(Reniguntla) Venkataramayya and Others vs Thallam Subbarayudu

Wadsworth, J.—This appeal raises a point of limitation on which, so far as I am aware, there is no direct authority. The question is whether

in computing the period of limitation for a claim against a person who has been adjudged insolvent but whose adjudication has been annulled, the

period to be excluded with reference to Section 78, Provincial Insolvency Act is only the period between the date of the adjudication and the date

of the annulment, or whether the plaintiff is entitled to rely on Section 28(7), Provincial Insolvency Act, and to exclude the whole of the period

between the presentation of the petition and the annulment of the adjudication on the legal fiction that the adjudication relates back to the date of

the presentation of the petition. The facts are not in dispute. The plaintiff''s claim is on a promissory note. There is an endorsement of payment

dated 1st May 1920 which saves limitation. On 10th November 1920 the defendant filed an insolvency petition and he was adjudged on 15th

November 1921. The adjudication was annulled on 23rd March 1926, and the suit was filed on 23rd July 1928. Therefore if the plaintiff in

calculating limitation is only entitled to deduct the period between the adjudication and the annulment, his suit would be barred. If, on the other

hand, he is entitled to deduct the period between the presentation of the insolvency petition and the annulment, the suit would be in time.

The nearest case to the facts with which I have to deal is that of Nizam v. Babu Ram Lah 688 1933 Lah 688, where it is held that a claim by a

creditor which was within time on the date of the presentation of the insolvency petition, but was barred by limitation on the date of the

adjudication, can be proved in insolvency with reference to Section 34, Provincial Insolvency Act; that is to say, that a debt to which the debtor

was subject when he was adjudged an insolvent, to use the words of Section 34, may be merely a debt to which the debtor was subject when he

presented his petition in insolvency. This however is not the same thing as holding that in calculating the period of limitation for a suit filed outside

the provisions of the Insolvency Act the plaintiff may deduct, with reference to Section 78, the period between the filing of the insolvency petition

and the adjudication. Mr. Ramadoss for the appellant has based an argument on rulings such as the case of Rangiah v. Appaji Rao 1927 26 MLW

865 where in this Court, prior to the amendment of Section 53, Insolvency Act, it was held that, in calculating the period prior to the date of the

adjudication for a voidable transfer, Section 28(7) could be applied and the date of adjudication could be antedated to the presentation of the

petition. In this case it was observed that Section 28(7) is a general clause which applies to all dealings by or with the insolvent unless any

particular dealing is expressly exempted from its operation. There is however another decision of this Court which enunciates a very different

proposition. Ramesam, J. in T.R. Kaliaperumal Naicker and Others Vs. O.S. Ramachandra Aiyar, Official Receiver in I.P. No. 38 of 1919 on the

file of the Court of the District Munsif of Kumbakonam (ceased to be O.R.) and Another, held that it was open to a creditor to file a suit against an

insolvent after the presentation of the insolvency petition and before the date of the adjudication without impleading the Official Receiver as a party

and without getting the leave of the Court; and in dealing with this matter Ramesam, J. observes:

For all purposes of the Insolvency Act this fiction ''i. e. the fiction of the antedating of the order of adjudication u/s 28(7)'' has to be used and it is a

very useful fiction; but outside those purposes it has no place. The filing of a suit prior to the adjudication may be regarded as outside the purpose

of the Insolvency Act with reference to the provisions of Section 28(2).

Turning to the actual words of Section 78(2), we find that the provision for the exclusion of the period between the date of adjudication and the

date of annulment in calculating limitation is not applicable to a suit for which the leave of the Court has been obtained u/s 28(2), nor is it applicable

to a debt which is provable but not proved under the Act. These exclusions seem to indicate an intention to save limitation only in respect of the

period during which a claim would necessarily be and was in fact prosecuted before the Official Receiver. Now, the present claim was actually

proved before the Official Receiver, but there was nothing to prevent it from being prosecuted in the ordinary way in the ordinary course during the

interval between the presentation of the insolvency petition and the date of the adjudication. There is therefore no very apparent logical reason for

the exclusion of this preliminary period in calculating limitation. There was nothing to bar a suit during; that period, and if Section 78 is intended

only to exclude the period during which a suit is barred except by leave, it is not very apparent why it should be applied to this period when there

was no bar. For the respondent it is argued that in Section 53 as amended the legislature has expressly used the words:

if the transferor is adjudged insolvent on a petition presented within two years after the date of the transfer.

That is to say, it is argued that when the legislature intended to fix the period with reference to the date of the presentation of the petition an

explicit phrase is used, and the Courts are not left to guess at its meaning with the help of Section 28(7) and the fiction of dating back the

adjudication. It seems to me that there is considerable force in this argument and that if it had been the intention of the legislature to exclude from

limitation the period between the presentation of the petition and the adjudication, there is no apparent reason why in Section 78 the phrase ""the

period from: the date of the order of adjudication"" should have been used instead of the obvious phrase ""the period from the date of the

presentation of the insolvency petition"". The words used are explicit in themselves and it is only by the application of a special provision found in a

section which deals entirely with the vesting of property and the procedure in insolvency, that it is possible to give to them a different meaning from

that which they would normally carry. It seems to me that the view taken by the lower appellate Court is correct and I must hold that the plaintiff is

not entitled in calculating limitation to exclude the period between the presentation of the insolvency petition and the adjudication. The appeal is

therefore dismissed with costs of defendant 1. Leave to appeal granted.