that the transfer was void as a
fraudulent preference and they thereupon annulled the
transfer as a matter of course. The judgments in the
High Court are reported in 45 C.W.N. 441. The transferee who was not a party to the insolvency petition,
then asked for an extension of time to prefer an appeal
from the order of adjudication but this was refused.
Then the matter was taken up to the Judicial Committee in further appeal. The Judicial Committee held
that the appellate Judges of the High Court were right
in their view that the principle of Ex parte Learoyd (' ),
applied to cases under the Presidency-towns Insolvency
Act, but they thought that in the circumstances of the
case the order of the a ppelb te judges refusing to extend
titne for the transferee to appeal from the order of
adjudication was not justified and set it aside and
extended the time to appeal. In order, however, to
make the order in the contemplated appeal, should it
succeed, effective, they also set aside the order annulling the transfer though in their view it was "plairtly
right". This would appear from their observations at
p. 99 of the report :
" It is plain that an appeal against the adjudication order would be useless while the orders stand in
this independent proceeding declaring the transfer
void because of the adjudication order itself. On the
other hand, the decision of the High Court avoiding
the transfer is plainly right while the adjudication
(1) (1878) JO Ch. D. 3·
S.C.R.
SUPREME COURT REPORTS
625
order stands and the appellant as a condition of the
·H'1
extension of time must p-ay, as he has offered to do,
Ramaswami
the costs thrown away."
Chettiar
And at p. 100 they said,
v.
"The order is without prejudice to the right of the The Official Receiller
official assignee, if he is so advised, to make a further
Sarkar J.
application to have the transfer declared void." .
It is therefore abundantly clear that all that the
Judicial
Committee held in Mahomed
Siddique
You~'f's case(1) was that in a. case under the Presiden · -towns Insolvency Act,
when
the act of
inso vency upon which an order of adjudication is
founded is a transfer amounting to a fraudulent preference, the transferee cannot so long as the order of
adjudication stands, question that finding, namely, that
the transfer was a fraudulent preference and that,
therefore, in an application by the official assignee to
have that transfer annulled on the ground that it was
a fraudulent. preference, the order of adjudication is
is coaelusive proof that the transfer was by way of a
fraudulenL preference and it was not open .to the
transferee to lead evidence to·prove that the transfer
was not a fraudulent preference. In such a case
therefore the order of annulment had to be made as a
matter of course on proof of the order of adjudication.
The Judicial Committee did not hold that in such a
case the order of adjudication itself annulled the
transfer and no separate order of annulment was
required for the purpose. In fact, it is obvious that
they thought that a separate order annulling the
transfer would be necessary even in such a case for
otherwise they would not have stated that "the decision of the High Court avoiding the transfer is plainly
right " nor while setting aside the order annulling the
transfer reserved the right of the official assignee,
should the occasion arise, to make a further application to have the transfer declared void. The case
· therefore does not support the proposition for whiCh it
has been cited. On the contrary, it. clearly proceeds
on the basis that even where the order of adjudication
is based on an a.ct of insolvency constituted by a.
(1 l (1943) L.R, 70 I.A. 93·
626
SUPREME COURT REPORTS [1960(1)]
transfer of property found to be a fraudulent preference,
the transfer stands till it is set aside. In our view,
Ramaswa1ni
Chettiar
. this is the correct position and nothing to the contrary
'959
v.
has been brought to our notice.
The Official Receiver
An argument had been raised at the bar that under
Sarkar].
the Provincial Insolveney Act an order of adjudication has not that binding force which Mahomed
Siddique Yousuf's case (1) held it had under the Presidency-towns Insolvency Act. It was said that this
was so because the terms of the two Acts were dissimilar. We <lo not think it necessary to express any
opinion on this question. We have discussed 11-Jahomed
Siddique Yoiisuf's case(') only to show that it does not
support the proposition for which it was cited. It is unnecessary for us to say whether it will govern a case
1Jnder the Provincial Insolvency Act or what the effect
of' the dissimilarity pointed out in the terms of the
two Acts is. That question is not before us.
There remains one other point to deal with. It is
said that the official receiver was not entitled to take
advantage of the applications for execution ma<lc by
:M:eenakshi Achi as he had not been claiming under
her but had actually claimed against her.
This contention is equally unfounded. Article 182 does not
say that no advantage of a previous application can
be taken for the purposes of saving the bar of limitation, unless it hatl been made by a person under w horn
the applicant in a later application, which is said to be
barre<l by limitation, claimed.
All that the article
contemplates is an application for execution of a decree
made within three years of the final order on a previous application made in aecorclance with law for the
execution of the same decree. That being 1>0, we must
reject this contention of the appellants also.
In view of what we have already said, it becomes
unnecessary to deal with the other points raised at
the bar.
In the result, we think that the appeal should be
dismissed and we order accordingly. The appellant
must pay the costs of this appeal.
(I) (1943) L.R. 70 I.A. 9~·
S.C.R.
SUPREME COURT REPORTS
627
SuBBA RAO J.-This appeal l'aises a question of
r959
limitation. There is no dispute about the facts. On
May 9, 1935, one Venkatachalam Chettiar obtained a
R~7,~~::mi
compromise decree against the appellants and respondv.
en ts 2, 3 and 4 and predecessors in interest of res- The Oficial 11ecei11n
pondents u and 6 in A. S. No. 226 of 1930, on the
file of the High Court of Madras. Under the decree
Subba Rao J.
the defendants were directed to pay the plaintiffs
therein a sum of Rs.1,10,101-4-0 together with interest
at 3 per cent. per annum in certain instalments, the
last of the inRtalments being payable on May 30, 1942.
The decree also provided that in the event of a default
in payment of any one of the instalments, the entire
decree amount would become payable. On February 27,
1937, one Visvanathan Chettiar obtained a decree
against the said Venkatachalam Chettiar in 0. S. No.
22 of 1936, on the file of the Court of Subordinate
Judge, Devakottai, for a sum of Rs. 33,000. The
suit ending in the above decree was filed on January 29,
1936. On February 3, 1936, Venkatachalam Chettiar
executed a deed of assignment transferring the decree
obtained by him in C. S. No. 14of1926 to his mother,
Meenakshi Achi, for consideration. On March 26,
1936, Visvanathan Chettiar filed I. P. No. 10 of 1936
in the Court of Subordinate Judge, Devakottai, for
adjudicating Venkatachalam Chettiar an insolvent on
the ground that the transfer of the decree in favour
of l\'Ieenakshi Achi was an act of insolvency. On
December 14, 1936, the arssignec, :Meena:kshi Achi, filed
E.P. No. 37 of 1937 for recognition of the assignment
in her favour and for execution of the decree. The
judgment-debtors did not object either to the recogni~
tion of the assignment of the decree or the execution
thereof. The said Visvanathan Chettiar intervened
in the execution petition and applied inE.A. No. 817 of
1937 for stay of execution of the decree on the ground
that he had filed an insolvency petition against the
decree-holder and also on the ground that the said
assignment was nominal. The learned Subordinate
Judge disallowed the objection of the creditor, recognised the assignment, and permitted the assignee-decreeholder to proceed with the execution of the decree.
628
SU PRE1"1E COUR'f REPORTS [1960(1)]
1959
. On September 27, 1937, .a settlement was entered into
Ramasw'"'"
between the assignee-decree-holder and the jndgmentCh,ttiar
debtors and the said execution petition was closed.
v.
Ori January 7, 1939, Venkatachalam Chcttiar was
The O.ufoa111o"i"" adjudicated insolvent on the ground that the assignment of the srticl decree by him in favour of his mother,
Subba Rao J.
Meenakshi Aehi, was an aet of insolvency, whereupon
his properti0s Yested in tlie fo·st rPspondent, the Official HecteiYer,
Ramarmthapuram at Madurai. On
August 2, 1940, the assigncc-dccreo-holclel' fiied another
execution petition, E.P. No. 243 of 1940, and it was
struck off on 8eptemhcr 30, 1940.
On January 26,
1942, the Offic'.al Receiver filer! I.A. Xo. 20 of 1942
in I. P. No. 10 Gf 1936 in the Court of the 8nbordinate Judge,
J)evakott.ai,
for
setting
1Lsidc
Hie
assignment, and by mtler dated April !.J, 1943, the
assignment was set aside by the Court on the gnmnd
of frauduhmt prcforenee within the meaning nf s. 54 of
t.he Provindal lm;olv<mcy Act, l!J20, herei1mftcr called
the Act.
On Septemher
027, 1943, the Official Receiver
filed a freRh exe~ntioJJ prelition, Kl'. l\n. 90 of 1944.
for executing thP decree. lt wn.s allege1l by tfa• rtppellants and the respondents 2 to 6, ·inter nlia, tlrnt the
said execution petition was barred liy limitar.ioll on
the ground that the t.wo earlier execution pAti1io11s were
not in accordance with law within thP meaning of
art. 182, cl. 5, of the Limitation Ad. The Of1foial
Receiver eontt·rnlcd that they WPl'e in aecordance with
law and therefore tho present ex<;<:ution pet.ition was
in time.
He further pleaded that the present execution petition was also saved from the bar of limitation
by the payments made by the judgment-debtors to
Meenakshi Achi, and that. in any event, the decree in
respect of the last three instalments was not barred
by limitation. The learned Subordinate .Judge rejected
the contentions of the Ofikial Receiver and held that
the execution petition was barred by limit:;ttion. The
Official Receiver preferred an appeal against the said
order of the Subordinate Judge to the High Court of
Madras. Govinda Menon and Basheer Ahmed Sayeed,
JJ., of the said High Court came to the conclusion that
the earlier execution petitions were in accordance with
-
S.C.R.
SUPREME COURT REPORTS
629
law and, therefore, the present execution petition was
i959
within time. They also expressed the view that the
payments made by the judgment-debtors to Meenakshi
Ra;;sw_ami
Achi were valid payments and therefore they also saved
~'.iar
the bar of limitation. In any view, they found that The Official Receiver
the last two instalments were not barred by limitation.
On their findings, the learned judges of the High Court
Subba Rao].
set aside the order of the learned Subordinate Judge
and remanded the execution petition to the Court of
the Subordinate Judge, Devakottai, for taking steps in
furtherance of execution. The present appeal to this
Court was filed against the said order of remand.
Learned Counsel for the appellants contended that
the execution petitions, E.P. No. 37 of 1937 and E.P.
No. 243 of 1940, were not in accordance with law for
the following reasons: (l) The order dated April 9, 1943,
annulling the assignment of the decree by Venkatachalam Chettiar in favour of his mother, Meenakshi
Achi, related back to the date of the transfer, i.e.,
February 3, 1936, and, therefore, E.P. No. 37 of 1937,
which was filed on December 14, 1936 and E. P.
No. 243 of 1940 which was filed on August 2, 1940,
were ineffective to save the bar of limitation, as
on the dates they were filed Meenakshi Achi had
no title in the decree ; (2) the order of adjudication
dated January 7, 1939, was based on the finding that'
the said assignment of the decree was an act of fraudulent preference and that the order related back to
the date of the filing of I. P. No. 10of1936 on March 26,
1936, and, therefore, the two execution petitions
filed thereafter were filed by a person without title,
with the result that the said two petitions were not in
accordance with law; (3) assuming that the said two
execution petitions were in accordance with law, the
Official Receiver neither claims under, nor represents,
the assignee-decree-holder, and, therefore, he has no
locus standi to file the present execution petition; (4)
payments made by the judgment-debtors to Meenakshi
Achi, who had no title in the decree, could not save
the bar of limitation; and (5) as Meenakshi Achi
in her execution petitions, by exercising her option,
claimed the entire decree amount, the Official Receiver
So
630
SUPREME COURT REPORTS [1960(1)]
1959
cannot now claim that the last two instalments are
within time.
Ramaswami
Chettiar
At the outset it may be stated that it would be suffiv.
cient if we consider the objections of the appellants
TkeOfficialReceiv"in regard to E. P. No. 243of1940, for, if that was not
in accordance with law, the present execution petition
Subba Rao f.
would be barred by limitation. The validity of E. P.
No. 37 of 1937 was also questioned on the same
grounds of attack taken against the later execution
petition.
The relevant part of the Limitation Act is art. 182
and it reads ~
Description of
application
For the execution of a
decree or order of any
Civil Court not provided
for by article 183 or by
section 48 of the Code of
Civil Procedure, 1908.
Pt'riod of
Limitation
Three years; or,
where a certified copy
of the decree or order
has been registered,
six years.
Time from 'vhich period
begins to run
5.
(where the application,
next
hereinafter
mentioned
has
been
made) the date of the
final order passed on an
application
made
in
accordance with law to
the proper
Court
for
execution, or to take some
step in aid of execution
of the decree or order.
Under this article the latesi, execution petition should
have been filed within three years from the date of the
final order passed on an application made in accordance
with law to the proper Court of execution. Taking
first the second contention of the learned Counsel for
the appellants, the q"estion may be
po~ed thus:
Whether the execution petition, E.P. No. 243 of 1940,
filed on August 2, 1940, by Meenakshi Achi after
Venkatachalam Chetli<tr was adjudicated insolvent on
January 7, 1939, was one in accordance with law? If the
order of adjudication of Venkatachalam Chettiar on the
ground that the assignment of the decree made by him
in favour of Meenakshi Achi was an act of insolvency
..,
ex proprio vigore annul the transfer in her favour, the
execution petition filed by her after the said order of
adj11dication wo11ld not be one filed in accordance with
law. On the other hand, if the assignment of the decree
continued to be ggod till it was annulled on a:rv application filed by the Official Receiver, which was done in
S.C.R.
SUPREME COURT REPORTS
631
the present case on April 9, 1943, the execution petiz959
tion, subject to another argument that I would conRamaswami
sider at a later stage, would be one filed in accordance
Chettiar
with law. What then is the legal effect of such an
v.
order of adjudication? The question in the main falls The Official Receiver
to be decided on a true construction of the relevant
provisions of the Act. Section 6 of the Act defines the
Subba Rao J.
act of insolvency; it enumerates eight acts of insolvency, and one of them is.a transfer made by a debtor
which would be void as a fraudulent preferel\ce if he
w~re adjudicated insolvent. Section 7 enables a creditor
oil a debter to present an insolvency petition for
adjudicating the debtor an insolvent. Section 9 lays
down the conditions on which a debtor may petition.
Section 13 prescribes the particulars a creditor has to
give in his petition, and one of the particulars to be
·given is the act of insolvency committed by the debtor.
When an insolvency petition is admitted, s. 19 provides
that notice should be given to creditors in such manner
as may be prescribed, and, when the debtor is not the
petitioner, notice of the order admitting the petition
should be served on the debtor. On the date fixed for
hearing, the Court should require proof of the matters
mentioned under s. 24 of the Act ; it enables the Court
to examine the debtor and the creditors and take the
evidence adduced by them. After making the necessary enquiry, the Court may dismiss the petition or
make an order of adjudication. On the making of the
said order of adjudication, the whole property of the
insolvent would vest in the Court or in the Receiver
appointed under the Act, and the said property becomes divisible among the creditors. Under sub-s. 7 of
s. 28 the order of adjudication shall relate back to, and
take effect from, the date of the presentation of the petition. Under s. 30 notice of an order of adjudication stating the name, address and description of the insolvent,
the date of adjudication, the period within which the
debtor should apply for his discharge and the Court by
which the adjudication is made, should be published in
the Official Gazette and in such manner as may be
prescribed. It will be seen from the aforesaid provisions that till an order of adjudication is made, the
ti:l2
SUPREME COURT REPORTS
[1960(1)]
z959
person to whom the insolvent transferred his property
does not come into the picture at all.
The purchaser
Racmaswami
is neither a partv to the proceedings nor any notice is
hettiar
·
,,
given to him. It would, therefore, be contrary to all
The Offic~;l Receiver principles of natural justice to hold that the finding
arrived at in regard to an a.ssignm~nt of a property by
Subba Rao J.
the insolvent, in favour of a third party behind his
back, is binding on him. If the legislature intended
that the order should have that effect, it would have
provided for personal, or, at any rate, public notice to
the purchasers, or would have given in express terms
such a binding effect; and the fact that it did not do
so is a clear indication of the legislative intention that
an incidental finding was not intended to have such
a far-reaching effect.
On the other hand, the Act makes ample provision
for setting aside such transfers. Sections 53 and 54 of
the Act enable the Official Receiver to have voluntary
transfers made within two years of the insolvency
petition and that made in fraudulent pi·eference of
one creditor over another within three months from
the date of the petition ·annulled by the Court. If the
legislature intended to exclude a transfer constituting
an act of insolvency from the operation of these
provisions, it would have introduced a proviso to that
effect.
Therefore, unless such a transfer is duly
annulled in the manner pr<1seribed, the transfer would
be valid.
That this is the intention of the legislature is also
made clear by the other provisions of the Act vis-avis transfers. The Act provides for three stages:
(1) Transfers made before the presentation of the
insolvency petition; (2) transfers made after the
presentation of the petition and before the order of
adjudication; and (3) transfers made after adjudication.
A transfer made after adjudication is not binding on the
Receiver. A transfer by an insolvent after the filing
of the petition is also not binding on the Receiver
subject to a protection clause. A purchase in good
faith under a sale in execution (s. 51(3)) and a transfer
inter vivos in good faith for valuable consideration
(s. 55) fall within the protected class of transactions.
s.c.R.
SUPREME COURT REPORTS
633
A transfer before the filing of the petition is binding
z959
on the Receiver unless it is annulled under ss. 53, 54
Ramaswami
or 54-A of the Act.
The scheme of the Act in regard
Chettiar
to transfers clearly demonstrates that transfers before
Y.
the filing of the petition are good unless · they are The Official Receiv11
annulled in the manner prescribed in the Act and even s bb-; J
the doctrine of relating back of the or<ler of adjudica-
" a
ao
·
tion does not reach them as they fall on the other side
of the line. If it was the intention of the legislature
that the said order by its own force should declare the
transaction void, it woultl have fixed the date of the
transfer as the datum line instead of the date of the
filing of the petition.