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Magandas Bhukandas Vs. Bhalchandra Ramrao - Court Judgment

LegalCrystal Citation
SubjectLimitation
CourtMumbai High Court
Decided On
Case NumberSecond Appeal No. 413 of 1952
Judge
Reported inAIR1954Bom436; (1954)56BOMLR414; ILR1954Bom840
ActsProvincial Insolvency Act, 1920 - Sections 28, 28(1), 28(7), 34(2), 51, 51(1), 78 and 78(2); Indian Limitation Act, 1908 - Sections 14, 14(2) and 15; Insolvency Act, 1907; Presidency-towns Insolvency Act, 1909 - Sections 17, 46(1), 46(2), 46(3) and 51
AppellantMagandas Bhukandas
RespondentBhalchandra Ramrao
Appellant AdvocateG.S. Gupte, Adv.
Respondent AdvocateY.V. Chandrachud, Adv.
Excerpt:
- - the section in terms speaks of the date of the order of adjudication as well as the date of the order of annulment. but this plea was rejected, and for a very good reason. observed that it was perfectly true that in the bankruptcy a debt does not become barred by lapse of time if it was not so barred at the commencement of the bankruptcy. peer mohamed air 1933 rang 75 (c), but it is clear that this point has not been considered and the observations are no better than 'obiter'.8. it has, however, been urged before us by mr. justice black-well were considering the effect of the provisions of section 46(3), presidency-towns insolvency act. observed that it is well settled that debts which are barred by limitation are not provable in insolvency and he held that the material date for.....gajendragadkar, j.1. this is an execution appeal which raises a short question of limitation under section 78(2) of the provincial insolvency act. on 15-7-1927, an aware decree was passed in favour of the appellant for rs. 1,800. the decretal amount was made payable by annual instalments and it was provided that, if there was a default in the payment of three instalments, the whole of the decretal amount could be recovered. several darkhasts were filed by the decree-holder to recover the decretal amount. the last one of these was no. 815 of 1937; it had been filed on 10-7-1937, and it was finally dispose of on 17-10-1938.on 22-1-1941, the decree-holder himself filed an application in insolvency against the judgment-debtor, which was application no. 1 of 1941. pending this application, he.....
Judgment:

Gajendragadkar, J.

1. This is an execution appeal which raises a short question of limitation under Section 78(2) of the Provincial Insolvency Act. On 15-7-1927, an aware decree was passed in favour of the appellant for Rs. 1,800. The decretal amount was made payable by annual instalments and it was provided that, if there was a default in the payment of three instalments, the whole of the decretal amount could be recovered. Several darkhasts were filed by the decree-holder to recover the decretal amount. The last one of these was No. 815 of 1937; it had been filed on 10-7-1937, and it was finally dispose of on 17-10-1938.

On 22-1-1941, the decree-holder himself filed an application in insolvency against the judgment-debtor, which was Application No. 1 of 1941. Pending this application, he filed a darkhast No. 124f of 1942 to execute his award, decree. This darkhast was filed on 17-11-1942. Meanwhile, the insolvency proceedings continued and the judgment-debtor was adjudged an insolvent on 24-1-1949. An appeal was preferred by the judgment-debtor against this order and he succeeded before the appellate Court. On 18-10-1949, the appeal was allowed and the application of the decree-holder was dismissed. It is common ground that the order of dismissal of the decree-holder's application against his judgment-debtor amounts to the annulment of the judgment-debtor's insolvency.

When the decree-holder sought to proceed with his darkhast which he had filed on 17-11-1942, he was met with a plea of limitation, and he sought to bring his darkhast within time by relying on the provisions of Section 78, Sub-section (2) of the Provincial Insolvency Act. It is common ground that, if the decree-holder is entitled to avail himself of the provisions of Section 78(2) of the Provincial Insolvency Act, in the manner suggested by him, his darkhast would be in time. It is also common ground that, if he is not entitled to rely upon the said section, in the said manner, his darkhast would be beyond time.

That is how the only question which arises for decision in the present appeal is whether the decree-holder is entitled to exclude the period between 22-1-1941 and 18-10-1949, in deciding the question as to whether his darkhast is in time. The executing Court took the view that the decree-holder was entitled to exclude this period and so he held that the darkhast was in time. Accordingly he directed that the darkhast do proceed in accordance with law. On appeal, a different view has been taken and the learned District Judge has dismissed the darkhast on the ground that it is barred by limitation.

2. Section 78, Sub-section (2), Provincial Insolvency Act, provides that, where an order of adjudication has been annulled, in computing the period of limitation prescribed for any suit or application for the execution of a decree 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. The decree-holder contends that, in deciding the question as to which period should be excluded under the provisions of Sub-section (2) of Section 78, we must bear in mind another provision of the Provincial Insolvency Act and that is contained in Section 28, Sub-section (7).

This Sub-section gives effect to the doctrine of relation back and lays down that an order of adjudication shall relate back to, and take effect from, the date of the presentation of the petition on which it is made. It is, therefore, urged before us that, in considering the period which should be excluded in the present case, we must take into account, not so much the date on which the order of adjudication was passed, but the date on which the application for insolvency itself was made. There is no doubt that, if we were to exclude the period between 24-1-1949, when the judgment-debtor was adjudged insolvent, and 18-10-1949, when the adjudication was annulled, the darkhast would not be within time.

It is only if we exclude the whole of the period between the date of the presentation of the application and the date of annulment that the darkhast would be in time. That is why Mr. Gupte for the decree-holder has strenuously urged before us that we must read the provisions of Section 78(2) in the light of the provisions of Section 28(7), Provincial Insolvency Act.

3. In dealing with this question, it is necessary to remember that Sub-section (7) of Section 28 introduces a legal fiction and gives effect to the order of adjudication in a somewhat artificial manner. Indeed, the marginal note of Section 28 shows that the section deals with the effect of an order of adjudication. Undoubtedly, when an order of adjudication has been made, for several purposes mentioned in the Provincial Insolvency Act the order must be deemed to relate back and must be held to take effect from the date of presentation of the petition on which it is made. But the question, which we have to decide is whether this same doctrine of relation back must necessarily be invoked in construing the words used in Section 78(2).

Looking at the words of Sub-section (2) of Section 78, it seems to me fairly clear that what is intended as the first starting point is not the order of adjudication as such, but the date of the order of adjudication. The section in terms speaks of the date of the order of adjudication as well as the date of the order of annulment. Whatever may be the legal effect of the order of adjudication under the insolvency law, it seems to me somewhat difficult to accede to the argument that the doctrine of relation back should govern the construction of the words 'the date of the order of adjudication'.

The order of adjudication bears a date and it is to that date that Section 78(2) makes a direct and specific reference. In my opinion, it would be difficult to give effect to the doctrine of relation back in interpreting the expression 'the date of the order of adjudication'.

4. It may be pointed out in this connection that the earlier Insolvency Act of 1907 did not contain any provisions corresponding to Section 78 of the present Act. While the earlier Insolvency Act was in operation, it was sometimes urged by the decree-holders against the insolvent that they should be allowed to claim the benefit of Section 15. Indian Limitation Act for excluding the time occupied by the insolvency proceedings in determining the question of limitation arising in their respective suits or applications for execution. But this plea was rejected, and for a very good reason. The Insolvency Act did not impose an absolute prohibition against a creditor suing his debtor or applying in execution against him during the pendency of the Insolvency proceedings.

The provisions of the Insolvency Act merely required that he should obtain the leave of the Court before taking any such steps. Since the Insolvency Act contained no provision for the exclusion of time taken by insolvency proceedings and there was nothing in the Limitation Act which dealt with such cases or provided for exclusion of time on the ground of the pendency of the insolvency proceedings, the general rule invariably applied in the case of all claims by creditors against their debtors that if the period of limitation once begins to run, it continues to run in spite of the pendency of the insolvency proceedings.

I may, in this connection, with advantage refer to the decision of the court of Appeal in --'Benzon, In re: Bower v. Chetwynd 1914-2 Ch 68 (A). In this case the donee of a general testamentary power of appointment over a fund of 15,000 was adjudicated bankrupt in 1890 and a small dividend was paid. In 1892 he was again adjudicated bankrupt, but no dividend was paid. The donee died in July 1911 without ever obtaining his discharge in either bankruptcy. However, before his death he had exercised his power of appointment by his will. An action was brought by the creditors in the bankruptcy for the administration of the insolvent's estate which consisted almost entirely of the appointed fund, and that raised the question of limitation.

It was found that the appointment and death gave the creditors a new fund from which to get payment and a new mode of proceeding in order to got it; but that was merely a new remedy and not a new cause of action, the cause being really the old debt. The decision on the question of limitation, therefore, was that the Statute of Limitations having begun to run before the commencement of the bankruptcy, continued to run notwithstanding the bankruptcy, and that the claims of the creditors, not being claims in the bankruptcy, were barred by lapse of time. In dealing with the question of limitation Channell J. observed that it was perfectly true that in the bankruptcy a debt does not become barred by lapse of time if it was not so barred at the commencement of the bankruptcy.

But he added that there was no doubt that this rule applies only 'in the bankruptcy'. The question of limitation which arose for decision in this case was held to stand on a footing apart and the learned Judge added that the principle which would be applicable to such a case

'appears to be that if any man has a cause of action which is ripe so 'that he has an opportunity of bringing his action and does not do so, he thereby takes the risk of some unexpected event happening which takes away from him 1 the possibility of bringing his action within the remainder of the period which he has under the statute.'

The question which we have to consider is whether this position is changed by the introduction of Section 78 in the present Insolvency Act, and, if yes, to what extent.

There can be no doubt that some period is intended to be excluded by virtue of the provisions of Section 73(2). But that does not necessarily lead to the conclusion that In computing this period we must give effect to the legal fiction of the retrospective effect of the order of adjudication. The judgment of the Court of Appeal to which I have just referred itself lends considerable support to the view that the principle laid down in Section 78(2) would not apply to suits which were barred at the date of the adjudication; nor would it apply unless the adjudication has been annulled. In my opinion, therefore, the words 'the date of the order of adjudication' must be strictly and literally construed, and in interpreting them the legal fiction of retrospective effect cannot be invoked.

5. There is another section to which reference may be conveniently made in dealing with this point, section 51, Provincial Insolvency Act, which deals with the restriction of the rights of a creditor under execution, had originally used the words: 'before the date of the order of adjudication'. In 1920 these words have been Substituted by the words 'before the date of the admission of the petition'. Under this section, it is provided that where execution of a decree has issued against the property of a debtor, no person shall be entitled to the benefit of the execution against the receiver except in respect of assets realised in the course of the execution by sale or otherwise before the date of the admission of the petition.

If the words 'the date of the order of adjudication', which were originally used in Section 51, had, on a reasonable construction, meant retrospectively the date on which the application itself was made, then it was wholly unnecessary to have changed the words of the original section and to have introduced the present phraseology. It would not be unreasonable, I think, to assume that the Legislature made the change expressly in the words of Section 51(1) because they felt that the words 'the date of the order of adjudication' would not denote the date of the admission of the petition itself. In other words, the amendment made in the provisions of Section 51(1) indirectly supports the conclusion that, in construing the words 'the date of the order of adjudication', there is no scope for the application of the doctrine of relation back.

6. Even as to the order of adjudication itself, it may perhaps be difficult to hold that, wherever this expression is used, it must necessarily be read in the light of the doctrine of relation back. Section 28, sub-section (1), for instance, would not easily admit of this retrospective interpretation of the expression 'order of adjudication'. It imposes upon the insolvent the obligation to aid to the utmost of his power in the realisation of his property and the distribution of the proceeds among his creditors, on the making of the order of adjudication. If an application for insolvency is made by the creditor of the insolvent, it would, I apprehend, be somewhat difficult to hold that the obligation which is imposed on the insolvent by Section 28(1) must retrospectively operate as from the date when the application itself was made.

But whether the expression 'order of adjudication' wherever it occurs in the Insolvency Act must be retrospectively construed or not in the light of the provisions of Section 28(7), I feel that by the use of the words 'the date of the order of adjudication' the Legislature has indicated its intention that Section 28(7) should not be pressed into service while construing the provision as to the exclusion of the period under Section 78(2).

7. This question does not appear to have been .decided by this Court in any reported decision; and indeed at the Bar only one judgment has been cited before us which is directly in point and that is the decision in -- 'Sambayya v. Pedda Sub-bayya AIR 1938 Mad 19 (B). Pandurang Row and Venkataramana Rao JJ. have held in this case that, in construing Section 78(2), there is no scope for holding that the order of adjudication should be taken to mean the date when the application itself was made.

They accordingly held that under Section 78(2) a creditor is entitled to deduct only the period from the-date of the adjudication to the date of the annulment. It is true that observations to the contrary appear to have been made in -- 'Bandeally Jaffer v. Peer Mohamed AIR 1933 Rang 75 (C), but it is clear that this point has not been considered and the observations are no better than 'obiter'.

8. It has, however, been urged before us by Mr. Gupte that a decision of this Court reported in -- 'Byramji Bomanji v. Official Assignee of Bombay AIR 1936 Bom 130 (D) supports his contention that even while deciding the period which should be excluded under Section 78(2) it would be necessary to give effect to the provisions of Section 28(7), Provincial Insolvency Act. In -- 'Byramji's case (D)', Chief Justice Beaumont and Mr. Justice Black-well were considering the effect of the provisions of Section 46(3), Presidency-towns Insolvency Act.

This section corresponds lo the provisions of Section 34(2), Provincial Insolvency Act. Section 46(3) provides that, save as provided by Sub-section (1) and, (2), all debts and liabilities, present or future, certain or contingent, to which the debtor is subject when he is adjudged an insolvent or to which he may become subject before his discharge by reason of any obligation incurred before the date of such adjudication, shall be deemed to be debts provable in insolvency. Beaumont C. J. observed that it is well settled that debts which are barred by limitation are not provable in insolvency and he held that the material date for the purpose of deciding the applicability of Section 46(3) is not the date of the order of adjudication as such, but the date of the commission of the act of insolvency.

He added that, as from the date when the act of insolvency is committed, the Indian Limitation Act has no application and the relationship of debtor and creditor ceases to exist. Mr. Gupte contends--and with some force--that the view which was taken of the provisions of Section 48, Sub-section (3), lends support to his contention that the expression 'order of adjudication' which is used in Section 78(2), Provincial Insolvency Act should be likewise retrospectively construed; in other words, that we should hold that the period which can be excluded under Section 78(2) is the period between the date of the application and the date of the final order of annulment.

Mr. Gupte has also invited our attention to a decision of the Madras High Court in -- 'Subramania Ayyar v. Meenakshisundaram AIR 1937 Mad 577 (E), where a similar view has been taken about the provisions of Section 34(2), Provincial Insolvency Act. It appears from the judgment of Mr. Justice Varadachariar in this case that he accepted this view not without hesitation.' He felt some difficulty in applying the relation back doctrine in interpreting the expression 'order of adjudication' in Section 34(2). But he held that in a matter of this kind certainty and uniformity of practice is more important than theoretical unavailability.

He has also pointed out that, in dealing with the provisions of the Provincial Insolvency Act, it may not be always safe to derive assistance from English decisions because it is by no means certain that the provisions of the English Insolvency law are identical with those of the Indian Insolvency law. It is thus clear that, in construing the words of Section 34(2) of the Provincial Insolvency Act as well as the provisions of the corresponding Section 46(2), Presidency-towns Insolvency Act, effect has been given to the doctrine of relation back. It may, however, be pointed out that Sub-section (2) of Section 34, in the first place, refers to debts to which the debtor is subject when he is adjudged an insolvent and the clause 'when he is adjudged an insolvent' can be held to be different from the words 'the date of the order of adjudication' with which we are concerned in Section 78(2).

Besides Section 34(2) can be said to be dealing with the effect of the order of adjudication in the matter of proving debts in bankruptcy proceedings and as such it is concerned directly with the law of insolvency; from this point of view it may be legitimate to give effect to the relation back doctrine in construing the material clause in Section 34(2). Section 78(2), on the other hand, deals with the question of limitation and provides for the exclusion of certain time in other words, it gives a right to the party against whom limitation is running to claim exclusion of certain time and this right, I think, must be strictly construed. In my opinion, the scheme of Section 78(2) seems to contemplate an application for insolvency followed by an order of adjudication and the ultimate annulment of the order of adjudication.

Dealing with a case of this kind, Section 78(2) provides for the exclusion of the specific period between the dates of the two respective orders. If an application for insolvency is made and no order of adjudication is passed on it, but instead the application is dismissed, it would be impossible to invoke the provisions of Section 78(2) in favour of the decree-holder. It is only when an order of adjudication is passed that there is room to invoke the provisions of Section 78(2).

Therefore, I am disposed to think that, in considering the question of the exclusion of time under Section 78(2), it would not be reasonable to give effect to the legal fiction which has been introduced by Section 28(7) in dealing with the effect of the order of adjudication. It would be necessary to look at the date of the order of adjudication and count the period from that ascertained date to the subsequent date on which the order of annulment is passed.

9. Mr. Gupte has contended that the view which we are taking about the effect of Section 78(2) would cause a hardship to the creditor. But I am not impressed by this argument. Even if the creditor wanted to apply in insolvency against his debtor, there was nothing to prevent him from making an application in execution in proper time. In fact, in the present case, he applied pending the insolvency proceedings. He might as well have applied before the period of limitation expired. Ordinarily a person seeking the benefit of excluding a certain period would apply after the order of annulment is passed. In the present case the decree-holder took the precaution of applying even when the insolvency proceedings were pending. But, unfortunately, he did not apply within time.

It is true that even if he had applied within time, those proceedings would have remained virtually dormant and, in a sense, futile and ineffective. But that, in my opinion, is no reason why he should not have saved his claim from limitation when he knew that time had begun to run against him and the mere making of an application in insolvency would not arrest or stop it. The order of adjudication no doubt imposes a disability on the decree-holder in the matter of pursuing his remedy against his insolvent judgment-debtor; but then the period subsequent to such an order is saved under Section 78(2).

10. I must, therefore, hold that the learned District Judge was right in coming to the conclusion that the execution application filed by the appellant was barred by limitation.

11. Mr. Gupte has then contended that he should be given the benefit of Section 14 of the Limitation Act. But quite clearly Section 14 cannot apply, because, apart from other considerations, the relief which the decree-holder was claiming in his darkhast is not the same as the relief which he was claiming in his insolvency application. The two reliefs are entirely different, and one of the essential requirements of Section 14, Limitation Act is that both the proceedings should have the same relief in view, vide -- 'Yeshwant Deorao v. Walchand Ramchand', : [1950]1SCR852 .

Vyas, J.

12. I agree with the judgment just delivered by my learned brother. The appellant decree-holder had obtained a decree in his suit No. 311 of 1927 on 15-7-1927. Thereafter, between 1930 and 1937 he had filed three darkhasts to execute that decree; but all the darkhasts had proved fruitless. On 10-7-1937, Darkhast No. 815 was filed by the decree-holder and it was disposed of on 17-10-1938. Thereafter on 22-1-1941, the decree-holder filed an application in insolvency requesting that the judgment-debtor be adjudged insolvent. After filing that application and during the pendency of that application the present darkhast No. 1249 of 1942 was filed by the decree-holder on 17-11-1942.

The darkhast was however, kept pending the decision of the insolvency petition which had been filed by the decree-holder. On 24-1-1949, an order was made in the above-mentioned insolvency petition adjudging the judgment-debtor an insovent. The judgment-debtor went in appeal against that decision, which was Appeal No. 11 of 1949, and in that appeal the order of adjudication was annulled and the annulment took place on 18-10-1949. Now, the judgment-debtor's contention in the present darkhast is that this darkhast (No. 1249 of 1942) is time-barred.

The learned Civil Judge, Junior Division, Amalner, held that the order of adjudication passed in the insolvency petition No. 1 of 1941 on 24-1-1949, related back to the date on which the petition was presented, in other words, it related back, to 22-1-1941, that, therefore, the decree-holder was entitled to exclude the time between 22-1-1941, and 18-10-1949, for the purpose of limitation and that, in that view of the matter, the darkhast No. 1249 of 1942 was in time.

13. From the decision of the learned Civil Judge, judgment-debtor No. 1 appealed and in appeal the learned District Judge held that the doctrine of relation back referred to in Section 28, Sub-section (7), of the Provincial Insolvency Act 5 of 1920, applied to the legal effect of the order of adjudication and did not mean that the date of presentation of the insolvency petition and the date of the order of adjudication were to be treated as though they were identical dates. He observed that the legal fiction enacted by Section 28(7) could not, and did not obliterate the physical fact that an order of adjudication was passed on a certain date.

In other words, in his view, the doctrine of relation back has no application in the context of exclusion of a specified period of time for the purpose of limitation under Section 78(2) of the Act. Thus, according to the learned District Judge, the decree-holder was entitled to exclude only the time between January 24, 1949, the date of the order of adjudication, and 18-10-1949, the date of annulment of the said order; and in that view of the matter, the learned District Judge held that darkhast No. 1249 of 1942 was barred by limitation.

14. In the second appeal from the above-mentioned order of the learned District Judge, a short but an Interesting point of law which has arisen for our decision is this. Does the doctrine of relation back enacted by Section 28 Sub-section (7), of the Provincial Insolvecy Act, 1920, extend to or govern the direction regarding exclusion of time for computing the period of limitation under Section 78(2) of the Act? To put it differently, in place of the words 'from the date of the order of adjudication' in Sub-section 2 of Section 78, must we substitute the words 'from the date of the presentation of the insolvency petition' for computing the period of limitation? if the answer to this question is in the affirmative, darkhast No, 1249 of 1942 would be in time.

If the answer is in the negative, the darkhast would be barred by limitation. I answer the question in the negative. In my opinion, the principle of relation back of an order means that the order, though passed at a later date will take effect from an earlier date. Relation back is in respect of the effect of an order which is to relate back. Normally, an order becomes effective from the date on which it is passed. Relation back of that order means that It is to have retrospective operation. It is well known that under the Insolvency law certain legal effects and consequences follow the making of an adjudication order -- for instance, the vesting of the insolvent's property in the Court or the receiver -- and the relation back of an order of adjudication means that the said effects and consequences will come into operation retrospectively from the date of presentation of the insolvency petition.

This is a legal fiction created by Sub-section (7) of Section 28. That fiction has no relation to the rule of limitation laid down in Sub-section (2) of Section 78. The scope of the legal fiction of relation back under Section 28(7) is confined strictly to the proceedings in bankruptcy. It has no operation beyond matters in bankruptcy. It has no application to a case in which a decree-holder seeks to execute his decree by a darkhast. The effect of the doctrine of relation back in relation to Section 78(2) has not been considered in any reported decision of this Court and, therefore, it falls to be considered by us.

15. Mr. Gupte for the appellant decree-holder has referred us to the case of AIR 1936 Bom 130 (D). In that case, a question arose for considering the effect of Section 51 of the Presidency-towns Insolvency Act, 1909, in relation to Section 17 and 46(3) of the said Act. Sections 17, 51 and 46(3) of the Presidency-towns Insolvency Act, 1909, correspond to Section 78(2), 28(7) and 34(2) respectively of the Provincial Insolvency Act, 1920. The question in 'Byramji Bomanji's case (D)', was whether a creditor could prove a debt which was barred by limitation at the date, of the order of adjudication, but was not so barred at the date of the act of insolvency on which the adjudication was founded.

It was held by Beaumont C. J. and Blackwell J. that under Ss. 17 and 51, Presidency-towns Insolvency Act, the insolvency commenced on the date of the commission of the act of insolvency, that at that date the property of an insolvent vested in the Official Assignee who had to distribute it amongst the creditors who proved their debts, and that, if a creditor's debt was not barred at the date of the act of insolvency on which a debtor was adjudicated an insolvent, even though it may be barred at the date of the order of adjudication, such a debt could be proved in the insolvency.

The question had directly arisen under Section 46(3), Presidency-towns Insolvency Act, and after setting out the provisions of Section 46(3), which were similar to the provisions of Section 34(2), Provincial Insolvency Act, Chief Justice Beaumont referred to the well settled principle of law that debts which were barred by limitation were not provable in insolvency as the debtor was not subject to such debts, and pointed out that the question which the Court had to determine was the date at which time ceased to run in favour of the insolvent.

His Lordship observed that if the material date was the date of the order of adjudication, then the claimant's debt was not provable; but if the material date was the date of the commission of the act of Insolvency, then the debtor was stilt subject to the debt at the time at which he was adjudged, and the debt was provable. It was held in that case that the material date was the date of the commission of the act of insolvency.

16. Mr. Gupte relies on the above-mentioned decision in 'Byramji's case (D)' and contends that in substance there is no difference between the expression 'when he is adjudged insolvent' in Section 34(2) and the words 'the date of the order of adjudication' in Section 78(2) of the Provincial Insolvency Act, and that, therefore, the starting-point for limitation under Section 78(2) should be the date of presentation of the insolvency petition, just as the material date for the provability of the debt is also the date of presentation of the insolvency petition. It is argued that the words 'when he is adjudged an insolvent' and the words 'the date of the order of adjudication' denote the same point of time, namely, the date upon which the order of adjudication is made.

In my view, the decision in 'Byramji's case (D)' will not help the appellant before us. A proceeding for proving a debt in insolvency is a proceeding in bankruptcy, and it is well known that in bankruptcy a debt does not become barred by the lapse of time if it was not barred at the commencement of the bankruptcy. This immunity from the operation of the statute of limitation is confined only to bankruptcy, and that is obviously so in the interests of the insolvent's creditors. If the debts which are not barred at the date of the presentation of the insolvency petition are allowed to be time-barred by the subsequent delays or dishonest manoeuvres of the insolvent, the creditors' claims will suffer.

It is, therefore, that the Limitation Act, 1908, has no application to the proof of debts in bankruptcy. A debt which has already become barred at the commencement of insolvency is, of course, not provable; but if the debt was not barred at the commencement of insolvency, the lapse of time would not deprive the creditor of his rights of proof. It was in the light of this well-settled position in insolvency law that the words 'when he is adjudged an insolvent' in Section 46(3), Presidency-towns Insolvency - Act were construed in 'Byramji's case (D)' to refer to the date of the commission of the act of Insolvency.

17. The case of a person who has obtained a money decree against a judgment-debtor who was not an insolvent at the time when the decree was obtained stands on a totally different looting. When such a decree-holder files an application in execution of the decree, the execution application will not be immune from the operation of the law of limitation. Besides, I am unable to agree with Mr. Gupte that the words 'when he is adjudged an insolvent' in Section 34(2) and the words 'the date of the order of adjudication' in Section 78(2) denote the identical point of time. The words 'when he is adjudged an insolvent' mean 'at the time at which he is adjudged an insolvent', whereas the words 'the date of the order of adjudication' are precise and definite and refer to a specific date to the exclusion of all other dates.

The words in the two expressions are not Identical, however similar they may appear, and the difference must have been deliberately meant by the Legislature. In 'Byramji's case (D)', the learned Chief Justice was undoubtedly aware of an anomaly that if the petition for adjudication had been dismissed, the claimant's debt would have been time-barred. But he explained the anomaly by observing that it arose from the fact that the claim of a creditor against his debtor, when not insolvent, was of a different character from his claim to share in the distribution of the debtor's estate in insolvency.

18. In AIR 1937 Mad 577 (E) also the Courts below had held that in view of the provision in Section 28(7) as to relation back, the criterion date for the purposes of Section 34(2), Provincial Insolvency Act was the date of filing of the petition. That view was upheld by the High Court, in revision and the High Court held that a debt which could have been enforced in a Court of law on the date of the presentation of the insolvency petition, but the remedy by suit in respect of which had become barred by limitation before the date of the order of adjudication, was a, debt provable under the Provincial Insolvency Act.

Mr. justice Varadachariar, who delivered the judgment of the bench, referred to the Bombay decision in the case of Byramji Bonianji (D) and followed it with hesitation. His Lordship also referred to -- 'Nizam v. Babu Bam AIR 1933 Lah 688 (G); -- 'Sankaranarayana Aiyar v. Alagiri Aiyar AIR 1919 Mad 473 (H); -- 'Rangiah v. Appaji Rao AIR 1927 Mad 163 (I) and --'Atchuta Ramayyagaru v. Official Receiver, East Godavari AIR 1935 Mad 817 (J) and, in agreement with the decisions in all those cases, held that the material date for the purposes of Section 34(2) would be the date of the presentation of the petition.

Mr. Justice Varadachariar pointed out, however, that if the matter were 'res Integra', the High Court should have hesitated to come to the conclusion reached in the above-mentioned cases, but said that in a matter where certainty and uniformity of practice was more important than theoretical unassailability, the Court did not feel justified in dissenting from the view expressed ar assumed in the cases referred to above. It would thus be seen that in -- 'Subramania Ayyar's case (E)', Mr. Justice Varadachariar doubted the soundness of the decision in 'Byramji's case (D)', but followed it as it was in consonance with the view of the Madras High Court in certain cases. I have already given reasons why 'Byraraji's case (D)' cannot help the appellant and I do not wish to repeat-those reasons.

19. The case of -- 'Kewal Krishna v. Special Official Receiver AIR 1939 Lah 384 (K) was also cited before us by Mr. Gupte. in that case also, the decision in 'Byramji's case (D)' was followed, and as I have already referred to that case, I do not wish to add any observations in regard to the Lahore case. None of the cases referred to by Mr. Gupte helps the appellant.

20. Now, if we refer to the marginal note to Section 28, Provincial Insolvency Act, the said not is in these words: 'Effect of an order of adjudication.' This wording of the marginal note-would also indicate that the doctrine of relation back referred to in Sub-section (7) of Section 28 would relate to the effect of the order of adjudication. In my view, Sub-section (7) of Section 28 would afford no* justification for the pushing backward or forward of the date of the order of adjudication. Subjection (2) of Section 78 lays down the two termini in the context of the computation of the period of limitation and the two termini are the date of the order of adjudication and the-date of the order of annulment.

Between these two definite termini there is a well defined specified gulf of time and the said gulf of time cannot be widened by the doctrine of relation back. A lapse of eight years, which is a hard solid fact as the hardest of facts can be, cannot be obliterated out of existence by any legal fiction. Time which had already elapsed between the presentation of the petition and the passing of the order of adjudication cannot be converted into just nothing at all by the doctrine of relation back. By a legal fiction the effects of the order made on a certain date could be pushed backward or forward; but it could not be contended validly, by a recourse to the said fiction, that an order in fact made on a particular date was not made on that date.

In this context, the language itself of Sub-section (7) of Section 28 is significant. It says that what shall relate back is the order of adjudication and not the date of that order. Clearly, the date could be never put back. The proposition is so obvious that it hardly needs elaboration. The statute of limitation must always be strictly construed as it is vitally concerned with the preservation or extinction of the rights of the parties.

The limitation for each successive darkhast is three years from the date of the disposal of its predecessor, and if the law says that for computing the said period of three years a certain, specified time is to be excluded, only that much time, and no more, can be excluded. Only a proceeding in bankruptcy, as I have already stated above, enjoys immunity from the law of limitation. An application for execution of a decree does not enjoy that immunity.

21. There are clear indications in the Act itself to show that the date of the order of adjudication cannot be related back to the date of the presentation of the petition. For instance,, Sub-section (1) of Section 28 says :

'On the making of an order of adjudication the insolvent shall aid to the utmost of his power in the realisation of his property and the distribution of the proceeds among his creditors.'

Surely, the Legislature could not have expected or hoped that as soon as the insolvency petition. was presented the insolvent would aid to the utmost of his power in the realisation of his property and in the distribution of the proceeds among his creditors.

There is thus no doubt that the words 'on he making of an order of adjudication' in Sub-Section (1) cannot mean 'on the making of an insolvency petition'. Then again, there is the amended Section 51(1) where we find the words 'be fore the date of the admission of the petition.' Originally, before the amendment, the words were 'before the date of the order of adjudication.' If the date of the adjudication was to relate back to the date of the presentation of the petition, the amendment would have been uncalled for.

22. On a careful consideration of the question, therefore, I have no doubt that the doctrine of relation back enacted by Sub-section (7) of Section 28 has no application in relation to the direction for the exclusion of time for computing the period of limitation under Sub-section (2) of Section 78.

23. I am fortified in my conclusion by a division bench decision of the Madras High Court in AIR 1938 Mad 19 (B), in which it was held that the statute of limitation for the maintenance of an action at law, once it had commenced to run, would continue to run in spite of the presentation of the petition in insolvency. It was held further that if the order of adjudication was made, the operation of the statute of limitation was suspended till the date of the annulment, and, if the adjudication was annulled, the period between the date of the adjudication and the date of annulment was excluded and the statute began to run immediately on annulment.

24. Mr. Gupte has next contended that in the interval between 22-1-1941, and 18-10-1949, the appellant decree-holder was prosecuting with due diligence a proceeding in insolvency and, therefore, under Section 14(2), Limitation Act the said period should be excluded. I am unable to agree. The relief which the decree-holder was seeking in the insolvency proceeding was not the same as the relief he is seeking in the darkhast vide -- 'Yeshwant Deorao v. Walchand Ramchand (F)'.

25. In the result, I agree with my learned brother that the appeal fails and must be dismissed.

Curiam, J.

26. Parties to bear their own costs.

27. Appeal dismissed.


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