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Jivanlal Chimanlal Mehta Vs. Pramodchandra Chimanlal Mody - Court Judgment

LegalCrystal Citation
SubjectLimitation
CourtMumbai High Court
Decided On
Case NumberAppeal No. 27 of 1958 and Insolvency No. 129 of 1957
Judge
Reported inAIR1959Bom289; (1959)61BOMLR110; ILR1959Bom822
ActsLimitation Act, 1908 - Sections 19; Stamp Act, 1899 - Schedule - Article 1; Presidency Towns Insolvency Act, 1909 - Sections 9(1); Provincial Insolvency Act, 1920 - Sections 6; Code of Civil Procedure (CPC), 1908 - Sections 65 - Order 21, Rule 92; High Court Rules and the City Civil Court Rules - Rules 89 and 90; Insolvency Act - Sections 9; Sir Dinshaw Mulla's Insolvency Act
AppellantJivanlal Chimanlal Mehta
RespondentPramodchandra Chimanlal Mody
Appellant AdvocateH.S. Desai, Adv.
Respondent AdvocateSohani Mehta, Adv.
Excerpt:
.....to the extent that it relied on this document. ' now, the sale of a property and the sale being confirmed or becoming absolute are two different concept which are well recognised under the indian law. therefore, the legislature clearly recognises that there is a sale of property which is antecedent to its confirmation or its becoming absolute under rule 92. the same is the language used in rs. 7. strong reliance was placed on a decision of the english court reported in ex parte villars;.....apply to have the sale set aside. therefore, the legislature clearly recognises that there is a sale of property which is antecedent to its confirmation or its becoming absolute under rule 92. the same is the language used in rs. 90 where an application can be made to set aside a sale on the ground of irregularity or fraud. here also, the language used is: 'where any property has been sold in execution of a decree' and the concept of the sale becoming absolute arises when you come to order21, rule 92. therefore, as we have just said, these are two entirely separate legal concepts, - the sale of an immoveable property and the sale becoming absolute. now, if the legislature intended that the act of insolvency should only occur when the sale became absolute, there was no reason why the.....
Judgment:

Chagla, C.J.

1. This appeal arises two questions, one which is very simple to decide and the other of some importance. The Appellant was adjudicated insolvent on a petition presented on the 28th of November, 1957 by the Respondent basing the Petition on a debt of Rs. 3251.75 up and urging as the ground of insolvency that the property of the Appellant had been sold in execution of a decree; and the first question that was considered by the learned Judge below was whether there was a subsisting debt on which the Petition could be founded and the question that arose for consideration was whether a certation that arose for consideration was whether a certain document constituted an acknowledgment within the meaning of the Limitation Act or an acknowledgment within the meaning of Art. 1 of Schedule 1 of the Stamp Act. On the decision of this question depended whether there was a subsisting debt or not. Now, the document is a statement of account and it sets out the balance due to one Pramodchandra Chimanlal Mody, the Respondent, from the firm of C. Jivanlal and Co. in which the Appellant was a partner. There was an account of the Respondent in the books of the firm and the statement corresponds to the balance that appeared to the credit of the Respondent in the books of the firm. What is urged by the Appellant is that inasmuch as this document was not stamped, it is inadmissible in evidence and if the document is ruled out, the debt due by the firm of C. Jivanlal and Co. in which the Appellant was a partner, is barred by limitation. Now, the question as to whether the document falls within Art. 1 of Sch. 1 of the Stamp Act depends, as the article itself says, on the decision whether the document was given in order to supply evidence of a debt, and numerous authorities, which, it is not necessary to review, have clearly laid down that that must be the paramount intention of the person giving the document and the question that the Court has to ask looking at the document and looking at the surrounding circumstances is whether the document is given in order to supply a statement of account or whether the document is given in order to supply evidence of a debt. The learned Judge has held on consideration of all the facts that this particular document does not fall within Art. 1 of Sch. 1. No authority can help to construe this particular document. Each decision must turn on the facts of its own case; and that circumstance is that accounts of the firm of C. Jivanlal and Co., as admitted by the appellant himself, were made up every year after Diwali and the Appellant says:

'in due course the account of moneys brought in by the said Chimanlal Tricumlal Mody, a partner of the firm in the name of his son Pramodchandra Chimanlal Mody was made up after Asho, Vadya 30th Sanwat year 2011 i.e. 14th of November, 1955, and Khata acknowledgment was sent to him showing the amount due.'

So, the case of the Appellant himself is that accounts of the firm were made up from time to time, that one of the partners, who is the father of the Respondent, brought in money in the name of his son, the Respondent, and the account of moneys brought in by the father of the Respondent was made up at the end of every year and a statement supplied to the Respondent. Under these circumstances, it is difficult to take the view that the document, which we are considering, constitutes an acknowledgment within the meaning of the Stamp Act and we agree with the learned Judge that this is an acknowledgment within the meaning of the Limitation Act, that limitation is saved by this document and the Petition was well founded to the extent that it relied on this document.

2. The second question is whether the debtor committed an act of insolvency and the act of insolvency relied upon is the one set out in Section 9(1)(e) of the Presidency Towns Insolvency Act:

'If any of his property has been sold or attached for a period of not less than twenty-one days in execution of the decree of any Court for the payment of money.'

In this case, we are concerned with the first part of this sub-section 'if any of his (debtor's) property has been sold' and the relevant facts with regard to this aspect of the case are that one Bulubhai Vadilal and Co., obtained a decree against the Appellant for Rs. 11,444/- in the City Civil Court Suit No. 2676 of 1955. In execution of that decree, the immovable property of the Appellant situated at Ghod Bunder Road, Andheri, was attached on 29-11-1956; the warrant of sale was issued on 18-3-1957 and the proclamation of sale was issued on 11-10-1957 and the property was sold by public auction on 18-11-1957 and knocked down to the highest bidder. The insolvency petition, as already pointed out, was presented on 28-11-1957. Now, the contention of Mr. Desai is that an act of insolvency has not been committed because the property has not been sold. His submission is that for the purpose of this sub-section, the property can only be said to have been sold if the sale has been confirmed, as provided under the Civil Procedure Code, Order 21, Rule 92. There is a similar provision both in the High Court Rules and the City Civil Court Rules about confirmation of a sale. Now, what is said is that till the sale is confirmed under Order 21, Rule 92, the sale is an inchoate sale. It is open to the person, whose property has been sold, to apply to set aside the sale of the property under Rs. 89 and 90 and till his applications are disposed of the sale does not happened was that the Sheriff had knocked down the property to the highest bidder, but the sale never became absolute, it was never confirmed and the property did not vest in the purchaser. Therefore, what was urged was that there was no act of insolvency. It was contended that, under Section 9(e) of the Insolvency Act, it is only when the sale becomes absolute that an act of insolvency is committed.

3. Now, before turning to the authorities, looking at the language used by the Legislature, what the Legislature has stated is: 'if any of his property has been sold.' Now, the sale of a property and the sale being confirmed or becoming absolute are two different concept which are well recognised under the Indian law. The Civil Procedure Code, Order 21, Rule 89 uses language identical with Section 9(e) of the Insolvency Act. Rule 89 says: 'Where immoveable property has been sold in execution of a decree', any person, either owning such property or holding an interest therein, may apply to have the sale set aside. Therefore, the Legislature clearly recognises that there is a sale of property which is antecedent to its confirmation or its becoming absolute under Rule 92. The same is the language used in Rs. 90 where an application can be made to set aside a sale on the ground of irregularity or fraud. Here also, the language used is: 'Where any property has been sold in execution of a decree' and the concept of the sale becoming absolute arises when you come to Order21, Rule 92. Therefore, as we have just said, these are two entirely separate legal concepts, - the sale of an immoveable property and the sale becoming absolute. Now, if the Legislature intended that the act of insolvency should only occur when the sale became absolute, there was no reason why the Legislature should not have used appropriate language to convey that intention. The Legislature has advisedly used the expression that the property has been sold and not when the sale has become absolute or has been confirmed. The reason behind this language is that, for the purpose of insolvency, the Legislature is concerned more with the position of the debtor rather than the rights of the purchaser under the sale. Mr. Desai says that till the sale becomes absolute, the property does not vest in the purchaser. That idea is to be found in Section 65 of the Civil Procedure Code:

'Where immoveable property is sold in execution of a decree and such sale has become absolute, the property shall be deemed to have vested in the purchaser from the time when the property is sold and not from the time when the sale becomes absolute.'

So that although under Section 65 the vesting can only take place, if the sale his become absolute, the time of vesting is not when the sale became absolute but from the time when the property is sold. But, we are not concerned with the rights of the purchaser or with the vesting of the property in the purchaser. What we are concerned with and what the Insolvency Act is concerned with is either the acts of the debtor or his financial condition. It is true, as pointed out by Mr. Desai, that an act of insolvency may be voluntary act of the debtor or in some cases it may be the result of the acts of others and this is one of those cases where it is not the act of the debtor which constitutes the act of insolvency. It is his creditor who brings his property to sale which results in the act of insolvency. But even so, the very fact that the debtor has permitted his property to be sold may be looked upon by the Legislature as a sufficient ground for taking the view that he has committed an act of insolvency. Normally, a solvent person does not permit his property to be sold at a public auction and to be nocked down to the highest bidder. It is only when the person is in a very embarrassing financial circumstance that he allows his property to be sold at a public auction and therefore, it is not surprising and on the contrary it is natural that the Legislature should have considered the selling of the property in the sense of its being knocked down to the property in the sense of its being knocked down to the highest bidder as an act of insolvency, and not the sale becoming confirmed or becoming absolute under Order 21, Rule 92 of the Civil Procedure Code. Order 21. Rule 92 is more concerned with the rights of the purchaser. Section 9(e) of the Insolvency Act is more concerned, if not with the act of the debtor with his condition and position, and when we realise that the distinction between a sale and a confirmation of a sale becomes clear.

4. Now, as far as the Indian authorities are concerned, they have all taken the same view of the language used by the Legislature. The only way Mr. Desai has been able to distinguish is that all these decisions are under the Provincial Insolvency Act and not under the Presidency Towns Insolvency Act. Sub-section (e) of Section 6 says.

'A debtor commits an act of insolvency in each of the following cases, namely-

(e) if any of his property has been sold in execution of the decree of any Court for the payment of money.'

It is true that under the Provincial Insolvency Act, the property remaining under attachment is not an act of insolvency. We find it however difficult to appreciate the argument that, when our Indian High Courts have construed identical language used in Section 6(e) in a statue which is in pari materia with the statute with which we are concerned, we should attach no importance to those judgments but turn to the English cases dealing with English law. The position might have been different if the expression had been construed in the context of some other law. But if the context of the law is identical law, then it is difficult to understand why a different interpretation should be put upon the language used in the Presidency Towns Insolvency Act, unless there is something in the Act, to justify a different construction in case of this expression.

5. Now, the three decisions to which reference may be made are: Kanai Lal Nandy v. Tinkari De : AIR1933Cal564 ; Firm Phul Chand Nemachand v. Aggarwal Battery Manufacturing Co., AIR 1938 Lah 814 and Venkata Krishnayaya v. Malakondayyer, AIR 1942 Mad 306. We must refer partifularly to the judgment of the Madras High Court. This is a decision of Mr. Justice Wadsworth and Mr. Justice Patanjali Sastri and the learned Judges at p. 307 say:

'Having these considerations in mind it is but natural that the Legislature should lay down as one of the criteria for judging whether a man's ostensible credit has been shaken, the fact of a sale in Court of his assets in execution of a decree. The question whether the sale is eventually set aside for some irregularity or whether the debtor eventually finds it to his interest to deposit the amount of the particular decree is not really material. It is the very fact that his circumstances are sufficiently embarrassed to make him to submit to a sale of his property, which justified the creditor in asking the Insolvency Court, to take charge of his estate.'

With respect, we entirely agree with this view with regard to this particular provision of law in the Insolvency Act.

6. Mr. Desai referred to a passage in Sir Dinshaw Mulla's Insolvency Act, where the learned author says:

'The law as to commencement of insolvency under the Presidency Towns Insolvency Act is the same as the English law' and earlier on this passage: 'if the act of insolvency is the act of the insolvent himself, e. g., a transfer of property to defeat or delay creditors, the title of the Official Assignee or Receiver relates back to the moment of the commencement of the Act of insolvency, but if it is not a voluntary act, but a proceeding in invitum, e. g., a sale of property under an execution, the title relates back to the completion of the transaction which constitutes the act of insolvency'

and what is urged is that we must look at the English law in order to decide when the sale was completed and it is only on the completion of the sale that the act of insolvency is committed. Now, we do not read the learned author, with respect to say that we must prefer decisions of the English Courts to those given by our own High Courts on a construction of identical provision of law. All that this passage means is that the law under the Presidency Towns Insolvency Act is the same as the English law and yet the law may be the same under the Provincial Insolvency Law where that law is applicable.

7. Strong reliance was placed on a decision of the English Court reported in Ex parte Villars; In re, Rogers, (1874) 9 Ch A 432. There, the facts were that the Appellant recovered judgment against the bankrupt and issued the writ and the Sheriff seized the goods of the debtor under the judgment and the goods seized were assigned to the appellant, the execution creditor. The Appellant paid the Sheriff the purchase-money and the Sheriff after deducting the rent and other charges paid back the amount to the Appellant in satisfaction of the debt for which the attachment was levied. All this was done 14 days before the Petition in bankruptcy was presented, and the question that the Court had to consider was 'Could the execution creditor retain the amount of the sale proceeds which he was entitled to recover or the goods?'. It is in connection with this question that certain observation were made by Lord Chancellor Cairns and Lord Justice James on which reliance has been placed. At page 444, the learned Lord Chancellor Cairns says:

'I cannot find in the 15th and 17th sections any words which would vest in the trustee either the property itself, the completed sale of which to a third party is made the commencement of the bankruptcy or the proceeds of the sale, which never belonged to the bankrupt.'

Lord Justice James at p. 445 also uses similar language when he speaks of treating the completed sale as the act of bankruptcy and what is strenuously urged by Mr. Desai is that under the English law, it is the completed sale that constitutes an act of insolvency. But the question still remains what is the completed sale under the English law. As far as we can gather from the facts of this case, As soon as the Sheriff had sold the goods seized under a writ, it became a completed sale. If that was a position under the English law, it is difficult to understand why the sale is not a completed sale under the Indian law when the property is knocked down to the highest bidder. Mr. Desai says that under Indian law, you require a confirmation of eh sale. It is only then that the sale becomes absolute. But a completed sale in the meaning of the English law is different from the sale becoming absolute within the meaning of the Indian law. As far as we can see, there is no provision similar to Order 21, Rule 92 in the English law, and, therefore, the English law looked upon the sale by the sheriff as a completed sale. So that even assuming that we are governed by the English law, it is clear that as soon as the property is seized under a writ, - or to use our own language 'the property which is under attachment is sold' to the highest bidder, the sale becomes a completed sale. It may be that under the English law, the further concept of having the sale confirmed is not required. Under the Indian law, it is required. But that does not mean that when you are construing the Indian law, you must import into the section not merely the earlier concept of the property being sold to the highest bidder but also the subsequent concept of the sale being confirmed under Order 21, Rule 92. In our opinion, the learned Judge was right in the view that he took that an act of insolvency was committed when the property was sold by the Sheriff on 18-11-1957 by public auction and knocked down to the highest bidder.

8. The result is that the appeal faisl and is dismissed with costs.

9. Liberty to the respondent's attorneys to withdraw the sum of Rs. 500/- deposited in Court.

10. Appeal dismissed.


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