V.R.K.M. Kumarappa Chettiar vs K.M.V.R. Chidambaram Chettiar and Another

Alfred Henry Lionel Leach, C.J.—On the 22nd January, 1935, P.L.S.P.L. Palaniappa Chettiar, the second respondent, was adjudicated an

insovlentonthe petition of K.M.V.R. Chidambaram Chettiar, the first respondent, by the Subordinate Judge of Devakottah. The adjudication was

based on a. transfer of immovable property dated the 23rd February, 1934, which was said to constitute a fraudulent preference. The petition for

adjudication was filed on the 3rd of July, 1934, that is, more than three months after the transaction. Therefore the transaction, even if it constituted

a fraudulent preference could not be made the basis of an insolvency petition by reason of Section 9 (1)(c) of the Provincial Insolvency Act. The

reason given for filing the petition beyond three months was that the Court was closed for the summer vacation and it was not possible to file it

before the 3rd July, 1934, but the fact the Court was closed made no difference, as a Full Bench of this Court has pointed out Kaku

Chenchuramana Reddi Vs. Palapu Arunachalam, That was a case where the petition was filed on the 29th June, 1931, the re-opening day after the

Court''s vacation and the act of insolvency was a deed of sale said to have Been executed fraudulently on the 28th February, 1931. The Court

considered that the period of three months fixed by Section 9(1)(c) of the Provincial Insolvency Act was not a period of limitation, but constituted

a condition to an adjudication and consequently where the alleged act of insolvency had taken place more than three months prior to the

presentation of the petition it could not be set up as a ground for adjudication.

Before the second respondent was adjudicated by the Subordinate Judge of Devakottah, an adjudication order had been passed against him by

the District Court of Tharawady in Burma and his estate in Burma was being administered in insolvency by that Court. On the 7th November,

1935, the present petitioner applied to the Subordinate Judge of Devakottah for an order cancelling the adjudication. The application was made

u/s 35 of the Provincial Insolvency Act which provides that where, in the opinion of the Court, a debtor ought not to have been adjudged insolvent,

or where it is proved to the satisfaction of the Court that the debts of the insolvent have been paid in full, the Court shall, on the application of the

debtor, or of any other person interested, by order in writing, annul the adjudication. The petitioner is a creditor and his object in seeking the

annulment of the adjudication by the Subordinate Judge of Devakottah was to ensure that the proceedings in Burma should not be interfered with.

The learned Subordinate Judge granted the application and annulled the adjudication in view of the decision in Kaku Chenchuramana Reddi Vs.

Palapu Arunachalam, . From that order there was an appeal to the District Judge who considered that the Subordinate Judge was wrong in

annulling the adjudication, his reason being that the order adjudicating the insolvent might have been wrong, and was wrong in the light of Kaku

Chenchuramana Reddi Vs. Palapu Arunachalam, , but there was no appeal and, therefore, it ought not to be disturbed. Accordingly he reversed

the order of the Subordinate Judge. The order of the District Judge now comes before us on an application for revision.

In the first instance the application came before Burn, J., but it was placed before a Bench because the learned Judge was doubtful whether

Section 35 of the Provincial Insolvency Act gave authority to a Judge sitting in insolvency to revise, on the ground of want of jurisdiction, his own

order or an order of a predecessor adjudicating a person insolvent. If on the materials before the Court at the time the order of adjudication was

passed it is clear that the Court had no jurisdiction to pass the order, Section 35 clearly empowers the Court to annul the adjudication. It is true

that the Provincial Insolvency Act does not confer upon the Court the wide powers given by Section 8 of the Presidency Towns Insolvency Act

which allows the Court to review, rescind or vary any order made by it under its insolvency jurisdiction, but Section 35 is sufficient for the purpose

of this case and leaves the Court no discretion in the matter. The corresponding section in the Presidency Towns Insolvency Act is Section 21 in

which the word ''may'' is used, and therefore gives the Court a discretion.

What we have to ascertain in this case is whether the Court acted without jurisdiction when it passed the order of adjudication. The answer must

be that it did. More than three months had elapsed from the date of the alleged fraudulent transfer to the date of the presentation of the petition and

these facts were before the Court. There being no act of insolvency on which an adjudication order could be passed the Court had no jurisdiction

to adjudicate.

A point which was not taken in the lower courts has been taken before us and we will deal with it. When the case was in the list for hearing on

the 18th March, 1938, it was postponed at the instance of the advocate for the respondent as he wished to set up that there were other grounds

for adjudication than the alleged fraudulent preference. All the necessary papers are now before us and it does appear that in paragraph 5 of the

petition the first respondent did allege that the second respondent had, with a view to defeat and delay his creditors, secreted his jewels and

movable properties and had ""absented himself from the reach of his creditors."" But in the next paragraph there was the definite allegation that the

second respondent had given a fraudulent preference in favour of one P.L.P.P.V.R. Veerappa Chettiar on the 23rd of February, 1934, and in

paragraph 7 it was stated:

The said transfer is an act of insolvevcy and as this Hon''ble Court was closed in May and June this application is filed to-day.

The prayer for adjudication then followed. Paragraph 7 clearly shows that the act of insolvency relied on was the alleged fraudulent preference,

but as the adjudication order was passed by consent, the learned Advocate for the respondents says that it should be deemed to be based also on

the allegations in paragraph 5 of the petition. He is in difficulty here, because in the counter-affidavit which his client filed in opposition to the

petition u/s 35 of the Provincial Insolvency Act his client said (paragraph 8):

I submit that the respondent in I.P. No. 40 of 1934 has been adjudicated an insolvent upon a definite act of insolvency and upon the admission of

the respondent, it is not now open to the present applicant to question or set aside that order.

On his own showing the adjudication was upon one definite act of insolvency. The only definite act of insolvency was the fraudulent preference

set out in paragraph 6 of the petition for adjudication. Moreover, not a word was said in the Subordinate Judge''s Court about other acts of

insolvency and in the memorandum of appeal to the District Court it was not alleged that the order of the Subordinate Judge''s Court was bad,

because there were other acts of insolvency. In these circumstances we are unable to regard the adjudication as being based on other grounds than

that of a fraudulent preference. The adjudication being on that ground alone and the transfer attacked having taken place more than three months

before the presentation of the petition, the Court had, as I have already said, no jurisdiction to pass the order of adjudication.

For these reasons the petition will be allowed and the order of the District Court set aside. It follows that the adjudication is annulled; but, this

order will, of course, not affect the insolvency proceedings in Burma. The petitioner is entitled to his costs here and in the Court below.