IN THE HIGH COURT OF JUDICATURE AT HYDERABAD
FOR THE STATE OF TELANGANA AND STATE OF ANDHRA PRADESH
THURSDAY, THE SEVENTEENTH OF JULY TWO THOUSAND AND FOURTEEN PRESENT THE HONOURABLE SRI JUSTICE M.S. RAMACHANDRA RAO SA.No.606 of 2011 Between :
R. Mastan Reddy, S/o.R. Siva Reddy, Hindu, Aged : 37 years, Occ : Cultivation, R/o.D.No.1/124, Sunkulamma Palem, Tadipatri Town, Anantapur District and another. Vs.
Akula Sreenivasulu, S/o.A. Narayana, Hindu, Aged : 44 years, Occ : Business, R/o.D.No.1/126-4, Sunkulamma Palem, Tadipatri Town, Anantapur District and others.
…Appellants …Respondents Counsel for Appellants : Sri P. Srinivas Counsel for 3rd respondent : Sri K.S. Murthy Counsel for respondent nos.1 and 2 : -
The Court delivered the following : [judgment follows] THE HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO SA.No.606 of 2011 JUDGMENT :
This Second Appeal is filed challenging the judgment and decree dt.30.03.2009 in AS.No.95 of 2007 of the VI Addl. District Judge (FTC), Gooty, confirming the judgment and decree dt.24.08.2007 in I.P.No.22 of 2003 of the Senior Civil Judge, Gooty, insofar as it held that the sale deed Ex.A.3 executed by 1st respondent in favour of 3rd respondent on 24.01.2003 is not a fraudulent and void transaction.
2. The appellants herein filed the said I.P.No.22 of 2003 to declare that 1st respondent committed an act of insolvency by executing a mortgage deed under Ex.A.2 on 23.01.2003 in favour of 2nd respondent in respect of item no.1 of ‘B’ schedule and a registered sale deed dt.24.01.2003 under Ex.A.3 selling item nos.2 and 3 of ‘B’ schedule in favour of 3rd respondent; that these documents are nominal, sham and collusive; and were brought into existence to evade the legitimate claims of appellants and other creditors.
3. Respondent Nos.2 and 3 opposed the said Insolvency Petition contending that they were legitimate transactions and were not intended to evade the legitimate claim of appellants and other creditors; that under Ex.A.2, a sum of Rs.2,00,000/- was borrowed by 1st respondent from 2nd respondent and under Ex.A.3 consideration of Rs.1,50,000/- has been paid by 1st respondent for sale of item nos.2 and 3 of ‘B’ Schedule in favour of 3rd respondent.
4. The 1st respondent remained ex parte.
5. The trial court framed the following issues :
“(i) Whether the 1st respondent is due to the petitioners as claimed by them ?
(ii) Whether the mortgage in favour of 2nd respondent is valid and whether the 3rd respondent is a bonafide purchaser of items 2 and 3 of petition B schedule ?
(iii) Whether the 1st respondent can be adjudged as an insolvent?
(iv) To what order ?”
6. Before the trial court, the appellants examined PWs.1 to 3 and marked Exs.A.1 to A.3. The respondents examined RWs.1 and 2.
7. By judgment and decree dt.24.08.2007, the trial court adjudged 1st respondent as an insolvent; appointed Official Receiver, Anantapur to administer item nos.1 and 4 of plaint ‘B’ schedule and distribute its value to the General Body of creditors of 1st respondent. It declared that Ex.A.2 registered mortgage deed dt.23.01.2003 in respect of item no.1 of ‘B’ schedule is a void transaction. Insofar as item nos.2 and 3 of ‘B’ schedule which are covered by Ex.A.3 registered sale deed dt.24.01.2003 are concerned, it held that 3rd respondent is a bona fide purchaser of said items under the said document and no relief can be granted to petitioners in respect of the said document.
8. Challenging the judgment and decree of the trial court insofar as it held that Ex.A.3 sale deed dt.24.01.2003 executed by 1st respondent in favour of 3rd respondent is not a void transaction, the appellants therein filed AS.No.95 of 2007 before the VI Addl. District Judge, (FTC), Gooty. The 2nd respondent who suffered an adverse order in the trial court insofar as the mortgage deed Ex.A.2 dt.23.01.2003 in his favour was declared as a void transaction, did not file any appeal.
9. By judgment and decree dt.30.03.2009, the lower appellate court also confirmed the finding of the trial court as regards the validity of Ex.A.3 registered sale deed dt.24.01.2003.
10. Challenging the same, this Second Appeal is filed.
11. The counsel for appellants contended that both courts had acted perversely in holding that Ex.A.3 sale deed dt.24.01.2003 executed by 1st respondent in favour of 3rd respondent in respect of item nos.2 and 3 of ‘B’ schedule are not fraudulent and intended to evade the legitimate claims of appellants and other creditors; that when the trial court held that Ex.A.2 mortgage deed which was executed one day prior to Ex.A.3 sale deed was fraudulent, Ex.A.3 also should have been held by both courts to be fraudulent and void; that 3rd respondent is a resident of East Godavari District while item nos.2 and 3 open site in ‘B’ schedule are located in Tadipatri, Anantapur, and there was no necessity for 3rd respondent to buy property in Anantapur district when he is a resident of East Godavari District; that the appreciation of evidence by both the courts is incorrect; that the lower appellate court acted perversely in observing that trial court wrongly adjudged 1st respondent-debtor as an insolvent when there was no appeal by 1st respondent on that aspect.
12. On the other hand, the counsel for 3rd respondent contended that the findings of both courts that Ex.A.3 sale deed dt.24.01.2003 is a genuine and valid transaction and is not a fraudulent or void transaction, is correct; that the said finding has been arrived at by appreciating the evidence of all the witnesses and documents; and the concurrent findings of fact are not liable to be interfered with in the Second Appeal.
13. Heard Sri P. Srinivas, counsel for appellants and counsel for 3rd respondent Sri K.S. Murthy. Respondent nos.1 and 2 have been served but there is no appearance on their behalf.
14. The trial court in its judgement observed that the evidence of appellant nos.1 and 2 proves that 1st respondent still continues his business at Tadipatri and he never avoided appellants and that PW.3 deposed that 1st respondent had property worth Rs.20 to 30 lakhs at Tadipatri. It gave a finding in para.7(c) that 1st respondent is still wealthy and he has capacity to discharge the debts payable to appellants. But curiously it declared Ex.A.2 mortgage deed as one executed to avoid earlier debts contracted by 1st respondent. Coming to Ex.A.3, it accepted the evidence of 3rd respondent about the financial condition and capacity of 1st respondent at the time of purchase of property and the fact that 1st respondent was owning two other houses. It believed the evidence of RWs.1 and 2 that Rs.1,50,000/- was paid by 3rd respondent to 1st respondent; and therefore, Ex.A.3 sale deed is not a fraudulent transaction. Having held that 1st respondent had capacity to discharge the debts payable to petitioners, in my opinion, it could not have held that 1st respondent is liable to be declared as an insolvent and that the mortgage deed under Ex.A.2 in favour of 2nd respondent was wantonly executed in order to avoid the earlier debts contracted by 1st respondent.
15. The appellate court noticed the error committed by trial court in holding that 1st respondent is an insolvent while recording the finding that he had sufficient means to discharge the debts to creditors and opined that the trial court after giving the said finding, should have dismissed the IP petition. Since there was no appeal from 1st respondent, the lower appellate court necessarily had to confine itself as to whether the trial court was justified in concluding that 3rd respondent is a bona fide purchaser under Ex.A.3 for valuable consideration of item nos.2 and 3 of ‘B’ schedule. It noted the admission of PW.2 that 1st respondent owns property at Tadipatri, that he has a site worth Rs.2 lakhs and his house is worth Rs.20 lakhs and also the evidence of PW.3 that 1st respondent had property worth Rs.20 to 30 lakhs at Tadipatri. It held that 3rd respondent, though a native of Thuni of East Godavari District used to attend Tadipatri for his business of groundnut since he is a commission agent, and during the course of such transactions he came to know that 1st respondent wanted to sell item nos.2 and 3 and purchased them under Ex.A.3. It noted that the scribe of Ex.A.3 was examined as RW.2 and he also denied the suggestion that Ex.A.3 is a collusive transaction. It held that even if 3rd respondent is a native of Thuni, East Godavari District, it cannot be said that he purchased the property without any need at Tadipatri since he was carrying on the business of purchase of groundnut as commission agent and used to attend Tadipatri in connection with the said business. It further held that there is no evidence to show that 1st respondent transferred the property with intent to delay the creditors and an act of insolvency cannot be said to have been established, particularly when 1st respondent is found to be having sufficient other property to satisfy the claims of creditors.
16. The lower appellate court committed no error in holding that Ex.A.3 sale deed is a valid transaction particularly when even the trial court had accepted that 1st respondent had other properties to repay the debts of the appellants. I also agree with its conclusion that the 3rd respondent, even if he is a resident of Tuni, East Godavari District is not barred from purchasing property at TAdipatri. Both RWs.1 and 2 had stated that Rs.1,50,000/- had been paid by 3rd respondent to 1st respondent under Ex.A.3.
17. The findings of lower appellate court have been rendered on a correct appreciation of evidence on record and cannot be said to be perverse. I, therefore, do not find any question of law, much less, any substantial question of law warranting interference by him in the exercise of jurisdiction under Section 100 CPC.
18. Therefore, this Second Appeal fails and is accordingly dismissed at the stage of admission.
19. Miscellaneous applications, pending if any, in this appeal, shall stand closed.
JUSTICE M.S. RAMACHANDRA RAO Date : 17-07-2014 Ndr/*