A sale-agreement claim cannot defeat insolvency creditors when consideration is unproved and the transaction is suspicious.

The applicants sought a direction requiring the Official Assignee to execute sale deeds for Plots 25–29, relying on an agreement of sale said to have been made by their predecessors-in-interest with the insolvents and on payment of the full consideration of Rs.20 lakh.

The insolvents supported the claim, but the Official Assignee disputed it, pointing to the unregistered agreement, the absence of proof that the cheque had been encashed, inconsistencies in the applicants’ evidence, and the timing of the alleged transaction in relation to the insolvency proceedings.

The Court considered the application and dismissed it.

The application invoked Order II Rule I of the Presidency Towns Insolvency Rules and Sections 17, Rules 3 and 4, of the Presidency Towns Insolvency Act, as stated in the prayer.

The judgment does not cite or formulate a specific statutory test or rely on any precedent. Its decision rests on the Court’s assessment of the documentary and oral evidence, including whether the alleged consideration was proved and whether the circumstances supported the applicants’ claim.

The Court found that the agreement recited payment by a cheque dated more than six months before the agreement, but contained no recital that the cheque had been encashed, and the applicants produced no evidence of encashment.

It also noted the absence of an explanation for why no sale deed had been pursued after the alleged full payment.

The insolvency schedule identified the applicants’ predecessors-in-interest as secured creditors over Plots 22–26, including Plots 25 and 26 covered by the application; considered alongside the applicants’ evidence and admissions concerning the timing of the agreement and the proposed return of money, this supported the Court’s concern that the claim was collusive and could prejudice other creditors.

It dismissed the application, with no order as to costs.