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Saturday, December 7, 2013

Second appeal lies before high court under sec.75(2) of Provincial insolvency Act - Not revision against the appeal decree and judgement of District court as it is nothing but deciding a case under sec.4 of Insolvency Act though petition was filed under sec.9 as a creditor I.P. = Bhupathiraju Satyanarayana Raju and 2 others.... Petitioners Sanku China Pulla Rao and 2 others.... Respondents = Published in http://judis.nic.in/judis_andhra/qrydisp.aspx?filename=10481

 Second appeal lies before high court under sec.75(2) of Provincial insolvency Act - Not revision against the appeal decree and judgement of District court as it is nothing but deciding a case under sec.4 of Insolvency Act though petition was filed under sec.9 as a creditor I.P. =

Though the petition was filed under Section 9 of the Act, the power of the
Court to decide all questions emanates from Section 4 and the Court has to
adjudicate all questions in insolvency as per the provision of Section 4, which
reads as follows:
"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 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."

        Section 4 of the Act is very comprehensive to decide all questions arising
in insolvency.
The decisions relied on by the
learned counsel for the revision petitioners state that if the order is not one
under Section 4 but is either under Section 51 of the Provincial Insolvency Act
or under Section 151 of CPC, then the second appeal is incompetent.  
 Therefore, in view of my aforesaid discussion, I am of the opinion that
only an appeal lies to this Court under the second proviso to Section 75 (1) of
the Act against the impugned order and the revision does not lie. 
Accordingly, the Civil Revision Petition is dismissed as not maintainable.
However, it is made clear that it is always open for the revision petitioners to
avail all remedies available to them under law.

THE HON'BLE SRI JUSTICE A. RAJASHEKER REDDY          

CIVIL REVISION PETITION No.5256 of 2006  

dated:04-11-2013

Bhupathiraju Satyanarayana Raju and 2 others.... Petitioners

Sanku China Pulla Rao and 2 others.... Respondents

Counsel for petitioners:  Sri A. Ramalingeswara Rao

Counsel for respondent: Sri P. Vinayaka Swamy

<Gist:

>Head Note:

?Cases referred:

1)  AIR (36) 1949 Allahabad 464
2) AIR 1927 Calcutta 474
3) 2011 (6) ALD 736
4) AIR (36) 1949 Nagpur 39
5) AIR 1960 Punjab 604

HON'BLE SRI JUSTICE A. RAJASHEKER REDDY        
Civil Revision Petition No.5256 of 2006

Date:   04-11-2013

ORDER:

        The Civil Revision Petition is directed against the decree and judgment
dated 05-07-2006 in A.S.No.45 of 2004 passed by the learned Principal District
Judge, West Godavari, Eluru, 
whereby and whereunder the appeal filed under
Section 75 (1) of the Provincial Insolvency Act, 1920-the Provincial Insolvency
(Andhra Pradesh Extension and Amendment) Act, 1965 (for short "the Act") by the 
revision petitioners, was dismissed.
2.      The revision petitioners, who are creditors, filed I.P.No.37 of 1999 under
Section 9 (1) of the Act before the Senior Civil Judge, Tadepalligudem, for
declaring respondents 1 and 2 as insolvents, treating the sale deed in favour of
the 3rd respondent is an act of insolvency and in fraud of creditors and also a
fraudulent transfer and to cancel the sale deed dated 24-09-1999 executed by the
respondents 1 and 2 in favour of 3rd respondent.
 It is alleged that the
respondents 1 to 3 are closely related to each other and further alleged that
the respondents 1 and 2 borrowed an amount of Rs.90,000/- for their family
protection and agricultural investment and executed a promissory note agreeing
to repay the same with interest at 24% p.a. and that the respondents paid
Rs.59,400/- to the 1st petitioner and the same is endorsed on the reverse of the
promissory note dated 10-09-1999 and the balance of the same is due to the 1st
petitioner.  They also borrowed Rs.60,000/- from the 2nd petitioner on 10-09-
1999 for the same purpose and executed a promissory note agreeing to repay the
same with same rate of interest.  They also borrowed Rs.40,000/- on 07-02-1999
from the 3rd petitioner for some purpose and executed a promissory note and
apart from these three debts, the respondents 1 and 2 have some other debts to
others.  Thus, they are heavily indebted and the property possessed by them is
not sufficient to discharge their debts.  It is further alleged that while the
things stood thus, the respondents 1 and 2 created sale deed dated 24-09-1999 in
favour of 3rd respondent for Rs.1,03,000/- and the said document is a collusive,
fraudulent and without consideration and so, it is an act of insolvency and the
petitioners are entitled for the relief.  Respondents 1 and 2 remained ex parte
and the 3rd respondent filed counter denying all the allegations in the petition
and contending that the respondents 1 and 2 borrowed amount from the petitioners
and executed the documents and further payments are all false and the
petitioners are put to strict proof of the same.  It is alleged that the
pronotes are all nothing but concocted and forged one for the purpose of this
petition.  It is further alleged that the 3rd respondent purchased scheduled
property for a valuable consideration of Rs.1,03,000/- and the same has been in
his possession and enjoyment and he also filed a suit before the court and also
criminal cases before S.H.O., Davileswaram P.S. and the petitioners and
respondents 1 and 2 colluded together and got filed this petition to knock away
the suit property.  There are some other properties to the respondents and the
same was also suppressed and so this petition is not maintainable and requested
the court to dismiss the petition with costs.
3.      Before the Court of Senior Civil Judge, Tadepalligudem, PWs.1 to 6 were
examined and Exs.A.1 to A.9 were marked on behalf of the petitioners and DW.1
was examined and Exs.B.1 to B.4 were marked on behalf of the respondents. The
learned Senior Civil Judge, Tadepalligudem through order dated 15-12-2003
dismissed the petition against which the revision petitioners filed A.S.No.45 of
2004 before the Principal District Judge, West Godavari, Eluru.  The learned
Principal District Judge also dismissed the appeal by judgment dated 05-07-2006.
Assailing the said judgment, the present revision petition has been filed.
4.      Learned counsel for the 3rd respondent raised a preliminary objection
stating that this revision is not maintainable.
He referred to proviso to
Section 75 (1) of the Act to contend that any person aggrieved by a decision of
the District Court on appeal from a decision of a subordinate Court under
Section 4 may appeal to the High Court on any of the grounds mentioned in sub-
section (1) of Section 100 of the Code of Civil Procedure, 1908. 
In the present
case, the Insolvency Petition was dismissed by the Senior Civil Judge,
Tadepalligudem and an appeal was filed before the District Court, which was also
dismissed, as such, the petitioner should have filed appeal as per the proviso
to Section 75 (1) of the Act. 
 In support of his contentions he placed reliance
on Radhey Shiam and others v. Official Receiver of the Estate of Ram Charan Das
and others1, Khirod Chandra Das Gupta v. Receiver2, Boddeti Rameswaram and   
others v. Polamarasetti Trimurthulu and others3.
5.      On the other hand, the learned counsel for the revision petitioners placed
reliance on Sarjubai, w/o Ghasiram v. Cooperative Society, Nanpa and another4
and Chhotu Ram, s/o Narain Ram v. Kharaiti Ram, s/o Gokalmal Mahajan and  
others5.
6.      Though the learned counsel for both parties vehemently argued on the
merits of the case as well as the maintainability of the revision petition, I do
propose to take up firstly, the objection regarding maintainability of the
revision petition. Unless and until the said preliminary issue is decided, the
second issue with regard to merits of the revision petition cannot be taken up.
7.      Learned counsel for the revision petitioners contends that as the revision
petitioners filed the petition under Section 9 of the Act, the present revision
is maintainable.  As per the second proviso to Section 75 (1) of the Act, when
the order is passed under Section 4 of the Act by the trial Court, then only the
second appeal lies.  But, in the present case, since the Insolvency Petition was
filed under Section 9 of the Act and not under Section 4, only a revision lies
but not an appeal.
In support of his contention, he referred to 
Section 75 (1)
of the Act, which reads thus:
"The debtors, any creditor, the receiver or any other person aggrieved by a
decision come to or an order made in the exercise of insolvency jurisdiction by
a Court subordinate to a District Court may appeal to the District Court, and
the order of the District Court upon such appeals shall be final:
        Provided that the High Court, for the purpose of satisfying itself that an
order made in any appeal decided by the District Court was according to law, may
call for the case and pass such order with respect thereto as it thinks fit.
        Provided, further, that any such person aggrieved by a decision of the
District Court on appeal from a decision of a subordinate Court under Section 4
may appeal to the High Court on any of the grounds mentioned in sub-section (1)
of Section 100 of the Code of Civil Procedure, 1908."

        The second proviso to Section 75 of the Act clearly says that any such
person aggrieved by a decision of the District Court on appeal from a decision
of a subordinate Court under Section 4 may appeal to the High Court on any of
the grounds mentioned in sub-section (1) of Section 100 of the Code of Civil
Procedure, 1908. 
9.      In the present case, the Insolvency Petition was dismissed by the Senior
Civil Judge and the appeal against the said dismissal was also dismissed by the
District Judge.  Therefore, appeal lies as per the second proviso to Section 75
(1) of the Act.  The first proviso thereof says that the High Court, for the
purpose of satisfying itself that an order made in any appeal decided by the
District Court was according to law, may call for the case and pass such order
with respect thereto as it thinks fit.
10.     In this regard, the learned counsel for the revision petitioners placed
reliance on Radhey Shiam and others v. Official Receiver of the Estate of Ram
Charan Das and others (1 supra), wherein the High Court of Allahabad held as
follows:
"A preliminary objection was taken by Mr. R.C. Ghatak, learned counsel for the
respondents to the hearing of this appeal.  That was that no second appeal lay.
That again was on the basis that proviso 2 to sub-section (1) of Section 75,
Provincial Insolvency Act, would not apply, inasmuch as the order of the
Insolvency Judge could not be taken to be one under Section 4 of the Act.  As we
have already pointed out, there was a number of proceedings before that learned
Judge which he professed to dispose of by means of a single order, and all that
we have to see is whether the questions raised before him were questions
"arising in insolvency" as mentioned in the marginal note to Section 4 of the
Act.  It has not been shown as to how those matters could not be deemed to be
covered by these words.  Indeed, every one of those questions appears to be
expressly within the language of the section, and we are definitely of opinion
that the learned Insolvency Judge, while disposing of the matters raised before
him, did purport to pass an order under Section 4 of the Act.  We, therefore,
find ourselves unable to give effect to the preliminary objection and we
disallow it.

11.     In Khirod Chandra Das Gupta v. Receiver (2 supra), the High Court of
Calcutta held that an appeal against a decision of a Subordinate Judge under
Section 4 lies to the District Judge and a second appeal lies to the High Court
under Section 75 of the Act.
12.     In Boddeti Rameswaram and others v. Polamarasetti Trimurthulu and others 
(3 supra), a learned single Judge of this Court held as follows:
"Though the matter should have been treated as a second appeal arising out of
the judgment of the lower Court, it was filed as a civil revision petition.  It
is needless to say that whether in second appeal or in the civil revision
petition the power of the Court to interfere with the findings of fact are very
limited.  The finding of fact recorded by both the Courts is that the 5th
respondent has purchased the property and discharged the debts due to the
society, merely because a preference was given to a particular creditor, who
evidently is not related to the debtor, it cannot be said that there is an act
of insolvency.  Merely because, the debtor has filed subsequently a debtor
insolvency petition is also not a ground to interfere with the unsuccessful
challenge made by the petitioners."

13.     In Sarjubai, w/o Ghasiram v. Cooperative Society, Nanpa and another (4
supra), the High Court of Nagpur held as follows:
"Under Section 75, Provincial Insolvency Act, second appeal is maintainable only
if the decision of this insolvency Court is one under Section 4, Provincial
Insolvency Act.  If the order is not one under Section 4 but is either under
Section 51, Provincial Insolvency Act, or under Section 151, Civil Procedure
Code, then the second appeal is incompetent....."

14.     In Sarjubai, w/o Ghasiram v. Cooperative Society, Nanpa and another (5
supra), the High Court of Punjab held that the scope of proviso to Section 75
(1) of the Provincial Insolvency Act is much wider than Section 115 of the Code
of Civil Procedure.  The High Court can go into the question whether the
decision of the District Judge is in accordance with law.
15.     Though the petition was filed under Section 9 of the Act, the power of the
Court to decide all questions emanates from Section 4 and the Court has to
adjudicate all questions in insolvency as per the provision of Section 4, which
reads as follows:
"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 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."

        Section 4 of the Act is very comprehensive to decide all questions arising
in insolvency.
16.     Since the present Insolvency Petition filed under Section 9 of the Act was
adjudicated by virtue of Section 4 of the Act, it cannot be said that the trial
Court has not passed orders under Section 4 of the Act.  When once the trial
Court has passed the order under Section 4 of the Act, since all questions
relating to insolvency are to be dealt with thereunder and since the appeal
filed against the order of the District Judge was dismissed, further appeal lies
under Section 75 (2) of the Act.  The precedents cited by the learned counsel
for the respondents also laid down that further appeal lies to High Court
against the order passed by the District Judge.  The decisions relied on by the
learned counsel for the revision petitioners state that if the order is not one
under Section 4 but is either under Section 51 of the Provincial Insolvency Act
or under Section 151 of CPC, then the second appeal is incompetent.   Even in
the decisions relied on by the learned counsel for the revision petitioners and
also the learned counsel for the respondents, this Court held that second appeal
lies, but the learned Judge disposed of the case on merits stating that the
power of the Court to interfere with the findings of fact is circumscribed
either in second appeal or in revision.
17.     Therefore, in view of my aforesaid discussion, I am of the opinion that
only an appeal lies to this Court under the second proviso to Section 75 (1) of
the Act against the impugned order and the revision does not lie.
 As the
revision petition is not maintainable as discussed above, the question of going
into the merits of the revision petition does not arise even though the learned
counsel for both parties have argued at length on merits, apart from relying on
various precedents.  Therefore, the revision petition is liable to be dismissed
as not maintainable.
18.     Accordingly, the Civil Revision Petition is dismissed as not maintainable.
However, it is made clear that it is always open for the revision petitioners to
avail all remedies available to them under law.
        As a sequel thereto, Miscellaneous Petitions, if any, pending shall stand
closed.
_____________________  
A. RAJASHEKER REDDY, J    
Date: 04-11-2013

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