Puchalapalli Chandrasekhara Reddy and anr. Vs. the Official Receiver, Nellore - Court Judgment

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commercial - insolvency - section 53 of provincial insolvency act, 1920 - property transfer in favour of petitioner - later on transferor adjudged insolvent - application filed under section 53 by official receiver to amend transfer of property on ground that transfer is fraudulent and without consideration - application challenged contending adjudication as nullity as it is based upon false debt due to debtor (transferor) and official receiver do not have locus standi - validity of adjudication cannot be challenged in disposal of application under section 53 - proper course would be appeal against adjudication. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on grounds enumerated in sub-section (2) of section 149 of the act, and no other grounds are available to it. the insurer is not allowed to contest the claim of the injured or heirs of the deceased on other grounds, which are available to the insured. if insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer and will be negation of the intention of the legislature and annihilate mandate of the provisions of sections 170 and 149 of the act. the insured can pursue appeal only after giving up the insurer as the appellant and not otherwise. in the instant case, the insurer has not withdrawn from party array but has remained prosecuting the appeal with the insured on the grounds which are available only to the insured. therefore, the joint appeal as filed by the insured and the insurer is not maintainable. section 166: [v. gopala gowda & jawad rahim, jj] claim for compensation accident due to mechanical defect in the vehicle held, it is not in dispute that the claimant suffered injuries in an accident, which occurred during the course of his employment, albeit due to his negligence but law does not render him remediless. statutory right is conferred on him, accruing by virtue of his employment under insured to claim compensation under workmens compensation act. the insurer is statutorily duty bound to discharge the liability of the owner of the vehicle, to pay such compensation to the employee, as mandated under the provisions of section 149 of the act. the right of an injured employee or his dependents as the case may be to be compensated, when injury is suffered or death occurs during his employment, is recognised not only under workmens compensation act, but also under benevolent provisions under section 166 and 167 of the m.v. act. the right of driver to seek compensation is not restricted only to the workmens compensation act, it has been enlarged to enable such person to seek just compensation (sections 166 and 168), conferring upon him the right of election engrafted under section 167 of the act to choose either of the two forum. the only defence which the insurer could take is limit of its liability as enumerated under section 147 of the act, leading to contest, inter alia, only between insured and insurer and does not impact claimants right to recover the compensation determined by the tribunal which crystallizes into enforceable right against both. in the instant case, the claimant/driver has exercised right of election under section 167 of the act to seek compensation under section 166 of the act resulting in award passed by the tribunal. therefore, the insured and the insurer have no escape but to discharge the said award as directed. undisputedly, in this case as deduced for proved facts, the vehicle in question was not properly maintained by the owner and despite faulty brake system, the claimant had undertaken the hazardous journey to his peril at the behest of and at the instruction of the owner. the owner is therefore, tortfeasor. section 168: [v. gopala gowda & jawad rahim, jj] insurers limit of liability - held, it is well settled that the liability of the insurance company for payment of compensation can be statutory or contractual. is for the insurance company to show that the insurance policy was a statutory policy and not a contractual policy to restrict its liability. that issue was neither raised before the tribunal nor is raised in this appeal requiring decision. thus, if at all the insurer has any valid ground to restrict its liability, it can proceed against the insured but firstly it has to discharge the award as required under section 149 (1) of the act. where the owner/insured has failed to maintain the vehicle as per prescribed safety standards and has caused the claimant to drive the vehicle with mechanical defects, the owner would be the tortfeasor and the claimant can maintain a petition seeking compensation under the provisions of the act, instead of seeking compensation under the workmens compensation act. on facts, held, the material evidence on record, particularly, with regard to the income of the claimant, his age, medical evidence and the evidence relating to pecuniary loss has not been considered by the tribunal in the correct perspective, which has resulted in passing of the impugned award, disproportionate to the pecuniary loss and the loss of future income of the victim. the settled principles governing determination of compensation has been given a go-bye. compensation of rs.4,15,150/- awarded by the tribunal was enhanced to rs.8,20,000/-. - if a petitioning creditor has no locus standi to file the insolvency petition if would merely result in a wrong order of adjudication passed by the insolvency court and it is a well-known principle that a mere wrong order is not a nullity.m. krishna rao, j.1. this revision originally came up before gopal rao ekbote, j. as he then was. in view of the importance of the question involved and also that there was no direct decision of this court on the said question the learned judge felt that there should be an authoritative pronouncement by a division bench of this court. hence the case is posted before a division bench.2. the petitioners are transferees from a debtor under a sale-deed ex. b-1 dated 29-12-1960. the debtor was adjudged as an insolvent on 160901961 on an application ( i. p. 1 of 1961 ) filed by a creditor on 16-1-1961. one of the acts of insolvency alleged in the insolvency petition was that the debtor conveyed the property under ex. b-1 in favour of the transferees fraudulently and without any consideration. as a result of the order of the adjudication, the estate of the insolvent became vested in the official receiver who filed an application i. a. no 284 of 1962 before the subordinate judge kavali under section 53 of the provincial insolvency act to amend the transfer ex. b-1 made by the insolvent in favour of the petitioners. thetrial court held that the transfer in favour of the petitioners was fraudulent and devoid of consideration and hence liable for cancellation at the instance of the official receiver. but the application was dismissed on the ground that the petitioning creditor had no locus standi to file the i.p. as there was no satisfactory proof of his debt. on appeal by the official receiver in a.s. 94 of 1966 against the said order, the learned district judge. nellore while confirming the finding that the transfer is not binding on the official receiver, held that it is not open to the transferees to question the debt of the petitioning creditor and accordingly reversed the judgment of the learned subordinate judge and allowed the appeal filed by the official receiver. against the said order, the transferees filed the above revision to this court.3. according to the learned counsel for the petitioners sri. t. veerabhadraiah, the question for consideration is whether in an application under s. 53 or 54 filed by the official receiver to annual a transfer, it is open to the transferee to question the truth of the petitioning creditor's debt. but we do not think that the question which really arises in this case has been properly posed by the learned counsel. even if he succeeds in establishing that the petitioning creditor's debt is false, it does not serve him any purpose as that would not result in a dismissal of the application filed by the official receiver to annul the transfer. the point really raised by the learned counsel is that as the petitioning creditor's debt was false, the order of adjudication itself is a nullity and of so, the official receiver will have no locus standi to file a an application to annul this transfer. the learned counsel for the petitioner contended that though the order of adjudication is a judgment in rem the status of the petitioning creditor can be questioned in a subsequent proceeding. we quite agree that it will be open to any party to question the debt of a petitioning creditor in a subsequent proceeding, if such a question really falls for consideration. but in the present case that question is really irrelevant for even if we assume that the petitioner's learned counsel succeeds in establishing that the petitioning creditor's debt is false, that would not render the order of adjudication a nullity, if may at the most amount to a wrong order of adjudication, which should be only corrected by way of an appeal. the transferee could have filed an appeal against the adjudication order as a person aggrieved by the said order though he was not a party, but he did not choose to file any appeal and that order became final. so long as the order of adjudication stands, the official receiver is empowered under the provisions of the insolvency act to file an application to annul the transfers made by the insolvent. it is not the case of the petitioner that the order adjudication is a nullity on the ground that the insolvency court had no jurisdiction to pass the order. hence objection regarding the truth or otherwise of the petitioning creditor's debt is not at all a defence to an application filed by the official receiver under section 53 of the act.in bajirao v. bansilal, : air1963bom212 a similar question came up for consideration and it was held that so for as the effect of the order of adjudication is concerned no one is entitled to challenge the order of adjudication except by way of an appeal under the insolvency act. it was further held that an enquiry into the status of the creditor cannot be gone into in a proceeding under the insolvency act to set aside a transfer. in coming to this conclusion the court dissented from a contrary view taken by the nagpur high court in khanderao v. udhao danesh, air 1940 nag 393. in the said nagpur case the learned judge no doubt stated the proposition of law correctly, viz., that if the order of adjudication is a nullity it is open to the transferee to raise the said question as a defence to an application filed by the official receiver under section 53 of the act. but the learned judge erred in thinking that an objection to the genuineness of the petitioning creditor's debt renders the order of adjudication a nullity. we are unable to agree with this view and we hold that the view expressed by the bombay high court represents the true position of law. if a petitioning creditor has no locus standi to file the insolvency petition if would merely result in a wrong order of adjudication passed by the insolvency court and it is a well-known principle that a mere wrong order is not a nullity. so long as the insolvency court has jurisdiction to entertain the insolvency petition, the order of adjudication cannot be said to be a nullity. in this view of the matter, the question as to the genuineness of the petitioning creditor's debt is not relevant for consideration at all as a defence to an application filed under section 53 of the provincial insolvency act. we, therefore, uphold the order of the learned district judge and dismiss this revision with costs. 4. revision dismissed.