Radha vs Ramalingam and Others

T. Sudanthiram, J.—Challenging the order dated 06.08.2007 made in IA No. 240 of 2006 in Insolvency Petition No. 1 of 2006 on the file of the learned District Judge, Cuddalore, allowing the petition thereby restraining the respondents therein from causing bodily injury or arresting, harassing or threatening the 1st respondent herein, the petitioner who is the 1st respondent in the said Interlocutory application has come forward with this Civil Miscellaneous Appeal.

The 1st respondent herein has filed Insolvency Petition No. 1 of 2006 seeking to declare herself as insolvent and the said Insolvency Petition is still pending. Along with the said Insolvency Petition, the 1st respondent filed I.A. No. 240 of 2006 u/s 4 and 23 of the Provincial Insolvency Act seeking interim protection pending disposal of the Insolvency Petition. The said petition was resisted by the petitioner herein on many grounds including that the Court has no jurisdiction to grant any such interim protection. Having considered the rival submissions, the Lower Court allowed the Interlocutory application thereby granting the relief as prayed for.

The main ground raised by the petitioner before this Court is that the order of the Lower Court is without jurisdiction in as much as u/s 23 of the Provincial Insolvency Act, the order for release of a debtor alone could be passed during the pendency of the Insolvency Petition. It is further submitted that before the final adjudication is made declaring the 1st respondent as insolvent, it is not at all within the jurisdiction of the learned District Judge to grant interim protection as has been done in this case.

The learned Counsel for the appellant relies on the Division Bench judgment of this High Court in Sinnaswami Chettiar Vs. Aligi Goundan and Others, , wherein the Division Bench has held that the insolvency Court has no jurisdiction to pass any such interim order.

The learned Counsel also relies on the judgment of the Division Bench of Calcutta High Court in Jewraj Kharewalla Vs. Lalbhai Kalyanbhai and Co., and also the Judgment of Lahore High Court in Basheshar Das v. Central Co-operative Bank Ltd. Lahore reported in AIR 1934 Lahore 113 wherein the Court had followed the Division Bench judgment of the Madras High Court. The learned Counsel also relies on another judgment of the learned single Judge of the Andhra Pradesh High Court in Sanapala Narasamma and others Vs. Mallana Laxminarayana, Kaviti Mandal and others, wherein also reference has been made to the above Division Bench judgment.

But the learned Counsel appearing for the 1st respondent would submit that the District Judge has jurisdiction to grant such an interim order in exercise of the inherent power u/s 5 of the Provincial Insolvency Act. According to him, though u/s 23 of the Provincial Insolvency Act such an interim protection cannot be granted as the said provision can be made applicable in the case where arrest has already been made, u/s 5 of the Provincial Insolvency Act, the Court has been empowered to grant such an interim protection. To substantiate his contention he relies on the Division Bench judgment of this Court in Nallagatti Goundan Vs. Ramana Goundan and Others, .

This Court has considered the rival submissions. The earliest case of this Court in respect of the jurisdiction of the insolvency Court to grant interim protection is Sinnaswami Chettiar Vs. Aligi Goundan and Others, . In the said judgment though no specific reference has been made to Section 5 of the Provincial Insolvency Act, the Division Bench after having dealt with Section 23 as well as Section 31 of the Act has ultimately held as follows:

An insolvent is not entitled to make an application under the Act for protection, before he is adjudicated, unless he has been arrested; because, there is really no necessity till then for any protection. If the insolvent wants to apply for protection, he ought to expedite matters, in such a way, as to get his order of adjudication first and then ask the Court to grant protection u/s 31.

The next case on this subject dealt with by another Division Bench of this Court is Nallagatti Goundan Vs. Ramana Goundan and Others, wherein without reference to the judgment in Sinnaswami Chettiar Vs. Aligi Goundan and Others, , the Division Bench has held as follows:

In our opinion the District Judge has inherent powers u/s 5 of the Provincial Insolvency Act to grant the appellant the protection he has claimed.

A thorough reading of the above two judgments would indicate that apparently there is a conflict of views taken by two different Division Benches of this Court. Subsequently, yet another Division Bench of this Court had an occasion to consider the said question in Ramnad District Central Co-operative Bank Vs. Official Receiver of Ramnad Dt. Ramnad at Madura, . If one looks into the said judgment, it is obvious that the judgment in Sinnaswami Chettiar Vs. Aligi Goundan and Others, was not brought to the notice of this Division Bench. The Division Bench has referred only to Nallagatti Goundan v. Ramana Goundan and Ors. case (1925) Madras 170 and observed in Paragraph 14 as follows:

We are unable to see how the appellant can get any help at all from these observations. In our opinion the observations in The Official Receiver of Coimbatore Vs. Palaniswami Chetti alias Ponnuswami Chettiar and Another, are too widely stated and the principal is correctly stated in Paragraph 74 of Mulah''s Law of insolvency. In these circumstances, we have no doubt that the insolvency Court is empowered to issue the injunction in proper cases.

Though the view taken in Nallagatti Goundan v. Ramana Goundan and Ors. case (1925) Madras 170 has been approved by the Division Bench in Ramnad District Central Co-operative Bank Vs. Official Receiver of Ramnad Dt. Ramnad at Madura, , since the judgment in Sinnaswami Chettiar Vs. Aligi Goundan and Others, was not brought to the notice of this Division Bench, the said Division Bench had no occasion to consider the view taken by the earlier Division Bench.

In Ch. Ghulam Sarwar v. Guru Piara and Ors. reported in AIR 1934 Lahore 113 , a learned single Judge of the Lahore High Court had an occasion to refer to both the decisions in Sinnaswami Chettiar Vs. Aligi Goundan and Others, as well as Nallagatti Goundan Vs. Ramana Goundan and Others, . The learned Judge has held that the view taken in Nallagatti Goundan Vs. Ramana Goundan and Others, is obiter dictum, and the law laid down in Sinnaswami Chettiar Vs. Aligi Goundan and Others, is a correct law.

Though the Division Bench of Calcutta High Court in Jewraj Kharewalla Vs. Lalbhai Kalyanbhai and Co., , had no occasion to refer either Sinnaswami Chettiar Vs. Aligi Goundan and Others, or Nallagatti Goundan Vs. Ramana Goundan and Others, the Division Bench has held that insolvency Court had no power to grant such interim protection. However, a learned single Judge of Andhra Pradesh High Court in Sanapala Narasamma and others Vs. Mallana Laxminarayana, Kaviti Mandal and others, had an occasion to consider both Sinnaswami Chettiar Vs. Aligi Goundan and Others, and Nallagatti Goundan Vs. Ramana Goundan and Others, , and after having elaborately considering both the cases, in Paragraph 12, the learned Judge has observed as follows:

Apparently there is a conflict of views taken in Sinnaswami Chettiar Vs. Aligi Goundan and Others, and Nallagatti Goundan Vs. Ramana Goundan and Others, . Though in Sinnaswamy Chettiar v. Aligi Goundan there is no discussion about powers of the Court u/s 5 of the Provincial Insolvency Act but it has been held categorically that unless the judgment debtor is declared as insolvent, protection orders u/s 31 cannot be passed in his favour. Provision u/s 23 has also been considered in this judgment. It has been held that before adjudication an insolvent has no right to be protected unless he is arrested in execution of a decree. The provision u/s 23 clearly contemplated that an order under it can be passed only where the judgment debtor has been actually arrested. It is obvious that order u/s 23 of the Provincial Insolvency Act cannot be passed rest and approaches the Insolvency Court for protection to his arrest. Such a protection only u/s 32 of Provincial Insolvency Act which can be availed only after adjudication and not during pendency of adjudication proceedings. As against this in the case of Nallagatti Goundan Vs. Ramana Goundan and Others, it has been categorically held that Section 5 of the Provincial Insolvency Act has the powers to grant ad-interim protection to a person who has applied for being adjudicated during the pendency of such proceedings.

In paragraph 13, the learned judge has observed as follows:

It may be mentioned that the judgments of the Madras High Court rendered prior to 1954 are binding on this Court. In view of conflicting views expressed in the two Division Bench decisions of Madras High court referred to above I would have been inclined to frame a question and refer the matter for consideration by Division Bench of this Court. But from the facts of this case it does not appear to be necessary.

(Emphasis supplied)

A close analysis of all the aspects, more particularly Nallagatti Goundan Vs. Ramana Goundan and Others, and Sinnaswami Chettiar Vs. Aligi Goundan and Others, , in my considered opinion, conflicting views have been expressed in respect of jurisdiction of the insolvency Court to grant interim protection. Since both the Benches are of equal coram, I am of the view that the said question of importance may be referred to a Larger Bench for consideration and so I deem it appropriate to place the papers before My Lord The Honourable The Chief Justice for constituting a Larger Bench, if need be, to decide the following question of law of public importance:

Whether the insolvency Court constituted under Provincial Insolvency Act of 1920 has power under the law to grant ad-interim protection from ''arrest or detention'' before a final adjudication order is made adjudicating the individual as insolvent?