LexARORA ENTERPRISES LTD. AND ORS. versus INDUBHUSHAN OBHAN AND ORS.
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ARORA ENTERPRISES LTD. AND ORS. A v. INDUBHUSHAN OBHAN AND ORS. MARCH 10, 1997 [B.P. JEEVAN REDDY AND K.S. PARIPOORNAN, JJ.] B Insolvency Act, 1920 : Insolvency proceedings-Effect of annulling adjudication of-Suit filed by plaintiffs for declaration that agreement between them and first defendant, C an undischarge insolvent, for sale of property was valid and binding and for a decree for recovery of amount paid by f om1er to later-On death of first defendant, plaintiff took out chamber summons in said suit to bring on record LRs of first defendant as defendants in his place-Chamber summons dis- \ missed by court on two points--Firstly, sale agreement was void and unenf or: D ceable, therefore, suit not maintainable-Secondly, amendments sought by plaintiffs to imp lead LRs of first defendant could not 1Je allowed-Conse- quently suit stood abated against LRs of first defendant and order of court attained finality-Meanwhile insolvency proceedings annulled-Five years afte; dismissal of chamber summons fresh chamber summons filed by plain- tiffs in the same suit praying for amendment of plaillt by deleting name of E first defendant from title of suit and to sulistitute names of his Lrs in his place-No factual plea made to set aside: abatement-Held : Annulling of insolvency proceedings wiped out insolvency and"its effect-Property of insol- vent revested in him retrospectively from date of vesting order-But thereby the suit and judicial orders passed thereon were not rendered null and void F automatically until set aside or annulled in appropriate proceedings-11ze suit having become non-existent, fresh chamber summons in such suit was barred and unmstainable in law. The appellants filed a suit in the High Court for a declaration that the agreement between them and the first defendant-respondent, an undis- G charged insolvent, for sale of property by the latter was valid and binding and for a decree for recovery of the amount paid by the appellants to the said first defendant. On the death of the first defendant, the appellants took out chamber summons in the said suit to bring on record the legal heirs of the first defendant as defendants in his place. The chamber H 857 858 SUPREME COURT REPORTS [1997) 2 S.C.R. A summons was dismissed by a Single Judge on two points viz., that the sale agreement was void and unenforceable and, therefore, suit was not main- tainable and amendments sought by appellants to implead the legal heirs of the first defendant could not be allowed. A Division Bench of the High Court dismissed the appeal filed by the appellants. Consequently, the suit B stood abated against the legal heirs of the first defendant and the order of the Court attained finality. In the meanwhile insolvency proceedings of the first defendant were annulled. Five year after dismissal of the chamber summons, the appel- lants took out fresh chamber summons in the same suit praying for C amendment of the plaint by deleting the name of the first defendant from the title of the suit and to substitute the names of his legal heirs in his place. No factual plea made to set aside the abatement. The only plea made was that the abatement of the suit, if any, required to be set aside as a matter of law and that the orders made in the earlier summons were non-est and ineffective. The High Court dismissed the fresh chamber summons. D Hence this appeal. Dismissing the appeal, this Court HELD : 1.1. The effect of annulling the adjudication in insolvency E proceedings is to wipe out altogether the insolvency and its effect. The property will revert in the insolvent retrospectively from the date of the vesting order. [867-B] 1.2. However, the effect of the suit (independently) filed by the appel- lants and the orders passed therein have to be considered. That is a distinct p and different matter, which has its own existence and legal impact, unim- paired by the annulment of the insolvency and wiping out its effect retroac- tively, in law, the suit and the judicial orders passed thereon are not wiped out, or rendered void or a nullity, automatically. The order passed in the suit is not non-est or ineffective. This order is valid until set aside or annulled. It cannot be ignored. It will have legal effect of its own, until ap- G propriate proceedings are taken to establish its invalidity and to get it annulled by a person entitled to avoid it. The said order stands even today; it has
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