SHARLAJ S/O SURESAN v. GEETHAKRISHNAN and OTHERS

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN** **& THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI** **TUESDAY, THE 19TH DAY OF DECEMBER 2017 / 28TH AGRAHAYANA, 1939** ## **FAO.No. 113 of 2011** **(AGAINST THE ORDER IN I.A.Nos.2730/2009, 2731/2009 & 2732/2009 IN IP 1/1997 OF PRINCIPAL SUB COURT, PALAKKAD DATED 22-09-2010)** ## **APPELLANT/PETITIONER/1ST RESPONDENT:** **SHARLAJ, S/O.SURESAN, AGED 42 YEARS, WRITERS CHALLA, NANDIKODE, VANDITHAVALAM, CHITTUR TALUK.** **BY ADVS.SRI.N.K.SUBRAMANIAN SRI.S.ANANTHAKRISHNAN SRI.K.C.KURIYAN** ## **RESPONDENTS/PETITIONERS & RESPONDENTS 2 :** **1. GEETHAKRISHNAN, S/O. K.SAHADEVAN, AGED 55 YEARS, CHORRAKODE, PERUVEMBU POST-678 531, PALAKKAD DISTRICT.** ## **2. A.K.SREENIVASAN,** - **S/O. LATE KELUKUTTY, AGED 69 YEARS, THEKKEDESOM, ARANDAPALLAYAM, NALLEPILLY P.O. - 678 553, PALAKKAD DISTICT.** **3. A.S.SHIHARI, S/O. A.K.SREENIVASAN,** - **AGED 40 YEARS, THEKKEDESOM, ARANDAPALLAYAM,** - **NALLEPILLY P.O. - 678 553, PALAKKAD DISTRICT.** **4. * K.SAHADEVAN (DIED), S/O. KRISHNAN, AGED 81 YEARS, CHATTIYODEKALAM, PATTANCHERRY P.O.,** - **PIN - 678 532, CHITTUR TALUK, PALAKKAD DISTRICT.** - _**(*R1 TO R5 ARE RECORDED AS THE LEGAL HEIRS OF THE DECEASED 4TH RESPONDENT; VIDE**_ - _**ORDER DATED 10.2.2015 IN MEMO CF NO.622/15 DATED 10.2.2015)**_ **5. SUKUMARAN, S/O. K.SAHADEVAN, CHATTIYODEKALAM, PATTANCHERRY P.O., PIN-678 532, CHITTUR TALUK, PALAKKAD DISTRICT.** **6. RAJANANDA, W/O. SURESAN, AGED 60 YEARS, WRITERS CHALA, NANDIKODE, VANDITHAVALAM P.O.- 678 534, CHITTUR TALUK, PALAKKAD DISTRICT.** **7. ASHU SIVARAJ, S/O. SIVARAJAN, AGED ABOUT 41 YEARS, MALANKADU, VALIAVALLAMPATHY VILLAGE, CHITTUR TALUK, PIN - 678 104.** **:2:** ## _**FAO.No. 113 of 2011**_ **8. MANIKANDAN, S/O. CHAMI, AGED 43 YEARS, VALLATHAPULLI, THATHAMANGALAM VILLAGE, CHITTUR TALUK, PIN - 678 014.** ## **9. JAGADEESH KUMAR, S/O. KRISHNANKUTTY, AGED 45 YEARS, MAMATHA SADAN, VALMUTTY, CHITTUR - 678 014.** **ADDL.R10. APPUKUTTY, AGED 55 YEARS, S/O.LATE THETHU, NANDILODU P.O., PAYYAMPALLY P.O., MELAKAVARTHODU, CHITTOOR TALUK, PATTANCHERRY VILLAGE, PALAKKAD DISTRICT, PIN-678 534.** **ADDL.R11. RADHAKRISHNAN, S/O. LATE THEETHU, AGED 54 YEARS, PATTIKULAM, PATTANCHERRY, NANNIYODE, CHITTOOR TALUK, PALAKKAD DISTRICT, PIN-678 532.** _**(ADDL. R10 & R11 ARE IMPLEADED VIDE ORDER DATED 15.12.2017 IN I.A.NO.976/17 AND I.A.NO.977/17 RESPECTIVELY)**_ **R1 BY ADVS. SRI.SAJAN VARGHEESE K.** **SRI.LIJU. M.P R2 BY ADVS. SRI.V.BINOY RAM SMT.SAJITHA P.SOMAN R7-R9 BY ADV. SRI.RAJESH SIVARAMANKUTTY** **R6 BY ADV. SRI.B.PREMNATH (E) ADDL. R10 & R11 BY ADVS. SRI.SAJI MATHEW SRI.DENU JOSEPH SMT.NEETHU REGHUKUMAR** **THIS FIRST APPEAL FROM ORDERS HAVING BEEN FINALLY HEARD ON 19-12-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ss ## **C.R** ## **P.N.RAVINDRAN, J & R. NARAYANA PISHARADI, J** **-------------------------------** ----------------------------------- ## **F.A.O.No.113 of 2011** -----------------------------------------------------------Dated this the 19[th] day of December, 2017 ## **JUDGMENT** ## _**P.N.Ravindran, J**_ This appeal arises from the order passed by the Court of the Subordinate Judge of Palakkad on 22.09.2010, dismissing I.A.No.2731 of 2009 in Insolvency Petition No.1 of 1997, an application filed by the appellant herein under Order XXI Rule 90 of the Code of Civil Procedure with a prayer that the sale held by the Official Receiver on 17.07.2009 may be set aside. The brief facts of the case are as follows: 2. The appellant herein was adjudged to be an insolvent as per an order of adjudication passed by the Court of the Subordinate Judge of Palakkad on 12.04.2006 in Insolvency Petition No.1 of 1997. The Official Receiver, thereupon brought to sale two items of immovable properties, that originally belonged to the appellant and they were sold for Rs.11,07,500/- and Rs.7,32,000/- respectively and purchased by Appukutty and Radhakrishnan respectively. After depositing the balance sale consideration, they filed I.A.No.69 of 2010, for an order directing the Official Receiver to execute 2 ## **F.A.O.No.113 of 2011** assignment deeds in their favour. Shortly thereafter, the appellant filed three applications in the court below. They are I.A.Nos.2730 of 2009, 2731 of 2009 and 2732 of 2009. I.A.No.2732 of 2009 was filed under Order IX Rule 13 read with Section 151 of the Code of Civil Procedure to set aside the ex-parte order of adjudication. I.A.No.2730 of 2009 was filed under Section 5 of the Limitation Act, 1963 to condone the delay of 1230 days in filing the application to set aside the ex-parte order of adjudication. He also filed I.A.No.2731 of 2009 styled as an application under Order XXI Rule 90 of the Code of Civil Procedure with a prayer that the sale held by the Official Receiver on 17.07.2009 may be set aside. He contended that the properties are worth Rs.One Crore and therefore, the sale held on 17.07.2009 for a total sale consideration of Rs.11,07,500/and Rs.7,32,000/- respectively, is liable to be set aside. 3. The contesting respondents namely, the petitioners in Insolvency Petition No.1 of 1997 resisted all the three applications. The Insolvency Court considered the rival contentions and dismissed all the three applications by the impugned order. As stated earlier, the appellant has filed this appeal challenging only the order passed by the Insolvency Court dismissing the application filed by him as I.A.2731 of 2009, under Order XXI Rule 90 of the Code of Civil Procedure to set aside the sale held by the Official Receiver on 3 ## **F.A.O.No.113 of 2011** ## 17.07.2009. ## 4. Section 72 of the Insolvency Act, 1955 (hereinafter referred to as “the Act” for short) reads as follows: _“If the insolvent or any of the creditors or any other person is aggrieved by any act or decision of the receiver, he may apply to the Court, and the Court may confirm, reverse or modify the act or decision complained of, and make such order as it thinks just:_ _Provided that no application under this section shall be entertained after the expiration of twenty one days from the date of the act or decision complained of.”_ The proviso to Section 72 of the Act stipulates that, no application under Section 72 shall be entertained after the expiration of twenty one days from the date of the act or decision complained of. I.A.No.2731 of 2009 was presented on 21.08.2009 after the expiry of the said period of twenty one days computed from 17.07.2009, the date on which the sale was held by the Official Receiver. 5. Section 82 of the Insolvency Act, 1955 stipulates as ## follows: ## _Limitation:-_ _“(1) The provisions of Sections 5 and 12 of the Indian Limitation Act, 1908, shall apply to appeals and applications under this Act, and for the purpose of the said Section 12, a decision under Section 4 shall be deemed to be a decree._ 4 ## **F.A.O.No.113 of 2011** _(2) Where an order of adjudication has been annulled under this Act, in computing the period of Limitation prescribed for any suit or application for the execution of a decree other than a suit or application in respect of which the leave of the Court was obtained under sub-section (2) of Section 28 which might have been brought or made but for the making of an order of adjudication under this Act, the period from the date of the order of adjudication to the date of the order of annulment shall be excluded:_ _Provided that nothing in this section shall apply to a suit or application in respect of a debt provable but not proved under this Act.”_ The proviso to sub section (2) of Section 82 of the Act stipulates that, nothing in sub section(2) shall apply to a suit or application in respect of a debt provable but not proved under this Act. 6. Having regard to the stipulations in the proviso to Section 72 of the Act, a question will naturally arise as to whether the application filed on 21.08.2009 to set aside the sale held by the Official Receiver on 17.07.2009, is barred by limitation and whether the Insolvency Court could have condoned the delay in filing the said application. It is relevant in this context to note that, no such application to condone the delay had been filed in the instant case. The stand taken by the insolvent is that the application being one under Order XXI Rule 90 of the Code of Criminal Procedure, the period of limitation is 60 days and therefore, the application is well 5 ## **F.A.O.No.113 of 2011** within time. 7. A Division Bench of this court has in _**T.V.R.Fund v. Official Receiver,** (2009 (3) KLT 508)_ held, relying on the decision of the Division Bench of the Allahabad High Court in _**Cheda Lal v. Lachman Parshad and Others** (AIR 1917 Allahabad 74)_ and the decision of a learned single judge of Nagpur High Court in _**Kesheo Krishnaji v. Baliram Bakramji and Another** (AIR 1951 Nagpur 388)_ that the sale by a Receiver under the Provincial Insolvency Act, 1920, is not a court sale, but a private sale and there is no provision requiring an Official Receiver to conduct such a sale in accordance with the provisions of Order XXI of the Code of Civil Procedure. The Apex Court has in _**P.Srinivasa Naicker v. Engammal** (AIR 1962 (SC) 1141)_ held that, the power of the court under Section 68 of the Provincial Insolvency Act, 1920, (which corresponds to Section 72 of the Insolvency Act, 1955) is not hedged in by those considerations, which apply in the case of auction sales in execution proceedings, that the court has to look in the insolvency proceedings to the interest in the first place, of the general body of creditors, in the second place, to the interest of the insolvent and lastly, where a sale has been decided upon by the Official Receiver, to the interest of the intending purchaser, in that order. The Apex Court held that, even so, the decision of the Official 6 ## **F.A.O.No.113 of 2011** Receiver in favour of a sale should not be set aside, unless there are good grounds for interfering with the discretion of the Official Receiver and those grounds may be wider than the grounds envisaged in auction sales in execution proceedings. The relevant portion of the decision of the Apex Court in **P.Srinivasa Naicker** (supra) is extracted below: _“It may be accepted that the power of the Court under S.68 is not hedged in by those considerations which apply in cases of auction sales in execution proceedings. Even so the power under S.68 is a judicial power and must be exercised on well recognised principles, justifying interference with an act of the receiver which he is empowered to do under S.59(a) of the Act. The fact that the act of the receiver in selling properties under S.59(a) is subject to the control of the court under S.68 does not mean that the court can arbitrarily set aside a sale decided upon by the official receiver. It is true that the court has to look in insolvency proceedings to the interest in the first place of the general body of creditors, in the second place to the interest of the insolvent, and lastly, where a sale has been decided upon by the official receiver to the interest of the intending purchaser in that order. Even so the decision of the official receiver in favour of a sale should not be set aside unless there are good grounds for interfering with the discretion exercised by the official receiver. These grounds may be wider than the grounds envisaged in auction sales in execution proceedings. Even so there must be judicial grounds on which the court will act in setting aside, the sale decided upon by the official receiver. These grounds may be,_ 7 ## **F.A.O.No.113 of 2011** _for example that there was fraud or collusion between the receiver and the insolvent or the intending purchaser, the court may also interfere if it is of opinion that there were irregularities in the conduct of the sale which might have affected the price fetched at the sale, again even though there may be no collusion, fraud or irregularity, the price fetched may still be so low as to justify the court to hold the property should not be sold at that price. These grounds and similar other grounds depending upon particular circumstances of each case may justify a court in interfering with the act of the official receiver in the case of a sale by him under S.59(a) of the Act.”_ 8. It is evident from the decisions referred to above that the sale held by the Official Receiver in insolvency is not a sale in execution of a decree, as contemplated under Order XXI of the Code of Civil Procedure, but a private sale. In such circumstances, we are of the considered opinion that I.A.No.2731 of 2009, styled as an application filed under Order XXI Rule 90 of the Code of Civil Procedure can only be treated as an application filed under Section 72 of the Insolvency Act, 1955. 9. That takes us to the question whether the instant application is barred by limitation. In our opinion, it may not be necessary for us to go into the said question in this appeal, for the reason that in our view, this appeal is not maintainable in this court. An appeal from the impugned order would in our opinion lie only in 8 ## **F.A.O.No.113 of 2011** the District Court, in view of the provisions contained in Section 79 of the Insolvency Act, 1955. Section 79 of the Insolvency Act reads as follows: _Appeals:-_ _“(1) The debtor, 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 appeal 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”._ _(2) Any such person aggrieved by any such decision or order of a District Court as is specified in Schedule I, come to or made otherwise than in appeal from an order made by a subordinate Court, may appeal to the High Court._ _(3) Any such person aggrieved by any other order made by a District Court otherwise than in appeal from an order made by a subordinate Court may appeal to the High Court by leave of the District Court or of the High Court._ _(4) The periods of limitation for appeals to the District_ 9 ## **F.A.O.No.113 of 2011** _Court and to the High Court under this section shall be thirty days and ninety days, respectively._ 10. The first proviso to sub section (1) of Section 79 empoweres this court to call for the case decided by the District Court in appeal for the purpose of satisfying itself as to whether the order made in the appeal decided by the District Court, is according to law. A learned single judge of this court has in _**Narayana Panicker v. Kunju Pennu**_ ( _1978 KLT 311)_ held that, under Section 79(1) of the Act, the proper forum for filing an appeal from an order passed by the Sub Court under the jurisdiction of the Insolvency Act is the District Court. The said view was affirmed by the Division Bench in _**Rajan Mathai v. State of Kerala**_ ( _2009(4) KLT 822)_ wherein it was held that, when the Subordinate Court is notified under the Insolvency Act to exercise powers under the Act, it is still a court subordinate to the District Court under Section 79 of the Act. In the light of the binding decisions of this court with which we concur, we are of the opinion that an instant appeal from the impugned order will lie only to the District Court and is not maintainable in this court. We accordingly dismiss the appeal as not maintainable. Registry is directed to return to the learned counsel for the appellant the certified copy of the impugned order after retaining a 10 ## **F.A.O.No.113 of 2011** photostat copy thereof in the records. The question whether the application filed by the appellant to have the sale held by the Official Receiver set aside is one filed within the period of limitation and whether the Insolvency Court can condone the delay in filing such an application, is kept open to be decided in the appeal if any filed by the appellant in the District Court. _Sd/-_ **(P.N.Ravindran, Judge)** _Sd/-_ **(R. Narayana Pisharadi, Judge)** _//True Copy//_ _P.A. To Judge_ ss/jsr