JUDGMENT Prakash Krishna, J.
1. This is an appeal under Section 75(2) of the Provincial Insolvency Act (hereinafter referred to as 'the Act') at the instance of purchaser of certain piece of land from Param Hans Jati, who died during the pendency of Insolvency proceedings before the court below and was substituted by his son Parsu Ram.
2. The present appeal arises out of creditor's petition under Section 9 of the Provincial Insolvency Act, Sri Maha Naraln Misra, claiming himself as creditor of Sri Param Hans Jati filed a petition on 7.4.1975 with the allegation that Sri Param Hans and his son Sri Parsu Ram had borrowed Rs. 5,000 from him on 18.6.1974. In lieu thereof a sarkhat was executed. Thereafter Sri Param Hans Jati on 7.1.1975 executed a sale deed in favour of present appellant namely Sri Deo Saran Rat with intent to defeat the claim of the creditor. In the insolvency petition the relief that defendant No. 1 Sri Param Hans Jati (hereinafter referred to as debtor) may be declared insolvent and sale deed dated 7.1.1975 may be declared void and not binding on the creditor namely Maha Narain Misra, was claimed.
3. The debtor Param Hans Jati in his written statement accepted the loan dated 18.6.1974 of Rs. 5,000 and pleaded that the sale deed dated 7.1.1975 is a fictitious document, as no consideration was paid to him although in the sale deed it has been mentioned that Rs. 15,000 has been given as advance and Rs. 10,000 was given before, the Sub-Registrar. It was further pleaded that by playing fraud the defendant No. 2 got executed the sale deed dated 7.1.1975 and it was a sham transaction. The debtor died on 5.12.1975 just after filing of written statement and in his place his son Paras Nath Jati was substituted.
4. The purchaser namely Sri Deo Saran Rai, the present appellant who was Defendant No. 2 in the insolvency case filed separate written statement on the pleas inter alia that the alleged loan of Rs. 5,000 is a fictitious transaction and no such loan was taken by the debtor from the creditor ; that the debtor has not committed any act of insolvency and that he is a purchaser for valuable consideration without notice. It was also pleaded that the sale deed was executed after paying full consideration and he is in possession of the land in question. A plea that full particulars of all the assets of debtor has not been given in the insolvency petition and, as such, insolvency petition is liable to be dismissed on this ground, was also raised. The plaint allegation that the defendant No, 2 had taken the money from his brother Sri Bal Karan Ram to show passing of sale consideration was also denied. Number of other pleas was also taken.
5. Subsequently the written statement was got amended and a plea that the alleged loan taken by Hans Raj Jati could not be realized in view of U. P. Agricultural Debt Relief Act, as well as U. P. Money Lending Act as he was a marginal farmer within meaning of later Act, was added.
6. The court below by order under appeal allowed the insolvency petition and adjudged the debtor namely Param Hans as insolvent and declared that the sale deed dated 7.1.1975 executed by him in favour of the defendant No. 2 (present appellant) would be voidable as against the receiver under Section 53 of Transfer of Property Act. It was also found that Param Hans Jati was not a marginal farmer as it could not be proved that he possessed land less than one hectare land after the execution of sale deed dated 7.1.1975. The said order is under appeal.
7. Heard learned counsel for the parties and perused the record.
8. The learned counsel for the appellant submitted that the present proceeding was collusive proceeding in order to get sale deed declared void. It was submitted that the vendor debtor after execution of the sale deed adopted a novel method to get the sale deed cancelled through the recourse of the provisions of Insolvency Act, The appellant is a bona fide purchaser for value without notice of the alleged debt dated 18.6.1974 and the debtor did not commit any act of insolvency, in contra learned counsel for the respondents supported the judgment of the Court below and submitted that the finding recorded by the court below are findings of fact. It was further submitted by him that although the present appellant was impleaded as defendant No. 2, in the insolvency proceeding, but he was not a necessary party and, as such, at his instance the present appeal is not maintainable. Elaborating his argument it was submitted that the insolvency proceeding is a matter in between the creditor and debtor and the present appellant who is vendee from debtor could have no grievance if the vendor is adjudged insolvent.
9. Section 6 of the Act defines acts of insolvency. According to the respondents, the case falls under Section 6(1)(b) of the Act. A debtor commits an act of insolvency, if he makes transfer of his property or of any part thereof with the intent to defeat or delay the creditors. Now the question immediately arises as to whether execution of the sale deed in question, in the facts of the present case, amounts to execution of the sale deed with the intent to defeat or delay the creditor. The intention to defeat or delay the creditor is essential ingredient of this clause. The question of delay or defeating the creditor can be raised when transaction is done in such a manner that the property is not available for the creditor for recovery of debts due to him. Therefore, mere transfer of property by the debtor will not ipso Jacto amount to an act of insolvency. The Important words are "with the intent to defeat or delay the creditor". Intent to defeat or delay the creditor are mental act and can only be determined if one looks into surrounding circumstances. The true test to apply in such cases is whether the alleged insolvent is in a position to pay his debt and as to whether property which has been transferred bears such a proportion of the whole property that the remaining or residue of the property is still sufficient from the point of view that ordinary businessman to meet the debts of creditors who remained unsatisfied.
10. It is essential to scrutinize the pleading of the parties and evidence on record to find out as to whether the debtor has committed an act of insolvency or not. The burden of proof lay upon the shoulders of the creditor to establish that the sale deed dated 7.1.1975 was executed by the debtor with intent to defeat or delay the creditor. Up to para 4 of the petition the creditor has mentioned factum of the debt. In paragraph 5 of the petition only this much has been stated that the defendant No. 1 "debtor" with a view to defeat the claim of the creditor has executed the sale deed in respect of this property in favour of defendant No. 2 so that the property may not come in the hands of the creditor and the creditor may not be able to get the property auctioned in pursuance of his debt which amounts to act of insolvency. In para 6 it has been stated that the sale deed dated 7.1.1975 is fictitious document, as no consideration was passed on to the debtor. Rs. 15,000 was alleged to have been given prior to the execution of the sale deed and Rs. 10,000 was alleged to have been given before the Sub-Registrar. This money was withdrawn by the vendee from the account of his brother Bal Karan and after the sale deed the amount has been deposited in the accounts of Bal Karan. Therefore, the document is fictitious document. Only in these two paragraphs alleged act of insolvency has been pleaded. To my mind, this pleading ex-facie is Insufficient to prove act of insolvency. There is no pleading to the effect that the vendee was in any way aware about the money advanced by the creditor and the vendor executed the sale deed so that the property may go out of the reach of creditor. It is also not pleaded that on account of the sale of these plots, the debtor has not left with any other property from which his debt cannot be recovered.
11. In the light of the above pleading of the creditor to find out as to whether the transaction in question was entered into with a view to delay or defeat the creditor or it was bona fide transaction for value without notice, it is necessary to consider the attending circumstances of the case. Surprisingly, enough the debtor who was alive at that time did not dispute the debt and a close reading of his written statement clearly discloses that the said written statement was filed in support of insolvency petition. The most striking feature of the case is that the son of debtor was examined as P.W. 2 to prove the insolvency petition. He was impleaded in place of his father as defendant No. 1. In oral deposition he admitted the entire case of the creditor. In this chain it is also interesting to note that the creditor his debtors son both are represented by the same counsel in this Court. When this fact was pointed out by me to the learned counsel, he tried to come out with some explanation that he has to support the judgment of the court below. This gives strength to the plea of the appellant that the present proceeding is collusive one.
12. The present appellant before the court below raised a plea that the debtor had not borrowed Rs. 5,000 from the creditor nor it executed any Sharkat in his favour. A controversy was also raised by the present appellant that Sharkat (Exhibit-I) did not bear signature and thumb impression of Param Hans Jati. He also examined handwriting expert Madan Mohan Kakkar. as D.W. 1. The court below has come to the conclusion that execution of Sharkat (Exhibit-1) has been admitted in his written statement by Parsu Ram Jati. The opinion of hand writing expert ts nothing more than an expert opinion and thumb impressions on the Sarkhat, were too blurred for comparison. The opinion of the handwriting expert was discarded by the court below in view of the statement of Maha Narain, the creditor and the statement of Parsu Ram, P.W. 2. The relevant portion from the judgment is quoted below :
"I have referred to the written statement of Param Hans Jati that the Sharkat had been executed by him. Otherwise, also in the written statement, this opposite party had nowhere alleged that the Sharkat (Exhibit-1) did not bear the signature and thumb Impressions of Param Hans Jati. According to him, he and Parshuram had executed this Sharkat in collusion with the petitioner. That would create an impression that the signatures and thumb impressions were those of Paramhans. As it is, we have the admission of the scribe of the Sharkat who is the son of Paramhans and Paramhans himself that they had borrowed Rs. 5,000 and had executed the Sharkat (Exhibit 1). This would go to detract a great from the evidence of Madan Mohan Kachar, D.W. 1. His evidence is nothing more than an opinion. I have gone through his report and find that the thumb impression on the Sharkat were too blurred for comparison."
13. No valid reason for discarding the report of handwriting expert that the signatures of Param Hans Jati on the Sharkhat do not tally with the admitted signatures, has been given by the court below.
14. The approach of the court below is not justified, as a plea of collusion between the creditor and debtor was in issue. The Court should have scrutinized evidence in light of the plea of collusion. The collusion between them is apparent from the record. I have seen the Sharkat dated 18.6.1974. The litigation had started in the year 1975 Itself as the insolvency petition was filed on 15.4.1975. In Exhibit-I there is deposit of Rs. 25 dated 2.5.1977 towards the interest account. This document has been treated by the Court as agreement under the Court's order dated 26.4.1980. The said document is on general stamp of rupee one. Rs. 4 was found deficit and Rs. 40 was imposed as penalty. The said document on the face of it does not inspire any confidence. In the first part of the document it has been mentioned that after receiving Rs.
5,000 Sharkhat was executed and the property standing in the name of Param Hans shall stated guarantee in lieu of registration. Thereafter signature of Paras Ram Jati and the thumb impression of Param Hans Jati are there. After these signatures there is further writing to the effect that it is an account of Maha Narain of the year 1974. The rate of interest is rupee one per month. Under the heading deposit Rs. 5,000 cash dated 18.6.1974 is mentioned and thereafter Rs. 5,000 as loan for the purposes to purchase bullock and for construction of the house and towards house hold expenditure on the right hand side of the page under the heading naam, it is mentioned that Rs. 25 has been received on account of interest and has been signed by Parasu Ram Jati dated 20th May, 1977. This document was the basis of debt of the creditor petitioner. The entry dated 20.5.1977 itself creates a doubt towards the genuineness of loan transaction. The litigation had commenced in the year 1975 itself. The entry of 20th May, 1977, was made in the document after the lis with a view to establish the genuineness of the Sharkat. This fact though was pointed out by the appellant but has been ignored by the court below with the observation that Rs. 25 was paid towards interest on 20th May, 1977.
15. The court below has not properly scrutinized the evidence and material on record. A heavy burden lay upon the Court when a plea is raised that proceedings are fraudulent and collusive with a view to defeat the right of genuine person. Many times the parties do not approach to the fountain of Justice with clean hands. They initiate proceeding with ulterior motive with certain designs in their mind to defeat the genuine claim. The circumstances clearly establish that it was a case where sale deed was executed by the defendant No. 1 in favour of the present appellant. To set at naught the sale deed in question, the present insolvency petition was got filed by proxy by vendor against himself and a plea of loan of rupees five thousand was set up. The vendor filed a supporting written statement to the insolvency petition. He died in the meantime. Thereafter his son was examined as P.W. 2. He has admitted that the land in question is recorded in the name of appellant and has stated that Sharkhat dated 18.6.1974 was written by him and it contains his and his father's signature as well as thumb impression of his father. He has also stated that he gave Rs. 25 towards the interest account. He has further stated that his father has not filed any suit for cancellation of the sale deed. P.W. 2 supports the version of insolvency petition which itself shows that there is some secret arrangement between the creditor and debtor. The creditor examined himself as P.W. 1 and son of the debtor as P.W. 2. No other witness was examined. The substance of the statement of these two witnesses is that the loan of Rs. 5,000 was taken by the debtor along with his son and the sale deed dated 7.1.1975 was got executed without any consideration. The statement of these two witnesses is insufficient to prove any act of insolvency of the debtor. The creditor examined no independent witness. Necessity to take loan of Rs. 5.000 by Param Hans Jati and his son has not been established. Except the statement of P.W. 2 the evidence of the payment of loan of Rs. 5,000 is absent. In my view, taking evidence on its face value, it is insufficient to hold that the appellant was in any way in league with the debtor or had knowledge that the sale deed is being executed to save the property in question. On the other hand, creditor and defendant No. 1 were in collusion with each other.
16. The execution of sale deed is not denied. Dispute is only with regard to the payment of sale consideration. The registered sale deed contains averments of payment of Rs. 15.000 period to the execution of sale deed and that Rs. 10.000 was paid before the Sub-Registrar. The receipt of Rs. 10.000 is accepted, but subjected to qualification that it was taken back. If that is so, why the vendor kept silence and did not protest? Sale deed in question is a registered document. It contains the averment of payment of Rs. 10,000 before the Sub-Registrar at the time of execution of the deed. As against that, the only evidence is of oral deposition of creditor himself as P.W. 1 and the son of the vendor as P.W. 11. None of them were present at the time of registration of sale deed. They have no first hand knowledge. Therefore, their statements being hearsay is inadmissible in evidence. In the written statement of the debtor, it was pleaded that Rs. 10,000 which was given before the Sub-Registrar was taken back by the vendee and it was redeposited in the bank of his brother Bal Karan Ram, who had advanced the money. But not a single word had been stated in on this plea while in the witness box. The Supreme Court in Pawan Kumar Gupta v. Rochiram Nagdeo. 1999 (3) AWC 1793 (SC) : AIR 1999 SC 1823 (Paras 23 to 25), has held that burden of proof to substantiate that recitals in the documents are untrue lies on the party who wants to prove it. The relevant extract is quoted below ;
"23. ...................... The clear pleading of the plaintiff is that he purchased the suit property as per Ext. P. 11 sale deed. Burden of proof cannot be cast on the plaintiff to prove that the transaction was consistent with the apparent tenor of the document Ext. P-11 sale deed contains the recital that sale consideration was paid by the plaintiff to Narain Prasad the transferor. Why should there be a further burden of proof to substantiate that recitals in the document are true? The party who wants to prove that the recitals are untrue must bear the burden to prove it.
24. ..................................
25. In this case. Ext. P. II is the document by which transfer of ownership from Narain Prasad was effected. When any party proposes to show something which is at variance with the terms of Ext. P. 11 the burden of proof is on him. When respondent asserted that the real transaction is not what is apparently mentioned in Ext, P. 1 1 the burden is on the respondent to establish the transaction which he asserts to be the real one."
17. The creditor and the debtor both have failed to establish that the sale deed was a sham transaction and no consideration was passed. In Vidyadhar v. Mankiprao, JT 1999 (2) SC 183, it has been held that non payment of sale consideration or part thereof will not vitiate sale. Sale is complete as soon as sale deed is executed.
18. The P.W. 2 creditor's witness has admitted that the land in question is recorded in the name of the appellant. The creditor has not pleaded that possession has not been transferred. The purchaser has pleaded his possession over the land purchased by him through the disputed sale deed, This transfer of possession of the land and payment of sale consideration in question shows the genuineness of sale deed especially when the vendor during his lifetime did not question the sale deed.
19. Learned counsel for the appellant also pointed out from the statement of P.W. 1, creditor, that he was in service of U. P. Police and was removed for the misconduct committed by him during the service.
20. The learned counsel for the respondent has placed reliance on certain decisions in support of his contention that in insolvency proceeding a purchaser is not a necessary party but a proper party. Therefore, it was urged by him that the present appellant though impleaded, as defendant No. 2 should not be heard. Such submission being meritless is liable to be rejected. Under Section 75 of the Act, the right to file an appeal has been given to any such person aggrieved by the order passed by the District Court. The case of the appellant is that he is bonafide purchaser for value without notice. The sale deed in his favour has been declared voidable by order under appeal. Therefore, in the facts of the present case, he is entitled to maintain the present appeal.
21. In view of the above, I find sufficient force in the appeal. The appeal is allowed and the judgment and order of the court below is set aside and the Insolvency Petition No. 1 of 1975 is hereby dismissed.