1. This is an, appeal by an Insolvent who was adjudicated as such by Mr. Justice Desai, and the few facts which are to be appreciated in order to understand the contention put forward by Mr. Bhabha are these. An 'ex parte' decree was passed against, the appellant in favour of the respondents on 12-7-1952. On 10-3-1954, the respondents took out an insolvency notice which was founded on this judgment debt.
On 5-5-1954, the appellant took out a notice of motion to set aside the insolvency notice. That motion was dismissed by the Insolvency Judge on 8-12-1954. The appellant preferred an appeal to this Court on 10-12-1954, and that appeal was dismissed on 18-3-1955. On 28-3-1955, the respondents presented a petition for adjudicating the appellant insolvent and this petition was founded on the act of insolvency committed by the appellant in not complying with the insolvency notice.
On this petition the learned Judge made the order of adjudication on 19-7-1955, and that is the order which is being challenged in appeal, and the very short point that arises is whether the petition is presented within three months from the commission of the act of insolvency. In order that the petition should be well founded it must be presented within three months from an act of insolvency, and it is not disputed that If the petition is not so presented, then it is bad and the order of adjudication made thereon cannot stand.
2. Now, in the insolvency notice which was Issued by the Insolvency Registrar, time was fixed within which the appellant had to comply with the notice and that time was 35 days from the date of the notice. When the appellant took out a notice of motion on 5-5-1954, to set aside the insolvency notice, that time became automatically extended by reason of the Rules framed by us under the Insolvency Act, and the Question is to what point of time the time was extended by which the appellant could comply with the insolvency notice. The result of the taking out of a notice of motion to set aside the insolvency notice is dealt with in Rule 52-C and the rule is to the following effect :
'An application to set aside the insolvency notice, shall be made by a Notice of motion, and if the application cannot be heard until after the expiry of the time specified in the notice as the day on which the act of insolvency will be complete the Insolvency Registrar shall extend the time arid no act of insolvency shall be deemed to have been committed under the notice until the application shall be heard and determined.'
Therefore, the rule and the reason for the rule are clear. If an application to set aside an insolvency notice is heard, within the time fixed for compliance in the insolvency notice, no question of extension of time arises, but if as a result of the exigencies of work in the Court the Insolvency Judge cannot dispose of the application within that time, then the insolvent is not to Buffer, and the Registrar has been given the discretion to extend the time till the notice of motion is heard and finally determined.
In this case the Insolvency Registrar on 5-5-1954, made an order to the effect that the debtor having filed a notice of motion returnable on 1-6-1954, for an order setting aside the insolvency notice issued herein on April 9, 1954, it is ordered that the time specified in the notice as the 'day on which the act of insolvency will be complete be and the same is hereby extended to until the said notice of motion has been heard and determined; and what we have to decide in this appeal is as to when the notice of motion taken out by the appellant was heard and determined, because it was up to that point of time that the appellant was given the right to comply with the insolvency notice and on his failure to do so he would commit an act of insolvency.
3. Now, what was urged by the respondents --and the argument found favour with the learned judge--was that the notice of motion was not heard and determined till 18-3-1955, when the Court of appeal dismissed the appeal of the appellant. On the other hand, the contention of the appellant is that the notice of motion was heard and finally determined on 8-12-1954, when the Insolvency Judge dismissed the motion.
Now, if the appellant is right, then the petition which was presented on 28-3-1955, is clearly beyond three months. If, on the other hand, the view of the learned Judge is correct and the material date is 18-3-1955, then the petition is within time.
4. The learned 'Judge, with respect, seems to have imported into the construction of Rule 52-C the well-known principle that an appeal is a continuation of a suit or proceeding and a suit, or proceeding cannot be considered to be finally determined till the appeal is heard and disposed of. But that principle does not necessarily arise and cannot be given effect to in the construction of every rule or every law.
If the words used in the rule are clear and if the only reasonable interpretation that can be put upon the rule is that the hearing and final determination referred to in the rule is of the motion itself and not of the appeal which may result from the dismissal of the motion, then in our opinion it would not be right to give, an unreasonable interpretation to Rule 52-C merely because in certain cases the principle just referred to has been given effect to.
In our opinion, as we shall presently point, out, if the construction suggested by the learned Judge were to be accepted, it would lead to serious difficulties and anomalies. On the other hand, if we were to accept the construction suggested by Mr. Bhabha, it would not only be a reasonable construction put upon the rule but it would make the working of the insolvency law, as far as insolvency notices are concerned, possible and practicable.
With very great respect, the learned Judge has failed to appreciate the fact that when the motion was dismissed on 8-12-1954, no one knew and perhaps the insolvent himself did not know whether he was going to prefer an appeal, and on the strict terms of the rule and the order made by the Registrar the act of Insolvency was complete on that day. The appellant then preferred an appeal on 10-12-1954.
Is it suggested that by preferring the appeal he altered the situation which had arisen by his non-compliance with the insolvency notice on 8-13-1954? Is it possible to argue that the act of insolvency which was complete on 8-12-1954, became incomplete or ceased to be an act of insolvency merely by the act of the appellant on preferring the appeal on 10-12-1954? Such a construction would place tremendous powers in the hands of the insolvent.
Mr. Bhabha has rightly suggested that in effect it would be giving to the insolvent the power to stay the operation of an order made by the Insolvency Judge, which power in proper cases can only be exercised by the Court of appeal. But the matter does not rest there. There is a higher Court of appeal in this country and Mr. Laud was unable to tell us what would happen If the appellant were to appeal to the Supreme Court.
By parity of reasoning, as soon as his appeal was admitted by the Supreme Court the act of insolvency would cease to have any effect; the order of adjudication would automatically stand annulled and the petition presented by the creditor would be a bad petition. It would be a very serious matter for creditors at large if by the mere act of preferring an appeal the insolvent could extend the time for the completion of the act of insolvency.
One has only to look at Section 56 to realise that the insolvent could prefer his creditors and pay one creditor as against the other and that preference could not be challenged unless it was shown within three months of the presentation of the petition. But if no petition could be presented till after the matter is decided by the appellate Court here, even conceivably say the Supreme Court in Delhi, then notwithstanding the taking out of the insolvency notice, notwithstanding the desire of the creditor to get the debtor adjudicated Insolvent, and notwithstanding his anxiety that his estate should vest in the Official Assignee the insolvent would be at large and would be in a position to deal with his estate.
5. In our opinion, all these considerations can lead only to one conclusion that the language of Rule 52-C cannot admit of any other interpretation except this that the application which has to be heard said determined within the language of that rule is not by any other Court except the Insolvency Court which hears the notice of motion taken out by the insolvent.
This interpretation does not in any way prejudice the debtor because If a petition is presented for his adjudication after the notice of motion is dismissed and he is adjudicated insolvent on that petition, and If subsequently higher Court sets aside the insolvency notice, the order of adjudication would also be annulled because it was founded on that insolvency notice.
6. Mr. Bhabha has referred to a decision of the English Court which in our opinion is on all fours with the facts before us, and the attempt made to distinguish it in our opinion cannot succeed. The judgment is reported in -- 'Re A Debtor' (1953) 2 All ER 561 (A), and the facts there are rattier significant. An insolvency notice was taken out on 22-8-1952. On 1-9-1952, the Registrar fixed the hearing of the application for September 10, & extended to the date of the hearing the duration of the bankruptcy notice. On 10-9-1952, the Registrar dismissed the debtor's application. On October 18, 1952, the debtor appealed to the Divisional Court of the Chancery Division which allowed his appeal. On 10-2-1953, the Court of Appeal restored the decision of the Registrar. On 10-3-1953, the Judgment-creditor filed a petition for adjudication and what was argued by the judgment-creditor was that the relevant date for the purpose of the completion of the act of insolvency was 10-2-1953, when the Court of Appeal finally decided the notice of motion.
This contention was rejected and the Court held that the relevant date was 10-9-1952, when the Registrar dismissed the debtor's application. Now, it will be noticed that the insolvency rule in England dealing with Insolvency notices is substantially in pari materia with the rule that we have to consider here, and the only point of distinction that has been made in the Court below Is that whereas in England the application to set aside the insolvency notice is heard by the Insolvency Registrar, here the application is heard by the Insolvency Judge. With very great respect, it is difficult to understand how that distinguishing fact can make any difference to the principle of the decision or to its ratio. In England, from the Registrar's decision there are two appeals, and if the view taken by the learned Judge was correct, then it could not have been said that the application was heard and finally decided by the Registrar.
The final decision then would have been when the Court of Appeal decided it on 10-2-1953. If under the English Rules the decision referred to in the rule is the decision of the Registrar, then on the same reasoning the decision referred to in our rule is the decision of the Insolvency Judge and not the decision of higher Court.
7. Therefore, 'in our opinion, the appeal, must succeed. The result is that the appeal will be allowed with costs. The order of adjudication will be set aside. Petition dismissed with costs. Liberty to the appellant's attorneys to withdraw the sum of Rs. 500 deposited in Court.
8. Appeal allowed.