O R D E R
The only question in this appeal is whether Chiranji Lal, declared insolvent, had 1/3rd share in the property items 1 and 3 which was the subject matter before the High Court.
This appeal by special leave arises from the order in Second Appeal No.4/75 dated February 15, 1980. The Insolvency Court initially declared all the three partners and the partnership firm by name Chiranji Lal Nihal Chand as insolvents. On appeal filed by Nihal Chand and Sarwan Kumar, the District Court, by order dated August 29, 1955, declared them to be not insolvents and set aside the order of the Insolvent Court. The revision filed in the High Court was dismissed on September 29, 1959. Thus as far as Chiranji Lal is concerned, the order declaring him to be insolvent became final.
The Official Receiver, after taking over the estate, filed an application under Section 4 of the Provincial Insolvency Act on August 16, 1966 for a declaration that the insolvent had 1/3rd share in items mentioned in paras 4, 6 and 7; and 2/3rd share in property listed in para 5 of the petition. The Insolvency Court declared that he had got 1/3rd share in some properties and 2/3rd share in some other; but on appeal the District Court declared that Chiranji Lal had 1/3rd share in Item No.317, 326 in Division Number 3 in Ludhiana and 1000 sq. yds. in Civil Lines, which the High Court identified as item number 1 and 3 and held that Chiranji Lal had 1/3rd share in those properties. Thus, this appeal by special leave.
Shri E.C. Agarwal, learned counsel for the appellants, who are sons of Nihal Chand, contended that the alleged admissions relied on by the High Court are not correct. There is no such admission which was subsequently explained in the evidence and the High Court had not bestowed due care in scrutinising the evidence. He has contended that the petition itself is barred by limitation under Article 120 of Schedule III to the Limitation Act, 1908 which is equivalent to Article 113 of the Schedule to the Limitation Act, 1963, which mentions limitations of six years; but as the application was filed after 11 years, it is barred by limitation.
The first question is whether the application is barred by limitation. It is seen that declaration of insolvency was made on February 22, 1955, when the estate was taken into custody by the Official Receiver after the proceedings became final. He sought a declaration as to which part of the property, the insolvent had in several items of properties. He rightly had taken that step since it was difficult for him to decide as to in which part and to what extent, he was insolvent in joint properties. The insolvent Chiranji Lal claimed to have 1/3rd or 2/3rd share, as the case may be. The limitation, therefore, would begin to run when the appellants sought to create cloud over that right setting up their entitlement or title to these properties. It was done after the application under Section 4 was made by the Official Receiver. The High Court has rightly concluded that the cause of action, viz., the right to sue in the present case had accrued to the Official Receiver when some cloud was cast on the title of the Official Receiver claiming 1/3rd share of the insolvent. Under these circumstances, the learned Judge of the High Court rightly concluded that "I do not find any force in this contention of the learned counsel for the respondent". Consequently, the suit regarding the property in item No.1 and 3 was held to be within time. We agree with the learned Judge in this conclusion. The creditors’ stand was that it was joint property of the three partners and of the partnership firm which was sought to be declared as insolvents. In the proceedings for declaration of insolvency, the firm as well as the appellants father and Chiranji Lal and another were declared to be not insolvent. Since Chiranji Lal allowed the declaration to become final and the property was jointly property held by all of them, it would be difficult to decide as to what extent and in which property, the insolvent had interest or title to the property. When the appellants claimed exclusive title to these properties, the cloud on the title of the Official Receiver, who had taken over the estate, was cast. Consequently, the limitation began to run when the cloud was cast. Admittedly, that was done when the application came to be filed. Thus, the application was within limitation.
The question then is whether in items 1 and 3 as noted by the High Court, the insolvent had 1/3rd share. The question was considered in extension and it was held that the insolvent had 1/3rd share in item 1 and 3. The High Court noted in the order the admissions thus:
"Wherein admissions regarding property
at Item No.1 have been made, by the
respondent Nihal Chand, such as AW 1/4
evidence given by Nihal Chand:AW 5/7
written statement of Nihal Chand dated
26.8.57, AW 2/3 dated 8th October, 1965,
an application filed on behalf of Nihal
Chand claiming 1/3rd share in this
property; AS 5/6 application dated
29.7.54 by Nihal Chand, AW 4/1 the
desolation deed, AW 6/2 the copy from
the entries of the register of the
property-tax for the years 1956 to 1961;
AW 6/3 for the years 1960 to 1965;AW 6/9
for the years 1965 to 1970, in which the
share of Chiranji Lal insolvent has been
shown as 1/3rd. All this evidence has
been relied upon by the trial Court and
the lower appellate Court has also
observed, that "from the perusal of
these documents, it is well likely
clear, that these documents are only
admissions of either Nihal Chand or
Chiranji Lal, insolvent. The admissions,
no doubt have got some evidentiary value
and they are presumed to be true unless
they are proved to be false and wrong".
But, subsequently, all this evidence has
been brushed aside on the ground that
the same is contrary to the sale-deeds
and the revenue record and hence has not
much evidentiary value.
it was conceded that there are five
sale-deeds regarding the property at
Item No.1. Out of these, three sale-
deeds, i.e. Ex. OC dated 2nd June, 1938,
Ex. OL dated 17th April, 1940 and Ex.OM,
dated 2nd June, 1935 are in favour of
all the three brother, including
Chiranji Lal, insolvent, and hence 1/3rd
share in the property, which is the
subject matter of these sale-deeds, does
not vest in the Official Receiver.
Once the admission is proved, the burden
is shifted on the maker thereof to
explain the circumstances under which
the same was made. What a party himself
admits to be true may reasonably be
presumed to be so and until the
presumption was rebutted the fact
admitted must be taken to be
established. In the present case, Nihal
Chand, respondent, who appeared in the
witness-box, tried to explain the said
admissions by saying that in order to
help him, i.e. the insolvent, Chiranji
Lal, he allowed him to have 1/3rd share
of the rent of this property. Various
admissions made in this case are
unambiguous and unequivocal. In the
written reply Ex.AW 5/7, filed by Nihal
Chand in these proceedings, it has been
clearly admitted that the insolvent has
1/3rd share in the property. Under these
circumstances, the burden of proof on
the Official Receiver, if any, is fully
discharged. Mere absence of entry in the
revenue record in favour of persons in
pursuance of the sale-deeds in their
favour is hardly of any consequence.
Consequently, the findings of the lower
appellate Court on this point is set
aside and that of the trial Court is
restored and it is held that the
Official Receiver has 1/3rd share in the
property at item No.1."
These considerations with equal force apply to item No.3.
In view of the discussion of various items by the High Court and the conclusion reached on the basis thereof, we entirely agree with the High Court that the admissions bind the appellants. Therefore, it is clearly established from the admission that the insolvent Chiranji Lal had 1/3rd share in these properties. Consequently, they stood vested in the Official Receiver and he is entitled to proceed further in realising the amounts to distribute to the creditors.
The appeal is accordingly dismissed but, in the circumstances, without costs.