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District Court

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Mortgage & Section 52 of the Transfer of Property Act, 1882= whether the mortgagor can induct a person as tenant in a mortgaged property, to the prejudice of the mortgagee, pendente lite, in violation of Section 52 of the Transfer of Property Act, 1882. – No = Section 52 of the TPA prevents a mortgagor from creating any lease during the pendency of mortgaged suit so as to effect the right of a mortgagee or the purchaser. This Court in Mangru Mahto and others (supra) had -an occasion to consider the scope of Section 52 of the TPA in that very context and held as follows: “……………..But in view of Section 52 of the Transfer of Property Act, if the mortgagor grants such a lease during the pendency of a suit for sale by the mortgagee, the lessee is bound by the result of the litigation. If the property is sold in execution of the decree passed in the suit, the lessee cannot resist a claim for possession by the auction-purchaser. The lessee could apply for being joined as a party to the suit and ask for an opportunity to redeem the property. But if he allows the property to be sold in execution of the mortgage decree and they have now lost the present case, the lessees allowed the suit lands to be sold in execution of the mortgage decree and they have now lost the right of redemption. They cannot resist the claim of the auction purchaser of recovery of possession of the lands.”- Section 65-A of the TPA deals with the mortgagee’s powers to lease. However, in view of Section 52, if the mortgagor grants such a lease during the pendency of a suit for sale by the mortgagee, the lessee is bound by the result of litigation and if the property is sold in execution of the decree, the lessee cannot resist a claim for possession by auction purchaser.- A tenant who is inducted during the subsistence of the mortgage is not entitled to get the protection of the Maharashtra Rent Act. This legal position has been settled by this Court in Om Prakash Garg v. Ganga Sahai and others AIR 1988 -SC 108. – In the above-mentioned circumstances, we are of the view that the courts below have not appreciated the various legal issues and committed an error in non-suiting the appellant. We answer those questions in favour of the appellant and hold that the appellant is entitled to get a decree, as prayed for, since the original first respondent was inducted illegally and to the prejudice of the original mortgagee. Consequently, the judgments of the courts below are set aside and the suit is decreed, however, without any mesne profits. The appeal is allowed, but without any order as to costs.

  published in    http://judis.nic.in/supremecourt/imgst.aspx?filename=40663  REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 6966 OF 2013 [Arising out of SLP (Civil) No.12731 of 2007) Sunita Jugalkishore Gilda .. Appellant Versus Ramanlal Udhoji Tanna (Dead) Thr. Lrs. and others .. Respondents   J U D G M E N T K. S. … Continue reading

Provincial Insolvency Act, 1920: Ss. 28, 55 and its Proviso: Insolvency Petition by the debtor/transferor-Bonafide transferee for valuable consideration-Protection to-Held: When transfer of shares to the transferee was for valuable consideration without any notice as to the presentation of the Insolvency Petition by the debtor, requirements of Proviso to Section 55 satisfied-Hence, entitled to protection/claim. Section 218/Proviso to Section 55-Protection to creditor vis-a-vis- Protection to bona fide transferee-Interpretation of-Held, An order of adjudication in an Insolvency Petition relates back to the date of its presentation-No word or Provision of Law could be left redundant/ superfluous-Both must be given effect to by harmoniously construing-On construing so the bonafide transferee could be protected under the provisions when the conditions of Proviso to Section 55 are complied with. The question which arose for consideration and decision in the appeal was as to whether protection under Section 55 of the Provincial Insolvency Act is available to a bonafide transferee for valuable consideration after presentation of the Insolvency Petition by or against the debtor but without notice and before passing an order of adjudication. =Answering the question in the affirmative and allowing the appeal, the Court HELD: 1.1. The object of Section 28 of the Provincial Insolvency Act is to secure unrestricted right to dispose of insolvent’s property after an order of adjudication is made. On making an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a Receiver, as the case may be. When sub-section (1) is read along with subsection (7) of the Act, the effect would be an order of adjudication relates back to the date of presentation of Insolvency Petition and the order of adjudication takes effect from the date of the presentation of the Insolvency Petition. Consequently, vesting of property under sub-section (2) also relates back to the date of presentation of the Insolvency Petition. Combined reading of sub-sections (1), (2) and (7) makes the position clear that the interest of the creditors is safeguarded, parties are put on notice against attempt to transfer the property after the date of presentation of the Insolvency Petition by the petitioners or others relating to his property and also to warn the intending purchasers or transferees that they are taking the risk of purchasing or getting the property transferred in their names during the pendency of the insolvency proceedings from the date of presentation of the petition itself and even before passing of an order of adjudication. [936- D-G] 1.2. Sections 28 and 55 of the Act are to be read together. Where the transfer has been made by the insolvent after presentation of the Insolvency Petition, the transfer cannot be held as void ab initio but its validity or otherwise depends upon a consideration as to whether the conditions specified under Section 55 are or are not satisfied. [936-H; 937-A] 1.3. It is cardinal rule of construction that normally no word or provision should be considered redundant or superfluous in interpreting the provisions of a statute. The Courts always presume that the legislature inserted every part thereof with a purpose and the legislative intention is that every part of the statute should have effect. It may not be correct to say that a word or words used in a statute are either unnecessary or without any purpose to serve, unless there are compelling reasons to say so looking to the scheme of the statute and having regard to the object and purpose sought to be achieved by it. Once the requirements of Section 55 of the Act are satisfied, the appellant is entitled for the protection of the said Section as a bona fide transferee. A contrary view takes away the very protective umbrella specifically made available to a bona fide transferee covered by Section 55. Protection provided for bona fide transfer in Section 55 is in a way exception to Section 28(7) of the Act. Proviso to Section 55 of the Act protects bona fide transactions mentioned in clauses (a) to (d) of Section 55. [937-C, D, F, H] Jaipur Zila Sahakari Bhoomi Bank Ltd. Vikas v. Shri Ram Gopal Sharma and Ors., JT (2002) 1 SC 182, followed. 1.4. It is clear that the shares were transferred in favour of the appellant before the order of adjudication was made on the Insolvency Petition filed by the respondent and the appellant had no knowledge at the time of purchasing the shares as to the presentation of the Insolvency Petition, the transfer of shares was for valuable consideration and such transfer was bona fide. In this view, the appellants, did satisfy the requirements of proviso to Section 55 of the Act and hence they are entitled for the claim made by them. [938-B-D] 1.5. If the intention of the proviso to Section 55 of the Act was not to protect even a bona fide transferee for valuable consideration without notice of presentation of Insolvency Petition before an order of adjudication was made, the legislature could have simply said any transaction taking place after the date of presentation of any Insolvency Petition by or against the debtor instead of qualifying the transaction that takes place before the date of the order of adjudication. In this situation, the proviso which is intended to serve a definite purpose should be given full meaning and effect It is not possible to ignore a part of the provision, namely, “any such transaction takes place before the date of the order of adjudication”. It stands to reason as well, that a bona fide transferee for valuable consideration without the knowledge of the presentation of Insolvency Petition on the date of transfer of property is to be protected. [938-E-G] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 176 of 1997.

CASE NO.: Appeal (civil) 176 of 1997 PETITIONER: Sankar Ram and Co. RESPONDENT: Vs. Kasi Naicker and others DATE OF JUDGMENT: 30/07/2003 BENCH: Shivaraj V. Patil &[D.M. Dharmadhikari. JUDGMENT: J U D G M E N T Shivaraj V. Patil,J. “Whether protection provided in the proviso to Section 55 of the Provincial Insolvency Act, 1920 … Continue reading

Provincial Insolvency Act (5 of 1920), ss. 33, 75(1) and 80- Negotiable Instruments Act (26 of 1881), s. 118- Official Receiver-If bound to rely upon statutory presumption-High Court-Jurisdiction under s. 75(1) of the Insolvency Act. = The second appellant, who had executed promissory notes in favour of the respondents was adjudicated an insolvent on a petition by them. The Official Receiver in exercise of the powers under ss. 33 and 80 of the Provincial Insolvency Act (5 of 1920) and under directions of the Insolvency Judge, inquired into the claims of the respondents and rejected them. On appeal, the Insolvency Judge directed the inclusion of their names in the schedule of creditors. The appeal to the District Court against the order of the Insolvency Judge was allowed. In second appeal to the High Court, it was held, that the inference drawn by the District Court from its findings was a matter of law and that therefore the High Court had jurisdiction under s. 75(1), to interfere with the order of the District Court. Relying upon the presumption in favour of creditors in s. 118 of the Negotiable Instruments Act (26 of 1881), the High Court set aside the judgment of the District Court. The Official Receiver and the insolvent appealed to the Supreme Court. HELD : The appeal should be allowed. Since all the findings of the District Court were findings of fact and the question whether a statutory presumption was rebutted by the rest of the evidence was also a question of fact, the High Court had no jurisdiction to set aside the judgment of the District Court. [259A-C]. Wali Mohammad V. Mohammad Bakhsh, (1930) L.R. 57 I.A. 86. approved. Section 118 of the Negotiable Instruments Act, enacts a special rule of evidence which operates only between parties to the instrument or persons claiming under them in a suit or proceeding relating to the negotiable instrument. The section does not affect s. 114 of the Evidence Act, and in cases not falling within s. 118 of the Negotiable Instruments Act the Court may or may not presume that a promissory note was founded on good consideration. Therefore, in a proceeding relating to proof of debts, the question being not one between the insolvent and the proving creditor alone, and since the rights of other creditors of the insolvent have of necessity to be considered, the Court has jurisdiction to investigate whether there is a real -debt. Even if for some reason the debtor himself is estopped from denying the debt, there could be no estopped against the Insolvency Court. There is thus no statutory presumption of consideration in favour of the creditors under promissory notes in proceedings under s. 33 of the Provincial Insolvency Act for settlement of the schedule of creditors, and the Receiver exercising powers under s. 80 of that Act is not bound to admit the debts in the schedule merely because the insolvent or the creditors have failed to displace such a presumption. [261F-262C; 264E-G]. Case law reviewed. 255

PETITIONER: OFFICIAL RECEIVER, KANPUR AND ANOTHER Vs. RESPONDENT: ABDUL SHAKUR AND OTHERS DATE OF JUDGMENT: 11/09/1964 BENCH: SHAH, J.C. BENCH: SHAH, J.C. GAJENDRAGADKAR, P.B. (CJ) AYYANGAR, N. RAJAGOPALA CITATION: 1965 AIR 920 1965 SCR (1) 254 CITATOR INFO : E 1969 SC1334 (8A) ACT: Provincial Insolvency Act (5 of 1920), ss. 33, 75(1) and 80- … Continue reading

Provincial Insolvency Act (5 of 1920), ss. 33, 75(1) and 80- Negotiable Instruments Act (26 of 1881), s. 118- Official Receiver-If bound to rely upon statutory presumption-High Court-Jurisdiction under s. 75(1) of the Insolvency Act.

PETITIONER: OFFICIAL RECEIVER, KANPUR AND ANOTHER Vs. RESPONDENT: ABDUL SHAKUR AND OTHERS DATE OF JUDGMENT: 11/09/1964 BENCH: SHAH, J.C. BENCH: SHAH, J.C. GAJENDRAGADKAR, P.B. (CJ) AYYANGAR, N. RAJAGOPALA CITATION: 1965 AIR 920 1965 SCR (1) 254 CITATOR INFO : E 1969 SC1334 (8A) ACT: Provincial Insolvency Act (5 of 1920), ss. 33, 75(1) and 80- … Continue reading

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