Hit Narayan Singh vs Brij Nandan Singh

Kulwant Sahay, J.—The question involved in this appeal is whether the appellant''s application for execution of a money decree was barred by limitation. The decree was passed on 26th May 1926. The application for execution was made on 5th June 1929. On the face of it therefore the application was barred.

It is however contended that on account of certain proceedings in insolvency the period of limitation did not begin to run from the date of decree. The judgment-debtor was adjudicated an insolvent and the adjudication order was made on 29th January 1926. A receiver was appointed who took charge of all the properties of the insolvent. The decretal debt of the appellants was one of the debts proved in the Courts of insolvency. The appellant applied in the Court of insolvency for leave to proceed against the person of the judgment-debtor u/s 28, Sub-section (2), Provincial Insolvency Act, Act 5 of 1920. This application was made on 28th May 1929 and leave was granted on the same day and the application for execution by arrest and imprisonment of the judgment-debtor was made on 5th June. It is contended that the period of limitation began to run from this date, that is 28th May 1929, and that therefore the application for execution made on 5th June 1929 was within the period of limitation.

Both the Courts below have held that the appellant was not entitled to compute the period of limitation from 28th May 1929 and they have held that the application was barred by limitation. Section 28, Provincial Insolvency Act, 1920, in Sub-section (2) provides that on the making of an order of adjudication the whole of the property of the insolvent shall vest in the Court or in a receiver as provided in the Act and that thereafter no creditor to whom the insolvent is indebted in respect of any debt provable under the Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceeding except with the leave of the Court On such terms as the Court may impose.

It is contended on behalf of the appellant that a disability was imposed upon him by the concluding portion of Sub-section (2), Section 28, which debars a creditor from commencing any suit or other legal proceeding, except with the leave of the Court. An application for execution of a decree is certainly the commencement of a legal proceeding; and therefore an application for execution comes within the mischief of the second part of Sub-section (2). Section 28. If that is so, then the period from the making of the adjudication order up to the termination of the insolvency proceedings has to be excluded in computing the period of limitation except in cases where leave of the Court is obtained. It is admitted in this case that the insolvency proceedings are still pending.

It is contended on behalf of the respondent that it was open to the decree-holder to apply for execution by arrest of the judgment-debtor inasmuch as no order had been made by the Court u/s 31 of the Act. It is true that a protection order has not been made. If an order had been made then such an order would debar the decree-holder from making any application at all to proceed against the person of the judgment-debtor. The fact that no protection order has been made u/s 31, does not affect the disability imposed by Section 28(2) as the latter section entitled the decree-holder to apply for execution by arrest of the judgment-debtor only if he obtains leave of the Court to do so.

It is next contended that the bar as against the commencement of any suit or other legal proceeding must refer to a suit or proceeding against the property of the insolvent which is dealt with in the first part of Section 28, Sub-section (2), In my opinion there is no justification for such an interpretation. The first part deals with remedies against the property of the insolvent and the second part deals with all remedies including the remedy against the person of the insolvent. Section 16(2) of the old Act (3 of 1907) imposed a disability not only as against the property but also against the person of the insolvent, and the Act of 1920 has made the alteration that the disability as against the person of the insolvent may be removed by obtaining leave of the Court.

The learned District Judge has relied on the decision of this Court in Sheosaran Ram v. Basudeo Prasad Sahu [1918] 47 I.C. 798. That was a case in which a decree for money was executed and the judgment-debtor was arrested. After his arrest an adjudication order was made in insolvency under the Presidency Towns Insolvency Act 3 of 1909. After the making of the adjudication order the judgment-debtor was released on production of the order. A fresh application for execution was made after the annulment of the adjudication, and it was held that this fresh application was barred by limitation. The grounds given were twofold: first, that time had already begun to run before the disability was imposed upon the decree-holder, and the subsequent disability did not stop the time running against the decree-holder. This apparently refers to the fact that the decree had been passed and in fact application for execution of decree had been made before the order of adjudication had been made in that case and time for execution of the decree had begun to run before the disability imposed by the adjudication order had come into existence. In the present case the decree was passed after the adjudication order had been made and therefore time did not begin to run as against the decree-holder from the date of the decree as there was a disability existing from before in taking out execution of the decree. Another reason given by the learned Judges in Sheosaran Ram''s case [1918] 47 I.C. 798 was with reference to Section 25, Presidency Towns Insolvency Act, which corresponds with Section 31, Provincial Insolvency Act of 1920. Their Lordships observed:

Section 25 expressly provides that any insolvent who shall have submitted his schedule as aforesaid may apply to the Court for protection, and the Court may on such application, make an order for the protection of the insolvent from arrest or detention. There is also a provision in that section that no such order shall operate to prejudice the right of any creditor in the event of such order being revoked or the adjudication annulled.

The learned Judges did not consider the provisions of Section 17 in connexion with this question. Section 17, Presidency Towns Insolvency Act corresponds with Section 28, Provincial Insolvency Act of 1920, by which the disability has been imposed upon creditors in commencing any legal proceedings without the leave of the Court. Having regard to the facts in Sheosaran Ram''s case [1918] 47 I.C. 798 and to the observations made therein, it is clear that that decision has no application to the facts of the present case.

Reliance was also placed upon the decision of the Allahabad High Court in (Maharaj) Hari Ram Vs. Sri Krishna Ram . There also the concluding portion of Sub-section (2), Section 28, Provincial Insolvency Act, was not considered at all. All that the learned Judges say in that case is:

In Section 28, Provincial Insolvency Act the effect of an order of adjudication is described and protection from arrest in execution of a decree is not provided. If it had been the intention of the legislature to protect insolvents, the provision of Section 31 which permit an insolvent to apply to the insolvency Court for a protection order, would have been superfluous.

To my mind with very great respect to the learned Judges, the reason does not appear to be sound. Section 31 empowers the Court to make a protection order, after the making of which no proceeding can be taken against an insolvent. Section 28 contemplates cases before a protection order is made and in that case it is open to a creditor to apply to the insolvency Court for leave to proceed against the person of the insolvent.

Having regard to the express terms of Sub-section (2), Section 28, Provincial Insolvency Act, I am of opinion that the decree-holder was under a disability from taking any step in execution of his decree until leave had been obtained and as the application for execution was made within the period of limitation from the order granting leave, the present application for execution is not barred by limitation.

The appeal is therefore allowed the order of the Court below is set aside. The execution will proceed in due course of law. The appellant is entitled to his costs.

Macpherson, J.

I agree. The case of Sheosaran Ram v. Basudeo Prasad Sahu [1918] 47 I.C. 798 is distinguishable on the facts. An application in execution by arrest of judgment-debtor is, in my opinion, the commencement of a legal proceeding u/s 28(2), Provincial Insolvency Act and limitation began to run against the appellant from the date when the leave of the insolvency. Court for such commencement was granted.