SPECIFIC PERFORMANCE - INSOLVENCY OF DEFENDANT= When the agreement of sale is true, valid and for consideration, no court can refuse to grant relief under specific relief Act simply because insolvency proceedings are filed against the property as the scope of this case is very limited = Whether the trial court direction that the plaintiff can agitate rights over the schedule property before the Insolvency Court, while holding that the agreement of sale is true and correct, is not sustainable in view of the provisions under Section 55 of the Provincial Insolvency Act. Section 55 of the Act reads as under: Protection of bona fide transactions:- Subject to the foregoing provisions of this Act with respect to the effect of insolvency on an execution, and with respect to the avoidance of certain transfers and preferences, nothing in this Act shall invalidate in the case of an insolvency- (a) any payment by the insolvent to any of his creditors; (b) any payment or delivery to the insolvent; (c) any transfer by the insolvent for valuable consideration; or (d) any contract or dealing by or with the insolvent for valuable consideration; Provided that any such transaction takes place before the date of the order of adjudication, and that the person with whom such transaction takes place has not at the time notice of the presentation of any insolvency petition by or against the debtor. Proviso to Section 55 of the Provincial Insolvency Act protects bona fide transactions mentioned in clauses (a) to (d) of Section 55. However, in view of the very limited scope of the suit, the above provisions cannot be invoked in the present proceedings.

published in http://hc.ap.nic.in/csis/MainInfo.jsp?mtype=AS&mno=182&year=2012

AS 182 / 2012

ASSR 3617 / 2012

PETITIONER RESPONDENT ARAVAPALLI LAXMI RAMA DEVI   VS SINDHE NARSUBAI AND ANOTHER PET.ADV. : UGRANARASIMHA RESP.ADV. : CHAKRAVARTHY P V S K SUBJECT: SPECIFIC PERFORMANCE DISTRICT:  GUNTUR

HONOURABLE SRI JUSTICE RAJA ELANGO

APPEAL SUIT No:182 OF 2012

JUDGMENT:

         

1.       The present appeal has been preferred by the appellant-plaintiff against the Judgment and Decree dated 30.11.2009 passed by the Additional Senior Civil Judge, Narasaraopet, Guntur District in O.S.No.12 of 2009.

2.       The appellant herein is the plaintiff and the 1^st respondent is the defendant in the suit.  For the sake convenience, the status of the parties will hereinafter be referred to as arrayed in the suit.

3.       Brief facts of the case are as follows:

(i) The suit schedule property is exclusive property of the defendant and she intended to sell the same for consideration of Rs.7,15,000/- and the plaintiff agreed to purchase the same and the defendant executed an agreement of sale in favour of the plaintiff on 26.6.2008 after receiving advance amount of Rs.3,65,000/- out of total sale consideration and as per the agreement, the balance of sale consideration has to be paid within two months from the date of agreement of sale. 

(ii) The defendant and her son indebted to one Pulibandla Nageswara Rao by way of registered mortgage regarding the schedule property during the year 2005 and in discharge of debt, the defendant and her son sold the suit schedule property to the plaintiff.  Subsequently, they discharged the said debt and released the mortgage.  On 14.8.2008, the defendant and her son approached the plaintiff to give further sum of Rs.50,000/-out of the balance sale consideration.  Accordingly, the plaintiff paid Rs.50,000/- to the defendant and the time was extended for a period of four months from 26.8.2008 for payment of balance sale consideration.  Thereafter, in spite of plaintiff’s readiness to perform her part of the contract and in spite of several demands and notice, the defendant and her son did not come forward to perform their part of contract.    Hence, the plaintiff filed the above suit for specific performance of contract of sale.

4.       The defendant filed her written statement denying the averments made in the plaint and contending that at the time of construction of building in the suit schedule property, she obtained loans and the plaintiff is also one of the creditors, who obtained her thumb impression and she borrowed only Rs.50,000/- from the plaintiff and the agreement of sale is nothing but forged one and manipulated document and the same was brought into existence to grab the property.   She further stated that she failed to discharge the debts of her creditors and she filed I.P. to adjudicate her as an insolvent and the suit schedule property has been handed over to the Official Receiver, Guntur as per the directions of the Court and the Official Receiver conducted auction of lease hold rights of the property and presently, the suit schedule property is in the custody of Official Receiver and as such the suit is not maintainable.

5.       On the basis of the above pleadings, the trial Court settled the following issues:

1)                              Whether the agreement of sale dated 26.6.2008 is true, valid and duly executed by the defendant in favour of the plaintiff?

2)                             Whether the plaintiff is entitled for specific performance of contract as prayed for ?

3)                             To what relief?

6.       During the course of trial, the plaintiff examined herself as P.W.1 and examined one of the attesters of agreement of sale as P.W.2 and got Exs.A1 to A7 marked on behalf of the plaintiff.  The defendant examined herself as D.W.1.  No documents were marked on her behalf.

7.       On appreciation of oral and documentary evidence, the trial Court answered the 1^st issue in favour of the plaintiff holding that the agreement of sale dated 26.6.2008 is true and correct, duly executed by the defendant in favour of the plaintiff in the presence of P.W.2 and the son of the defendant, after receiving the advance sale consideration and that the defendant failed to execute the registered sale deed in favour of the plaintiff in spite of her readiness and willingness to perform her part of contract.  

Insofar as the 2^nd issue is concerned, the trial Court held as follows:

 “Admittedly, neither the plaintiff nor the defendant relied on any document to know about the Insolvency Proceedings in I.P.No.1 of 2009 whether it was disposed of or it is pending.  Since P.W.1 admitted in her evidence that the Official Receiver, Guntur conducted auction regarding the suit schedule property, which is Ex.B1 schedule property in insolvency proceedings and the plaintiff has participated in the said auction and auctioned the said property, the plaintiff can agitate before the Court where the Insolvency Proceedings are pending or for her individual civil rights without prejudice to the rights of other creditors of the defendant.  It is specified as per Sections 16 and 20 of the Specific Relief Act, when the contract in between plaintiff and defendant is impossible for enforcement which causes hardships to the defendants for enforcement of a decree, if the decree is passed in favour of the plaintiff and thereby, if at all any orders passed in favour of the plaintiff basing on Ex.A1 it becomes nullity as such the Court cannot pass any such orders to enforce any contract in between the plaintiff and defendant in respect of Ex.A1 agreement of sale in view of the Insolvency Proceedings launched by the defendant against her creditors regarding suit schedule property.”

On the above grounds, the trial Court dismissed the suit.  Aggrieved by the same, the plaintiff filed the present appeal.

8.       The main contention raised by the learned Counsel for the appellant is that the observation made by the trial Court on issue No.2 and consequently, on issue No.3 that the plaintiff can agitate rights over the schedule property before the Insolvency Court, while holding that the agreement of sale is true and correct, is not sustainable in view of the provisions under Section 55 of the Provincial Insolvency Act.

9.       The learned Counsel for the 1^st respondent submitted that the entire property is in possession of the Official Receiver.

10.      The grievance of the appellant is limited to the extent of findings of the trial Court on issue Nos.2 and 3 in the judgment under appeal.  

The learned Counsel for the appellant mainly relied upon Section 55 of the Insolvency Act.

11.      Section 55 of the Act reads as under:

Protection of bona fide transactions:-

Subject to the foregoing provisions of this Act with respect to the effect of insolvency on an execution, and with respect to the avoidance of certain transfers and preferences, nothing in this Act shall invalidate in the case of an insolvency- (a) any payment by the insolvent to any of his creditors;

(b) any payment or delivery to the insolvent;

(c) any transfer by the insolvent for valuable consideration; or

(d) any contract or dealing by or with the insolvent for valuable consideration;

Provided that any such transaction takes place before the date of the order of adjudication, and that the person with whom such transaction takes place has not at the time notice of the presentation of any insolvency petition by or against the debtor.

Proviso to Section 55 of the Provincial Insolvency Act protects bona fide transactions mentioned in clauses (a) to (d) of Section 55.     

However,  in view of the very limited scope of the suit, the above provisions cannot be invoked in the present proceedings.

12.      Insofar as the findings of the trial Court on Issue No:1, which are on appreciation of evidence and sound footing, they need no interference.

13.      In view of the nature of the suit proceedings, the findings arrived at by the trial Court on Issue No:2, which are beyond the scope of the suit, are not sustainable under law and thereby, the findings on Issue No:2 and the consequent finding on Issue No:3, are liable to be set aside.  

14.      In the circumstances, this Court is of the view that it is a fit case to remit the matter back to the trial Court to adjudicate issue Nos:2 and 3 afresh keeping in view the very scope of the suit itself.

15.      Accordingly, the Appeal Suit is allowed to the extent as indicated above and the matter is remitted back to the trial Court for adjudication of issue No:2 as well as the consequential Issue No.3 afresh keeping in view the very scope of the suit itself after affording an opportunity to both the parties.

                                                            ________________
           Justice Raja Elango

Dated: 23.07.2013

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HONOURABLE SRI JUSTICE RAJA ELANGO

 

 

 

 

 

 

 

 

 

 

 

A.S.No:182 OF 2012

23^rd July, 2013

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