Satyabadi Sahu and Others vs Puri Bank, Ltd.

Beevor, J.—The present appellants with one Gadadhar Sahu, a member of the same family, were adjudicated insolvents on 19-3.193?. The respondent, Puri Bank Ltd., before that date, obtained a decree against these persona and had already put the said decree into execution once or more than once. Thereafter, the proceedings in execution continued until the order of adjudication was annulled on 27-10-1942 u/s 43, Provincial Insolvency Act, as the insolvents had never prayed for an order of discharge u/s 41 within the period limited. Subsequent to the order of annulment the respondent, Puri Bank, proceeded to take out fresh execution of the decree. By this time, one of the insolvents had died, and the present appellants objected that the decree was barred by limitation. The respondent bank claimed that the decree was not barred by limitation, because of the provisions of Article 182(5) of the schedule to the Limitation Act, as the respondent bank had filed execution proceedings even during the pendency of the insolvency proceedings. They filed execution petitions in the regular course against these appellants as well as against the son of the deceased Gadadhar. The appellants contended that the respondent could only have proceeded in execution after the annulment, if he could bring his case within Section 78(2), Provincial Insolvency Act, and that his case was excluded by the proviso.

The Subordinate Judge held in favour of the respondent that the mere filing of the several execution petitions saved limitation, if they were according to law as required under Order 21, Rule 11, Civil P.C., and he, therefore, allowed execution to proceed and rejected the claim of the present appellants that the execution case was barred by limitation. Against that order, the present appeal has been filed. On behalf of the appellants it has again been urged that the respondent could succeed only if he brought his case within Section 78(2), Provincial Insolvency Act, and that, as there was no permission granted by the Insolvency Court for the filing of the execution petitions during the pendency of the insolvency proceedings, those petitions could not be treated as in accordance with law for the purposes of Article 182(5), Limitation Act, and, therefore, those petitions for execution would not save limitation and it was further contended that, as the debt due to the respondent bank was provable but not proved under the Provincial Insolvency Act, the proviso to Section 78(2) would prevent the respondent bank from claiming any exemption of time under that section.

Now, the learned Advocate for the respondent bank has attempted to support the decision of the lower Court on three grounds: first, that as the son of Gadadhara was a person against whom the Bank proceeded in execution and the son would be liable for the father''s debts from the family property, therefore, he might proceed to execute the decree obtained against the father, Gadadhara, against the son after the death of the father, Gadadhara, and, for these reasons, the execution cases filed during the pendency of the insolvency proceedings should be regarded as in accordance with law. In connection with this argument, it was urged that the father might have been representing the family including the son in the suit, in which the decree was passed, and, thus, the son might be personally liable under the decree. The second point urged by the respondent is that, as the form of the executions petitions Was in accordance with Order 21, Rule 11, Civil P.C., therefore, the said petitions must be treated as being in accordance with law for the purposes of Article 182(5), Limitation Act even though the prayer in those execution petitions was for reliefs, which it subsequently proved the Court could not grant. Thirdly, it was urged that by reason of certain proceedings, to which I would later refer, the debt due to the respondent bank had actually been proved in the insolvency proceedings and therefore, the proviso to Section 78(2), Provincial-Insolvency Act would not bar the respondent bank from relief under that section.

Now, Section 28(2), Provincial Insolvency Act provides that

On the mailing of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as hereinafter provided, and shall become divisible among the creditors, and thereafter, except as provided by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceeding except with the leave of the Court and on such terms as the Court may impose.

Now, I do not find it necessary to consider closely the question how far the respondent bank might have been entitled to proceed against the son of Gadadhara personally had they established that Gadadhara represented his son in the suit in which the decree in favour of the respondent bank was passed, because it is conceded on behalf of the respondent bank that there is no evidence on the record to prove such representation in this case. On the other branch of this argument, a large number of cases were cited before us regarding the limits of the wording of Article 182(5), Limitation Act. So far as this Court is concerned, the position is made absolutely clear by the decision in Firm Johar Mal-Paran Ram Vs. Bindeswari Prasad Singh and Others, where it was held that

The words ''in accordance with law'' which occur in Article 182(5) are general and cannot be construed to mean only ''in accordance with the Civil Procedure Code'',

and that:

the expression means applying to the Court to do something in execution which by law that Court is competent to do, and it does not mean applying to the Court to do something which either to the decree-holder''s direct knowledge in fact or from his presumed knowledge of the law he must have known the Court was incompetent to do.

Now, in this case, from the respondent''s presumed knowledge of law, he must be treated as knowing by reason of Section 28(2), Provincial Insolvency Act that he was not entitled to institute the execution proceedings, and, therefore, the executing Court could not legally grant him the relief he sought. I am satisfied, therefore, that the execution proceedings filed by the (respondent bank during the pendency of the insolvency proceedings cannot be treated as in accordance with law for the purposes of Article 182(5), Limitation Act, and this application cannot help the respondent bank.

As regards the third argument on behalf of the respondent bank, Section 78(2), Provincial Insolvency Act, lays down that:

Where an order of adjudication has been annulled under this Act, in computing the period of limitation prescribed for any suit or 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 this Act, the period from the date of the order of adjudication to the date of the order of annulment shall be excluded,

This is subject to the following proviso:

Provided that nothing in this section shall apply to a suit or application in respect of a debt provable but not proved under this Act.

We have been furnished with affidavits on behalf of the respondent showing that subsequent to the date of annulment in the insolvency proceedings now in question, the respondent bank filed on 27-1-1945, in the Insolvency Court an affidavit in proof of his debt. As by a mistake no vesting order was made before, the District Judge by his order dated 13-2-1945, ordered that the properties of the debtors including the sum then held in Court should vest in the receiver and he should act u/s 33, Insolvency Act.

The reference to the vesting order referred to above has a reference to Section 37, Provincial Insolvency Act. Section 37, subs, (1), lays down as follows:

Where an adjudication is annulled, all sales and dispositions of property and payments duly made, and all acts theretofore done, by the Court or receiver, shall be valid; but, subject as aforesaid, the property of the debtor who was adjudged insolvent shall vest in such person as the Court may appoint, or, in default of any such appointment, shall revert to the debtor to the extent of his right or interest therein on such conditions (if any) as the Court may, by order in writing, declare.

It has been held by this Court in Chouthmal Bhagirath v. Jokhiram Surajmal AIR 1933 Pat. 84 that an order u/s 37 vesting the property in some person need not be simultaneous with the order of annulment. There has been a large number of cases cited before us regarding the powers of the Insolvency Court and of the person in whom the property of the debtor is vested by an order u/s 37(1), Provincial Insolvency Act, and the learned advocate for the respondent has argued at considerable-length to show that both the Insolvency Court and even the person in whom the property is so vested have power after the annulment of the adjudication to proceed not merely to realise the assets and property which are vested in the person so appointed but also to determine the rights of creditors and to distribute the property. It is no disrespect to the learned advocate if I fail to deal in detail with the numerous decisions which he has cited. The reason why I shall refrain from doing so is that it seems to me that this case may be decided without considering very closely the questions raised in those cases. I may point out, however, that the decision of the Rangoon High Court in Annamalay Chettier v. R.K. Bannerjee AIR 1936 Rang. 284, and the decision of the Madras High Court in Veerayya v. P.V. Sreenivasa Rao AIR 1935 Mad. 826, and the cases therein cited show that there is a conflict of opinion regarding the true position of the person in whom the property is vested by an order u/s 37(1) and the powers and duties of the Insolvency Court after an adjudication has been annulled u/s 43, Provincial Insolvency Act. The Madras High Court has taken the view that even after the annulment of an adjudication u/s 43, the Insolvency Court retains full powers to give directions u/s 37 as to the realisation and disposal of the debtor''s assets. There remains the question whether even on the view of the Madras High Court any power in the Insolvency Court to decide the status of creditors after an annulment of adjudication u/s 43 is power to receive proof of debt under the Act.

Now, soon after the above decision of a Full Bench of the Madras High Court, there was another decision of the Madras High Court in Venkata Srinivasa Rao v. Secy. of State AIR 1935 Mad. 931, in which a claim was preferred on behalf of the Government to the Official Receiver in whom the property of a debtor had been vested by an order u/s 37, Provincial Insolvency Act, for realisation of a debt due to the Government which had accrued after the date of the annulment itself, and it was held that this debt could be proved for the purposes of Section 37 and that the rule in Section 34 of the Act that only debts which are subsisting at the time of the adjudication are provable in the insolvency can have no further application when the adjudication has been annulled. To my mind, this decision shows clearly that even if there is a power in the Court to determine what persons have rights as creditors for the purposes of Section 37 of the Act, that is a power under the general law, and cannot be a power to accept proof of debts under the Provincial Insolvency Act itself. I am satisfied, therefore, that even if in one sense the respondent bank has proved the debt due to them in the Insolvency Court by means of the affidavit filed subsequent to the date of annulment, still they have not proved under the Act within the meaning of the proviso to Section 78(2), Provincial Insolvency Act.

For these reasons, I would allow this appeal and direct that the execution case filed by the respondent bank be dismissed as barred by limitation. The appellants are entitled to costs in both the Courts.

Reuben, J.

I agree.