SANKAR RAM AND CO. versus KASI NAICKER AND ORS.

Citation: [2003] SUPP. 1 S.C.R. 930 · Decided: 30-07-2003 · Supreme Court of India · Bench: SHIVARAJ V. PATIL · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
SANKAR RAM AND CO. 
v. 
KASI NAICKER AND ORS. 
JULY 30, 2003 
B 
[SHIVARAJ V. PATIL AND D.M. DHARMADHIKARI, JJ.] 
Provincial Insolvency Act, 1920: 
C 
Ss. 28, 55 and its Proviso: 
Insolvency Petition by the debtor/transferor--Bonafide transferee for 
valuable consideration-Protection to-Held: When transfer of shares to the 
transferee was for valuable consideration without any notice as to the 
presentation of the Insolvency Petition by the debtor, requirements of Proviso 
D to Section 55 satisfied-Hence, entitled to protection/claim. 
Section 218/Proviso to Section 55--Protection to creditor vis-a-vis--
Protection to bona fide transferee-Interpretation of-Held, An order of 
adjudication in an Insolvency Petition relates back to the date of its 
presentation-No word or Provision of Law could be left redundant/ 
E superjluous--Boih must be given effect to by harmoniously construing-On 
construing so the bonafide transferee could be protected under the provisions 
when the conditions of Proviso to Section 55 are complied with. 
The question which arose for consideration and decision in the appeal 
F was as to whether protection under Section 55 of the Provincial Insolvency 
Act is available to a bonafide transferee for valuable consideration after 
presentation of the Insolvency Petition by or against the debtor but without 
notice and before passing an order of adjudication. 
Answering the question in the affirmative and allowing the appeal, 
G the Court 
HELD: I.I. The object of Section 28 of the Provincial Insolvency Act 
is to secure unrestricted right to dispose of insolvent's property after an 
order of adjudication is made. On making an order of adjudication, the 
whole of the property of the insolvent shall vest in the Court or in a 
H 
930 
SANKAR RAM AND CO. '" KASI NAICKER 
931 
Receiver, as the case may be. When sub-section (I) is read along with sub- A 
section (7) of the Act, the effect would be an order of adjudication relates 
back to the date of presentation of Insolvency Petition and the order of 
adjudication takes effect from the date of the presentation of the 
lnsolvency Petition. Consequently, vesting of property under sub-section 
(2) also relates back to the date of presentation of the Insolvency Petition. B 
Combined reading of sub-sections (I), (2) and (7) makes the position clear 
that the interest of the creditors is safeguarded, parties are put on notice 
against attempt to transfer the property after the date of presentation of 
the Insolvency Petition by the petitioners or others relating to his property 
and also to warn the intending purchasers or transferees that they are 
taking the risk of purchasing or getting the property transferred in their C 
names during the pendency of the insolvency proceedings from the date 
of presentation of the petition itself and even before passing of an order 
of adjudication. (936-D-GI 
1.2. Sections 28 and 55 of the Act are to be read together. Where 
the transfer has been made by the insolvent after presentation of the D 
Insolvency Petition, the transfer cannot be held as void ab initio but its 
validity or otherwise depends upon a consideration as to whether the 
conditions specified under Section 55 are or are not satisfied. 
[936-H; 937-AJ 
1.3. It is cardinal rule of construction that normally no word or 
provision should be considered redundant or superfluous in interpreting 
the provisions of a statute. The Courts always presume that the legislature 
inserted every part thereof with a purpose and the legislative intention is 
that every part of the statute should have effect. It may not be correct to 
E 
say that a word or words used in a statute are either unnecessary or F 
without any purpose to serve, unless there are compelling reasons to say 
so looking to the scheme of the statute and having regard to the object 
and purpose sought to be achieved by it. Once the requirements of Section 
55 of the Act are satisfied,. the appellant is entitled for the protection of 
the said Section as a bona fide transferee. A contrary view takes away G 
the very protectivP. umbrella specifically made available to a bona fide 
transferee covered by Section 55. Protection provided for bona fide 
transfer in Section 55 is in a way exception to Section 28(7) of the Act. 
Proviso to Section 55 of the Act protects bona fide transactions mentioned 
in clauses (a) to (d) of Section 55. (937-C, D, F, HI 
H 
932 
SUPREME COURT REPORTS (2003] SUPP. I S.C.R. 
A

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