Civil Procedure vs Sundar Das Khetri1. The
2024 Latest Caselaw 859 AP

Andhra Pradesh High Court - Amravati

Civil Procedure vs Sundar Das Khetri1. The on 1 February, 2024

         THE HON'BLE Ms. JUSTICE B.S.BHANUMATHI

       Civil Miscellaneous Second Appeal No.10 of 2022

JUDGMNET:


      This Appeal is filed under II proviso to Section 75 of the

Provincial Insolvency Act, 1920 r/w Section 100(1) CPC against the

judgment and decree, dated 12.08.2022, passed in C.M.A.No.12 of

2015 on the file of the Court of II Additional District Judge, Kadapa,

filed under Order 43 Rule 1 CPC.      By the impugned judgment &

decree, the learned Additional District Judge allowed the appeal

confirming the order of the trial Court, dated 31.12.2014, passed in

I.A.No.56 of 2002 in I.P.No.44 of 2000 on the file of the Court of

Senior Civil Judge, Proddatur, filed under Section 4 and Section

28(v) of the Provincial Insolvency Act, and Section 60 of the Code of

Civil Procedure, 1908, setting aside the auction of item No.2 house

property conducted by the Official Receiver, Kadapa, and directing

the Official Receiver, Kadapa to return the sale amount to the

auction purchaser and directing him to handover item No.2 house

property mentioned in the insolvency petition schedule to the

petitioner No.2.
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                                                       C.M.S.A.No.10 of 2022


2.    Heard Sri S. Lakshminarayana Reddy, learned counsel for the

appellant and Sri A.Syam Sundar Reddy, learned counsel for the

respondent.

3. The facts leading to filing this appeal are briefly as follows:

Sri Lorrygari Sankar Reddy (hereinafter referred to as the

'auction purchaser') is the appellant herein. The respondents 1 and

2, namely, (late) Kummara Yellala Sanjanna and Sri Kummara

Yellala Siva Ramudu filed an Insolvency Petition vide I.P.No.44 of

2000 on the file of the Court of the Senior Civil Judge, Proddatur, in

which two items were shown as item No.(1) landed property; and,

item No.2 House property. The petition was allowed on 06.04.2001

declaring them as insolvents. An Official Receiver was appointed.

While passing the order, dated 06.04.2001, the Court has not

decided the question of exemption of the item No.2 i.e., residential

house under Section 60 CPC leaving it open to the receiver to

decide the same at the time of administration. The Official Receiver

made a publication of the sale, by auction, on 24.10.2001 in respect

of the land in item No.1 of the petition schedule only, however at

the time of the auction, the item No.2 i.e., house property, was also

put to sale on 06.04.2002, in spite of taking objection by the

petitioners before the Official Receiver, observing that the issue is

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to be decided by the Court of Senior Civil Judge, Proddatur. The

Official Receiver, Cuddapah, executed a registered sale deed on

16.04.2002 vide document bearing No.387 of 2002 of the

Sub-Registrar, Jammalamadugu. As such, the respondents No. 1

and 2 herein approached the Court of Senior Civil Judge, Proddatur

by filing I.A.No.56 of 2002. As per their contention, except the

house shown in item No.2, there is no other house to them and they

are agriculturists and they keep their agricultural implements

therein, bulls, buffalos, seed grains etc., and therefore, the said

house is exempt from sale under Section 60 CPC r/w Section 28 (v)

of the Provincial Insolvency Act ('PI Act' in short). The auction

purchaser, shown as the respondent No.2 in I.A.No.56 of 2002, filed

counter opposing the petition and the same was adopted by the

respondents No.5 to 10 therein. In the counter, it was contended

that the order was passed on 06.04.2001 on merits and that the

petitioners in (in I.A.No.56 of 2002) did not plead in their petition in

I.P. or their evidence to seek exemption of item no.2 from sale and

the same was dismissed, but the present petition was filed to evade

the delivery of the property to the auction purchaser, who stood as

highest bidder in the auction conducted by the Official Receiver and

obtained a registered sale deed to the knowledge of the petitioners.

BSB, J

4. In I.A.No.56 of 2002, evidence was lead. The petitioner No.2

therein was examined as PW-1 and S.Chinna Nagireddy was

examined as PW-2 and Exhibits were marked for petitioners as

follows:

Ex.A1: Certified copy of I.P. Petition

Ex.A2: Certified copy of order and decretal order in I.P.

Ex.A3: Certified copy of sale list of Official Receiver, kadapa

Ex.A4: Certified copy of bidders list of Official Receiver, Kadapa.

Ex.A5: Certified Copy of petition and order filed before the Official Receiver, Kadapa.

Ex.A6: Publication dated 24.10.2001 issued by Official Receiver, Kadapa.

Ex.A7: Voters list of Peddapasupula village for the year 1995.

Ex.A8: House tax receipt for the year 1995 and 1996 for the house D.No.1/205.

Ex.A9: House tax receipt for the year 1997.

Ex.A10: House tax receipt for the year 1998.

Ex.A11: Voter's identity card of the wife of the 2nd petitioner.

5. After considering both oral and documentary evidence and

also arguments, the Court of Senior Civil Judge, Proddatur

dismissed the petition on 17.04.2003 observing that the ingredients

of Section 4 and Section 28(v) of the PI Act were not attracted to

the contentions of the petitioners and by following the decision of

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the Privy Council in Raghunath Das Vs Sundar Das Khetri1. The

Court of Senior Civil Judge, Proddatur is of the view that the

petitioners in I.A.No.56 of 2002 have to agitate before the Official

Receiver to decide the issue at the time of administration as to

whether the house property i.e., item No.2 is exempted from sale or

not, and that the house property was already auctioned and the

sale proceeds were distributed amongst the creditors and so the

petitioners cannot later raise the issue of exemption and these

aspects have to be taken by the petitioners at the initial stage while

filing the application (for declaration of insolvency). It is further

observed that having allowed the sale of the property to be

conducted, as an afterthought, the petition was filed to obstruct

further proceedings.

6. Aggrieved by the order, order dated 17.04.2003, in I.A.No.56

of 2002, A.S.No.64 of 2006 was filed. The appeal was allowed

setting aside the order of the Court of Senior Civil Judge, Proddatur.

It was mainly contended in the appeal that while allowing the

Insolvency Petition, both items of the property were ordered to be

vested in the Official Receiver for due administration, leaving it

open to the Official Receiver to decide the objection regarding sale

of house property, but the objections were disallowed by the Official

AIR 1914 PC 129

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Receiver and the house property was also sold, though exempted

from sale. The contesting respondents stated that the order in the

Insolvency Petition has become final and the appellants did not take

objections at the earliest and the petition was filed with a mala fide

intention. The Official Receiver also filed counter stating that the

appellants handed over item No.2 property voluntarily and that he

had taken all steps for the sale of the same and thumb impressions

of the petitioners were not taken by playing fraud as alleged by

petitioners/appellants and that the benefit under Section 60 CPC

was waived by the act of the petitioners consenting for sale of the

property. The appellate Court framed a point for determination as

"Whether B schedule item is exempted from attachment as

contended?" The appellate Court noted from the evidence and

contentions that the appellants are agriculturists and they have only

house property which is item No.2/B Schedule property and

therefore, it is clearly proved that the property is exempted from

sale under Section 60(1)(c) CPC and that there is no waiver against

a statute. It further observed that Section 28 (v) of the PI Act lays

down that the property exempted under CPC from attachment

would not fall within the definition of the property of insolvents and

therefore, the residential house of an agriculturist debtor is

exempted from attachment and sale. It is further observed that

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vesting of said property is itself illegal and an illegal act cannot be

availed by the parties and so the order of the Court of Senior Civil

Judge, Proddatur cannot be supported. Accordingly, the appeal was

allowed on 25.03.2008.

7. Against the judgment and decree dated 25.03.2008 in

A.S.No.64 of 2006, a second appeal in CMSA.No.19 of 2010 was

preferred before this Court by the auction purchaser. The following

points for consideration were framed in the second appeal:

i. Whether item 2 of the property which was sold and purchased by the revision petitioner cannot be proceeded? ii. Whether the judgment passed by the learned District Judge is legal and sustainable?

iii. To what relief?

8. It was noted that the petitioners in I.P sought for exemption

of the item No.2 of property but the Court of Senior Civil Judge,

Proddatur left it to be decided at the time of the administration of

the properties and that merely because the auction was conducted

by the Official Receiver ignoring the claim of the insolvent, it does

not mean the Court denied the benefit, if any, available to the

insolvent irrespective of handing over possession of the property to

the Official Receiver. Therefore, the High Court observed that the

plea of waiver considered by the Court of Senior Civil Judge,

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Proddatur is not correct. In the Second Appeal, it is further

contended by the auction purchaser that the challenge of the order

passed by the Official Receiver is barred by limitation under Section

68 of the Provincial Insolvency Act as the application was not filed

within 21 days and placed reliance on the decision in Hans Raj Vs.

Rattan Chand and others2 and therefore the High Court allowed

the appeal on 26.11.2011 and set aside the judgment and decree of

the appellate Court and the order of the lower Court and remanded

the matter to the Court of Senior Civil Judge, Proddatur for

determination as to the following points:

i. Whether the exemption under Section 60 CPC applies or not? ii. Whether the claim made by the insolvents is in accordance with the provisions of the Insolvency Act or not? iii. Whether the claim is within time or not?

The matter was remanded with a direction to the Court of Senior

Civil Judge, Proddatur to determine the rival contentions and to

decide the matter afresh after giving an opportunity to both the

parties.

9. On such remand the Court of Senior Civil Judge, Proddatur re-

heard I.A.No.56 of 2002. It is recorded that evidence and the

appendix of evidence shows that three witnesses were examined

AIR 1967 S.C.1780

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and one document was marked on behalf of the petitioners and

three witnesses were examined for the respondents. They are as

follows:

Witnesses Examined For Petitioner:-

P.W.1: k. Yeliala Sivaramudu.

P.W.2: T.Chenna Reddy

P.W.3: V. Kesava Ramachandra Reddy.

Witnesses Examined For respondents:-

R.W.1:M.L.Sankar Reddy.

R.W.2:G.Gopal

R.W.3: B.subbanna.

Exhibits Marked for Petitioner:-

Ex.A.1: Certified copy of resettlement register pertaining to the S.No.293/A & P of Peddapasupula village.

Thus, PW3, RWs 1 to 3 and Ex.A1 noted above is the

additional evidence received on remand. The said Court passed a

fresh order on 31.12.2014 allowing the petition and consequently

set aside the sale by auction of item No.2 house property conducted

by the Official Receiver, Kadapa and further directed to hand over

item No.2 property to the 2nd Insolvency Petitioner under a proper

acknowledgement. A further direction was given to the Official

Receiver to return the sale amount to the auction purchaser. The

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Official Receiver, Kadapa was further directed to address a letter to

office of the concerned Sub-Registrar and revenue authorities to

note the entry about the cancellation of the sale held by him in

respect of item No.2 of the schedule property in Insolvency Petition.

10. Against the order dated 31.12.2014 in I.A.No.56 of 2002, an

appeal in CMA.No.12 of 2015 was filed before the Court of II

Additional District Judge, Kadapa at Proddatur by the auction

purchaser. It was contended that during pendency of the case

before the Court of Senior Civil Judge, Proddatur, the 1 st Insolvency

Petitioner died and the other petitioner did not take any steps to get

the legal representatives of the diseased petitioner brought on

record and consequently the case was abated insofar as the 1st

Insolvency Petitioner is concerned. Similarly, it is also contended

that the respondents No.6, 9, 11 and 14 before the Court of Senior

Civil Judge, Proddatur died and the case against them also got

abated and that the claim against the respondents No.1, 3 to 16

therein was not pressed. It is also contended that at the time of

filing of the Insolvency Petition, the petitioners in I.P. stopped

agriculture and are not agriculturists and that the said issue was

already decided by the Court of Senior Civil Judge, Proddatur on

merits in I.A.No.56 of 2002 and the same is Res Judicata. It is also

contended that the Insolvency Petitioners did not file any appeal

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against the order passed by the Official Receiver, Kadapa and that

appeal against the order of Official Receiver is to be filed within 21

days of the order as per Section 68 of the PI Act and that there are

no grounds to restore I.A.No.56 of 2002. It is further contended

that the Court of Senior Civil Judge, Proddatur failed to consider

that there was no house and it was a open place and therefore the

Insolvency Petitioners have no right to make any claim for

exemption in respect of item No.2 of the I.P schedule property.

11. After hearing the appellant i.e., respondent No.2 (2 nd

Insolvency Petitioner), respondent No.1 died. Respondent No.3

having remained ex parte (without recording anything about the

other respondents up to Respondent No.16), the appellate Court

dismissed the appeal on 12.08.2022 confirming the order of the

Court of Senior Civil Judge, Proddatur dated 31.12.2014 in

I.A.No.56 of 2002.

12. It was observed by the appellate Court that the contention of

the appellant on the ground of res judicata in view of the disposal of

I.A.No.56 of 2002 on 17.04.2003 on merits is not acceptable and

that the contention that the insolvent failed to prefer appeal against

the order of the Official Receiver within 21 days, and therefore, the

said order remained unchallenged is not tenable as I.A.No.56 of

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2002 was filed challenging the order of the Official Receiver. The

appellate Court further rejected the contention of the appellant

regarding abetment of the proceedings on the death of the 1st

insolvent pending proceedings, by stating that the properties

devolved on the insolvent (2nd insolvent) after the death of the 1st

insolvent and insolvent/petitioner (2nd insolvent) in I.A.No.56 of

2002 has right to establish his case in the 2nd item of IP schedule,

i.e., house property. The appellate Court agreed with the

observations of the Court of Senior Civil Judge, Proddatur that the

evidence of PWs 1 to 3 and RW1 shows that the 2nd item is a house

used for agricultural tools etc., and is exempted under Section

60(1)(c) CPC.

13. Aggrieved by the same, this CMSA is preferred mainly stating

that the Court of Senior Civil Judge, Proddatur as well as the

appellate Court failed to determine whether the claim made by the

insolvent was barred by limitation as Section 68 of the PI Act

prescribes limitation of 21 days and whereas the order of the Official

Receiver was passed on 06.04.2002 and the petition was filed

beyond the period of limitation. It is further contended that the

orders were passed by the Court of Senior Civil Judge, Proddatur

and the appellate Court without considering the direction and the

observations of the High Court in C.M.S.A.No.19 of 2010, dated

BSB, J

26.04.2011. It is further contended that the appellate Court is not

justified in dismissing I.A.No.226 of 2019 in C.M.A.No.12 of 2015

filed under Order 41 Rule 22 CPC to receive the additional evidence

though it is required to be heard along with the appeal. It is further

contended that unless the insolvents are discharged under Section

41 of the PI Act, they cannot file the application seeking exemption

of property covered by item No.2. It is further contended that it is

not justified in allowing the appeal holding that item No.2 is

exempted under Section 60 CPC though the 1st and 2nd respondents

did not file any appeal against the sale dated 16.04.2002 conducted

by the Official Receiver as contemplated under Section 68 of the PI

Act. It is also contended that the appellate Court is not justified in

dismissing the appeal without any finding about the maintainability

of the petition in I.A.No.56 of 2002 as it is barred by limitation.

14. Since I.A.No.56 of 2002 is filed under Sections 4 and 20(5)

and 60 of the PI Act, the observation of the appellate Court that

filing of I.A.No.56 of 2002 is answering the objection regarding the

limitation claimed in the light of Section 68 of the PI Act is incorrect.

The cryptic observation noted above does not answer the purpose

for which the remand was ordered. Moreover, such observation is

without there being any observation by the Court of Senior Civil

Judge, Proddatur. The appellate Court could have answered only if

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the Court of Senior Civil Judge, Proddatur has answered the point,

but in the absence of any such finding, it cannot be said that the

direction of this Court in C.M.A.No.19 of 2015 has been duly

complied by the Court of Senior Civil Judge, Proddatur.

15. The learned counsel for the appellant reiterated various

grounds raised at different levels which are already stated above.

16. The learned counsel for the 2nd respondent submitted that

both the Courts have rightly passed the orders.

17. It is pertinent to mention that now this civil miscellaneous

second appeal is filed by the auction purchaser against the

insolvents only. Out of them, the 1st respondent already died

pending adjudication in the second round of enquiry in I.A.No.56 of

2002. It is only the 2nd respondent/insolvent who contested this

appeal. The other respondents are not made parties.

18. As can be seen from the order, dated 31.12.2014, in

I.A.No.56 of 2002, there is no point for consideration framed as

directed by this Court in C.M.S.A.No.19 of 2010. The only point for

consideration framed is as to 'whether item No.2 of the insolvency

petition schedule house is an agricultural house used by the

petitioners/insolvents and it is liable to be exempted under Section

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60 CPC for the decision of the same by the Official Receiver,

Kadapa'?'.

19. Even while discussing the said point also, no finding is given

regarding the point directed by the High Court to be considered by

the Court of Senior Civil Judge, Proddatur, i.e., whether the claim

by the insolvent is in accordance with the provisions of the PI Act or

not and whether the claim is within the time or not. Though this

point was raised before the appellate Court, even in the absence of

any finding by the Court of Senior Civil Judge, Proddatur, the

appellate court decided it holding that filing of I.A.No.56 of 2002

itself is sufficient.

20. It is pertinent to mention the observation of the appellate

court in its own words as follows:

"13 Further, the another contention that the insolvent failed to prefer an appeal against the order of the official receiver within 21 days and remained unchallenged and the trial court failed to consider the same is also not at all tenable as the very I.A.No.56/2002 is filed by challenging the order of the official receiver."

Therefore, it is clear that the direction of this Court has not been

duly followed.

BSB, J

21. That apart, item No.2, i.e., house property belongs to 1 st

insolvent and the 2nd insolvent also contended that the property of

the 1st insolvent alone cannot be put to sale. The fact that the 1st

insolvent died pending proceedings is not in dispute. In spite of a

specific ground raised in that regard for not bringing the legal

representatives on record, no finding is given that the 2nd insolvent

alone is the legal representative or that in spite of the other legal

representatives left by the 1st insolvent, they have not been brought

on record. It is a legal flaw which goes to the root of the matter

about maintainability of the petition itself insofar as his interest in

the lis. In that view of the matter, allowing the petition is illegal,

however, the same was not addressed by the appellate Court.

22. The Court of Senior Civil Judge, Proddatur, vide its order,

dated 31.12.2014, directed the Official Receiver to return the

amount of sale price to the auction purchaser. However, it is to be

noted that the Court of Senior Civil Judge, Proddatur, vide order,

dated 17.04.2003 itself, recorded that the sale proceeds were

already distributed amongst the creditors. When the sale proceeds

were already appropriated, direction to the Official Receiver to

refund the amount to the auction purchaser without any order

against the other creditors to refund the amount is improper.

Moreover, it is recorded in the order, dated 31.12.2014, in

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I.A.No.56 of 2002 that the respondents No.2 to 6 and their creditors

remained ex parte and other respondents were represented by

counsel whereas in the order, dated 12.08.2022 in C.M.A.No.12 of

2015, it is recorded that the appellant contended that the

respondent Nos.6, 9, 11 & 14 also died during the pendency of the

petition and the case against them abated and the claim was not

proved against respondent Nos.1, 4 to 16 in the trial court (Court of

Senior Civil Judge, Proddatur).

23. The learned counsel for the 2nd respondent submitted that in

case this Court is of the opinion that the courts below have not

answered the direction given by the High Court in the previous

order, the matter may be remanded for fresh consideration.

24. Having considered the long chequred history of the case and

for the observations already made in the preceding paragraphs

regarding abetment of the proceedings in relation to the 1st

petitioner whose property is the subject matter of the dispute, no

purpose would be served by remanding the matter.

25. In the result, the Civil Miscellaneous Second Appeal is allowed

and the order, dated 12.08.2022, in C.M.A.No.12 of 2015 on the file

of the Court of II Additional District Judge, Kadapa, at Proddatur, is

set aside and the appeal in C.M.A.No.12 of 2015 is allowed and the

BSB, J

petition in I.A.No.56 of 2002 is dismissed, by setting aside the order

dated 31.12.2014, therein, consequent to which the Court of Senior

Civil Judge, Proddatur, is directed to address letters to the offices of

the concerned Sub-Registrars and the revenue authorities to record

validity of the sale deed, dated 16.04.2002, bearing document

No.387 of 2002 of the Sub-Registrar, Jammalamadugu, in

pursuance of this order to make necessary entries in all the

concerned records.

There shall be no order as to costs.

Pending miscellaneous petitions, if any, shall stand closed.

_________________ B. S. BHANUMATHI, J Dt.01-02-2024 NSM/RAR