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Judgment
Alfred Henry Lionel Leach, C.J.—These two second appeals have been referred to a Bench for decision as a question of limitation arises
and there is no direct authority on the point.
An examination of the record discloses an unfortunate state of affairs. The second and third respondents are the sons of one Muneappa Naidu,
who died in the month of February, 1931. The father and the sons were joint. On the 29th January, 1931, a fortnight before the death of
Muneappa, he and his sons disposed of the whole of the family property. By a registered conveyance '' they transferred to the appellant in S.A.
No. 910 of 1940, part of the family estate and the rest of it to the appellant in S.A. No. 1071 of 1940. The consideration for the transfer first
mentioned was said to be Rs. 2,000 and for the second Rs. 1,000.
On the 5th December, 1931, the second and third respondents were adjudicated insolvents by the Subordinate Judge of Chittoor on a petition
filed by the first respondent and two other creditors. The transfers to the appellants were made the basis of the order of adjudication. The order of
adjudication was passed without opposition. The second respondent, in fact, agreed to the adjudication. At that time the third respondent was a
minor and therefore the order of adjudication, so far as he was concerned, was invalid. On the 21st April, 1934, the Subordinate Judge annulled
his adjudication.
On the 22nd August, 1933, the Official Receiver filed an application under Sections 53 and 54 of the Provincial Insolvency Act, in which he
asked for an order setting aside the conveyance to the appellant in S.A. No. 910 of 1940, and a similar application in respect of the conveyance to
the appellant in S.A. No. 1071 of 1940. By an order, dated the 3rd March, 1936, the Subordinate Judge held that the transactions had been
entered into bona fide and that consideration had passed. Consequently he dismissed the petitions. The Official Receiver appealed to the District
Judge of Chittoor, who took an unusual course. Instead of hearing the appeal on the merits he decided to annul the adjudication of the second
respondent on the ground that he had not applied for his discharge within the time allowed by the order of adjudication and indicated that the
creditors should institute a suit for the setting aside of the conveyances u/s 53 of the Transfer of Property Act. The District Judge''s reason for
adopting this course was that, if the appeal was allowed, it would mean that the creditors would only get a third Interest in the properties conveyed
to the present appellants. The father''s estate was not being administered in insolvency, and the adjudication of the younger son had been set aside.
The appeals before the District Judge were concerned merely with the validity of the orders passed by the Subordinate Judge on the applications
made by the Official Receiver under Sections 53 and 54 of the Provincial Insolvency Act and therefore it was not open to the District Judge in
those proceedings to annul the order of adjudication passed against the second respondent. The Judge having seisin of the insolvency proceedings
was the Subordinate Judge of Chittoor and he alone could deal with such a matter, unless it came before the District Judge on appeal.
The District Judge directed that the Official Receiver should drop all proceedings relating to the estate of the second respondent and having
indicated that the proper course for the creditors to adopt was to file a suit for a declaration that the alienations made on the 29th January, 1931,
were void u/s 53 of the Transfer of Property Act, he added:
As at present advised, I am of opinion that the time taken up in, prosecuting the remedy in the Insolvency Court may be deducted when calculating
the period of limitation for filing such a suit.
The Article of the Limitation Act which applies is Article 120 and the period is six years. The District Judge''s order was passed on the 14th
December, 1936, and if a suit u/s 53 of the Transfer of Property Act had been filed by the first respondent immediately it would have been in time;
but he did not take action until the 4th May, 1937, when he instituted the present suit in the District Munsif''s Court for a declaration that the
conveyances were void as against the creditors under that section. Subsequently the suit was transferred to the Court of the Subordinate Judge,
who tried it. The present appellants contended that the suit was barred by the law of limitation, having been filed more than six years after the date
of the conveyances. The Subordinate Judge overruled this objection and held that partial consideration had passed, but that the transactions were
not entered into bona fide. On this footing he decreed the suit. The present appellants appealed to the District Judge who agreed with the
Subordinate Judge on the question of limitation and that the transfers were not entered into bona fide; but he disagreed with him on the question
whether consideration had passed. In the opinion of the District Judge no consideration at all had passed. The first respondent had filed a cross-
appeal in which he objected to the finding of the Subordinate Judge that partial consideration had passed. The result was that the appellants''
appeal was dismissed and that of the first respondent was allowed. The appeals now before the Court are from the decrees passed by the District
Judge on this occasion.
The findings of the District Judge with regard to the nature of the transaction are conclusive and the Court is merely concerned with the question
whether the suit was filed within time. The District Judge considered that Section 14 of the Limitation Act applied and that the suit was in time. In
my judgment it is manifest that Section 14 of the Limitation Act does not. apply here. Sub-section (1) of that section says:
In computing the period of limitation prescribed for any suit, the time during which the plaintiff has been prosecuting with due diligence another civil
proceeding'', whether in a Court of first instance or in a Court of appeal, against the, defendant, shall be excluded, where the proceeding is
founded upon the same cause of action and is prosecuted in good faith in a Court which, from defect of jurisdiction, or other cause of a like nature,
is unable to entertain it.
Now, in the first place, the plaintiff in the present suit was not the petitioner in the proceedings in the Insolvency Court. The petitioner there was the
Official Receiver, and although the Official Receiver represents the creditors it cannot be said that the present plaintiff was prosecuting those
proceedings. The person who was prosecuting the proceedings was the Official Receiver, who was asking that the transfers be set aside under, the
provisions of Sections 53 and 54 of the Insolvency Act which refer to transactions which are void as against the Official Receiver. Here the cause
of action falls within the provisions of another Act, the Transfer of Property Act. Moreover the suit which was filed by the first respondent as the
result of the order of the District Judge of the 14th December, 1936, could have been filed by him during the pendency of the insolvency
proceedings. See Chidambaram Chettiar (died) and Others Vs. Sellakumara Goundan and Others, .
Mr. Sampath Aiyangar has contended that Section 14 can have no application to any insolvency matter and has referred us to the decision of
this Court in Aiyapparaju v. Venkatakrishnayya (1922) 44 M.L.J. 393. It is not necessary to decide whether proceedings in insolvency are
completely outside the scope of Section 14, because in any event the section cannot be called in aid by the first respondent in respect of the
present suit, which means that it was filed out of time. Therefore both the appeals will be allowed and the suit will be dismissed with costs
throughout (one set).
It is certainly regrettable that the creditors are not able to get the benefit of any of the property unlawfully conveyed to the appellants on the 29th
January, 1931. Had it not been for the unfortunate opinion expressed by the District Judge with regard to the applicability of Section 14 of the
Limitation Act, when he was dealing with the appeals arising out of the petitions filed by the Official Receiver the position might have been very
different.