Fatma Bi by her duly authorised agent Mr. Jainulabdeen Sahib vs Nagoorkhan and Another

Horace Owen Compton Beasley, Kt., C.J.—This is an appeal from a judgment of Waller, J., sitting in insolvency. The Official Assignee

allowed the claim of the appellant here which was in respect of a debt alleged to be due to her on a promissory note by the insolvent. A creditor

preferred an appeal from the order of the Official Assignee to Waller, J. and he allowed the appeal.

The facts can be briefly stated. The insolvent owed the appellant money on a promissory note. The last payment was a payment of interest on

the 20th of October, 1925. No further payment was made by the insolvent and the debt would have become and did become barred by limitation

on the 20th October, 1928. Up to that time the appellant had taken no steps to enforce her claim against the insolvent on the promissory note. The

20th of October, which was a Saturday, was a public holiday and the High Court was closed. The next day, the 21st, was a Sunday and the Court

was closed that day also. On the 22nd October the appellant could have filed a suit against the insolvent upon the promissory note and enforced

her claim because by reason of the provisions of Section 4 of the Limitation Act, the insolvent could not successfully set up as bar to the suit the

Limitation Act. Section 4 of the Limitation Act is as follows:

Where the period of limitation prescribed for any suit, appeal or application expires on a day when the Court is closed, the suit, appeal or

application may be instituted, preferred or made on the day that the Court re-opens.

However, on the morning of the 22nd October, 1928, the insolvent was adjudicated an insolvent and it is admitted that no steps were taken

thereafter with regard to this claim by the appellant until she preferred her claim in the insolvency. Waller, J., held that, as the claim on the

promissory note was barred on the 20th October and as the appellant had not filed a suit on the 22nd October, the first available day after that,

her claim was one which could not be proved in the insolvency and accordingly allowed the appeal.

What we have got to consider here is, what effect an adjudication in insolvency has upon Section 4 of the Limitation Act. It is argued by the

respondent here that it has no effect at all and that the appellant''s claim was barred by limitation on October 20th and she did not avail herself of

the time given her for enforcing her claim against the insolvent on October 22nd. On behalf of the appellant it is argued that when the adjudication

took place on the 22nd October, no further steps could reasonably be taken by the appellant and that her claim was one to be dealt with in the

insolvency. What has got to be considered is the meaning of Section 46(3) of the Presidency Towns Insolvency Act. That states that all debts to

which the debtor is subject when he is adjudged an insolvent shall be deemed to be debts provable in insolvency. It is argued on behalf of the

appellant that on the 22nd October this was a debt to which the debtor was subject and that, being so, it was provable in insolvency. It seems to

me that at any rate throughout the 22nd October this was a debt to which the debtor was subject and the question as to whether or not it was

provable cannot depend upon the action taken thereafter by the creditor. It is argued by the respondent that it was a conditional debt only,

conditional on the appellant filing a suit against the debtor. In my view, on that date the appellant had an enforceable claim against the debtor and

the debtor had a debt which could be enforced against him. We have now got to consider whether it was necessary, the adjudication having

supervened, for the creditor to file a suit. After the adjudication of a debtor all his property by reason of Section 17 of the Presidency Towns

Insolvency Act vests in the Official Assignee and no one can bring any suit to enforce any right against the property without the leave of the. Court.

It is argued here that, notwithstanding this vesting of the insolvent''s property in the Official Assignee, the appellant should have come to Court on

the 22nd October after the adjudication of the insolvent and applied for leave to file a suit. That would have meant, of course, that he would have

had to pay Court-fee on his plaint and that if, on an examination of his claim, it appeared to the Official Assignee that the claim was a good one, the

filing of the suit would have been entirely unnecessary and would have cast upon the estate of the insolvent the burden of paying the costs of that

plaint. A position somewhat similar, though the facts were slightly different, arose in In re General Rolling Stock Co. (1872) 7 Ch. App. 646 In

that case, which was a company winding-tip case, it is true that it appears that the debt was not barred at the time of the making of the winding-tip

order but became time-barred during the pendency of the liquidation. It was held there that the creditor had a good claim. On page 649 James,

L.J. says:

After a winding-up order has been made, no action is to be brought by a creditor except by the special leave of the Court.

Here, after an adjudication no suit can be filed by a creditor against a debtor without the leave of the Court. Then he proceeds:

And it cannot have been the intention of the Legislature that special leave to bring an action should be given merely in order to get rid of the Statute

of Limitations.

Here the obvious effect of filing a suit on the 22nd October would have been to deprive the debtor of his plea that the suit was barred by

limitation. That seems to me to be the same thing as filing a suit for the purpose of getting rid of the Limitation Act; nor does it seem to me to make

any difference at all that in that case there was at the time of the winding-up order a debt which was not barred by limitation. Here was an

enforceable debt; before it could be enforced the adjudication happened and it seems to me to be quite an unreasonable thing to force a creditor

under such circumstances to apply for the leave of the Court to file a suit. Supposing the Court refused leave, then, although the Limitation Act

gave the creditor the right to file a suit and enforce his claim on that day, that right would be taken away by the action of the Court. Another case

to which reference can usefully be made is Ex parte Lancaster Banking Corporation, In re Westby (1879) 10 Ch.D. 776. There Bacon, C.J., says:

When a bankruptcy ensues, there is an end to the operation of that statute,, with reference to debtor and creditor. The debtor''s rights are

established and the creditor''s rights arc established in the bankruptcy, and the Statute of Limitations has no application at all to such a case, or to

the principles by which it is governed.

It is perfectly clear that but for the intervention of the insolvency here, if the creditor did not file the suit on October 22nd she could not enforce

her claim. What I have said here must not be taken as meaning that Section 4 of the Limitation Act extends the period of limitation. It does not; it

merely gives an extended time to a creditor in which to enforce his claim under certain circumstances. For these reasons, the appeal must be

allowed with costs (throughout) on the O.S. scale.

Ramesam, J.

I agree.

Cornish, J.

I agree.