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PETITIONER: RM.NL. RAMASWAMI CHETTIAR AND OTHERS

       Vs.

RESPONDENT: THE OFFICIAL RECEIVER, RAMANATHAPURAM Art MADURAI & OTHERS

DATE OF JUDGMENT: 28/08/1959

BENCH: SARKAR, A.K. BENCH: SARKAR, A.K. DAS, S.K. SUBBARAO, K.

CITATION:  1960 AIR   70            1960 SCR  (1) 616

ACT:        Insolvency--Decree-holder  assigning decree-Adjudication  as        insolvent   on   ground  of  assignment   being   fraudulent        preference-Whether   upon  adjudication  decree   vests   in        official Receiver-Orderannulling assignment-if relates  back        to   date  of  assignment-Execution  applications  made   by        assignee   before  annulment  order,  whether   incompetent-        Official  Receiver  making application for  execution  after        annulment  order-Limitation--Whether  limitation  saved   by        applications made by assignee-Indian Limitation Act, 1908 (V        of 1908)-Provincial Insolvency Act 1920 (V Of 1920), SS.  28        and 54.

HEADNOTE: On May 91 1935, one V obtained a decree against R and  later assigned  the  same  in favour of his mother M.  M  made  an application for an order recognizing her as the assignee and for               617 execution  which was disposed of on September 27, 1937.   In 1939, V was adjudicated an insolvent on the ground that  the assignment was a fraudulent preference.  Thereafter M made a second  application for execution which was disposed  of  on September  30,  1940.  The Official Receiver  who  had  been appointed receiver in insolvency applied under s. 54 of  the Provincial Insolvency Act and on April, 9, 1943 obtained  an order annulling the assignment.  On September 27, 1943,  the Receiver  applied for execution of the decree  relying  upon the  applications  made by M to save limitation  under  art. 182, Limitation Act.  The judgment debtor objected that  the execution  application was time barred because, in  view  of the orders in the insolvency proceedings, M was not entitled to the decree on the dates she applied for execution and her applications were incompetent and could not save limitation. The  judgment  debtor  contended  that  (i)  the  order   of annulment  related  back  to  the  date  of  assignment  and consequently  M had never been entitled to the decree,  (ii) the  order   of  adjudication  had  the  effect  itself   of annulling  the  assignment  and vesting the  decree  in  the receiver  from the date of presentation of  the  application for adjudication, and (iii) the receiver was not entitled to

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take  advantage of the applications made by M as he was  not claiming through her but against her. Held,  (per curiam) that the application for execution  made by the receiver was within time as the previous applications made  by  M were competent and saved  the  limitation.   The assignment  in  favour of M stood till it was  annulled  and till  then M had the right to execute the decree.   Even  if the annulment related back to the date of assignment, it did not  make  illegal  the exercise of  the  rights  under  the assignment  made prior to the annulment.   Sub-sections  (2) and  (7)  Of S. 28 of the Provincial  Insolvency  Act  which provided  that  upon  adjudication all  the  assets  of  the insolvent  vested in the receiver with effect from the  date of  the  application for adjudication, could  not  have  the effect of vesting the decree in the receiver.  The order  of adjudication,  though  it was based on the ground  that  the assignment  was a fraudulent preference amounting to an  act of  insolvency, did not itself annul the assignment and  the assignment  stood till it was annulled by an order under  S. 54.   As such M was competent to execute the decree and  the applications  made  by her were in accordance with  law  and could be relied upon by the receiver to save the  limitation for the application made by him.  The fact that the receiver did  not claim through M did not disentitle him from  taking advantage  of  the  applications made  by  M.  Article  182, Limitation   Act,  merely  required  the   application   for execution  of a decree to be made within three years of  the final  order  on a previous application made  in  accordance with law for the execution of the same decree. Mahomed  Siddique Yousuf v. Official Assignee  of  Calcutta, (1943) L.R. 70 I.A. 93; Ex-Parte Learoyd, (1878) 10 Ch.   D. 3, distinguished. 618 Subba  Rao J.-The order of adjudication did not by  its  own force  divest  the title of M and vest it  in  the  Official Receiver.   An  assignment  made before the  filing  of  the application  for  adjudication was binding on  the  Official Receiver  until it was annulled under ss. 53, 54 or 54-A  of the Act. Mahomed  Siddique Yousuf v. Official Assignee  of  Calcutta, (1943)  L.R. 70 I.A. 93 and Ex-parte Learoyd, (1878) 10  Ch. D. 3, distinguished. Official Receiver, Guntur v. Narra Gopala Krishnayya  I.L.R. 1945 Mad. 541 and D. G. Sahasrabudhe v. Kala Chand  Deochand JUDGMENT: (i)  A transfer by a debtor before insolvency with a view to give  fraudulent  preference conveyed a valid title  to  the transferee;  (2)  such a transfer was voidable  against  the Official Receiver in circumstances mentioned in s. 54 of the Act; (3) when the transfer was annulled the property  vested in  the  Official Receiver who could administer  it  in  the interest of the creditors ; and (4) even after annulment the transfer stood as between the transferor and the  transferee and  the transferee was entitled to the balance of the  sale proceeds remaining after satisfying the creditors. Official Receiver, Coimbatore v. Palaniswami Chetti,  (1925) I.L.R.  48  Mad.  75o, Amir Hasan v.  Saiyid  Hasan,  (1935) I.L.R. 57 All. 900, and Rukhmanbai v. Govindram I.L.R. 1946 Nag. 273, relied on.

&        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 207 of 1955.        Appeal  by special leave from the judgment and  order  dated

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      the  6th December 1950, of the Madras High Court  in  C.M.A.        No.  332  of 1945, arising out of the’  judgment  and  order        dated  the  17th  January 1945, of  the  Subordinate  Judge,        Devakottai in E. P. No. 90 of 1944 in 0. S. No. 14 of 1926.        M.   S. K. Iyengar, for the appellants.        A.   V. Viswanatha Sastri and T. B. V. Sastri for respondent        No. 1.        1959.   August  28.   The judgment of S. K. Das  and  A.  K.        Sarkar  JJ.  was  delivered by Sarkar,  J.  Subba  Rao,  J.-        delivered a separate judgment.        SARKAR  J.-This  appeal  arises out of  an  application  for        execution  of  a decree for money and the only  question  is        whether the application was made within the time  prescribed        by the Limitation Act.        619        The  decree  was  passed  in  favour  of  one  Venkatachalam        Chettiar  on May 9,1935, against the appellants and  certain        other persons.  On February 3, 1936, Venkatachalam  Chettiar        transferred the decree to his mother, Meenakshi Achi, by  an        assignment  in  writing  never having tried  to  execute  it        himself,.   Soon  thereafter, namely, on March 26,  1936,  a        creditor  of  Venkatachalam Chettiar  presented  a  petition        under the Provincial Insolvency Act (hereinafter referred to        as the Act) for adjudicating him an insolvent on the  ground        that  the  transfer of the decree to Meenakshi  Achi  was  a        fraudulent  preference  and as such an  act  of  insolvency.        This  petition remained pending for a considerable time  and        ultimately  on  January  7, 1939, an order was  made  on  it        adjudicating  Venkatachalam Chettiar an insolvent.  By  that        order   respondent   No.  1,  the   Official   Receiver   of        Ramanathapuram, was appointed the receiver in insolvency and        the insolvent’s estate vested in him.  This order was  based        on  the finding that the transfer of the decree by  Venkata-        chalam   Chettiar  to  Meenakshi  Achi  was   a   fraudulent        preference  and an act of insolvency.  On January 26,  1942,        the   receiver  made  an  application  in   the   insolvency        proceedings  for  an  order annulling the  transfer  of  the        decree  by  the  insolvent to Meenakshi  Achi  and  on  this        application an order was made on April 9, 1943, under s.  54        of the Act annulling that transfer.        In  the meantime, Meenakshi Achi had made  two  applications        for  execution  of the decree as the assignee of -it  and  a        reference  to  them  is  necessary.   The  first  of   these        applications  was  made on December 14, 1936, for  an  order        recognising  her as the assignee of the decree and  for  its        execution  against  some  of  the  judgment-debtors.    This        application  was disposed of by an order made  on  September        27, 1937, recognising her right to execute the decree as the        assignee and directing a certain compromise made  presumably        with  the judgment debtors concerned, to be  recorded.   The        terms of this compromise are not relevant for the purpose of        the  appeal.  Thereafter, on August 2, 1940, Meenakshi  Achi        as  the assignee of the decree made another application  for        its execution and this        620        application    was disposed of by an order made on September        30,  1940,  dismissing  it for default of  prosecution.   It        will be remembered that it was after these applications  and        the  orders thereon had been made that the  order  annulling        the assignment of the decree to Meenakshi Achi was passed.        After  the  order annulling the transfer of  the  decree  to        Meenakshi  Achi  had been made,  the,  receiver  considering        himself then entitled to the decree, made an application for        its execution on September 27, 1943.  It is this application        which has given rise to the present appeal.

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      The executing court dismissed the application as having been        made  beyond the time prescribed by the Limitation Act.   On        appeal, the High Court at Madras set aside the order of  the        executing  court  and held that the application  was  within        time.   Some  of the judgment-debtors have now  come  up  in        appeal  to  this  Court.  The appeal  is  contested  by  the        receiver, the respondent No. 1. The other respondents  among        whom are the remaining judgment-debtors or their  successors        in interest, have not appeared.        Applications for execution like the present one are governed        by art. 182 of the Limitation Act.  That article provides  a        period  of three years within which the application must  be        made.   The article prescribes different points of time  for        different  cases  from  which  the  period  is  to  commence        running.  The first point of time so prescribed is the  date        of  the  decree.   The fifth point  of  time  prescribed  is        expressed in these words:        (Where  the application next hereinafter mentioned has  been        made)  the date of the final order passed on an  application        made  in  accordance  with  law  to  the  proper  court  for        execution.....        The question for determination is whether the fifth point of        time  applies to the receiver’s application  for  execution.        If  it does not, the application must be held to  have  been        made  out of time, while if it does, the  application  would        not be barred by limitation.        The receiver contends that the two applications by Meenakshi        Achi were " applications made in accordance with law to  the        proper court for execution"        621        within  the meaning of the article and his  application  was        within  time as it had been made within three years  of  the        date  on  which  the final order on  Meenakshi  Achi’s  last        application was made.        It  is said on behalf of the appellants that in view of  the        orders  in the insolvency proceedings it must be  held  that        she  was not entitled to the decree on any of the  dates  on        which   she   applied  for  its  execution  and   that   her        applications   were   therefore  incompetent  and   not   in        accordance with law.        The appellants put their contention in several ways.  It  is        first  said that the order annulling the assignment  of  the        decree  to  Meenakshi Achi related back to the date  of  the        assignment  with the result that it has to be deemed  as  if        she  had  never  been  entitled  to  the  decree  and  that,        therefore,  the applications for execution by her  were  not        competent and hence were not in accordance with law.        We  think  this  contention is wholly  unfounded.   We  will        assume  for  the purpose of the present case  that  when  an        order is made tinder s. 54 of the Act annulling a  transfer,        the  transfer stands annulled as from the date it was  made.        But  even  so, the transfer stands till it is  annulled  and        therefore,  till then, the transferee hag all the rights  in        the  property  transferred.  So long as the  transferee  had        such  rights  he  was competent to exercise  them  and  such        exercise  would be legal and fully in accordance with   law.        The  fact,  if  it be so, that the  transfer  on  annulment,        becomes  void as from the date of the transfer  cannot  turn        the  exercise of a right under the transfer, made  prior  to        the  annulment  and  which was  legal  when  made,  illegal.        Meenakshi  Achi had hence full legal competence  to  execute        the  decree,  till the transfer of it to her  was  annulled.        Her  two  applications  for execution of  the  decree  were,        therefore,  fully in accordance with law when they had  been        made and that is all that art. 182 requires.

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      Next, it is said that the provisions of sub-ss. (2) and  (7)        of  s. 28 of the Act make Meenakshi Achi’s two  applications        for execution incompetent in law.  These provisions have now        to be considered.  Sub-section (2)        79        622        says  that upon the making of an order of  adjudication  the        whole  of  the property of the insolvent shall vest  in  the        receiver  and sub-s. (7) says that an order of  adjudication        shall  relate back to and take effect from ,the date of  the        presentation  of  the petition on which it is made.   It  is        said  that  under  these  provisions,  the  assets  of   the        insolvent   in  this  case,  including  the   decree   under        execution, became vested in the receiver on March 26,  1936,        when the petition for adjudicating him an insolvent had been        presented,  and  consequently,  the  two  applications   for        execution  by Meenakshi Achi which had been made after  that        date were incompetent and not in accordance with law.        It  seems  to us that this contention  also  is  fallacious.        These  sub-sections  cannot have the effect of  vesting  the        decree  in the receiver till its transfer to Meenakshi  Achi        had  been  annulled.   Till then it was not a  part  of  the        insolvent’s  estate.   The  annulment, as  we  have  earlier        pointed out, was made under s. 54 of the Act.  That  section        provides that certain transfers of property by the insolvent        would be deemed fraudulent and void as against the  receiver        in insolvency and shall be annulled by court.  It is obvious        that  a  transfer liable to be annulled under  this  section        remains a perfectly valid transfer till it is annulled.   If        it   had   become  void  automatically  on  an   order   for        adjudication  being made, there would be no need to  provide        for its annulment by court.  It would follow that  Meenakshi        Achi  was legally possessed of the decree and  competent  to        apply  for its execution till the transfer of the decree  to        her was annulled under s. 54.        It  is  then  said that though it may generally  be  that  a        transfer  liable  to be annulled under s. 54  remains  valid        till  it is annulled, that is not so where the  transfer  is        the  act of insolvency upon which the order of  adjudication        is founded, for, in such a case the order itself annuls  the        transfer.  So, it is said that as the order of  adjudication        in this case was founded upon the transfer of the decree  to        Meenakshi  Achi, that transfer became annulled on the  order        being  made on January 7, 1939, and the  second  application        for execution by Meenakshi Achi was incompetent, It is        623        true  that if this in the correct view, then the  receiver’s        application  for  execution must be held to have  been  made        beyond  the  time allowed, for, it had been made  more  than        three  years after the final order on the first  application        for execution by Meenakshi which is the only order on  which        the  receiver  can on this basis rely for resorting  to  the        fifth point of time fixed by art. 182.        Now  this  argument is based solely on the decision  of  the        Judicial  Committee in Mahomed Siddique Yousuf  v.  Official        Assignee  of Calcutta(1) which it is said held that where  a        transfer  is  the act of insolvency on which  the  order  of        adjudication is founded, that order itself has the effect of        annulling the transfer.        We think this case has been misunderstood.  We find  nothing        in  it  to lead to the view that an  order  of  adjudication        founded on an act of insolvency constituted by a transfer of        property  amounting to a fraudulent preference,  itself  and        without more annuls that transfer.  That was a case  decided        under the Presidency towns Insolvency Act.  In that case one

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      of the acts of insolvency on which the order of adjudication        had  been  founded  was a transfer by  the  insolvent  of  a        certain  decree  in his favour to the appellant,  which  was        held  to have been a fraudulent preference.  The  transferee        was not a party to the order of adjudication.  The  official        assignee,  that is, the receiver in insolvency,  applied  to        have that transfer annulled.  It was contended on behalf  of        the official assignee before the judge in insolvency in  the        High  Court  that  the order  of  adjudication  holding  the        transfer  to be a fraudulent preference was  conclusive  and        binding  on the transferee though he was not a party to  the        insolvency petition.  It was said that had been held in  Ex-        parte Learoyd(2) which turned on the English Bankruptcy Act,        1869,  the  terms  of which were  similar  to  the  relevant        provisions  in  the Presidency-towns  Insolvency  Act.   The        learned judge felt some difficulty in view of a decision  of        the  Madras High Court to which it is unnecessary to  refer,        whether the principle of the        (1) (1943) L.R. 70 I.A. 93.        (2) (1878) 10 Ch.  D. 3.        624        English  decision  applied to a case  under  the  Presidency        towns  Insolvency Act.  He, therefore, went into  the  facts        and  came to the conclusion that the transfer amounted to  a        fraudulent preference and thereupon made an order  annulling        it.   On  appeal the appellate Judges of the  High  Court  "        expressed  some  doubt whether the intent to prefer  was  in        fact  proved; but they were both of opinion  (following  Ex-        parte Learoyd (1) that the order of adjudication was conclu-        sive and could not be disputed." They hold that this was  so        though  the  transferee  was not a party  to  the  order  of        adjudication.   In  that view of the  matter  the  appellate        Judges  felt  that  there  was a  decision  binding  on  the        transferee  that  the  transfer was  void  as  a  fraudulent        preference  and  they thereupon annulled the transfer  as  a        matter  of  course.   The judgments in the  High  Court  are        reported  in  45 C.W.N. 441.  The transferee who was  not  a        party  to  the  insolvency  petition,  then  asked  for   an        extension  of  time to prefer an appeal from  the  order  of        adjudication but this was refused.        Then  the matter was taken up to the Judicial  Committee  in        further  appeal.   The  Judicial  Committee  held  that  the        appellate Judges of the High Court, were right in their view        that the principle of Ex parts Learoyd (1), applied to cases        under the Presidency-towns Insolvency Act, but they  thought        that  in  the  circumstances of the case the  order  of  the        appellate judges refusing to extend time for the  transferee        to  appeal from the order of adjudication was not  justified        and  set  it  aside and’ extended the time  to  appeal.   In        order,  however,  to  make the  order  in  the  contemplated        appeal,  should it succeed, effective, they also  set  aside        the order annulling the transfer though in their view it was        "plainly right ". This would appear from their  observations        at p. 99 of the report :        " It is plain that an appeal against the adjudication  order        would be useless while the orders stand in this  independent        proceeding  declaring  the  transfer  void  because  of  the        adjudication order itself.  On the other hand, the  decision        of  the  High Court avoiding the transfer is  plainly  right        while the adjudication        (1)  (1878) 10 Ch.  D. 3.        625        order  stands  and  the  appellant as  a  condition  of  the        extension  of  time must pay, as he has offered to  do,  the        costs thrown away."

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      And at p. 100 they said,        "The order is without prejudice to the right of the official        assignee, if he is so advised, to make a further application        to have the transfer declared void."        It is therefore abundantly clear that all that the  Judicial        Committee  held  in Mahomed Siddique Yousuf’s case  (1)  was        that  in a case under the Presidency-towns  Insolvency  Act,        when   the  act  of  insolvency  upon  which  an  order   of        adjudication  is  founded  is  a  transfer  amounting  to  a        fraudulent preference, the transferee cannot so long as  the        order of adjudication stands, question that finding, namely,        that  the  transfer was a fraudulent  preference  and  that,        therefore,  in  an application by the official  assignee  to        have  that  transfer annulled on the ground that  it  was  a        fraudulent   preference,  the  order  of   adjudication   is        conclusive  proof  that  the  transfer  was  by  way  of   a        fraudulent preference and it was not open to the  transferee        to  lead  evidence  to prove that the  transfer  was  not  a        fraudulent  preference.  In such a case therefore the  order        of  annulment had to be made as a matter of course on  proof        of  the order of adjudication.  The Judicial  Committee  did        not  hold  that  in such a case the  order  of  adjudication        itself  annulled  the  transfer and  no  separate  order  of        annulment  was  required for the purpose.  In  fact,  it  is        obvious  that they thought that a separate  order  annulling        the  transfer  would be necessary even in such  a  case  for        otherwise they would not have stated that’ "the decision  of        the High Court avoiding the transfer is plainly right "  nor        while  setting  aside  the  order  annulling  the   transfer        reserved  the  right of the official  assignee,  should  the        occasion  arise, to make a further application to  have  the        transfer declared void.  The case therefore does not support        the  proposition  for  which  it has  been  cited.   On  the        contrary,  it clearly proceeds on the basis that even  where        the  order of adjudication is based on an act of  insolvency        constituted by a        (1)  (1943) L.R. 70 I.A. 93.        626        transfer  of property found to be a  fraudulent  preference,        the transfer stands till it is set aside.  In our view, this        is the correct position and nothing to the contrary has been        brought to our notice.        An  argument  had  been raised at the  bar  that  under  the        Provincial Insolvency Act an order of adjudication has  -not        that binding force which Mahomed Siddique Yousuf’s case  (1)        held it had under the Presidency-towns -Insolvency Act.   It        was said that this was so because the terms of the two  Acts        were  dissimilar.  We do not think it necessary  to  express        any  opinion  on this question.  We have  discussed  Mahomed        Siddique  Yousuf’s  case (1) only to show that it  does  not        support  the proposition for which it was cited.  It is  un-        necessary for us to say whether it will govern a case  Under        the  Provincial  Insolvency Act or what the effect  of’  the        dissimilarity  pointed out in the terms of the two Acts  is.        That question is not before us.        There remains one other point to deal with.  It is said that        the official receiver was not entitled to take advantage  of        the applications for execution made by Meenakshi Achi as  he        had  not  been claiming under her but had  actually  claimed        against her.  This contention is equally unfounded.  Article        182 does not say that no advantage of a previous application        can  be taken for the purposes of saving the bar of  limita-        tion,  unless  it had been made by a person under  whom  the        applicant in a later application, which is said to be barred        by  limitation, claimed.  All that the article  contemplates

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      is  an  application for execution of a  decree  made  within        three  years  of the final order on a  previous  application        made  in accordance with law for the execution of  the  same        decree.   That being so, we must reject this  contention  of        the appellants also.        In view of what we have already said, it becomes unnecessary        to deal with the other points raised at the bar.        In the result, we think that the appeal should be  dismissed        and we order accordingly.  The appellant must pay the  costs        of this appeal.        (1)  (1943) L.R. 70 I.A. 93.        627        SUBBA  RAO J.-This appeal raises a question  of  limitation.        There  is no dispute about the facts.  On May 9,  1935,  one        Venkatachalam Chettiar obtained a compromise decree  against        the  appellants and respondents 2, 3 and 4 and  predecessors        in interest of respondents 5 and 6 in A. S. No. 226 of 1930,        on  the file of the High Court of Madras.  Under the  decree        the defendants were directed to pay the plaintiffs therein a        sum  of  Rs. 1,10,101.4-0 together with interest  at  3  per        cent.  per  annum in certain instalments, the  last  of  the        instalments being payable on May 30, 1942.  The decree  also        provided  that in the event of a default in payment  of  any        one  of  the  instalments, the entire  decree  amount  would        become  payable.   On  February 27,  1937,  one  Visvanathan        Chettiar  obtained a decree against the said  Venkataclialam        Chettiar  in 0. S. No. 22 of 1936, on the file of the  Court        of  Subordinate Judge, Devakottai, for a sum of Rs.  33,000.        The suit ending in the above decree was filed on January 29,        1936.  On February 3, 1936, Venkatachalam Chettiar  executed        a deed of assignment transferring the decree obtained by him        in  C. S. No. 14 of 1926 to his mother, Meenakshi Achi,  for        consideration.   On  March 26,  1936,  Visvanathan  Chettiar        filed  1.  P.  No. 10 of 1936 in the  Court  of  Subordinate        Judge, Devakottai, for adjudicating Venkata chalam  Chettiar        an  insolvent on the ground that the transfer of the  decree        in  favour of Meenakshi Achi was an act of  insolvency.   On        December 14, 1936, the assignee, Meenakshi Achi, filed  E.P.        No.  37  of 1937 for recognition of the  assignment  in  her        favour  and  for  execution of the  decree.   The  judgment-        debtors  did  not object either to the  recognition  of  the        assignment  of the decree or the execution thereof The  said        Visvanatban  Chettiar intervened in the  execution  petition        and applied in E.A. No. 817 of 1937 for stay of execution of        the  decree  on the ground that he had filed  an  insolvency        petition  against the decree-holder and also on  the  ground        that   the  said  assignment  was  nominal.    The   learned        Subordinate Judge disallowed the objection of the  creditor,        recognised  the  assignment,  and  permitted  the  assignee-        decree-holder to proceed with the execution of the decree.        628        On September 27, 1937, a settlement was entered into between        the assignee-decree-holder and the judgment debtors and  the        said  ’execution petition was closed.  On January  7,  1939,        Venkatachalam  Chettiar was ,,adjudicated insolvent  on  the        ground  that  the assignment of the said decree  by  him  in        favour  of  his  mother,  Meenakshi  Achi,  was  an  act  of        insolvency,  whereupon  his properties vested in  the  first        respondent,   the  Official  Receiver,   Ramanathapuram   at        Madurai.   On  August 2,  1940,  the  assignee-decree-holder        filed another execution petition, E.P. No. 243 of 1940,  and        it  was  struck off on September 30, 1940.  On  January  26,        1942, the Official Receiver filed I.A. No. 20 of 1942 in  1.        P.  No.  10 of 1936 in the Court of the  Subordinate  Judge,        Devakottai,  for setting aside the assignment, and by  order

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      dated  April  9, 1943, the assignment was set aside  by  the        Court  on  the ground of fraudulent  preference  within  the        meaning  of  s. 54 of the Provincial Insolvency  Act,  1920,        hereinafter  called  the Act.  On September  27,  1943,  the        Official Receiver filed a fresh execution petition, E.P. No.        90 of 1944, for executing the decree.  It was alleged by the        appellants and the respondents 2 to 6, inter alia, that  the        said  execution  petition was barred by  limitation  on  the        ground that the two earlier execution petitions were not  in        accordance  with law within the meaning of art. 182, cl.  5,        of the Limitation Act.  The Official Receiver contended that        they  were in accordance with law and therefore the  present        execution petition was in time.  He further pleaded that the        present  execution petition was also saved from the  bar  of        limitation  by the payments made by the judgment-debtors  to        Meenakshi  Achi,  and  that, in any  event,  the  decree  in        respect  of  the last three instalments was  not  barred  by        limitation.   The  learned Subordinate  Judge  rejected  the        contentions  of  the  Official Receiver and  held  that  the        execution  petition was barred by limitation.  The  Official        Receiver  preferred an appeal against the said order of  the        Subordinate  Judge  to the High Court  of  Madras.   Govinda        Menon and Basheer Ahmed Sayeed, JJ., of the said High  Court        came to the conclusion that the earlier execution petitions,        were in accordance with        629        law  and,  therefore,  the present  execution  petition  was        within time.  They also expressed the view that the payments        made  by the judgment-debtors to Meenakshi Achi  were  valid        payments   and  therefore  they  also  saved  the   bar   of        limitation.   In  any  view, they found that  the  last  two        instalments  were  not  barred  by  limitation.   On   their        findings, the learned judges of the High Court set aside the        order  of  the learned Subordinate Judge  and  remanded  the        ’execution  petition to the Court of the Subordinate  Judge,        Devakottai,  for taking steps in furtherance  of  execution.        The present appeal to this Court was filed against the  said        order of remand.        Learned  Counsel  for  the  appellants  contended  that  the        execution petitions, E.P. No. 37 of 1937 and E.P. No. 243 of        1940,  were  not in accordance with law  for  the  following        reasons:  (1) The order dated April 9, 1943,  annulling  the        assignment of the decree by Venkatachalam Chettiar in favour        of  his mother, Meenakshi Achi, related back to the date  of        the  transfer, i.e., February 3, 1936, and, therefore,  E.P.        No. 37 of 1937, which was filed on December 14, 1936 and  E.        P.  No. 243 of 1940 which was filed on August 2, 1940,  were        ineffective  to save the bar of limitation, as on the  dates        they  were filed Meenakshi Achi had no title in the  decree;        (2)  the  order of adjudication dated January 7,  1939,  was        based on the finding that the said assignment of the  decree        was  an  act  of fraudulent preference and  that  the  order        related  back to the date of the filing of I. P. No.  10  of        1936  on March 26, 1936, and, therefore, the  two  execution        petitions  filed thereafter were filed by a  person  without        title, with the result that the said two petitions were  not        in  accordance  with  law; (3) assuming that  the  said  two        execution  petitions  were  in  accordance  with  law,   the        Official Receiver neither claims under, nor represents,  the        assignee-decree-holder,  and,  therefore, he  has  no  locus        standi to file the present execution petition; (4)  payments        made  by the judgment-debtors to Meenakshi Achi, who had  no        title  in the decree, could not save the bar of  limitation;        and  (5)  as Meenakshi Achi in her execution  petitions,  by        exercising her option, claimed the entire decree amount, the

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      Official Receiver        80        630        cannot  now claim that the last two instalments  are  within        time.        At  the outset it may be stated that it would be  sufficient        if we consider the objections of the appellants in regard to        E.  P. No. 243 of 1940, for, if that was not  in  accordance        with law, the present execution petition would be barred  by        limitation.   The validity of E. P. No. 37 of 1937 was  also        questioned on the same -grounds of attack taken against  the        later execution petition.        The  relevant part of the Limitation Act is art. 182 and  it        reads:        -----------------------------------------------------------        Description of    Period of       Time from which period        application      Limitation        begins to run        -----------------------------------------------------------        For the execution  Three years; or,   5. (where the applic-        of a decree or     where a certified  tion next hereinafter        order of any      copy of the decree  mentioned has been m-        Civil Court not   or order has been   ade) the date of the        provided for by   registered, Six     final order passed on        article 183 or    Years.             an application made in        by section 48 of                      accordance with law to        the code of Civil                     the proper Court for        Under this article the latest execution petition should have        been  filed  within three years from the date of  the  final        order  passed on an application made in accordance with  law        to  the proper Court of execution.  Taking first the  second        contention  of the learned Counsel for the  appellants,  the        question may be posed thus: Whether the execution  petition,        E.P. No. 243 of 1940, filed on August 2, 1940, by  Meenakshi        Achi after Venkatachalam Chettiar was adjudicated  insolvent        on January 7, 1939, was one in accordance with law?  If  the        order  of  adjudication  of Venkatachalam  Chettiar  on  the        ground  that  the assignment of the decree made  by  him  in        favour of Meenakshi Achi was an act of insolvency ex proprio        vigore  annul  the  transfer in her  favour,  the  execution        petition  filed by her after the said order of  adjudication        would not be one filed in accordance with law.  On the other        hand,  if the assignment of the decree continued to be  good        till it was annulled on an application filed by the Official        Receiver, which was done in        631        the  present case on April 9, 1943, the execution  petition,        subject to another argument that I would consider at a later        stage, would be one filed in accordance with law.  What then        is  the legal effect of such an order of adjudication  ?’The        question  in  the  main  falls  to  be  decided  on  a  true        construction of the relevant provisions of the Act.  Section        6  of the Act defines the act of insolvency;  it  enumerates        eight acts of insolvency, and one of them is a transfer made        by  a debtor which would be void as a fraudulent  preference        if  he  were  adjudicated insolvent.  Section  7  enables  a        creditor  or a deter to present an insolvency  petition  for        adjudicating  the debtor an insolvent.  Section 9 lays  down        the  conditions on which a debtor may petition.  Section  13        prescribes  the  particulars a creditor has to give  in  his        petition, and one of the particulars to be given is the  act        of  insolvency committed by the debtor.  When an  insolvency        petition  is admitted, s. 19 provides that notice should  be        given to creditors in such manner as may be prescribed, and,        when  the debtor is not the petitioner, notice of the  order        admitting  the petition should be served on the debtor.   On

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      the  date fixed for hearing, the Court should require  proof        of the matters mentioned under s. 24 of the Act; it  enables        the  Court to examine the debtor and the creditors and  take        the  evidence adduced by them.  After making the,  necessary        enquiry, the Court may dismiss the petition or make an order        of  adjudication.   On  the  making of  the  said  order  of        adjudication, the whole property of the insolvent would vest        in the Court or in the Receiver appointed under the Act, and        the  said  property becomes divisible among  the  creditors.        Under  sub-s.  7 of s. 28 the order  of  adjudication  shall        relate  back  to,  and take effect from,  the  date  of  the        presentation  of  the petition.  Under s. 30  notice  of  an        order   of  adjudication  stating  the  name,  address   and        description of the insolvent, the date of adjudication,  the        period  within  which  the  ’debtor  should  apply  for  his        discharge  and the Court by which the adjudication is  made,        should  be  published in the Official Gazette  and  in  such        manner  as  may  be prescribed.  It will be  seen  from  the        aforesaid  provisions that till an order of adjudication  is        made the        632        person  to whom the insolvent transferred his property  does        not come into the picture at all.  The purchaser is  neither        a  party to the proceedings nor any notice is given to  him.        It  would,  therefore,  be contrary to  all  ,principles  of        natural  justice  to  hold that the finding  arrived  at  in        regard  to an assignment of a property by the  insolvent  in        favour of a third party behind his back, is binding on  him.        If the legislature intended that the order should have  that        effect,  it  would have provided for personal,  or,  at  any        rate,  public notice to the purchasers, or would have  given        in express terms such a binding effect; and the fact that it        did  not  do  so is a clear indication  of  the  legislative        intention  that  an incidental finding was not  intended  to        have such a far-reaching effect.        On the other hand, the Act makes ample provision for setting        aside such transfers.  Sections 53 and 54 of the Act  enable        the  Official  Receiver  to have  voluntary  transfers  made        within two years of the insolvency petition and that made in        fraudulent  preference of one creditor over  another  within        three  months from the date of the petition annulled by  the        Court.   If the legislature intended to exclude  a  transfer        constituting  an  act of insolvency from  the  operation  of        these provisions, it would have introduced a proviso to that        effect.  Therefore, unless such a transfer is duly  annulled        in the manner prescribed, the transfer would’ be valid.        That  this is the intention of the legislature is also  made        clear by the other provisions of the Act vis-avis transfers.        The Act provides for three stages: (1) Transfers made before        the  presentation of the insolvency petition; (2)  transfers        made  after the presentation of the petition and before  the        order   of  adjudication;  and  (3)  transfers  made   after        adjudication.   A  transfer made after adjudication  is  not        binding  on the Receiver.  A transfer by an insolvent  after        the  filing  of  the petition is also  not  binding  on  the        Receiver subject to a protection clause.  A purchase in good        faith  under a sale in execution (s. 51(3)) and  a  transfer        inter vivos in good faith for valuable consideration,        633        A  transfer before the filing of the petition is binding  on        the Receiver unless it is annulled under ss. 53, 54 or  54-A        of  the Act.  The scheme of the Act in regard  to  transfers        clearly demonstrates that transfers before the filing of the        petition  are  good unless they are annulled in  the  manner        prescribed in the Act and even the doctrine of relating back

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      of  the  order of adjudication does not reach them  as  they        fall on the other side of the line.  If it was the intention        of  the  legislature that the said order by  its  own  force        should declare the transaction void, it would have fixed the        date  of the transfer as the datum line instead of the  date        of  the filing of the petition.  It appears to me that  this        was  designedly  done to give an opportunity  to  the  party        affected  to  defend his title when  the  Official  Receiver        filed an application to annul the transfer.  Sections 53  54        and 28 must be reconciled and they can be reconciled without        doing  violence to the language of the said sections if  the        order  of adjudication is conclusive only in regard  to  the        status of the insolvent it declares and the transfer, though        it  formed  the  basis of the adjudication, so  far  as  the        transferee  is  concerned,  continues to be  good  till  set        aside.        Strong reliance is placed upon the judgment of the  Judicial        Committee in Mohamed Siddique Yousuf v. Official Assignee of        Calcutta  (1) in support of the contention that the  finding        that the transfer of the decree in favour of Meenakshi  Achi        was  an  act of insolvency was binding  on  the  transferee,        though she was not a party to the adjudication  proceedings.        That  decision  turned upon the relevant provisions  of  the        Presidency towns Insolvency Act, 1909, and the corresponding        provisions  of  the Bankruptcy Act of 1869.   That  decision        cannot  apply  to a situation created under  the  Provincial        Insolvency  Act, unless the provisions of said Act are  pari        materia with those of the Presidencytowns Insolvency Act and        the  Bankruptcy Act.  A comparative study of the three  sets        of   provisions  by  placing  them  in  juxtaposition   will        facilitate a better understanding of the problem.        (1)  (1943) L.R. 7o I.A. 93.        634        Bankruptcy Act, 1869        S.   10 A copy of an order of the Court adjudging the debtor        to be bankrupt shall be published in the London Gazette, and        be  advertised  locally  in  such manner  (if  any)  as  may        beprescribed,  and the date of such order shall be the  date        of  the adjudication for the purposes of this Act,  and  the        production of a copy of the Gazette containing such order as        aforesaid   shall  be  conclusive  evidence  in  all   legal        proceedings of the debtor having been duly adjudged a  bank-        rupt, and of the date of the adjudication.        S.   11: The bankruptcy of a debtor shall be deemed to  have        relation back to and to conimence at the time of the act  of        bankruptcy  being  completed  on which  the  order  is  made        adjudging him to be bankrupt ; or if the bankrupt is  proved        to have committed more acts of bankruptcy than one, to  have        relation  back and to commence at the time of the  first  of        the  acts  of  bankruptcy that may be proved  to  have  been        committed   by  the  bankrupt  within  twelve  months   next        preceding the order of adjudication ; but    the  bankrcptcy        shall  not relate to any prior act of bankruptcy, unless  it        be  that  at  the  time of committing  such  prior  act  the        bankrupt was indebted to some creditor or creditors in a sum        or sums sufficient to support a petition in bankruptcy,  and        unless  such  debt or debts are still remaining due  at  the        time of the adjudication,        The Presidency-towns Insolvency Act, 1909        S.   116  6 (1) : A copy of the Official Gazette  containing        any  notice  inserted  in pursuance of  this  Act  shall  be        evidence of the facts stated in the notice.        (2): A copy of the Official Gazette containing any notice of        an order of adjudication shall be conclusive evidence of the        order having been duly made, and of its date.

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      S.   5I: The insolvency of a debtor, whether the same  takes        place  on  the  debtor’s  own petition or  upon  that  of  a        creditor or creditors, shall be deemed to have relation back        to and to commence at--        (a)  the time of the commission of the act of insolvency  on        which an order of adjudication is made against him, or        (b)  if the insolvent is proved to have committed more  acts        of insolvency than one, the time of the first of the acts of        insolvencyproved  to  have been cornmited by  the  insolvent        within   three  months  next  preceding  the  date  of   the        presentation of the insolvency petition:        Provided   that   no  insolvency  petition   or   order   of        adjudication shall be rendered invalid by reason of any  act        of  insolvency  committed  anterior  to  the  debt  of   the        petitioning creditor.        The Provincial Insolvency Act, 1920        S.   30:  Notice  of an order of  adjudication  stating  the        name, address and description of the insolvent, the date  of        the  adjudication, the period within which the debtor  shall        apply  for  his  discharge,  and  the  Court  by  which  the        adjudication  is  made, shall be published in  the  Official        Gazette and in such other manner as may be prescribed.        S.   28(7):  An order of adjudication shall relate back  to,        and  take effect from, the date of the presentation  of  the        petition on which it is made.        635        Bankruptcy Act, 1869        Nil...        The Presidency-towns Insolvency Act, 1909        S.56(1)  : 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        adjudicated  insolvent on a petition presented within  three        months after the date thereof, be deemed fraudulent and void        as against the Official assignee.        (2):This  section shall not affect the rights of any  person        making  title  in good faith an for  valuable  consideration        through or under a creditor of the insolvent.        635        The Provincial Insolvency Act, 1920        S.54(1)  : 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.        (2):This  section shall not affect the rights of any  person        who in good faith and for valuable consideration has acquir-        ed a title through or under a creditor of the insolvent.        With some difference in. the phraseology, with which we  are        not  concerned,  Ss.  116  and  51  of  the  Presidencytowns        Insolvency  Act are,-in terms similar to  the  corresponding        sections, ss. 10 and II, of the Bankruptcy Act.  Section  10        of  the Bankruptcy Act and s. 116 of  the  Presideticy-towns        Insolvency  Act  make  the  copy  of  the  Official  Gazette        containing the order of adjudication conclusive evidence  of        the  date  of adjudication and the fact that  the  order  of        adjudication  was  duly made.  But s. 30 of  the  Provincial        Insolvency Act only enjoins that the notice of the order  of

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      adjudication  with  the  necessary  particulars  should   be        published in the Official Gazette and in such manner as  may        be prescribed; but a copy of the said Gazette containing the        said notification is not made conclusive evidence either  of        the facts mentioned therein or of the fact that adjudication        has  been  duly made.  Section 51  of  the  Presidency-towns        Insolvency  Act is in terms similar to that of s. II of  the        Bankruptcy Act, and        636        under  both the sections the insolvency of a debtor  relates        back to the time of the commission of the act of  insolvency        on  which  the order of adjudication has been  made  against        him.  But under s. 28(7) of the ,Provincial Insolvency  Act,        the  order of adjudication relates back to and takes  effect        from  the  date of the presentation of  the  application  on        which  it  is  made.  Under s. 56  of  the  Presidency-towns        Insolvency  Act,  transfer  of a property  in  favour  of  a        creditor  with a view to give preference to him  over  other        creditors shall be deemed fraudulent and void as against the        Official  Assignee,  whereas under s. 54 of  the  Provincial        Insolvency Act, the said transfer has to be annulled by  the        Court.   There are, therefore, essential differences in  the        structure of the scheme between the three Acts in the matter        of adjudication.        With  this  background  let us look  at  the  Privy  Council        decision in Mohomed Siddique Yousuf’s case, (1) to ascertain        the basis of that decision.  The facts in that case were: On        January 20, 1939, the insolvent assigned to the appellant  a        decree  obtained  by him for consideration.   On  April  19,        1939, the petitioning creditor filed a petition in the  High        Court for the adjudication of the insolvent as such.  One of        the  acts of insolvency alleged was the said  assignment  of        the  decree in, favour of the appellant.  On June 13,  1939,        an  adjudication order was made against the  insolvent.   No        one appeared except the petitioning creditor, and the  order        -recited  that the insolvent had committed each of the  acts        of  insolvency  alleged in the petition.   On  November  23,        1939,  the  Official Assignee gave notice of motion  in  the        Insolvency  Court  for a declaration that the  indenture  of        assignment  dated January 20, 1939, should be declared  void        as  against  the  Official Assignee and  that  the  transfer        should  be set aside.  The Judge in Insolvency held  on  the        merits  that the said transfer was void under s. 56  of  the        Presidency-towns  Insolvency Act.  On appeal the High  Court        held that the order of adjudication was conclusive  evidence        against  the appellant that the assignment was a  fraudulent        preference, and on that        (1)  (1943) L.R. 70 I.A. 93.        637        ground  it declared the transfer void.  On  further  appeal,        the  Privy Council agreed with the High Court.   Relying  on        the  decision  in  Ex  _varte Learoyd  (1),  a  decision  on        analogous  provisions  of  the  Bankruptcy  Act,  the  Privy        Council made the following observations at p. 98:        "The  provisions  of the  Presidency-towns  Insolvency  Act,        1909, are also in similar terms, and their Lordships feel no        doubt  that  the principles of the English decision  are  as        valid in India as in England.  No doubt it is anomalous that        a  decision affecting the right of a third party  should  be        conclusively determined against him in his absence, and even        without notice to him, but the words of the section and  the        importance  of  maintaining  the status  of  the  debtor  as        determined by an order of adjudication, and the necessity of        securing the stability of the administration of the debtor’s        estate once his status has been fixed, have been justly held

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      to  outweigh  the consideration of hardship to  the  private        citizen."  But the Privy Council came to the conclusion,  on        the  facts that a case was made out for the -High Court  for        excusing  the  delay in preferring the  appeal  against  the        order  of  adjudication.  On that view they  set  aside  the        order of the High Court and made the following  observations        for its guidance, at p. 99:        "  It  may be that if the appellant takes advantage  of  the        extension of time and appeals, the High Court may adopt  the        procedure in Ex parte Tucker (2) and content themselves with        striking  out  the  act of  bankruptcy  complained  of,  and        leaving  the official assignee to make a  fresh  application        without themselves determining the facts."        This  decision  decides  three points,  namely:  (i)  having        regard  to  the express provisions of  the  Presidency-towns        Insolvency Act, and for maintaining the status of the debtor        and  the stability of the administration of his estate,  the        decision  affecting the rights of a third party though  made        behind his back, would be binding on him; (ii) an appeal can        be entertained against the,        (1)(1878) 10 Ch.D 3.      (2) (1879) 12 Ch.  D. 308.        81        638        order  of  the adjudication at the instance  of  the  trans.        feree,   and,  if  necessary,  by  excusing  the  delay   in        preferring the appeal; and (iii) in such an appeal, the High        Court  may strike out one of the acts of  insolvency,  i.e.,        the transfer in favour of the appellant, and leave it to the        Official, Assignee to make a fresh application.  Though  the        principles  underlying  the relevant provisions of  the  Act        were  expounded, the decision mainly rested on  the  express        provisions of the Presidency-towns Insolvency Act.  Nor  did        the  Privy  Council  hold that when there was  an  order  of        adjudication on the basis of an act of insolvency, there was        no  necessity on the part of the Official Assignee  to  take        out   an   application  for  setting  aside   the   transfer        constituting  the act of insolvency.  Though it is not  very        clear,  it appears to me that what the Privy Council  stated        was that in such an application the decision on the transfer        forming  part  of the order of  adjudication  is  conclusive        evidence  of  the  invalidity of the transfer.   To  put  it        differently,  in such an application the  Official  Assignee        need  not  prove  afresh that the transfer was  a  fraud  on        creditors or an act of fraudulent preference.  That decision        was  mainly  based upon Ex parte Learoyd (1), which  in  its        turn was founded upon the interpretation of ss. 10 and 11 of        the Bankruptcy Act-sections corresponding to ss. 116 and  51        of the Presidency-towns Insolvency Act.  A scrutiny of  that        decision,  therefore, will disclose the raison detre of  the        decision  of the Privy Council.  There, on August 30,  1877,        an  insolvent executed in favour of George Payne a  bill  of        sale of his household furniture etc., by way of security for        consideration.    The   goods  remained  in   the   apparent        possession  of  the mortgagor until January  1,  1878,  when        Payne  removed  them.   On January  3,  1878,  a  bankruptcy        petition was presented against the insolvent by a  creditor,        relying upon an alleged act of bankruptcy, namely, that  the        insolvent, being a trader, departed from his  dwelling-house        on  December  31,  1877.  On January 3, 1878,  an  order  of        adjudication was made on the petition upon proof of the said        act of bankruptcy, and that        (1)  (1878) 10 Ch.  D. 3.        639        order was advertised in the usual way in the London Gazette.        On January 8, 1878, the goods removed by Payne were sold  on

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      his  behalf.   The trustees in the  Bankruptcy  claimed  the        proceeds  of  the sale, and the Judge of  the  County  Court        ordered  the payment.  On appeal Bacon, C. J.,  allowed  the        appeal  on the ground that it had not been established  that        there was an act of insolvency before Payne took  possession        of  the goods.  On further appeal, the Court of  Appeal  set        aside  the  judgment of Bacon, C.J., on the ground  that  by        virtue of ss. 10 and 11 of the Bankruptcy Act, 1869, "a bill        of  a sale holder is conclusively bound by the  adjudication        so  long  as it stands, and cannot dispute that the  act  of        bankruptcy  on which the adjudication professedly  proceeded        was in fact committed," and that the trustee’s title related        back  to that act of bankruptcy James, L.J., after  a  brief        survey  of  the historic background of the  Bankruptcy  Act,        based  his  judgment  mainly  on  the  construction  of  the        provisions  of  ss. 10 and I I of the Bankruptcy  Act.   The        learned Judge observed at p. 8:        "  A man cannot be I duly’ adjudged a bankrupt,  unless  the        great requisite of all exists, that he has committed an  act        of bankruptcy.  That is the capital offence of which he must        have  been  guilty  before  he  can  be  ’duly’  adjudged  a        bankrupt.   That  he has been ’duly’  adjudged  a  bankrupt,        necesssarily  involves the previous commission of an act  of        bankruptcy.   The  mere fact that an adjudication  has  been        made  could  have been proved without the aid of  sect.  10.        That section may, however, only involve this, that some  act        of bankruptcy had been committed before the adjudication was        made.   But then comes sect.  II, which has no operation  at        all  as between the bankrupt and the trustee.  The  bankrupt        has no rights whatever; all his rights have been transferred        to  the  trustee.  The mere fact that sect. 1 1  is  dealing        with the relation back of the trustee’s title, shews that it        is dealing with the rights of third persons, and not  merely        with  the  rights of the bankrupt and  persons  indebted  to        him....  Then  sect. 11 goes on to provide that, by  way  of        enlargement        640        of  the  trustee’s  title,  he may  go  behind  the  act  of        bankruptcy  on which the adjudication was founded, and  may,        under   certain   circumstances  and  subject   to   certain        limitations,  prove  that other earlier acts  of  bankruptcy        have been committed, and if this is done the trustee’s title        is to relate back to the earliest act of bankruptcy which is        proved  to have been committed within twelve  months  before        the  adjudication.   This,  however,  is  to  be  proved  by        evidence, whereas the act of bankruptcy on which the adjudi-        cation  is  founded  is  proved by  the  production  of  the        adjudication  itself.   It seems to me to be  impossible  to        evade the words of these sections."        Baggallay,  L.  J., also, after emphasizing on the  words  "        duly made " in s. 10 of the Bankruptcy Act, remarked on  the        scope of s. 11 thus, at p. 10:        "  But  then comes sect.  II, which, I think,  if  more  was        needed,  makes the adjudication conclusive on third  persons        that  the  act  of bankruptcy on which it  was  founded  was        really committed."        Thesiger, L. J., also said much to the same effect, at P. 11        :        " We start, therefore, with this, that we are bound to  hold        conclusively  that a ’due’ adjudication was made on the  3rd        January.   It  must,  therefore, have been  founded  upon  a        proper act of bankruptcy.  Then sect. 11 goes still further,        and  it  is  important to compare  it  with  the  provisions        contained in the prior Bankruptcy Acts.  Sects. 234 and  235        enabled third persons to dispute the act of bankruptcy  upon

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      giving  notice of their intention so to do.  That  provision        is swept away by the Act of 1869, and in language clear  and        distinct  the Legislature has said by sect.  II that  I  the        bankruptcy  of  a debtor shall be deemed  to  have  relation        -back  to  and  to  commerce  at the  time  of  the  act  of        bankruptcy  being  completed  on which  the  order  is  made        adjudging him to be bankrupt."        From  the  aforesaid  extracts from  the  judgments,  it  is        manifest   that  the  decision  turned  upon  the   express’        provisions of ss. 10 and 11 of the Bankruptcy Act.  Under s.        10 of that Act, the gazette containing the        641        order was conclusive evidence that the order of adjudication        was duly made on the basis of an act of insolvency and s. 11        fixed  the datum line for the commencement of the  trustee’s        title  from the act of bankruptcy.  The former section  made        the  order  of,.,  adjudication  conclusive  against   third        parties  and  the  latter section vests  the  title  of  the        property concerned in the official receiver from the date of        the act of insolvency.  This judgment, therefore, cannot  be        applied  to  an Act which differs in all  respects-from  the        relevant  provisions of ss. 10 and 11 of the Bankruptcy  Act        on  the  basis  of which that judgment was  given.   In  the        Provincial Insolvency Act, neither the order of adjudication        is  conclusive evidence that it has been duly made, nor  the        trustee’s title dates back to the act of insolvency on which        the  adjudication is founded.  I am, therefore, of the  view        that  neither the decision in Ex parte Learoyd (1) based  on        the  provisions of the Bankruptcy Act, 1869, nor  the  Privy        Council  decision  in Mahomed Siddique  Yousuf  v.  Official        Assignee  of Calcutta (2) based upon the provisions  of  the        Presidencytowns   Insolvency   Act,  has  any   bearing   in        construing   the  relevant  provisions  of  the   Provincial        Insolvency  Act.   A similar view was expressed  by  a  Full        Bench  of  the Madras High Court in The  Official  Receiver,        Guntur  v. Narra Go v. Narra Gopala Kri8hnayya(3) and  by  a        Full Bench of the Nagpur High Court in D. G. Sahasrabudhe v.        Kila  Chand  Deochand & Co., Bombay (4).  Both  Courts  held        that  the decision of the Privy Council did not apply  to  a        case  under  the  Provincial  Insolvency  Act  and  that   a        transferee,  who  was  not  a  party  to  the   adjudication        proceeding,  could  contend in  subsequent  proceedings  for        annulment  that his transfer was good  notwithstanding  that        the order of adjudication was based on the alleged  transfer        as being an act of insolvency.  I accept the correctness  of        the said two decisions.  If so, it follows that the order of        adjudication  made  in the present case did not by  its  own        force divest the title of Meenakshi Achi and vest it in  the        official   receiver  and  that  she  continued  to  be   the        transferee of the decree at the time        (1)  (1878) 10 Ch.  D. 3.        (2)  1943 L.R. 70 I.A. 93.        (3)  I. L. E. 1945 Mad. 541        (4)  1.L.R. 1947 Nag. 85.        642        when  she filed the second execution petition, E.P. No.  243        of 1940.         For the same reasons, when E.P. No. 37 of 1937, was  filed,        Meenakshi Achi had subsisting title to the decree runder the        transfer  deed dated ’February 3, 1936, and, therefore’  the        said execution petition was also in accordance with law.        The next argument of the learned Counsel for the  appellants        is  that  the order of the Insolvency Court dated  April  9,        1943,  related  back  to  the date  of  the  transfer  i.e.,        February  3, 1936, and that by the order of  annulment,  the

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      transfer became void from its inception with the result that        on  the dates when the Execution Petitions Nos. 37  of  1937        and  243 of 1940 were filed Meenakshi Achi-had no  title  to        the  decree,  and, therefore, the said  petitions  were  not        filed in accordance with law.  The answer to this contention        depends upon the true legal effect of the order of annulment        of  the  transfer on the ground  of  fraudulent  preference.        That  part of s. 54 of the Provincial Insolvency Act so  far        relevant to the present enquiry reads thus:        S.   54  (1): " Every transfer of property ... 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.        (2): This section shall not affect the rights of any  person        who  in  good  faith and  for  valuable  consideration  has,        acquired  a  title  through  or  under  a  creditor  of  the        insolvent."        It  is  clear  from the provisions of this  section  that  a        transfer of property by a debtor before insolvency in favour        of a creditor giving him preference over other creditors  is        not  absolutely  void.  As between the  transferor  and  the        transferee,  the title in the property conveyed passes  from        one  to  the other, but it is liable to be annulled  at  the        instance  of the receiver.  This is because  the  Insolvency        Act confers on the official ,receiver a title superior  that        of the insolvent enabling        643        the  former  to  get  it annulled in  the  interest  of  the        creditors.   Sub-section  2 of that section  also  indicates        that the-transfer is not void ab initio, for under that sub-        section the rights of any person, who in good faith and  for        valuable  consideration acquired title through, or  under  a        creator  of the insolvent, are protected.  If  the  transfer        was  ab initio void in the sense that it is a  nullity,  all        the depending transactions should fall with it.  Emphasis is        laid upon the word " void " in s. 54(1) of the Act, but  the        said  word in the context can only mean voidable, for it  is        made  void  only  against the receiver and  requires  to  be        annulled  by  the  Court.  It  follows  from  the  aforesaid        premises that such a transfer is valid till annulled in  the        manner  prescribed  by  the  provisions  of  the  Provincial        Insolvency Act.        The legal effect of annulling a transfer under s. 53 of  the        Act  was considered by a Division Bench,of the  Madras  High        Court  in The Official Receiver, Coimbatore  v.  Palaniswami        Chetti  (1).   In that decision, Devadoss, J.,  observed  as        under at p. 758:        "But till such a declaration is made by the Insolvency Court        under section 53, the transaction is good and the  mortgagee        could  proceed  with the suit or with the execution  of  his        decree against the insolvent’s property."        Wallace, J., elaborated thus, at p. 764:        "  Section 53 implies an attack by the Official Receiver  on        behalf  the general body of creditors, and the remedy  which        he  is  entitled  to get on proving his  case  is  that  the        transfer is voidable against him and may be annulled by  the        Court.............   it   does   not   really   affect   the        relationship  of the transferor and transferee as  mortgagor        and mortgagee.  For example, if the property is sold by  the        Official  Receiver,  and the creditors and costs  are  fully        paid out of the proceeds and there is a surplus  remaining.,        that surplus belongs primafacie to the transferee and not to        the  transferor,  and is his unless the  transferor  has  by

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      appropriate    proceedings   established   his   right    to        it............  The relationship between the  mortgagor  and        mortgagee remains        (1)  (1925) I.L.R. 48 Mad. 750.        644        unaffected  by  any proceedings under section  53,  and  the        mortgagee  is  entitled therefore to  enforce  his  mortgage        against  the  mortgagor except so far as  proceedings  under        section 53 may have held the property mortgaged as assets of        the  mortgagor  at  the  disposal of  the  general  body  of        creditors."        The  observations  of  the  learned  Judges  establish   two        propositions: (i) that the transaction inter se between  the        debtor and transferee is good; and (ii) it is not binding on        the  Official Receiver so far as it is necessary to  protect        the interests of the creditors.  The decision in Amir  Ahmad        v. Saiyid Hasan (1) is also one laying down the legal effect        of s. 53 of the Act.  The learned Judges made the  following        observations in that case, at p. 903:        It seems quite clear that if a transfer made by a debtor  is        wholly fictitious and bogus and no interest in the  property        passes  to  the  transferee, then the transfer  is  void  ab        initio  and  subsequent transferees can never  be  protected        because   the   foundation   of   their   title   does   not        exist..........  On the other hand, if the transfer made  by        the  debtor  was  not wholly fictitious and  bogus  but  the        intention  of the parties was that property should  is  fact        pass  to  the transferee, then the result  would  depend  on        whether the transferee was a purchaser in good faith and for        valuable  consideration, or not.  The transfer for the  time        being  is valid, though it is voidable at the option of  the        receiver,  and  it is discretionary with court to  annul  it        under section 53 of the Provincial Insolvency Act."        The  said  observations  will apply mutatis  mutandis  to  a        situation under s. 54 of the Act.  Indeed, a Division  Bench        of the Nagpur High Court in Rukhmanbai v. Govindram (1),  in        the  context of s. 54 of the Act, stated to the same  effect        thus at p. 275:        "The  wording  of  the section (s.  54)  thus  very  clearly        indicates that a transfer of the nature mentioned therein is        voidable  as against the receiver and is not void ab  initio        and  may be annulled by the Court......... It is thus  clear        from the section        (1) (1935) I.L.R 57 All. 900.        (2) I.LR. 1946 Nag. 273.        645        that till the transfer is actually annulled by the Court  it        remains a valid transaction."        The aforesaid discussion yields the following result: (1)  a        transfer  by a debtor of his property before  insolvency  in        favour  of a creditor with a view to giving  him  preference        over   other  creditors  conveys  a  valid  title   to   the        transferee;  (2) under circumstances mentioned in s.  54  of        the Act, it is voidable against the receiver; (3) when it is        annulled   by  the  Court  on  the  ground   of   fraudulent        preference, the property vests in the official receiver, who        can administer it in the interest of the creditors; and  (4)        even after the transfer is annulled, it continues to be good        between the transferor and transferee, and in a  contingency        of any balance remaining of the sale proceeds after the cre-        ditors  are fully paid, the transferee would be entitled  to        the same.        Two lines of decisions have been relied upon by the  learned        Counsel for the appellants.  The first one holds that in the        case  of  conflicting  claims to  an  estate,  the  claimant

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      ultimately  declared  to be the owner thereof by  the  final        Court  cannot  rely, to save the bar of limitation,  upon  a        petition  filed by the rival claimant to execute the  decree        pertaining  to the estate at the time the title was  in  his        favour;  and the other decides that when a transfer  is  set        aside  on the ground of fraudulent preference, the  official        receiver  can  claim  to  recover  mesne  profits  from  the        transferee of the property of an insolvent from the date  of        the  transfer.  The first line of decisions turns  upon  the        principle  that  a  defeated claimant had no  title  to  the        property  at  the  time he filed the  application,  for  the        effect of the final decree is that the said claimant had  no        title  at  any  time, and the second line  of  decisions  is        founded   on  some  equitable  doctrine.   There  are   also        decisions taking the contrary view.  It is not necessary  in        this  case’. either to go into that question or  attempt  to        resolve the conflict.  As I have held that in the case of  a        transfer in fraud of creditors or by fraudulent  preference,        the  transfer  is  good till set aside  by  the  Court,  the        transferee  would have title to file the execution  petition        before the transfer was set aside.        82        646        The  third  contention  of  the  learned  Counsel  for   the        appellants  is  a weak one.  It is said  that  the  official        receiver   does  not  claim  under  Meenakshi   Achi,   and,        therefore, he cannot rely upon the execution petition  filed        by  her to save the bar of limitation.  There is  a  fallacy        underlying this argument.  The question for decision is  not        whether  the official receiver claims under Meenakshi  Achi,        but  whether  the execution petitions filed by her  were  in        accordance with law.  If as I held, at the time the previous        execution  petitions were filed, Meenakshi Achi had a  valid        title  to execute the decree, the execution petitions  filed        by her would certainly be in accordance with law within  the        meaning  of  art. 182(5) of the Indian Limitation  Act.   I,        therefore, reject this contention.        In  view of the aforesaid conclusions arrived at by me,  the        last two contentions based on payments of instalments do not        arise for consideration.        In the result, the appeal fails and is dismissed with costs.                                      Appeal dismissed.