Aiyapuraju alias Ayyappa vs Veeva Venkatakrishnayya and Others

Spencer, J.—This is an appeal against an order of adjudication under the Provincial Insolvency Act. The insolvency petition, from which

originated the District Judge''s proceedings, was one presented by a creditor u/s 6(4) of Act III of 1907.

It was first presented on June 28th, 1919, to the District Munsif of Razole who had no jurisdiction to entertain it. Having been returned by that

Court on September 22nd, 1919, it was re-presented to the District Court on October 1st, 1919, which had jurisdiction u/s 3. One of the pre-

requisites for the valid presentation of a creditor''s petition is that contained in sub-Clause (c) to Clause (4) of Section 6, namely, that the act of

insolvency which forms the ground of the application should have occurred within three months of the date of presentation of the petition. The act

of insolvency put forward in this case as the basis of the petition was a transaction of sale of the debtor''s property on March 31st, 1919, alleged

to have been made with the intent of defeating his creditors. The Razole District Munsif had been invested u/s 3 of the Act with jurisdiction only

over debtors'' insolvency petitions. When this creditor''s petition was presented to a Court having jurisdiction, more than three months had elapsed

since the commission of the act of insolvency upon which the petition was grounded. Thus the petition was liable to be rejected as out of order. But

the District Judge, on a petition to excuse delay being presented on February 21st, 1921, acted u/s 5 of the Limitation Act, and, holding that there

was ""sufficient cause"" for the petition not being presented earlier, excused the delay and proceeded to enquire into the merits of the case. In

Kopparthi Lingayya v. Praveti Chinndrayana 7 L.W. 443 (F.B.), a Full Bench of this Court laid down that the general provisions of the Indian

Limitation Act, which include Section 5, were not applicable to petitions under the Provincial Insolvency Act (III of 1907).

After the pronouncement, however, a new Provincial Insolvency Act (V of 1920) was passed and came into force on February 25th, 1920, the

old Act being simultaneously repealed.

The new Act contained a new provision (Section 78) which runs thus:

The provisions of Sections 5 and 12 of the Indian Limitation Act, 1908, shall apply to appeals and applications under this Act, and for the purpose

of the said Section 12, a decision u/s 4 shall be deemed to be a decree.

The question of law to be decided now is, whether the District Judge acted legally in excusing the delay upon sufficient cause being shown and

admitting a petition which at the date of its presentation failed to comply with one of the conditions of a legal presentation under the Act in force at

the time when it was presented.

I hold for two reasons that he had no power to excuse the delay.

In the first place, Section 6, Clause (4) of Act III of 1907, which was applicable on the date (October 1st, 1919) when the insolvency petition was

presented, makes the occurrence of an act of insolvency within three months of the date of presentation one of three conditions precedent to a

lawful presentation.

If any of these conditions are unfulfilled, the petition is an incompetent one.

The English Bankruptcy Act of 1914 contains a similar provision in Section 4 re-produced from the Bankruptcy Acts of 1883 and 1890.

A creditor shall not be entitled to present a bankruptcy petition against a debtor unless

(a) * * *

(j) * * *

(c) The act of bankruptcy on which the petition is grounded has occurred within three months before the presentation of the petition.

This provision appears to be quite independent of the Statute of Limitations in both countries and to be absolute. This view can be held

consistently with what was said in Kopparthi Lingayya v. Araveti Chinnarayana 44 Ind. Cas. 805 : 41 M. 169 : L.W. 443 (F.B.). I was one of the

Referring Judges in that case, and the first thing we had to decide was, whether the appeal to the High Court was in time. This depended on the

questions (1) whether the time occupied in obtaining a copy of the District Judge''s order could be excluded u/s 12 of the limitation Act, and (2) if

not, whether we had power u/s 5 to excuse the delay.

The difficulty caused by the last date for the presentation of the creditor''s application to the District Court having fallen on a date when that

Court was closed for the vacation could have been overcome by the application of Section 10 of the General Clauses Act, if the District Judge had

not been of opinion that a question of limitation was involved.

Whether the District Judge''s opinion was right or wrong did not require consideration till it was decided whether the appeal was in time.

When the amendment of the Provincial Insolvency Act was under the consideration of the legislative Council, this High Court drew the attention

of Government to the Full Bench decision in Kopparthi Lingayya v. Araveti Chinnarayana 33 M.L.J. 566 : 7 L.W. 443 (F.B.), and I feel no doubt

that it was in order to meet the doubts and difficulties that had been experienced in admitting appeals against orders of Insolvency Courts that the

Legislature in passing the new Insolvency Act of 1920 introduced Section 78 which made Section;'' 5 and 12 of the Limitation Act applicable to

appeals and applications while omitting other general provisions of the Limitation Act such as Sections 4 and 14.

Secondly, assuming for the purpose of argument that Section 5 purports to provide a period of limitation for the presentation of insolvency

petitions, and that the Sections in the body of the Limitation Act which deal with the computation of periods of limitation can be invoked for

extending a period of this kind, under the law prevailing when this petition was presented the District Judge had no power to apply Section 5, as

the Full Bench had declared it to be inapplicable to petitions and appeals under the Provincial Insolvency Act. The introduction of Act V of 1920

with its new Section 78 did not alter the law prevailing at the date of the presentation of the petition which alone governed the question of its

admissibility. The law in force when the District Judge passed his order has no bearing on this question, for Section 6 of the General Clauses Act

prevents the repeal of the previous Act having the effect of reviving a petition that had become barred before the later Act came into force, or

affecting the rights and liabilities of creditors and debtors under the earlier Act. Section 14 of the Indian Limitation Act, which is the appropriate

section for excluding time spent in prosecuting another proceeding in a Court which had no jurisdiction to entertain it has not been made applicable

to insolvency petitions either by the Act of 1920, or previously. Consequently, the act of presenting a petition by a creditor to a District Munsif''s

Court which had no jurisdiction was a nullity and had no effect on the subsequent proceedings in a competent Court.

The proviso in Clause (2) of Section 6 of the Provincial Insolvency Act of 1907, even if read with Section 21 of the Code of Civil Procedure,

cannot be of any avail to the petitioner, as the jurisdiction there referred to is local jurisdiction, not inherent jurisdiction.

The appeal must, therefore, be allowed with costs in this Court and the Court below to be paid to appellant by first respondent, and the

adjudication is annulled, and the petition dismissed.

Venkatasubba Rao, J.

I am also of the opinion that the order of the District Judge adjudicating the first respondent an insolvent must be set aside.

The act of insolvency relied on occurred on the 31st March 1919, and the insolvency petition was presented on the 1st October 1919 : that is,

after the lapse of three months from the occurrence of the act of insolvency on which the petition was grounded. The Provincial Insolvency Act in

force on the date of the presentation of the petition was. Act III of 1907. It is not disputed that under that Act the creditor had no right to present

the petition. It was held by a Full Bench of this Court in Kopparthi Lingayya v. Araveti Chinnarayana 7 L.W. 443 (F.B.) that in dealing with the

admission of petitions and appeals presented after the time prescribed under the provisions of the Provincial Insolvency Act, III of 1907, recourse

should not be had to the general provisions of the Limitation-Act, IX of 1908.

The District Judge, however, purported to act u/s 78 of the Provincial Insolvency Act V of 1920 which repeated the previous Insolvency Act

and excusing the delay in the presentation of the petition. held that, the creditor''s right subsisted and passed an order of adjudication. The District

Judge made the order on the 26th April 1921, that is, on a date subsequently to the coming into force of Act V of 1920.

Section 78 referred to, enacts inter alia that the provisions of Section 5 of the Indian Limitation Act, 1908, shall apply to appeals and

applications under the Act (Act V of 1920). There is no corresponding section in the repealed Act, and as pointed out above this Court held that

the general provisions of the Limitation Act of 1908 were inapplicable to applications and appeals presented under the old Provincial Insolvency

Act. Section 5 of the Limitation Act is one of such general provisions. u/s 5 the Court may extend the period of limitation on sufficient cause being

shown for not making the application within the period allowed by law.

Was the District Judge right in acting u/s 78 of the new Act? The, application to excuse delay was filed on the 21st February 1921, and it was

suggested that a fresh insolvency petition should be deemed to have been filed on that date, that is, after the new Act had come into force.

Whether the District Judge purported to make an order excusing the delay in the course of an insolvency petition presented--under the old Act or

on a petition presented under the new Act, the action of the District Judge seems to be equally unjustifiable. Section 6 of the General Clauses Act,

Act X of 1897, clearly provides that when any Act of the Governor-General in Council repeals any enactment, the repeal shall not revive anything

not in force or existing at the time at which the repeal takes effect or affect any right or privilege acquired under any enactment so repealed. The

right of the creditor became barred under the Act of 1907, and Section 78 of the new Act cannot be invoked for the purpose of reviving a right

which had become barred. The right acquired by the debtor to have no insolvency petition against him grounded on the act of insolvency referred

to above, cannot be affected by Section 78.

In Hari Nath Chatterjee v. Mohunt Mothnrmohun Goswami : 10 Ind. Dec. (N.S.) 638 their Lordships of the Judicial Committee observe at

page 192 : ""The intention of the Law of Limitation is, not to give a right where there is not one, but to interpose a bar after a certain period to a suit

to enforce an existing right."" See also Khunni Lal v. Gobind Krishna Narain 10 Ind. Cas. 477 : 38 I.A. 87 (P.C.).

I am, therefore, of the opinion that the, order of the District Judge adjudicating the first respondent an insolvent cannot be supported.

In this view, it is unnecessary to decide the other question whether the provision that the presentation of a petition is not valid unless the act of

insolvency has occurred within three months before it, is a rule of limitation or independent of the Statute of Limitations. The question is a difficult

one, and I do not propose to express an opinion upon it.

In the result, I concur in the order proposed by my learned brother.