Andhra Pradesh High Court: While exercising its civil revision jurisdiction, the single judge bench of Bandaru Syamsunder J., held that the Insolvency Court cannot adjudicate upon the validity of Sale Deed and directs the Official Receiver to cancel the same without the application under Section 53 of the Provincial Insolvency Act, 1920 (‘1920 Act’).
In the matter at hand, the petitioner/creditors challenged the Order passed by the Additional District Judge, Tirupati under Section 9 of the 1920 Act which had confirmed the Orders passed by the Additional Senior Civil Judge, Tirupati wherein respondents were declared insolvents and the Official Receiver were directed to take over the charge of the scheduled property for proper administration by cancelling the Sale Deeds dated 16-09-2002 and 19-09-2002 executed by respondents, in favour of the petitioners to allegedly evade the debt due to them, which amounted to the act of insolvency.
The Court navigated through Section 53 and 54 of the 1920 Act which made it clear that when a transferor is adjudged as insolvent on a petition presented within two years after the date of the transfer, it would be held as voidable against the Receiver and may be annulled by the Court, which indicated that a separate petition had to be filed by the Official Receiver before the Insolvency Court for annulling the sale. Only then the Insolvency Court could pass an Order annulling the Sale Deed and accordingly the Official Receiver could further take action, addressing letter to the concerned authorities for cancellation of the Sale Deed.
The Court however, noted that in the present case the Insolvency Court had directed the Official Receiver to take steps to cancel the Sale Deeds in the name of the petitioners without a separate application for annulment which was against the provisions of Section 53 of the 1920 Act.
The Court stated that the Orders passed by the Insolvency Court ordering the Official Receiver to take steps to cancel the Sale Deeds, which were not in conformity with Section 53 of the 1920 Act was neither sustainable in law nor in facts.
The Court observed that the Appellate Court had failed to appreciate the facts and erroneously confirmed the Orders passed by the Insolvency Court which were liable to be set aside.
With the above observation, the Court set aside the Order passed by the Additional Senior Civil Judge, which was confirmed by the Additional District Judge, Tirupati. According to the powers conferred under Section 68 of the 1920 Act, the Court set aside the Order passed by the Official Receiver cancelling the Sale Deed. Further directed that the petitioners were at liberty to file an appropriate petition before the Insolvency Court to revive the cancelled Sale Deed.
[R. Asalatha v Manikonda Kuppaswamy Naidu, 2023 SCC OnLine AP 447, decided on 28-02-2023]
Advocates who appeared in this case :
For the petitioner- Advocate Vivekananda Virupaksha;
For the respondent- Advocate P. Hemachandra.
