Manicka Nainar vs Murugesa Goundan

Alfred Henry Lionel Leach, C.J.—The question here is whether a money decree obtained by the appellant against the respondent in the

Court of the District Munsiff of Arni on the 13th September, 1927, is barred by the law of limitation. Between the date of the decree and the 28th

of September, 1935, the decree-holder filed on different dates three applications for execution. These applications kept the decree alive. On the

28th September, 1935, he filed a fourth application for execution, which resulted in the District Munsiff ordering the respondent''s arrest on the

16th December, 1935. He was liberated at once as he undertook to apply under the provisions of Section 55(4) of the CPC for adjudication, in

insolvency. On the same day he filed in the Court of the Subordinate Judge, Vellore, an application for adjudication and on the 20th December,

1935, he was granted interim relief from arrest. Thereupon the District Munsiff dismissed the application for execution. On the 2nd September,

1936, the respondent was-adjudicated an insolvent in the Court of the Subordinate Judge. He failed to apply within the stipulated period for his

discharge and consequently on the 25th September, 1940, the order of adjudication was annulled u/s 43 of the Provincial Insolvency Act. On the

20th December, 1942, the decree-holder filed another application for execution. He claimed to be entitled to the benefit of Section 78(2) of the

Provincial Insolvency Act. The application was opposed on the ground that the case fell within the proviso to Sub-section (2) to Section 78 as the

decree-holder had not proved the debt in the insolvency proceedings. This objection was accepted by the District Munsiff, whose decision was up

held by the District Judge of Vellore on appeal. The present appeal is from the order of the District Judge. The appeal first came before

Rajamannar, J., who referred it to a Bench for hearing as there is conflict in the judgments of this Court which have bearing on the case.

Section 33 of the Provincial Insolvency Act provides that when an order of adjudication has been made, all persons alleging themselves to be

creditors of the insolvent in respect of debts provable under the Act shall tender proof of their respective debts by producing evidence of the

amounts and particulars thereof. It is the duty of the Court to examine the amounts owing to the creditors and to frame a schedule of them and their

debts. Section 49 states that a debt may be proved under the Act by delivering, or sending by post in a registered letter, to the Court an affidavit

verifying the debt. The affidavit shall contain or refer to a statement of account showing the particulars of the debt and shall specify the vouchers by

which it can be substantiated. The Court has the right to call for the production of the vouchers. Section 78(2) provides that where an order of

adjudication has been annulled under the Act, in computing the period of limitation prescribed for a suit or an application for the execution of a

decree (other than a suit or application in respect of which the leave of the Court was obtained under Sub-section (2) of Section 28) which might

have been brought or made but for the making of an order of adjudication under the Act, the period from the date of the order of adjudication to

the date of the order of annulment shall be excluded ; but the section goes on to state that nothing in it shall apply to a suit or application in respect

of a debt provable, but not proved, under the Act. Does the proviso mean that the debt must be proved by the method contemplated in Section 49

or does it leave it open to the Court to accept other proof? It is on this question that there is a conflict of authority.

In Raj Kumar Dutta Vs. Jadu Nath Gupta, a Bench of the Calcutta High Court expressed the opinion that Section 49 only specifies a simple

mode of proof and does not exclude any other mode. In that case, the judgment-debtor was adjudicated an insolvent during the pendency of

execution proceedings. In the schedule which he filed he described the decree-holder as his only creditor. The executing Court stayed the

execution and directed the decree-holder to produce a copy of the insolvency proceedings. He failed to do so whereupon his application for

execution was dismissed. In a later execution the question was whether Section 78 of the Provincial Insolvency Act applied. The Court held that

the statement by the insolvent in the insolvency proceedings that the decree-holder had obtained a decree against him amounted to proof of the

debt within the contemplation of the section. We consider that this decision is open to criticism because the admission of an insolvent that he owes

a debt does not in itself constitute proof of the debt, although the admission may be used against him. An insolvent might falsify his schedule for

ulterior purposes and such cases have been known.

In Ramalinga Aiyar v. Rayalu Aiyar (1929) 58 M.L.J. 170 : ILR 53 Mad. 243 a Bench of this Court (Venkatasubba Rao and Madhavan Nair,

JJ.) accepted the principle that proof was not confined to the manner of proof contemplated by Section 49 and held that where a decree had been

obtained against the Official Receiver after an order of adjudicarion, that in itself was sufficient proof of the debt within the meaning of Section

78(2). In (Allu) Ramalinga Ayyar Vs. Malli N.M. Subba Ayyar (dead) and Others, the same learned Judges accepted as proof of the debt factors

which were also not in accordance with Section 49. On the other hand, Krishnaswami Aiyangar, J., held in Sait Sogmull Lachiram Firm of Tenali

Vs. Vallabhaneni Parandhamayya and Others, that the word ""proved"" in Section 78(2) meant "" proved "" in accordance with stction 49.

The word "" proved "" in Section 78(2) does not imply that the Insolvency Court must have accepted the proof tendered. In Lakshmi Bai v.

Rukmaji Rao (1934) 67 M.L.J. 45 : ILR 57 Mad. 767 Beasley, C.J., held that the word covered the case where proof of the debt had been

lodged and all the requirements of Section 49 had been fulfilled. The Privy Council gave a pronouncement to the same effect in Govind Prasad v.

Pawnkumar ILR (1943) Nag. 669. Therefore compliance with Section 49 will save limitation running while the order of adjudication remains in

force. Surely a fortiori Section 78(2) will apply when there exists on the record of the Insolvency Court evidence of the debt which the Court is

bound to accept. In our opinion the operation of Section 78(2) is not confined to the narrow limits of Section 49, but can be applied where there is

sufficient evidence on the record to establish the debt. It must, of course, be proof before the Insolvency Court.

In the present case there was no proof of the respondent''s debt to the appellant in the insolvency proceedings. We have sent for and have

examined the record of the Insolvency Court. The petition on which the adjudication was made is missing, but it is clear that the respondent applied

for his adjudication because he had been arrested in execution of a decree. The order of adjudication is extant. It shows that the order was passed

because none of the creditors objected.

Mr. Ramaswami Aiyar on behalf of the appellant has contended that by reason of the provisions of Sections 13 and 24 of the Provincial

Insolvency Act, the debt must be deemed to have been proved. We cannot accept this contention. Section 13 states what his petition for

adjudication shall contain. Where he has been arrested in execution of a decree he is required to give particulars of the decree. Whether the

respondent did so in this case does not appear. Presumably he did so, but the statement filed in Court u/s 13 would not in itself amount to proof of

the amount actually owing under the decree. Section 24 states what the Court shall require proof of at the hearing. Where the debtor is the

petitioner he shall for the purpose of proving his inability to pay his debts be required to furnish only such proof as to satisfy the Court that there are

prima facie grounds for believing the same. If the Court is satisfied that there are prima facie grounds it shall not be bound to hear further evidence.

There is absolutely no indication on the record of what happened in Court when the adjudication order was passed beyond the fact that it was

passed without objection from the creditors. Even if the respondent had prepared a schedule of his debts and included therein the amount of the

decree passed in favour of the appellant, this, as we have already indicated, would net amount to proof of what was due under it.

It is the Official Receiver''s duty to settle the list of creditors and he prepared a schedule, but the appellant''s name is not included therein. If the

Official Receiver had included the appellant in the list and shown the amount due to him the Court would be justified in holding that the debt had

been proved, but that is certainly not the case here. We may add that it was found by both the Courts below that no proof of the debt was

tendered to the Official Receiver.

In these circumstances the appellant is not entitled to the benefit of Section 78(2) of the Act and his appeal must be dismissed without costs.