ORDER
1. The 3rd defendant is the appellant herein. The plaintiff filed a suit for-partition and separate possession of his share in the suit property. The suit was resisted by the defendants, who are three in number. The suit was decreed in favour of the plaintiff, granting the plaintiff a preliminary decree for partition and separate possession. The 3rd defendant aggrieved by the said judgment and decree, preferred an appeal to the sub-Court. Tirupur, in A.S. No, 34 of 1986, and the judgment and decree of the trial court were confirmed by the sub-Judge, who dismissed the appeal. Hence, this second appeal by the 3rd defendant.
2. At the time when the second appeal was admitted the following substantial questions of law were framed for consideration:-
(i) Whether the suit for partition by the purchaser from the Official Receiver is maintainable when the settlement deed is in favour of the appellant which was long prior in point of time ie., before filing the insolvency petition and without setting aside the settlement deed under section 54 of the Provincial Insolvency Act?
(ii) whether the lower appellate court is correct in granting a decree in favour of the 1st respondent.
3. The facts of the case lie in a narrow compass:
The suit property is that comprised in Door No. 2/4 in T.S. No. 1203/30/2. Tirupur Town. The 1st defendant is entitled to half share in it. The other half share belonged to the 2nd defendant. The 2nd defendant filed an application in I.P. No. 19 of 1970 for adjudicating him as an insolvent. In the said application, the half share in the suit property was shown as an asset of the petitioning debtor. The 2nd defendant was adjudicated as an insolvent and the properties vested with the Official Receiver, Coimbatore. The Official Receiver sold the suit property in an auction and the same was purchased by
the plaintiff on 30.3.1972, for a sum of Rs.1, 400, The sale was confirmed and a sale deed was executed in favour of the plaintiff. The plaintiff also filed an Execution Petition and obtained symbolic possession since the 1st defendant is entitled to the other half share in the property. The 3rd defendant claimed that the 2nd defendant had executed a settlement deed in his favour on 17.9.1969. According to the plaintiff, the said settlement deed had not been accepted and acted upon. Further, as the property was shown to form part of the Estate of the petitioning debtor and was sold in auction by the Official Receiver, the 3rd defendant cannot claim any right in pursuance of the settlement deed. The plaintiff therefore sought partition and separate possession of his half share. Therefore what has to be decided in this case is whether the suit filed by the plaintiff for partition without any declaration regarding the settlement, is maintainable in law. In other words, whether the plaintiff ought to have asked for the setting aside of the settlement deed or for a declaration that it is invalid and inoperative.
4. Ex.A7 is the Insolvency Petition filed by the 2nd defendant, on the file of the sub-Court, Coimbatore. In the said petition, the petitioning debtor did not implead to settlee viz., the appellant herein as a party. In para-5, the petitioning debtor has simply averred that he had executed a settlement deed on 17-9-1979, in favour of K. Subramaniam. son of Getti Chettiar, Nallatti Palayam, Pollachi Taluk, and it is a nominal deed and that the property belongs to the petitioning debtor. Thus an unilateral statement has been made. But, the petitioning debtor viz., the 2nd defendant did not choose to implead the settlee. But, in the written statement now filed, it is the plea taken by the 2nd defendant that he had executed a settlement deed and the property belongs to the settlee. When the plaintiff herein-issued a notice, he has hot made mention of he settlement deed nor a notice has been issued to the 3rd defendant. Though the Order passed in the Insolvency Petition has not been produced, it is not in dispute that pursuant to the insolvency Petition filed by the petitioning debtor, the property vested with the Official Receiver. This Order has been passed on 2-9-1970, The application was filed into Court on 19-1- 1970. A xerox copy of the settlement deed is produced and marked as Ex.B.2. The settlement deed has been executed on 17.9.1969. within six months of the execution of the settlement deed, the settlor had filed an application under section 10 of the Provincial Insolvency Act (herein after referred to as the Act) to adjudicate him as a insolvent.
5. Section 4 of the Act confers complete and full powers on the Insolvency court to decide all questions of title of priority, or of any nature whatsoever, which may arise in any case of Insolvency. If a transfer is stated to be fictitious or sham, it may be said as there is no transfer in reality, they are not legally operative and hence need not be set aside under section 4. But section 53 of the Act provides that any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall if the transfer is adjusted insolvent on a petition presented within two years after the
date of transfer, be voidable against the receiver and may be annulled by the court. Therefore, in order that a transfer maybe annulled under this section, the following conditions must be fulfilled.
(a) that the transfer is not made before and in consideration of marriage;
(b) that the transfer is not made to a purchaser or incumbrancer in good faith and for valuable consideration;
(c) that the transferor has been adjusted insolvent on a petition presented within two years after the date of transfer.
6. Here in this case, the settlement is of the year 1969, whereas the petition for adjudicating the settlor has been filed by the settlor in the year 1970 (January). The order of adjudication has been passed on 2.9.1970, within an year. Ofcourse, in the petition filled under section 10 of the Act, the petitioning debtor has stated that it is a nominal settlement deed. This property is set out in the schedule of properties, showing it is as an assets of the petitioning debtor. On and from 2.9.1970, the property has vested with the Official Receiver, Coimbatore. The Official Receiver had not taken any steps at all under section 53 of the Act to avoid the transfer. If section 53 is held inapplicable on the ground that it is a void transfer and not voidable transfer, then he ought to have moved under section 4 for a declaration.
7. If the transaction is held to be not nominal or fictitious, but voidable then it would be fall within section 53 of the Act and if not challenged by the Receiver, it would hold good and valid. For when a person is adjudged insolvent and his entire estate vest with Official Receiver, the Receiver alone will be competent to take proceedings either under sections 4, 53 or 54 of the Act as the case may be. Section 54 of the Act provides that every transfer of property, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, with a view of giving that creditor a preference over the other creditors, shall, if such person is adjudged insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the receiver, and shall be annulled by the court. The object of Section 54 of the Act is to protect the interest of the whole body of creditors. Hence, on facts, Section 54 is not applicable as the 3rd defendant is not a creditor. I have already referred to the fact that the transaction is dated 17.9.1969. The application for adjudication has filed on 19.1.1970. It would follow that the petition has been filed only after four months of the transaction. Here, again it has to be pointed out that no application has been filed by the Receiver either for annulment of the transfer under Section 53 or for declaration under Section 4 of the Provincial Insolvency Act.
8. As pointed out at the outset, the settlee was not made a party to the Insolvency petition. We do not have any material to show that nature of the publication made and how it was effected. There is nothing to show that the settlee had notice of the Insolvency proceedings. The property was an
undivided one with the seller and his brother having equal share. Normally settlement would come into existence from the minute it is executed. Each co-owner was in possession for and on behalf of the other. The Official Receiver in whom the property vest did not choose to take action either under section 53 or 54 of the Act. It is stated that pursuant to sale by the Official Receiver, the property has been purchased by the plaintiff. In other words, whatever right and interest, the debtor had in the property, is claimed to have been purchased by the plaintiff. Any decision of the insolvency Court cannot have an effect upon the settlee. Even though the settlor had only stated that it was a nominal transaction, when the Official Receiver had not taken steps to have then said transaction set aside, or for declaration, the settlement will continue to be good and effective until it is set aside or so declared. In other words, the settlee under the document will be entitled to claim right, title an interest that was granted under the said document.
9. It is also to be pointed out in this connection that when the 2nd defendant, the settlor filed a written statement singing a different song, stating that he executed a settlement deed and that the property belongs to the third defendant, whereby he means that it is a valid transaction. Therefore, if one is to rely upon the statement made in the petition, to hold that the transaction is not a genuine one, equally one must rely upon the statement now filed before the Court by the 2nd defendant stating that it is a valid transaction. Therefore, the very averment made by the petitioning debtor in the petition filed by him for adjudication without making the settlor a party, cannot be taken as a conclusive with reference to the transaction.
10. The transaction here has not been held to be sham and nominal or fictitious by the Insolvency Court or by a Civil Court. Nor any declaration has been obtained. There was no challenge by the Official Receiver under section 53 or 4 of the Act. There was no notice given to the settlee either by the receiver or when an application was filed by the settlor to adjudicate him as an insolvent,. There was no occasion to go into the question of the truth and validity and it binding nature. Nor there was any decision that it is a fictitious transaction or a nominal transaction. There is thus a document affecting the said property. It is a registered document. Therefore, when there is a document which is thus an obstacle in the way of plaintiff obtaining a decree unless the obstacle is removed, the plaintiff cannot claim any relief. The plaintiff represents the debtor. He claims title through the Official Receiver in whom the property became vested on adjudication of the settlor as insolvent. Unless the document is set aside, then plaintiff cannot get a valid and clear title to the property. It is therefore necessary that plaintiff obtains a declaration with reference to the document and praise for setting aside of the same. Unless the obstacle is removed and the document is set aside, or declared to be invalid, the right of the plaintiff to ask for any relief with reference to the property will not become crystalised. This material aspect has not been considered by the Courts below. Hence, the courts below have erred in granting a decree to the plaintiff without a prayer relating to the document. Therefore, the purchaser of the property from the Official Receiver in the circumstances is bound to ask for relief relating to the settlement deed.
11. It is to be pointed out that the rights to get any relief with reference to the property would flow only if there is no obstacle or impediment in the way of the purchaser. There is a settlement deed over which no adjudication has been made by any Court. The settlement deed has not been challenged either under section 53 or 54 of the Act or by the filing of an application under section 4 of the Act. The creditors and the Official Receiver had kept quite. If a settlement deed is to be held as nominal or fictitious transaction, it can be done only in the presence of persons, who would derive benefit from the settlement deed.
12. Here, the settlee was not made a party in the insolvency petition. Nor there was adjudication with reference to the settlement deed in the presence of the settlor and settlee, when there is no prayer relating to the settlement deed, the Courts below have erred gravely in going into the question of validity of the document. For the defendants were not asked to meet such a case. Therefore, the document of settlement still holds good until it is set aside. Thus it is a document coming in the way of the plaintiff claiming partition, with reference to the property. Therefore, unless that obstacle is removed from the way of the purchaser, the purchaser cannot claim any relief, without setting aside the settlement deed and without declaring it to be in valid and inoperative no relief can be granted to the plaintiff.
13. Here in this case, the purchaser has filed the suit for partition. He has not asked for any relief for setting aside or for a declaration that the settlement deed is null and void. The Courts below have merely upon the allegations made by the insolvent in application, when the plaintiff had not asked for any relief pertaining to the document, erred in holding that it is only a nominal and fictitious transaction. The document is a registered document. It purports to create rights. It is also to be pointed out that the trial court did not frame any issue to consider the truth and validity of the settlement deed. The appellate court also did not frame any point to consider the truth and validity of the settlement deed. Therefore, I am of the view that the judgment and decrees of the courts below cannot be maintained and the suit filed by the plaintiff for partition without asking for a declaration with regard to the settlement deed, is not maintainable. The plaintiff is only a purchaser of the property from the official receiver. The Official Receiver represented the estate of the insolvent. The insolvent had executed a settlement deed. The unilateral statement of the insolvent that it was executed nominally is not the end of the matter. The plaintiff who traces title to the property through the settlor is bound by the settlement deed, unless it is set aside. Hence, the suit as framed and filed is not maintainable. Hence, it is liable to be dismissed.
14. In the result, this appeal is allowed with costs. The judgment and decrees of the courts below are hereby set aside. The suit will stand dismissed with costs.