In Re: Kencherla Krishna Rao

William Watkins Phillips, Officiating C.J.

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

insolvency (I) whether Section 7, 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, Letters Patent, is governed by Clause 12 of the same. Both these questions were

decided by a Beach of this Court in Official Assignee of Madras v. Vadavalli Ammal 36 Ind. Cas. 534 : 40 M. 810 : 20 M.L.T. 311 : 4 L.W. 425

and it was there bald that Section 7 does give jurisdiction to the High Court to adjudicate on claims relating to Immovable property situated outside

the limits of its ordinary original civil jurisdiction. The learned Judges also held that Clause 12, 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 Official

Assignee of Madras v. Vadavalli Ammal 36 Ind. Cas. 534 : 40 M. 810 : 20 M.L.T. 311 : 4 L.W. 425 but 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, Letters Patent the same limitations must apply to insolvency

matters. Section 7, Insolvency Act, is identical with Section 105 of the English Bankruptcy Act, 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 such jurisdiction 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 in 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 Official

Assignee of Madras v. Vadavalli Ammal 36 Ind. Cas. 534 : 40 M. 810 : 20 M.L.T. 311 : 4 L.W. 425 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 Abdur

Rahim, Officiating 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, 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 con-sideration. 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 Letters Patent governs Clause 18, the argument in Official Assignee of Madras v. Vadavalli Ammal 36 Ind. Cas. 534 :

40 M. 810 : 20 M.L.T. 311 : 4 L.W. 425, 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, Letters Patent. It has been held by the Privy Council in Srinivasa Moorthy Vs. Venkatavarada Iyengar, , 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

Banerjee v. Nobo Kishore Roy 33 C. 560 : 9 C.W.N. 952 Sale, J., following this case, held that the High Court exercises the powers of an

Insolvency Court under a special jurisdiction, but as apart of the oridinary original jurisdiction vested by the law. Taking it that the jurisdiction is

exercised as oridinary jurisdiction it does not follow that Clause 12, which deals with ordinary original civil jurisdiction, must govern the case. It is

Clause 11, 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 insolvency 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 of the Act 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, 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 tit is 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 The Official Assignee Vs. The

Registrar, Small Cause Court, 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 13, 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.