# / JOHRILAL SONI v. SMT. BHANWARI BAI

- **Citation:** [1978] 1 S.C.R. 231
- **Court:** Supreme Court of India
- **Decided:** 1977-08-01
- **Case number:** Civil Insolvency Appeal No. 50 of 1972
- **Bench:** N. L. Untwalia, S. Murtaza Fazal Ali
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/johrilal-soni-v-smt-bhanwari-bai-7266
- **Pages:** 7

## Headnote

231
Provincial lnsofl·ency Act 1920-Section 453-Wltether transfers
cfj'cctt'd
1nore than 2 years prior to conunencen1e11t of insolvency proceedings can
be
declared void and inoperatii·e by insolrency court-Differen'ce between raid and
1·oidable transfers.
i
Pyare Laf Gupta, an insolvent, executed a deed of gift in favour of his wife
It
about 7 years before an application under s. 10 of the Provincial Insolvency Act
c·
1920 was .made for adjudging him as an insolvent. The appellant was appointed
as a Receive\- by the Court. He made an application under s. 4 of the Act for
decklrihg the deed of gift as void and inoperative on the ground that it was a
sham transaction~ The Insolvency Court ·upheld the plea of the appellant and
declared the deed of gift as being void and inoperative.
The respondent donee filed an appeal to the High Court challenging the
judgment of the Insolvency Court on the ground that s. 53 of the Act does not
authorise an Insolvency Court to decide questions about title or Talidity in
respect of transfers made during a period beyond hvo years of the commence-
-
ment of the Insolvency proceedings. The High Court upheld the contention of
the respondent.
In an appeal by certificate the appellant contended that the High Court had
taken an erroneous view of s. 53 of the Act.
Section 53 merely deals with
voidable transfer and not void transfer.
The respondent contended that since
the gift was made about 6-i years before the insolvency proceedings began, the
R
Insolvency Court could not examine the question of title.
Allowing the appeal,
·HELD : Section 4 of the Act empowers the Insolvency Court to decide all
questions whether of title or of priority or of any nature whatsoever which may
arise in any case of insolvency. The said provision is, however, subject to the
other provisions of the Act.
Under s. 53 any transfer of Property not being
made before and in consideration of marriage -or made· in favour of a purchaser
F
or encumbrancer in good faith and for valuable consideration shall if the trans·
feror is adjudged insolvent on a petition presented. within two years after the
date of the transfer, is voidable, against the Receiver and may be annulled by
the court. Section 53 only deals with transfers which are voidable. There is a
\Veil known distinction between a void and a voidable transfer. Void transfer
is no transfer at all and is completely destitute of any legal effect. It is a nuJlity
and does not pass any title at aII, where a transfer is nominal, sham or fictitious,
the title remains with the transferor and so does the possession and
nothing
passes to the transferee.
Such a transfer clearly falls outside the purview of
G
s. 53. The limitation of two years imposed by s. 53 applies only to voidable
transfers.
[233H. 234A-E]
Haji Anwar Khan v. Mo!tanunad Khan & Ors. AIR [1929} All. 105, referred
to.
_"4fadan Kr1111ar dnd Anr. v. Mis. Han
1 'T\'arain AJ?rawal .& Ors. A.T.R. [19771
AU. 141; Padan1si Pren1chand and Ors. v. Laxn1a11 Vishnu Deshpande and Ors.
H
AIR fl.949] Born. 129; Radha Krishna Thakur and Anr. v. Official Receiver AIR
[1932] Cal. 642; Biseswar Chaudhuri v. Ka11/1Gi SillRh AIR [1932] Pat.
129:
G. N. Godho/e v. Mt. Nani Bai AIR [1938] Nag. 546 and Bud/IG Mal'" Offic;az
Receiver AlR [1930] Lah. 122, approved.
232
SUPREME COURT REPORTS
[1978] I S.C.R.
A
A1njad Ali and Ors. v. /\land Lal Tandon and Ors. A1R [1930] Oudh. 314,
over-ruled.

## Text

--
./
JOHRILAL SONI
v.
SMT. BHANWARI BAI
August 1, 1977
(N. L. UNTWALIA AND S. MURTAZA FAZAL ALI, JJ.]
231
Provincial lnsofl·ency Act 1920-Section 453-Wltether transfers
cfj'cctt'd
1nore than 2 years prior to conunencen1e11t of insolvency proceedings can
be
declared void and inoperatii·e by insolrency court-Differen'ce between raid and
1·oidable transfers.
i
Pyare Laf Gupta, an insolvent, executed a deed of gift in favour of his wife
It
about 7 years before an application under s. 10 of the Provincial Insolvency Act
c·
1920 was .made for adjudging him as an insolvent. The appellant was appointed
as a Receive\- by the Court. He made an application under s. 4 of the Act for
decklrihg the deed of gift as void and inoperative on the ground that it was a
sham transaction~ The Insolvency Court ·upheld the plea of the appellant and
declared the deed of gift as being void and inoperative.
The respondent donee filed an appeal to the High Court challenging the
judgment of the Insolvency Court on the ground that s. 53 of the Act does not
authorise an Insolvency Court to decide questions about title or Talidity in
respect of transfers made during a period beyond hvo years of the commence-
-
ment of the Insolvency proceedings. The High Court upheld the contention of
the respondent.
In an appeal by certificate the appellant contended that the High Court had
taken an erroneous view of s. 53 of the Act.
Section 53 merely deals with
voidable transfer and not void transfer.
The respondent contended that since
the gift was made about 6-i years before the insolvency proceedings began, the
R
Insolvency Court could not examine the question of title.
Allowing the appeal,
·HELD : Section 4 of the Act empowers the Insolvency Court to decide all
questions whether of title or of priority or of any nature whatsoever which may
arise in any case of insolvency. The said provision is, however, subject to the
other provisions of the Act.
Under s. 53 any transfer of Property not being
made before and in consideration of marriage -or made· in favour of a purchaser
F
or encumbrancer in good faith and for valuable consideration shall if the trans·
feror is adjudged insolvent on a petition presented. within two years after the
date of the transfer, is voidable, against the Receiver and may be annulled by
the court. Section 53 only deals with transfers which are voidable. There is a
\Veil known distinction between a void and a voidable transfer. Void transfer
is no transfer at all and is completely destitute of any legal effect. It is a nuJlity
and does not pass any title at aII, where a transfer is nominal, sham or fictitious,
the title remains with the transferor and so does the possession and
nothing
passes to the transferee.
Such a transfer clearly falls outside the purview of
G
s. 53. The limitation of two years imposed by s. 53 applies only to voidable
transfers.
[233H. 234A-E]
Haji Anwar Khan v. Mo!tanunad Khan & Ors. AIR [1929} All. 105, referred
to.
_"4fadan Kr1111ar dnd Anr. v. Mis. Han
1 'T\'arain AJ?rawal .& Ors. A.T.R. [19771
AU. 141; Padan1si Pren1chand and Ors. v. Laxn1a11 Vishnu Deshpande and Ors.
H
AIR fl.949] Born. 129; Radha Krishna Thakur and Anr. v. Official Receiver AIR
[1932] Cal. 642; Biseswar Chaudhuri v. Ka11/1Gi SillRh AIR [1932] Pat.
129:
G. N. Godho/e v. Mt. Nani Bai AIR [1938] Nag. 546 and Bud/IG Mal'" Offic;az
Receiver AlR [1930] Lah. 122, approved.
232
SUPREME COURT REPORTS
[1978] I S.C.R.
A
A1njad Ali and Ors. v. /\land Lal Tandon and Ors. A1R [1930] Oudh. 314,
over-ruled.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 149 of J 976 .
•
From the Judgment and Order dated 26-9-1973 of the Rajasthan
High Court in D. B. Civil Insolvency Appeal No. 50 of 1972.
~
Badri Das Shanna and S. R. Srivastava for the Appellant.
0. P. Verma for the Respondent.
·,o
The Judgment of the Court was delivered by
FAZAL Au, J.-To what extent is s. 4 of the Provincial Insolvency Act, 1920 controlled by s. 53 of the said Act in the matter
of determination of the question of title of a property transferred by
the insolvent before he was declared insolvent is the serious question
of law which is involved in this appeal by certificate.
The insolvent
Pyarelal. Gupta appears to have executed a deed of gift in favour of
his wife on November 7, 1961.
About seven years later i.e.
on
April 1, 1968 an application under s. 10 of the Provincial Insolvency
Act hereinafter to be referred for short as "'the Act"-was
made
for adjudging Pyarelal as an insolvent.
On April 5, 1968 the appellant Zohri Lal Soni an Advocate was appointed receiver by the Court.
On October 15, 1960 Pyarelal was on his own application adjudged
as an insolvent by the Additional District Judge,
Jodhpur.
On
January 4, 1969 the appellant who was the receiver moved the Court
under s. 4 of the Act for declaring the deed of gift dated ·November 7,
1961 as .void and inoperative inasmuch as it was a sham transaction.
On March 3, 1972 the Insolvency Court of the Additional District
Judge, Jodhpur, after making an inquiry, upheld the plea of the
receiver/appellant and declared the deed of gift dated November 7,
1961 as being void and inoperative.
Thereafter the respondent Smt.
Bhanwari Bai ( donee) went up in appeal to the High Court assailing
the judgment of the Insolvency Court on the ground that it was
legally erroneous.
The plea of the respondent Bhanwari Bai seems
to have found favour with the High Court of Rajasthan which allowed
the appeal and act aside.the judgment of the Insolvency Court declaring the deed of gift as void by its judgment dated September 26,
1973.
The appellant thereafter applied for grant of certificate of
fitness for leave to appeal to this Court which was granted by the
High Court on October 27, 1975, and this is how the appeal has been
brought to this Court.
The High Court was of the opinion that in view of the express
provision of s. 53 of the Act. the Insolvency Court had no jurisdiction
to determine the question of title, nor could it go into the question
of the validity of a transfer which was rnadc more than
two vears
before the Insolvency proceedings had started. According to the High
Court, while s. 4 of the Act undoubtedly conferred a power on the
Insolvency Court to decide questions of title, but this power could
not be exercised in respect of transfers made during a period beyond
two years of the insolvency proceedings.
\.
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JOHRILAL v. BilAl'IWARI BAI (Fazal Ali, J.)
233
In support of the appeal, learned counsel for the appellant submitted that the High Court had taken an erroneous view of the law
and had misconstrued the scope and ambit of s.
5 3 of the Act.
Learned counsel for the respondent, however, supported the stand.
taken by . the High Court and submitted that as the gift was made
about 6! years before the proceedings began, the Insolvency Court
could not examine the question of title.
A number of authorities have
been cited by counsel for the parties in support of their respective
submissions, but we think the question lies within a very narrow
compass.
It would appear that s. 4 of the Act was not there in the
Insolvency Act of 1907, but was introduced for the first time by Act
5 of 1920. Before 1920, the Provincial Insolvency Act did not contain any such provision as a result of which, there was
a serious
divergence of judicial opinion on the question as to whether or not an
Insolvency Court could determine a question of title regarding a transfer made by the insolvent.
Act 5 of 1920, however, set at rest this
controversy and gave wide powers to the Insolvency Court to determine queitions of title.
We now proceed to interpret the provisions of s. 4 itself, the relevant part of which may be extracted thus :
"4. ( 1) Subject to the provisions of this Act, the Court
shall have full power to decide all questions whether of title
or priority, or of any nature whatsoever, and whether involving matters of law or of 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."
It would be seen that the section has been couched in the widest
possible terms and confers complete and full powers on the Insolvency Court to decide all questions of title or priority, or of any nature
whatsoever, which may arise in any case of insolvency.
The only
restriction which is contained in s. 4 is that these powers are subject
to the other provisions of the Act. In other words, the position is
that where any other section of the Act contains a provision which
either runs counter to s. 4 or expressly excludes the application of s.
4, to that extent s. 4 would become inapplicable.
Counsel for
the
respondent strongly relied on the provisions of s.
53 which runs
thus :
"53. Any transfer of property not being a transfer made
before and in consideration of marriage or made in favour
of a purchaser or incnmbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent on a petition presented within two years after the date
of the transfer, be voidable as against the receiver and may
be anntilled by the Court."
It was s~b~tt~d. that the effect of s. 53 of the Act clearly is that it
bars the 1unsd1ction of the Insolvency Court to determine the validity
4-768SC!/77
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SUPREME COURT lll!POllTS
[1978) 1 S.C.R.
of any transfor made beyond two
years of tbe transferor being
adjudged insolvent.
It is no doubt true that the words "within two
years after the date of tbe transfer" being voidable as against tbe
receiver does fix a time-limit within which the transfer could be
annulled by the Court.
But a plain construction of s. 53 would
manifestly indicate that tbe words "within two years after the date,
be l'oidable as against the receiver, and shall be annulled by
the
Court" clearly connote tllllt only those transfers are excepted from
Vie jurisdiction of the Court which are voidable.
The section has,
therefore, Illlldc a clear distinction between void and voidable
transfers-a distinction which is well-known to law.
A void transfer
is no transfer at all and is completely destitute of any legal effect :
it is a nullity and does not pass any title at all.
For instance, where
a transfer is nominal, sham or fictitious, tl1e title remains witlt the
transferor and so does the possession and notl1ing passes to the transferee . It is Illllnifest, therefore, that such a transfer is no transfer in
the eye of the law.
Such transfers, tl1erefore, clearly fall beyond the
purview of s. 53 of the Act which refers only to transfers which are
voidable.
It is well settled that a voidable transfer is
otherwise a
valid transaction and continues to be good until it is avoided by the
party aggrieved.
For instance, transfers executed by the transferor
to delay or defraud his creditors IllllY be. avoided under s. 53 of the
Transfer of Property Act.
Similarly transfers made nnder coercion,
fraud or undue influence may be avoided by the party defrauded.
It is only such transfers which, if they take place beyond two years
of the date of transfer, cannot be enquired into by the Court by
virtue of s. 53 of the Act.
This appears to us to be the plain and
simple interpretation of the combined reading of ss. 4 and 53 of the
Act.
Indeed if a different interpretation is given, it will render the
entire object of the section nugatory, because the Court would be
powerless to set at naught transfers which are patently void, merely
because they had been made at a particular point of time.
Reliance was placed by counsel for the appellant on a Full Bench
decision
of the Allahabad High Court in Haji Anwar Khan v.
Mohamad Khan & Ors(') where the following two questions were
referred for the decision of the Full Bench :
"(1) Whether an insolvency Court can try a question
of title raised on the basis of a transfer which took place
more than two years prior to the adjudication, having
regard to the provisi011s of s. 53, Insolvency Act ?
(2) Would it make any difference if the receiver alleges
that no transfer had been intended from the very beginning
and no title bad passed, the transaction being a mere pap«
transaction and void ?"
After discussing a large number of authorities, Dalal, J., answered
the first question in the affirmative and held that an Insolvency Court
could try a question of title raised on the basis of a transfe£ which
(I) A.l.R.1929 All. 115.
\
r
I r
JOHRILAL v. BHANWARI BAI (Fazal Ali, J.)
235
took place two years prior to the adjudication, but the learned· Judge,
however, refrained from giving any opinion on the other question,
which in our opinion was the most pertinent question to be answered
havil\,g regard to the specific distinction made by s. 53 between void
and voidable transactions.
Sen, J., appears to have sounded a discordant note in observing as follows :
.. My answer to the reference is (I) An insolvency Court
cannot try a question of title relating to a transfer which
has taken place more than two years before the order of
adjudication having regard to the provisions of s. 53, Insolvency Act.
(2) Where the transfer was intended not to be operative
from the beginning and the insolvent had remained
in
possession of the property the receiver may
apply for its
annulment.
But where the transfer was executed by a proper instrument and duly registered and was intended to put
the property beyond the reach of the creditors and a third
party is claiming under the transfer, such a transaction cannot be treated as a mere paper transaction."
We feel that the view of Sen. J., appears to be based on a correct
interpretation of ss. 4 and 53 of the Act.
King, J.,
agreed with
Dalal, J., and observed as follows :
"I see no difficulty, therefore, in giving a meaning and
effect to the words "subject to the provisions of this Act"
without construing them in the restrictive sense suggested
by my learned brother Sen, J.
In my opinion they do not
bar the jurisdiction of the insolvency Court to decide a 'Luestion of title under the ordinary law when the special provisions of the Act do not apply."
In a later decision of the Allahabad High Court in Madan Kumar
and Anr. v. Mis. Hari Narain Agrawal and Ors (1) following the
Full Bench decision referred to above, it was observed as follows
"As observed earlier, Section 53
refers to transfers
which are only voidable and it does not cover a case where
the transfer is claimed to be void since its inception.· The
bar of two years provided for in Section 53
should not
therefore, apply to a transaction which is claimed to be
void."
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We are of the opinion that the learned Judge has laid down the
Correct law on the subject.
A Full Bench of the Bombay High Court
in Padamsi Premchantl and others v. Laxman Vishnu Despande and
others(') has taken the same view, which we have taken. In
that
H
(1) A.I.R. 1977 All. 141.
(2) A.I.R. 1949 Bom.129.
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236
SUPREME COURT REPORTS
(1978] 1 S.C.R.
case, and which we feel. is based on a correct and true interpretation
of ss. 4 and 5 3 of the Act, after considering the history of the Act;
Chagla, C. J., speaking for the Court observed as follows :
"It is perfectly true that s. 4 is merely declaratory of the
jurisdiction of the insolvency Court .......... Therefore,
Mr. Desai is right when he says that if a transaction falls
within the ambit of s. 53, then it can only be challenged
provided the conditions laid down in that section are satisfied ..... .
In our opinion transactions which are challenged on the
ground of their being fictitious or nominal do not fall within
the ambit of s. 53, then s .. 4 is wide enough to confer npOll
the insolvency Court jurisdiction to decide whether these
transactions were in fact nominal or fictitious."
We find ourselves in complete agreement with the view expressed by
Chagla, C.J., in the aforesaid decision. The Bombay High Court further
pointed out that the same view was taken by the Calcutta High Court
in Radha Krishna Thakur and Anr v. Official Receiver,( I) by the
Patna High Court in Biseswar Chaudhuri v. Kanhai Singh,(') the
Nagpur High Court in G. N. Godbole v. Mt. Nani Bai,(3) and the
Lahore High Court in Budha Mal v. Official Receiver.(<)
The only
decision which appears to have taken a contrary view is of the Oudh
Chief Court in Amjad Ali and others v.
Nand Lal Tandon and
others(•) which appears to be the shoot-anchor of the argument of
the learned counsel for the respondent.
The Oudh Chief
('..ourt
observed as follows :
"We do not consider that where in s.
53 which is
governed by this heading the Act gives the Court power to
annul transactions entered into within two years we should
go out of our way to find that a general section in the same
Act gives power to the Court to annul transactions which
may have been entered into at any time and which are voidable under the ordinary law under s. 53, T. P. Act. In
our opinion transactions of this nature must be challenged,
if at all, in an ordinary civil Court and not in the insolvency
Court.
With duel respect, however, we are unable to agree with the view
G
expressed by the learned Judges of the Chief Court Oudh, because
they seem to overlook the distinction made by s. 53 between a void
and a voidable transaction. Moreover, the Oudh Chief Court was
concerned with a benami transaction and it is not necessary for us to
say anything about such a transaction, because in the instant case we
(I) A.I.R. 1932 Cal. 642.
(2) AJ.R. 1932 Pat. 129.
(3) A.LR. 1938 Nag. 546.
(4) AJ.R.1930 Lah.122.
(5) A.I.R. 1930 Oudh. 314.
'\
1
:
JOHRILAL v. BHANWARI BAI (Fazal Ali, J.)
237
· are concerned with a transfer which was sought to be challenged on
A
the ground that it was a nominal and sham transaction and thns a
void transaction which clearly falls within the four comers of s. 4 oil
the Act and is not covered by s. 53 of the Act so as to deprive the
Insolvency Court of its jurisdiction to determine the question of title
of the transfer.
For these reasons, therefore, we are clearly of the opinion that in
B
· the present case the Additional District Judge was right in holding
that the Insolvency Court had complete jurisdiction to decide
the
validity of the transfer when it was challenged on the ground that it
was a sham and a fictitious transaction which need not have been set
aside and a declaration that the transfer was void was sufficient. The
view taken by the High Court is legally erroneous and is not in consonance with the correct interpretation of ss. 4 and 53 of the Act.
C
We, therefore, allow the appeal, set aside' the judgment of the High
Court and remit the case back to it for a fresh disposal of the appeal
on merits.
We make no order as to costs.
P.H.P.
Appeal allowed.