In Re: Kencharla Krishna Rao

William Phillips, Offg. C.J.

This petition comes before us on a reference by Kumaraswami Sastri, J., and we are asked to determine two questions of law relating to

insolvency (1) whether Section 7 of the Presidency Towns Insolvency Act confers jurisdiction on the High Court in garnishee proceedings where

the garnishee lives outside its jurisdiction, and (2) whether Clause 18 of the Letters Patent is governed by Clause 12 of the same. Both these

questions were decided by a Bench of this Court in Abdul Khader v. Official Assignee of Madras ILR (1916) Mad. 810 and it was there held that

Section 7 does give jurisdiction to the High Court to adjudicate on claims relating �o Immovable property situated outside the limits of its

ordinary original civil jurisdiction. The learned Judges also held that Clause 12 of the Letters Patent does not control the provisions of Clause 18 so

as to limit the insolvency jurisdiction of the Court. The reference does not in terms question the correctness of the decision in Abdul Khader v.

Official Assignee of Madras ILR (1916) Mad. 810 hut the learned Judge refers the matter on the ground that these questions are of considerable

importance and are frequently arising in the Insolvency Court.

It is contended for the garnishee that the proceedings in the Insolvency Court are governed by rules relating to the ordinary original civil

jurisdiction of the High Court and that, as such jurisdiction is limited by Clause 12 of the Letters Patent, the same limitations must apply to

insolvency matters. Section 7 of the Insolvency Act is identical with Section 105 of the English Bankruptcy Act of 1914. Under that Section 105 it

has been held that the Court of Bankruptcy has jurisdiction in cases of claims, by a trustee against a third party and that such jurisdiction is not

limited to cases in which the trustee''s right is a higher one than the bankrupt''s. While admitting this jurisdiction, the Courts have observed that it is

a discretionary one which should not be exercised hi all cases but the parties should be allowed to fight out the dispute in certain cases by an

ordinary action. The question is fully dealt with by Williams in his Bankruptcy Practice, pages 392 to 395, and the principles on which the

Bankruptcy Court should refuse jurisdiction are sought to be explained. In view of the fact that the same question has been dealt with fully by a

Bench of this Court in Abdul Khader v. Official Assignee of Madras ILR (1916) Mad. 810 it seems unnecessary to discuss the question at great

length and I would merely express my agreement with the decision in that case and would repeat the observations of Abdul Rahim, O.C.J., that the

Insolvency Court will seldom deem it expedient to try difficult questions of title. We are aware that this view of Section 7 of the Insolvency Act has

not been adopted in all the other High Courts of India and we understand that the question of further legislation on this point is now under

consideration. Meanwhile I see no reason to differ from the previous decision of this Court so far as Section 7 is concerned.

As to whether Clause 12 of the Letters Patent governs Clause 18, the argument in Abdul Khader v. Official Assignee of Madras ILR (1916)

Mad. 810 is somewhat brief, but I agree that the conclusion arrived at is correct. The insolvency jurisdiction of the High Court is given by Clause

18 of the Letters Patent. It has been held by the Privy Council in In the matter of Candas Narrondas ILR (1889) Bom. 520 that the entering up of

a judgment by the Insolvency Court is an act done in the ordinary jurisdiction of the High Court. Similarly in Annoda Prasad Banerjea v. Nobo

Kishore Roy ILR (1905) Cal. 560 Sale, J., following this case held that the High Court exercises the powers of an Insolvency Court under a

special jurisdiction, but as a part of the ordinary jurisdiction vested by the law. Taking it that the jurisdiction is exercised as ordinary original

jurisdiction it does not follow that Clause 12 which deals with ordinary original civil jurisdiction must govern the case. It is Clause 11 of the Letters

Patent that gives ordinary original civil jurisdiction to the High Court and that prescribes that it shall be exercised ""within such local limits as may

from time to time be declared and prescribed by any law made by the Governor in Council"". Clause 12 makes provision for receiving, trying and

determining suits in the exercise of its ordinary original civil jurisdiction, and so far as suits are concerned the territorial jurisdiction is limited to the

Town of Madras, but jurisdiction is also given in certain cases where the leave of the Court has been first obtained. So far as the Insolvency Court

jurisdiction is concerned, we have to refer to Clause 18, which states that the Court for relief of insolvent-debtors shall have and exercise within the

Presidency of Madras such powers and authorities with respect to original and appellate jurisdiction and otherwise as are constituted by the laws

relating to insolvent-debtors in India. In the first place this clause shows that the Insolvency Court exercises not only original jurisdiction but also

appellate jurisdiction provided such is constituted by any law. The law which gives the Insolvency Court its jurisdiction now is the Presidency

Towns Insolvency Act, III of 1909. u/s 3, the Courts having jurisdiction in insolvency under this Act shall be the High Courts of Judicature at Fort

William, Madras and Bombay and in the Act there is no limitation of the jurisdiction to the Town of Madras. Unless, therefore, Clause 12 governs

Clause 18 such limitation cannot be upheld. It appears that the insolvency jurisdiction, although part of the ordinary original jurisdiction, is a special

power relating to insolvency matters which can be distinguished from the power given under Clause 12 relating to suits. On a consideration of the

two clauses it will be seen that it is impossible that Clause 12 can govern Clause 18, for if it does, the whole of it and not merely the provision for

obtaining leave of the Court in certain cases must apply. If, therefore, an insolvency matter is of a small cause nature falling within the jurisdiction of

the Small Cause Court at Madras, the High Court would have no jurisdiction at all and it is not contended that such petty questions arising in

insolvency should go to the Small Cause Court. Similarly when there is a provision in Clause 18 that the Insolvency Court shall have such powers

as are constituted by the laws relating to insolvent-debtors in India and there is no reference made to Clause 12, it is difficult to hold that the clause

should be read as if the words ""subject to the provisions of Clause 12"" were inserted. Again if this were the case, the converse would equally apply

and if the powers under Clause 18 were restricted by the Act such restriction would be of no avail as against Clause 12. It is, therefore, impossible

to hold that Clause 18 is governed by Clause 12 and this view is further confirmed by Section 90 of the Insolvency Act which runs as follows:

In proceedings under this Act, the Court shall have the like powers and follow the like procedure as it has and follows in the exercise of its

ordinary original civil jurisdiction.

This, by itself, may support the view that Clause 12 is applicable, but we find the following proviso:

Provided that nothing in this sub-section shall in any way limit the jurisdiction conferred on the Court under this Act.

This proviso clearly provides that the limitations of Clause 12, if they limit the jurisdiction conferred by the Insolvency Act, do not apply.

A further contention is put forward that the words ""within the Presidency of Madras"" in Clause 18 take away the jurisdiction of the Court to deal

with persons living or property situated, outside the Presidency, but it has been held by the Privy Council in Official Assignee, Bombay v.

Registrar, Small Cause Court, Amrttsar ILR (1910) Cal. 418 : 1910 20 M.L.J. 432 that an adjudication and vesting order in Bombay had the

effect of vesting all the property of the debtors, including that in the Punjab, in the Official Assignee of Bombay, and it cannot be contended that the

Insolvency Court has no jurisdiction to examine witnesses outside the Presidency although it may be necessary to do so by means of a commission,

and consequently the words ""within the Presidency of Madras"" must be deemed to limit the jurisdiction of the High Court at Madras to cases of

insolvency arising within the Presidency of Madras. I must therefore hold that the Insolvency Court has jurisdiction u/s 7 of the Act and that Clause

12 of the Letters Patent does not affect the provisions of Clause 18. The case must, therefore, be remitted to the Insolvency Judge with a direction

that he should use his discretion in determining whether the present claim, which we understand involves a very large sum of money, is one that

should be tried in the Insolvency Court or whether the Official Assignee should be directed to file a suit in the ordinary course.

The costs of this reference shall be costs in the cause to be provided for in the order of the Insolvency Court.

Ramesam, J.

I agree.

Madhavan Nair, J.

I agree.