Holding

The Supreme Court held that the High Court erred; the sale deed was not saved by Section 37 because the transaction lacked finality and was based on fabricated documents, and therefore the district court's order rejecting the deed stands.

Summary

The case concerned a partnership share that was purportedly sold by an official receiver after the appellant and his mother were declared insolvent in 1977. The sale deed dated 11 March 1983 was executed based on a district court order, but later the insolvency adjudication was annulled in 1996. The High Court held that all actions of the receiver between the declaration of insolvency and its annulment were saved under Section 37(1) of the Provincial Insolvency Act and that the sale deed remained valid. The Supreme Court examined the evidence and found that the alleged offer and acceptance documents were fabricated, the transaction was not protected under Section 55, and that Section 37 requires finality of transactions, which was lacking. Consequently, the Court held that the High Court erred in upholding the sale deed and restored the district court's judgment rejecting the deed. The appeals of the appellants were allowed, while the connected appeals of the respondents were dismissed.

Issues considered

Whether Section 37(1) of the Provincial Insolvency Act saves the acts of the official receiver, including the 1983 sale deed, between the declaration of insolvency and its annulment.
Whether the sale deed of 11 March 1983 is valid and binding on both the appellant and his mother.
Whether the documents alleged to show an offer and acceptance (Ex.P.4 and Ex.P.6) are genuine and thus the transaction protected under Section 55 of the Act.
Whether the High Court erred in reversing the factual findings of the District Court and in its interpretation of Section 37.

Legislation cited

Code of Civil Procedure, 1908s. 144, s. 151, s. 94
Provincial Insolvency Act, 1920s. 37, s. 4, s. 5, s. 55

Headnote

Issue for Consideration Whether in the facts and circumstances of the case, the High Court erred in holding that all the acts done by the official receiver between the declaration of the appellant’s insolvency and adjudication of insolvency were saved u/s.37(1), Provincial Insolvency Act, 1920 and that notwithstanding the annulment of insolvency against the appellant and his mother, the sale deed executed on 11.03.1983 was valid. Headnotes† Provincial Insolvency Act, 1920 – s.37 –

Subjects

Section 37Provincial Insolvency Act, 1920Proceedings on annulmentAnnulment of insolvencyInsolvency and the annulment of the adjudication of insolvencyProperty shall not revert to debtorAnnulment of adjudication under Section 37, Provincial Insolvency Act, 1920Duty of appellate court

Judgment

[2025] 9 S.C.R. 1539 : 2025 INSC 1159

Singamasetty Bhagavath Guptha & Anr.
v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D)
by Lrs. & Ors.
(Civil Appeal No(s). 12048-12049 of 2018)
25 September 2025
[Pamidighantam Sri Narasimha and
Atul S. Chandurkar, JJ.]

Issue for Consideration
Whether in the facts and circumstances of the case, the High Court
erred in holding that all the acts done by the official receiver between
the declaration of the appellant’s insolvency and the annulment
of the adjudication of insolvency were saved u/s.37(1), Provincial
Insolvency Act, 1920 and that notwithstanding the annulment of
insolvency against the appellant and his mother, the sale deed
executed on 11.03.1983 was valid.

Headnotes†
Provincial Insolvency Act, 1920 – s.37 – Proceedings on
annulment – By way of the impugned judgment, High Court
inter alia held that all the acts done by the official receiver
between the declaration of the appellant’s insolvency and
the annulment of the adjudication of insolvency were saved
u/s.37(1) and that, notwithstanding the annulment of insolvency
against the appellant and his mother, the sale deed executed
on 11.03.1983 was valid:
Held: 1.1 It is only upon a conclusion that the transactions and
orders of the court and the receiver are valid and attained finality
that the property shall not revert to the debtor upon annulment of
adjudication u/s.37. [Para 18]
1.2 Documents in Ex.P.4, the alleged offer and Ex. P.6, the alleged
acceptance were fabricated as there were significant contradictions
in the said documents – The fact that the documents were fabricated
was further strengthened by the failure of the Partner to produce
the original correspondence of offer and acceptance despite the
Notice from the official receiver for the production of the same.
[Para 21]
1540 [2025] 9 S.C.R.

Supreme Court Reports

1.3 The transaction covered by Ex.P.4 and Ex.P.6 were not protected
u/s.55 of the Act, as the provision is applicable only to protect
bonafide transaction earlier to the adjudication of insolvency –
Ex.P.4 was not in existence on 08.05.1975, the date of initiation
of the insolvency proceedings. [Para 21]
1.4 The deposits of Rs. 35,000/- on 19.04.1981, Rs 60,000/- on
25.05.1981, and Rs. 69,955/- on 07.02.1983 by the Respondent No.
1 as consideration for share acquisition were inconsequential as the
transfer deed dated 11.03.1983 was not to survive at all. [Para 21]
1.5 For operation of s.37, there must in fact be a finality of
transactions – There must be conclusion of sales, dispositions
of property and/or the payments made in that regard – s.37
proceedings cannot partake the character of a civil court deciding
a suit for specific performance of an agreement. [Para 22]
1.6 Transfer deed dated 11.03.1983 was executed on the basis
of the order passed by the District Court on 04.01.1983 – When
the said order dated 04.01.1983 is set aside and the matter is
remanded back to the District Court for reconsideration in view of
the subsequent annulment order dated 20.04.1996, the High Court
was not justified in reversing the findings of the District Court on
the ground that the transfer deed remained unchallenged – High
Court committed a serious error in drawing these conclusions –
It also committed a jurisdictional error in not reappreciating the
evidence adduced before the trial court, which as an appellate
court the High Court was bound to undertake. [Paras 23, 24]
1.7 High Court committed a serious error in reversing the findings
of the District Court – If the judgment of the District Court is upheld,
the appeals filed by the purchaser does not survive –Appeals filed
against the judgment and order passed by the High Court in M.F.A
No. 2873 of 2004 c/w M.F.A No. 2706/2004 dated 25.02.2011 are
allowed and the judgement and order passed by the Additional
Judge in I.A.NO. XV in I.C. No 2/75 c/w Ms. C.NO.5 /2000 dated
16.02.2004 is restored. [Paras 23, 24, 27]

Case Law Cited
Babu Ram alias Durga Prasad v. Indra Pal Singh [1998] 3 SCR
1145 : (1998) 6 SCC 358; Arora Enterprises Ltd. v. Indubhushan
Obhan [1997] 2 SCR 857 : (1997) 5 SCC 366; Santosh Hazari v.
Purushottam Tiwari [2001] 1 SCR 948 : (2001) 3 SCC 179;
Madhusudan Das v. Narayanibai [1983] 1 SCR 851 : (1983) 1
SCC 35; Sarju Pershad Ramdeo Sahu v. Jwaleshwari Pratap
Narain Singh [1950] 1 SCR 781 : AIR 1951 SC 120 – referred to.
[2025] 9 S.C.R. 1541

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

List of Acts
Provincial Insolvency Act, 1920.

List of Keywords
Section 37, Provincial Insolvency Act, 1920; Proceedings on
annulment; Annulment of insolvency; Insolvency and the annulment
of the adjudication of insolvency; Property shall not revert to debtor;
Annulment of adjudication under Section 37, Provincial Insolvency
Act, 1920; Duty of appellate court.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 12048-
12049 of 2018
From the Judgment and Order dated 25.02.2011 of the High Court
of Karnataka Circuit Bench at Dharwad in MFA Nos. 2873 and
2706 of 2004
With
Civil Appeal No(s). 12050-12053 of 2018

Appearances for Parties
Advs. for the Appellants:
Basava Prabhu S. Patil, ADN Rao, Sr. Advs., Abdul Azeem
Kalebudde, Annam Venkatesh, Rahul Mishra, Ms. Agrimaa Singh,
Satyarth Singh.
Advs. for the Respondents:
ADN Rao, Basava Prabhu S. Patil, Sr. Advs., V. N. Raghupathy,
Annam Venkatesh, Rahul Mishra, Ms. Agrimaa Singh, Satyarth
Singh, Abdul Azeem Kalebudde.

Judgment / Order of the Supreme Court

Judgment

1. The present appeals assail the reversing judgment of the Karnataka
High Court1 setting aside the common order passed by the Additional

1 In Miscellaneous First Appeals M.F.A. No. 2873/2004 and M.F.A. No. 2706/2004, dated 25.02.2011.
1542 [2025] 9 S.C.R.

Supreme Court Reports

District Judge Bellary2 under Provincial Insolvency Act, 19203. For the
reasons to follow, we have allowed the appeals filed by the appellants
and also dismissed the connected appeals filed by the respondents
against the very same judgment of the High Court.
2. The facts relevant to the present appeals are that on 28.06.1963, a
partnership in the name of M/s Gavisiddheshwara & Co. came to be
constituted by late Sri Allam Karibasappa (the original applicant before
the District Court) and Agadi Laxminarayana Setty, the convenor of
the firm. The said firm was reconstituted with the inclusion of three
more persons, namely, Singamasetty Subbarayudu (father of the
present appellant), P. Govindappa Setty and T. G. Sathyanarayana
Setty and a deed of partnership was entered. Sri Allam Karibasappa
was a major partner in the firm, having a share of 8 anna in a rupee,
and Sri Agadi Laxminarayana Setty had a share of five anna in a
rupee. The remaining three partners had a share of one anna in a
rupee. The firm made losses in the initial years but started to make
profits in the early 1970s. It is learnt that the composition of the firm
underwent some major changes in the later years, effectuated by
clause 9 of the partnership agreement that included devolution of
the share of a partner to other partners as a peremptory right.
3. On 31.03.1974, Sri Sathyanarayana Setty retired from the firm, and
his share was purchased by Allam Karibasappa for a consideration
of Rs. 95,000/- (book value), increasing the latter’s share to 9 annas
in a rupee. The firm was accordingly reconstituted on 01.04.1974.
Soon thereafter, on 20.02.1975, appellant’s father Sri Singamasetty
Subbarayudu passed away, and appellant was inducted into the
partnership on 21.02.1975. It is learnt that at the time of his death,
Sri Singamasetty Subbarayudu owed a large sum of money to various
creditors. The appellant, in view of his family’s indebtedness at the
relevant time, is alleged to have sent a letter dated 20.03.1975 to
the convenor of the firm offering to sell his share of one anna in a
rupee to any of the willing partners.
4. Late Shri Allam Karibasappa, i.e., the Respondent No. 1 (through
LRs), has made the case throughout that he intended to purchase
the appellant’s share. Since other partners were not inclined to

2 In IA No. XV IN I.C. No. 2/75 Clubbed with Ms. C. No. 5/2000, dated 16.02.2004.
3 Hereinafter referred to as ‘the Act’.
[2025] 9 S.C.R. 1543

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

purchase appellant’s share, Respondent No. 1 accepted appellant’s
offer and endorsed his acceptance vide letter dated 25.03.1975. On
25.03.1975, Respondent No. 1 addressed a letter to the appellant
and mentioned that the consideration for the appellant’s share in
the firm would be a sum of about Rs 95,000/- and called upon the
appellant to receive the said money. It is the case of the Respondent
No. 1 that, in view of the communications between the parties, the
contract had stood concluded, except for a formal deed for transfer.
5. While the parties were in the process of deliberations, some of the
creditors of the appellants filed insolvency proceedings in I.C. No.
2/75 and I.C. No. 3/75 before the District Court at Bellary under the
Act, in which the appellant and his mother were arrayed as parties.
On 25.06.1977, the District Court declared appellant and his mother
insolvent and appointed a receiver to take over appellant’s assets.
6. On 09.08.1977, the original applicant, Sri Karibasappa, filed I.A.
No. XV in I.C. No. 2/75 under Sections 4 and 5 of the Act, before
the District Court seeking direction to the receiver to accept Rs.
95,000/- and transfer the one anna share of late Sri Singamasetty
Subbarayudu in his favour and contended that there was a concluded
contract prior to adjudication of insolvency and that he was entitled to
share of the appellant. The said application I.A. No. XV was allowed
by the District Court on 04.01.1983, directing the official receiver to
execute a transfer deed in favour of Sri Allam Karibasappa. In terms
of the District Court, the official receiver transferred the share of the
appellant and the appellant’s mother, and the transfer came to be
registered on 11.03.1983.
7. Appellants challenged the order dated 04.01.1983 before the High
Court vide M.F.A. No. 1048/1983. The High Court on 10.06.1983
passed an order staying the operation of the District Court order
dated 04.01.1983.
8. However, subsequently, during the pendency of the proceedings
before the High Court in M.F.A. No.1048/1983, the appellants
preferred an application under Section 35 of the Act, before the
District Court in I.C. No. 2/1975 on the ground that the appellants
had discharged the liabilities towards most of the creditors. The said
application came to be allowed on 20.04.1996, and the insolvency
process as a whole, which was initiated pursuant to the order dated
25.06.1977, was annulled. The District Court also observed that the
1544 [2025] 9 S.C.R.

Supreme Court Reports

pendency of the appeal before the High Court will not come in the
way if an order of annulment is passed. The relevant portion of the
said order is as follows:
“2. According to Section 35 of the Provincial Insolvency Act,
if Court is satisfied that the amount of all the creditors is
paid, it can pass order of annulment of adjudication. Here in
this case, the insolvent has shown that all undisputed debt
is paid to the respective creditors or to their heirs. In case
of disputed claim, the amount is deposited in the Court.
3. It is submitted that some dispute is pending before the
Hon’ble High Court of Karnataka regarding one property,
i.e. Nataraj Theatre, between Insolvent and some other
persons. Pendency of the said case will not come in the
way of passing order of annulment. Because that dispute is
between insolvent and some other party. Moreover, subject
to the decision of the Hon’ble High Court in respect of
that property annulment order can be passed. When the
insolvent has shown that he has paid the debt amount, if
order of annulment is not passed, much hardship would
be caused to the insolvent. Hence, in the interest of justice
passing annulment order is necessary.”
9. On 13.02.1997, the appeal directed against the District Court order dated
04.01.1983 was allowed by the High Court, and as a consequence,
the District Court order, as well as the transfer deed dated 11.03.1983,
came to be nullified. However, the High Court remanded the matter
back to the District Court for fresh adjudication. The relevant portion
of the High Court order dated 13.02.1997 is as under:
“In as much as the order made by the learned District
Judge has already been annulled without making use of
the directions issued earlier by him and which were under
appeal before this Court, it becomes necessary to set
aside the order made by the learned District Judge and
remit the matter for fresh adjudication on this aspect of
the matter, if necessary. It is open to the parties to raise
all contentions, including the question as to whether an
application of this nature is maintainable or not.
Appeal shall stand disposed of accordingly.”
[2025] 9 S.C.R. 1545

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

10. On remand, appellant and his mother preferred an application Ms.
C. No. 5/2000 under Section 151 of the Code of Civil Procedure,
1908 seeking dismissal of the I.A. No. XV filed by Sri Karibasappa
and sought cancellation of the sale deed executed by the official
receiver. The District Court heard both sides and by its judgment
dated 16.02.2004 dismissed I.A. No. XV with costs and allowed the
application - Ms. C. No. 5/2000 filed under Sections 144 and 94
read with Section 151 of the Code of Civil Procedure with costs. The
District Court thus ordered the official receiver to execute a registered
instrument after cancelling the transfer deed dated 11.03.1983 within
three months from the date of the order and also granting liberty
to the appellants to get such a registered deed through a court
Commissioner, in the event the office of the official receiver was
lying vacant. The District Court also ordered that the expense for
such registration would be made from deposits made earlier to the
District Court, and the appellant’s family would be entitled to receive
the balance amount. The relevant excerpt from the District Court
judgement is as under:
“47. Before parting this court is bound to assign reasons
for imperative need of an instrument cancelling the said
deed of transfer dated 11.03.1983. It cannot be disputed
that through this transfer deed dated 11.03.1983, the official
receiver being Respondent No.1 transferred one anna
share of the then insolvent Singmasetty Bhagawath Guptha
being Respondent No.3, in the said partnership firm. Under
Ex.P.4 being the got up document dated 20.03.1975, the
Respondent No.3 was stated as· having offered to the
remaining partners of the firm to transfer one anna share
of his father. Since Ex.P.4 is unregistered document and
as it has already been declared as got up document no
further action is essential on this document. But the same
cannot be the reasons in regard to the said transfer deed
dated 11.03.1983 which is a registered instrument. If it is not
cancelled through a necessary instrument, it would create
unwarranted confusion and consequences. And at this
juncture, it cannot be forgotten that the Respondent No.3
who was inducted as a partner under Ex.P.2 was made to
discontinue because of the insolvency proceedings. Now
that adjudicated insolvency has been annulled the legal
1546 [2025] 9 S.C.R.

Supreme Court Reports

position of this Respondent No.3 as a partner in the said
firm having a share of one anna is bound to be restored.”
11. Aggrieved, the respondents preferred appeals before the High
Court. During the pendency of the appeals, appellants also made an
application seeking direction to Respondent No. 1 to furnish accounts
from the date of transfer till the date of disposal. The application was
allowed by the Division Bench of the High Court on 21.11.2005 and
the respondents were directed to deposit a sum of Rs. 50,61,000/-
being the share of the appellant and also to furnish the accounts,
subject to the final result in the appeals. The High Court’s interim
direction was challenged before this Court in SLP (C) No. 3604 of
2006, which came to be dismissed on 05.05.2011.
12. Finally, by the order impugned before us the High Court allowed the
appeals of the respondents. The High Court held that all the acts
done by the official receiver between the declaration of the appellant’s
insolvency and the annulment of the adjudication of insolvency were
saved under Section 37(1) of the Act. For the conclusion, the High
Court placed reliance on the judgements of this Court in Babu Ram
alias Durga Prasad v. Indra Pal Singh4 and Arora Enterprises Ltd. v.
Indubhushan Obhan.5 On the basis of these precedents, the High
Court held that, notwithstanding the annulment of insolvency against
the appellant and his mother, the sale deed executed on 11.03.1983
was valid. The relevant portion of the impugned order is as under:
“20. (…) When the principles laid down by the Hon’ble
Supreme Court in the above referred cases are applied to
the above said undisputed facts of the case, it is clear that
the order of the learned District Judge dated 20.04.1996
annulling his earlier order dated 25.06.1977 adjudicating
Singamasetty Bhagavath Gupta and Singamasetty
Venkataramaiah and Son as insolvents and the order
passed by this Court in M.F.A. No.1048/1983, wherein
the order of the learned District Judge passed on I.A.XV
dated 04.01.1983 pursuant to which, the sale deed dated
11.03.1983 was executed by the Official Receiver in favour
of Allum Karibasappa, has been set aside, would not in any

4 (1998) 6 SCC 358.
5 (1997) 5 SCC 366.
[2025] 9 S.C.R. 1547

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

way affect the sale deed dated 11.03.1983 that is executed
by the Official Receiver in favour of Allum Karibasappa as
the said conveyance is saved as per the principles laid
down by the Hon’ble Supreme Court as referred to above.
The learned District Judge has proceeded on the basis
that Exs. P4 to P7 are concocted and fabricated. The said
finding is based upon surmises and conjectures, as it is
clear from the order passed by the Insolvency Court that
after the declaration of insolvency by the District Judge,
Bellary, in I.C. Nos. 2 and 3 of 1975 dated 25.06.1977,
all the assets of the insolvents vested with the Official
Receiver and the sale deed, which has been executed
on 11.03.1983 has not been challenged nor set aside by
the order of the Court and only because of the amount
deposited creditors could be discharged and order of
insolvency could be annulled and now it is not open to
contend that sale deed is void. In view of the above said
finding on the facts of the case, the decision relied upon
by the learned counsel appearing for the respondents is
not helpful to the present case. However, the question that
is to be considered is as to whether the said sale deed
would be binding in respect of the entire extent of one anna
share of Singamasetty Subbarayudu in the partnership
firm - M/s. Gavisiddeswara and Company.”
13. However, on the question as to whether the sale deed dated 1983
can bind both appellant and his mother qua their half-anna share
each in the firm, the High Court observed that the execution of the
sale deed in 1983 shall bind only the appellant as there was no
consent by the appellant’s mother regarding sale of her shares. The
relevant excerpt of the High Court judgement is as under:
“21. (…) There is no material on record to show that
Singamasetty Govindamma had consented to sell her share
along with Singamasetty Bhagavath Gupta in favour of
partners of the Firm - M/s. Gavisiddeswara and Company.
The material on record would show that Singamasetty
Govindamma had filed objections by contending that
she had not expressed her willingness to sell the share
inherited by her. Since Singamasetty Bhagavath Gupta and
Singamasetty Govindamma have succeeded to the estate
1548 [2025] 9 S.C.R.

Supreme Court Reports

of Singamasetty Subbarayudu including one anna share
in partnership firm - M/s. Gavisiddeshwara and Company
as class I heirs in equal proportion i.e., half anna share
each in the absence of any material whatsoever on record
to show that Singamasetty Govindamma, the mother of
Singamasetty Bhagavath Gupta had consented to sell
the share of her husband in the said partnership firm in
favour of the other partners, it is clear that the sale deed
dated 11.03.1983 could not have been executed in favour
of Allum Karibasappa in respect of the entire extent of
one anna share of Singamasetty Subbarayudu of M/s.
Gavisiddeshwara and Company. The sale deed dated
11.03.1983 executed by the Official Receiver in favour
of Allum Karibasappa, though saved by the provisions of
Section 37 of the Provincial Insolvency Act as referred to
above, the same would be binding only in respect of the
half anna share of Singamasetty Bhagavath Gupta…”.
14. The appellants challenge the reversal of the District Court judgment
by filing the present appeals. The respondents have also preferred
Special Leave Petitions assailing the findings of the High Court insofar
as it entitles the appellant’s mother to her half anna share. These
Special Leave Petitions were admitted on 11.12.2018. We heard
Mr. ADN Rao, learned Senior Advocate and Mr. Annam Venkatesh,
Advocate for the appellants and Mr. Basava Prabhu S. Patil, learned
Senior Advocate and Mr. Abdul Azeem Kalebudde, Advocate for the
respondents.
15. At the outset, Mr. Patil took us through the mandate of Section 37
of the Act and the relevant precedents to argue that the decision
of the High Court affirming the legality and validity of transfer of
the appellant’s share to the Respondent No. 1 by court receiver is
unassailable. For this purpose, he also relied on the decision of this
Court in Babu Ram (supra). The relevant portion of the decision is
as under:
“35. Summarising the legal position, the position is as
follows. In the case of an annulment under Section 37 read
with Section 43 of the Act, where the property is not vested
in any other person and no conditions are imposed by the
Insolvency Court, the property and rights of the insolvent
[2025] 9 S.C.R. 1549

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

stand restored or reverted to him with retrospective effect
from the -date of the filing of the insolvency petition and the
insolvency gets wiped out altogether. All acts done by the
undischarged insolvent between the date of the insolvency
petition and the date of annulment get retrospectively
validated. However, all sales and dispositions of property
and payments duly made and all acts therefore done by
the court or Receiver, will remain valid.”
16. Mr Patil also relied on Arora Enterprises (supra), the relevant portion
is as under:
“10. (…) Suffice it to say that the preponderance of judicial
opinion is in favour of the view that the effect of annulling
the adjudication in insolvency proceedings is to wipe out the
effect of insolvency and to vest the property retrospectively
in the insolvent. The consequence of annulling an order
of adjudication is to wipe out altogether the insolvency
and its effect. The property will revest in the insolvent
retrospectively from the date of the vesting order. We
hold that the law is fairly clear to the above extent. But,
this does not solve the problem arising in this case. The
effect of the suit (independently) filed by the appellants
and the orders passed therein have to be considered.
That is a distinct and different matter, which has its own
existence and legal impact, unimpaired by the annulment
of the insolvency. In other words, by the annulment of the
insolvency and wiping out its effect retroactively, in law the
suit and the judicial orders passed thereon are not wiped
out, or rendered void or a nullity, automatically.”
17. Before examining the consequences of annulment as contemplated
under Section 37 of the Act, it is necessary to enquire whether sales
and dispositions of the property, and payments done are duly made
or not. Section 37 is reproduced herein for ready reference;
“Section 37. Proceedings on annulment.—(1) Where an
adjudication is annulled, all sales and dispositions of
property and payments duly made, and all acts theretofore
done, by the Court or receiver, shall be valid; but, subject
as aforesaid, the property of the debtor who was adjudged
insolvent shall vest in such person as the Court may
1550 [2025] 9 S.C.R.

Supreme Court Reports

appoint or, in default of any such appointment, shall revert
to the debtor to the extent of his right or interest therein
on such conditions (if any) as the Court may, by order in
writing, declare.
(2) Notice of every order annulling an adjudication shall be
published in the Official Gazette and in such other manner
as may be prescribed.”
18. As it is only upon a conclusion that the transactions and orders of the
court and the receiver are valid and attained finality that the property
shall not revert to the debtor upon annulment of adjudication under
Section 37 of the Act. It is therefore necessary to examine the due
conclusion of sales and dispositions, as well as the orders of the
court or the receiver.
19. It is the case of the Respondent No. 1 that he is the owner of
the share of the appellant by virtue of the transfer deed dated
11.03.1983 executed by the official receiver pursuant to the order
of the District Court dated 04.01.1983. The said order and the
transfer deed are based on the averments made by respondents
in I.A. No. XV before the District Court and that in turn is the basis of
the correspondence dated 20.03.1975, 22.03.1975 and 25.03.1975,
by which he alleges that the offer and acceptance are complete and
there is an enforceable agreement.
20. However, the District Court rejected the said application on the
ground that the communications dated 20.03.1975, 22.03.1975 and
25.03.1975, leading to the transfer deed dated 11.03.1983, are not
true. One of the issues framed by the learned District Court was,
“Whether the original Petitioner No.1 had been able to prove that
the present Respondent No.3 Singamasetty Bhagawath Guptha did
execute Ex.P.4 the deed of offer on 20.03.1975, offering to transfer
share of one anna of his late father Singamasetty Subbarayadu in the
said partnership firm to any one of the remaining partners on record?”.
The court answered this question in the negative after undertaking
meticulous analysis of the evidence on record. The court rejected
the existence of Ex. P.4 deed of offer as on the date of initiation of
insolvency against the appellant and concludes as under:
“30(a). It is a definite contention of the original Petitioner
No.1 and the then convenor of Petitioner No.2 that on
[2025] 9 S.C.R. 1551

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

20.03.1975 the Respondent No.3 came forward to transfer
one anna share in favour of the Petitioner No.1, in as much
as, the Respondent No.3 made offer vide Ex.P.4 dated
20.03.1975 and the same came to be accepted by the
original Petitioner No.1 on 25.03.1975 under Ex.P.6. This
much of reference sounds almost real that there ought to
have been such valid offer and valid acceptance. But little
probe into the matter would reveal that the contentions
of the original Petitioner Nos. 1 and 2 were not only self-
serving but were based on fabricated documents.
31. That such documents were fabricated came to be
apprehended by none-else but the very responsible the
then official receiver, in as much, as he pleaded in his main
and then additional counter in regard to said documents
as hereunder:-
31(a). The relevant portion of pleadings in the main counter
by this official receiver at paragraph No.3(b) reads thus:-
“The Respondent called upon the 1st Petitioner to produce
the alleged original correspondence dated 20.03.1975,
22.03.1975, 24.03.1975 and 25.03.1975 in support of
the alleged offer and acceptance, by means of a notice
dated 7th April, 1975 (with a copy of the - petitioning
creditors in I. C. No. 2/75), for his inspection; but, it was
not produced, though the Respondent had offered in that
letter to take back the originals after comparing them
with copies. Even the reminder dated 02.06.1976 (with a
copy to the petitioning creditors In I. C. No. 2/75) failed
to persuade him to produce the originals. He contended
himself by producing only copies, stating that they were
true copies. The Respondent apprehends either they were
not in existence, or were incomplete. All the available
evidence relating this claim - negatives its truth.”
Paragraph No.6 of the additional counter reads thus:- “It is
submitted that there was no offer for the sale of the share
of late Singamasetty Subbarayadu by the 2nd Respondent
and that there was no unconditional acceptance of the
alleged offer. In law there was no offer much less any
unconditional acceptance. The 1st Petitioner has made
1552 [2025] 9 S.C.R.

Supreme Court Reports

these allegations only to suit his illegal and vexatious claim
with a view to deprive the rights of the creditors of late S.
Subbarayadu. Further the very fact that the documents
were not produced along with the application and that they
were produced after several months go to show that they
were got up to suit his false claim. In any event the said
documents were never in existence and they are got up
for the purpose of this application.”
Paragraph No.13 of the additional counter reads thus:-
”The 2nd Respondent alone had no absolute rights to
part with the 1/16th share. His mother was not a party to
the alleged contract of sale or acceptance. Her share is
vested in this Respondent.”
31(b). Therefore, this Court shall have to proceed with
note of caution in considering the relevant documents, the
said Ex.P.4 contended offer and the said Ex.P.6 contended
acceptance. Even on a cursory glance on these documents
would go to show that if the contended offer is one thing,
the contended acceptance is altogether different thing.
There is no meeting point. Contrary when this Ex.P4 the
contended deed of offer is placed in juxtaposition with the
contended deed of acceptance vide Ex.P.6 the divergence
emerge.
…….
32. Therefore, the earlier plea taken up by the then official
receiver about inaction of the original Petitioner No.1 in not
coming up with original documents vide said Exs.P.4 and
P.6 had made him to doubt about the existence of these
documents and apparently he did plead that they were
got up documents. This Court reaffirms that apprehension
of this official receiver about the fabrication of the said
documents were nothing but true.
……….
37(a). (…) this Court is to repeat that Ex.P.4 was got up
document, besides being detriment to legitimate interest
of the Respondent No. 4 on succession to the said estate
of her deceased husband to the extent of one anna share
[2025] 9 S.C.R. 1553

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

in the said firm, therefore, on this count also, Ex.P.4 is
bound to be held as invalid, presuming for a while that
otherwise it is tenable. And at this juncture, this court deems
it essential to refer to Ex.P.7 to come to the conclusion
that as the very original Petitioner No.1 had agreed with
Respondent No.3 alone who too had no exclusive title in the
said share so inherited, opted of the Respondent No.3 to
bring Respondent No. 4 to receive the contended amount.
38. The anomalies do not cease to exist only to the
aforementioned aspects. Further they stand continued. The
very Petitioners they did plead that of them the original
Petitioner No.1 came to know of the offer covered by Ex.P.4
dated 20.03.1975 only on 24.03.1975 vide Ex.P.5 letter by
the said convenor and he accepted the same on 25.03.1975
as covered by Ex.P.6. If it were to be so, why the original
Petitioner No.1 did maintain all along through his IA No.
XV that he had accepted the offer vide said endorsement
in Ex.P.4 on 22.03.1975? Therefore, even with regard to
the date of acceptance, contradictions mount up.
…………….
39(a). Besides vide Ex.D.30, the Respondent No.3 did
execute Power of Attorney in favour of the original convenor
to the Petitioner No.2, among others, authorising to
transfer the properties inherited by him through deceased
father Singamasetty Subbarayadu which were inclusive of
contended share of one anna in the said firm. Seemingly,
this Ex.D.30 is being General Power of Attorney at the
instance of Respondent No.3, is dated 08/09.04.1975.
If Ex.P.4 were to be true the document said to be dated
20.03.1975, this Ex.D.30 ought to have been exclusive of
subject covered by it and not inclusive of it.
40. Therefore, viewed from all angles, Ex.P.4 did not
come into being at the instance of Respondent No.3 on
contended date 20.03.1975. When so, this Court is bound
to concede to the plea maintained by the Respondent
No.3 that during the financial crisis he did sign on blank
papers to overcome mounting pressures of the creditors
of his deceased father.
1554 [2025] 9 S.C.R.

Supreme Court Reports

41. Therefore, the transactions covered by Exs.P.4 and 6
were not at all to be protected as contemplated U/s. 55
of the Act as pressed into service by the learned counsel
appearing for the Legal Representatives of the said
deceased Petitioner No.1. For this provision is applicable
only to protect bonafide transaction earlier to adjudication
of insolvency. By going through Exs.D.3 and D.30 as on
01.09.1975 and or on 09.04.1975, the said Ex.P.4 was
not at all in existence and if at all it was in existence, it
was subsequent to initiation of insolvency proceedings,
which commenced as far as this case is concerned on
08.05.1975. Once so Ex.P.4 would be nothing but got up
document. Consequently, these Legal Representatives of
the original Petitioner No.1 cannot even on any stretch of
imagination think of applicability of the said provisions.”
21. In brief, the District Court rejected the interlocutory application
preferred by respondents in view of the following findings:
a. Documents in Ex.P.4, the alleged offer and Ex. P.6, the
alleged acceptance were fabricated as there were significant
contradictions in the said documents.
b. The fact that the documents were fabricated was further
strengthened by the failure of the Partner to produce the original
correspondence of offer and acceptance despite the Notice from
the official receiver for the production of the same.
c. The transaction covered by Ex.P.4 and Ex.P.6 were not protected
under Section 55 of the Act, as the provision is applicable
only to protect bonafide transaction earlier to the adjudication
of insolvency, further it is clear that the Ex.P.4 was not in
existence on 08.05.1975, the date of initiation of the insolvency
proceedings.
d. The deposits of Rs. 35,000/- on 19.04.1981, Rs 60,000/- on
25.05.1981, and Rs. 69,955/- on 07.02.1983 by the Respondent
No. 1 as consideration for share acquisition were inconsequential
as the transfer deed dated 11.03.1983 was not to survive at all.
22. As against the clear finding of fact, as arrived at by the District
Court, the High Court proceeded on the premise that the earlier
direction of the District Court dated 04.01.1983, allowing I.A. No.
[2025] 9 S.C.R. 1555

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

XV was given effect to, and the transfer deed dated 11.03.1983
was executed. Under the assumption that the said order, as well
as the sale deed, continue to subsist, the High Court came to
the conclusion that the sale is legal and must be protected under
Section 37 of the Act. The High Court committed an error in ignoring
the fact that, by virtue of its earlier order dated 13.02.1997, the
order dated 04.01.1983 allowing I.A. No. XV was set aside, and
I.A. No. XV was remanded for reconsideration. As a consequence,
the transfer deed dated 11.03.1983 had no legs to stand. That
is how the District Court, on remand, considered the matter in
detail and passed final orders on 16.02.2004, dismissing I.A.
No. XV. Further, the High Court failed to analyse the findings
of the Trial Court with respect to the alleged evidence under
Exs.P4 to P7. In fact, there is no analysis by the High Court about
Exs.P4 to P7. As indicated earlier, the High Court simply proceeded
on the premise that the order dated 04.01.1983, coupled with the
execution of the transfer deed having become final, the appellants
are bound by the transaction. For operation of Section 37, it is
fundamental that there must in fact be a finality of transactions.
In other words, there must be conclusion of sales, dispositions
of property and/or the payments made in that regard. Section 37
proceedings cannot partake the character of a civil court deciding
a suit for specific performance of an agreement.
23. The transfer deed dated 11.03.1983 was executed on the basis of
the order passed by the District Court on 04.01.1983. When the said
order dated 04.01.1983 is set aside and the matter is remanded back
to the District Court for reconsideration in view of the subsequent
annulment order dated 20.04.1996, the High Court was not justified
in reversing the findings of the District Court on the ground that
the transfer deed remained unchallenged. High Court committed a
serious error in drawing these conclusions.
24. Apart from the mistake, as indicated hereinabove, the High Court also
committed a jurisdictional error in not reappreciating the evidence
adduced before the trial court, which as an appellate court the High
Court was bound to undertake. All that the High Court did to reverse
the findings of facts arrived at by District Court was simply to say
that, “the learned District Judge has proceeded on the basis that Exs.
P4 to P7 are concocted and fabricated. The said finding is based
upon surmises and conjectures”. There is no independent reasoning
1556 [2025] 9 S.C.R.

Supreme Court Reports

based on the evidence on record. The High Court, while reversing
the order of the District Court has concluded in the following terms:
“When the principles laid down by the Hon’ble Supreme
Court in the above referred cases are applied to the above
said undisputed facts of the case, it is clear that the order
of the learned District Judge dated 20.04.1996 annulling his
earlier order dated 25.06.1977 adjudicating Singamasetty
Bhagavath Gupta and Singamasetty Venkataramaiah and
Son as Insolvents and the order passed by this Court in
M.F.A. No.1048/1983, wherein the order of the learned
District Judge passed on I.A.XV dated 04.01.1983 pursuant
to which, the sale deed dated 11.03.1983 was executed by
the Official Receiver in favour of Allum Karibasappa, has
been set aside, would not in any way affect the sale deed
dated 11.03.1983 that is executed by the Official Receiver
in favour of Allum Karibasappa as the said conveyance
is saved as per the principles laid down by the Hon’ble
Supreme Court as referred to above. The learned District
Judge has proceeded on the basis that Exs.P4 to P7 are
concocted and fabricated. The said finding is based upon
surmises and conjectures as it is clear from the order
passed by the Insolvency Court that after the declaration
of Insolvency by the District Judge, Bellary, in I.C. Nos.2
and 3 of 1975 dated 25.06.1977, all the assets of the
insolvents vested with the Official Receiver and the sale
deed, which has been executed on 11.03.1983 has not
been challenged nor set aside by the order of the Court
and only because of the amount deposited creditors could
be discharged and order of insolvency could be annulled
and now it is not open to contend that sale deed is void.
In view of the above said finding on the facts of the case,
the decision relied upon by the learned counsel appearing
for the respondents is not helpful to the present case.
However, the question that is to be considered is as to
whether the said sale deed would be binding in respect
of the entire extent of one anna share of Singamasetty
Subbarayudu in the partnership firm M/s. Gavisiddeswara
and Company.”
(emphasis supplied)
[2025] 9 S.C.R. 1557

Singamasetty Bhagavath Guptha & Anr. v.
Allam Karibasappa (D) by Lrs./Allam Doddabasappa (D) by Lrs. & Ors.

25. In Santosh Hazari v. Purushottam Tiwari6 this court highlighted the
important duty that an appellate court exercises, particularly when
it seeks to reverse the judgment of the Trial Court. The principles of
law laid by this court are extracted for ready reference:
“15. A perusal of the judgment of the trial court shows that
it has extensively dealt with the oral and documentary
evidence adduced by the parties for deciding the issues on
which the parties went to trial. It also found that in support
of his plea of adverse possession on the disputed land,
the defendant did not produce any documentary evidence
while the oral evidence adduced by the defendant was
conflicting in nature and hence unworthy of reliance. The
first appellate court has, in a very cryptic manner, reversed
the finding on question of possession and dispossession
as alleged by the plaintiff as also on the question of
adverse possession as pleaded by the defendant. The
appellate court has jurisdiction to reverse or affirm the
findings of the trial court. First appeal is a valuable right
of the parties and unless restricted by law, the whole
case is therein open for rehearing both on questions of
fact and law. The judgment of the appellate court must,
therefore, reflect its conscious application of mind and
record findings supported by reasons, on all the issues
arising along with the contentions put forth, and pressed
by the parties for decision of the appellate court (…) While
writing a judgment of reversal the appellate court must
remain conscious of two principles. Firstly, the findings of
fact based on conflicting evidence arrived at by the trial
court must weigh with the appellate court, more so when
the findings are based on oral evidence recorded by the
same Presiding Judge who authors the judgment. This
certainly does not mean that when an appeal lies on facts,
the appellate court is not competent to reverse a finding
of fact arrived at by the trial Judge. As a matter of law
if the appraisal of the evidence by the trial Court suffers
from a material irregularity or is based on inadmissible
evidence or on conjectures and surmises, the appellate
court is entitled to interfere with the finding of fact.7 The

6 (2001) 3 SCC 179.
7 See, Madhusudan Das v. Narayanibai, (1983) 1 SCC 35.
1558 [2025] 9 S.C.R.

Supreme Court Reports

rule is — and it is nothing more than a rule of practice —
that when there is conflict of oral evidence of the parties
on any matter in issue and the decision hinges upon the
credibility of witnesses, then unless there is some special
feature about the evidence of a particular witness which
has escaped the trial Judge’s notice or there is a sufficient
balance of improbability to displace his opinion as to where
the credibility lie, the appellate court should not interfere
with the finding of the trial Judge on a question of fact.8
Secondly, while reversing a finding of fact the appellate
court must come into close quarters with the reasoning
assigned by the trial court and then assign its own reasons
for arriving at a different finding. This would satisfy the
court hearing a further appeal that the first appellate court
had discharged the duty expected of it.”
(emphasis supplied)

26. Having considered the matter in detail, we have no hesitation in
holding that the High Court committed a serious error in reversing
the findings of the District Court in its judgment. If the judgment of
the District Court is upheld, the appeals filed by the purchaser does
not survive.
27. We thus allow the Civil Appeal Nos. 12048-12049 of 2018 against
the judgment and order passed by the High Court in M.F.A No. 2873
of 2004 c/w M.F.A No. 2706/2004 dated 25.02.2011 and restore
the judgement and order passed by the Additional Judge Bellary in
I.A.NO. XV in I.C. No 2/75 c/w Ms. C.NO.5 /2000 dated 16.02.2004.
28. For the same reasons, we dismiss the Civil Appeal Nos. 12050-
12053 of 2018.
29. Order accordingly.

Result of the case: Appeals disposed of.

†
Headnotes prepared by: Divya Pandey

8 See, Sarju Pershad Ramdeo Sahu v. Jwaleshwari Pratap Narain Singh, AIR 1951 SC 120.