1. This is an application for revision under Section 75 of the Provincial Insolvency Act. Upon the petition of the non-applicant, the applicant has been adjudged insolvent. An appeal preferred by the applicant against his adjudication having been dismissed by the District Judge, Akola, he has come up to this Court in revision.
2. The non-applicant presented a petition for adjudicating the applicant as insolvent on June 14, 1954, in the Court of the Civil Judge, Mehkar. The total value of the debts set out by him in the petition was Rs. 2,930. The debts set out by him in the petition were as follows:
Rs. 233-8-0 Due under a decree passed in Civil Suit No. 266/53 in the Court of Civil Judge, Second Class, Mehkar, on 12-4-54.
Rs. 468-0-0 Due under a decree passed by the same Court in Civil Suit No. 16/54, on 23-4-54.
Rs. 586-0-0 Under a decree passed by the same Court in Civil Suit No. 12-B/54, on 20-8-54.
Rs. 1642-8-0 Being the claim made in a Civil Suit instituted by the non-applicant against the applicant in the same Court on 14.6.54.
The acts of insolvency alleged against the applicant consisted of partition of joint family property and effecting some transfers within three months of the making of the insolvency petition.
3. On October 16, 1954, the non-applicant filed an application in the Insolvency Court for amendment of the insolvency petition by striking out the last item of debt i.e. Rs. 1,642-8-0. The Court, however, rejected the application on November 5, 1954. It further found that its jurisdiction to deal with insolvency petitions was limited to those in which the value of debts did not exceed Rs. 2,000, and that the value of debts in this petition being in excess of that limit, it had no jurisdiction to entertain it. Instead of returning the petition to the non-applicant, the Court forwarded it to the District Judge, Akola, for orders. On November 11, 1954, the District Judge transferred the petition to the Civil Judge, Class I, Buldana, for disposal.
4. The non-applicant preferred an appeal against the order of the Insolvency Court rejecting his application for amendment of the petition. In that appeal, the District Judge, who heard it, passed the following order:
I have heard counsel for parties. As specifically agreed to by both of them, the order under appeal rejecting the application for amendment is set aside and the question whether amendment should or should not be allowed is left open for reconsideration and decision by the Civil Judge (Class I) Buldana, after hearing both the parties..
5. Thereafter, the matter went up before the Civil Judge, Class I, Buldana. He, however, did not pass any order on the application for amendment but proceeded to decide the case on merits. He found that the alleged acts of insolvency were committed by the applicant within three months of the insolvency application and on that ground he passed an order of adjudication. The applicant then preferred an appeal from this decision before the District Judge, Akola. In that appeal, two points were raised. The first point was that the Civil Judge, Buldana, had no jurisdiction to hear and decide the petition because the petition could not have been validly transferred to that Court by the District Judge. The second point was that if the petition is deemed to have been represented by the non-applicant to the Court having jurisdiction to entertain and decide it, it was barred by time. The District Judge negatived both the contentions and dismissed the appeal.
6. It is not disputed before me that by virtue of the notification No. 1596-1212-XIX, dated May 16, 1938, the Court of Civil Judge, Class II, Mehkar, had no jurisdiction to entertain a petition in which the value of debts alleged to be due by an insolvent exceeds Rs. 2,000. Shri Kalele, who appears for the non-applicant, however, says that this notification itself is ultra vires inasmuch as Section 3(1) of the Provincial Insolvency Act under which this notification was issued confers concurrent jurisdiction on the District Court and a Court subordinate to it which is invested with the powers of the District Court by the State Government. Sub-section (1) of Section 3 runs thus:
The District Courts shall be the Courts having jurisdiction under this Act:
Provided that the State Government may, by notification in the Official Gazette, invest any Court subordinate to a District Court with jurisdiction in any class of cases, and any Court so invested shall within the local limits of its jurisdiction have concurrent jurisdiction with the District Court under this Act.
Under this provision, the State Government is empowered to invest any Court subordinate to the District Court with jurisdiction in any doss of cases, and where it does so, that Court would have jurisdiction concurrently with the District Court in regard to those cases. It is permissible to the State Government under this provision to restrict the jurisdiction of a Court subordinate to the District Court by specifying the class of cases in which it will have jurisdiction. No doubt, after such investiture that Court will have jurisdiction concurrently with the District Court, but this concurrent jurisdiction will only be limited to the class of cases which the notification authorised it to entertain. This is the plain meaning of the provision and, therefore, the notification cannot, in any sense, be regarded as ultra vires.
7. On the face of it, the petition as presented to the Court of Civil Judge, Class II, Mehkar, was beyond its competence. But it is said on behalf of the non-applicant that the Court is bound to scrutinize the petition and find out whether every sum set out in the petition to be due from the debtor is a debt at all within the meaning of Section 9 of the Act, and if that is done here, it would be seen that the last item set out in the schedule to the petition is not a debt and as such it has to be excluded from consideration in ascertaining the total value of debts due from the insolvent. In support of this contention the learned Counsel relies upon the decision in Governor-General v. Guranditta Mal AIR Lah. 273 and also the decision in Raja Ram v. Chandi Prasad AIR Oudh 107, which is referred to and relied on in that case. In the Lahore case the petitioner was the Governor-General in Council and it was alleged that a sum of Es. 12,335-9-0 had been embezzled by the debtor. It was contended on behalf of the debtor that the petition did not lie because the amount claimed by the Governor-General was in the nature of unliquidated damages only. The contention was upheld by the learned Judge. He further held that unless there was contractual relation between the parties, the sura of money claimed to be due could not be regarded as a debt. It seems to me that this is the correct view of the law and that a Court has the jurisdiction to enquire into the question as to whether what is claimed to be due by the petitioning creditor is or is not a debt as contemplated by Section 9 of the Provincial Insolvency Act.
8. A little scrutiny of the insolvency petition itself would show that this sum of Rs. 1,642 is made up of three items : Rs. 1,000, Rs. 500 and Rs. 142 and odd. The first item is a claim for the return of earnest money which was paid by the non-applicant to the applicant when a contract for the sale of a field by the applicant to the non-applicant was entered into. The second item is claimed by way of damages for a breach of the contract by the applicant. The third item represented costs incurred by the non-applicant for instituting a suit for the recovery of the amount of Rs. 1,500 from the applicant.
9. In so. far as the items of Rs. 500 and 142 and odd are concerned, there is no difficulty. The amount claimed by way of damages being an unliquidated sum cannot be taken into account under Section 9 of the Act. As regards the amount of Rs. 142-8-0, which represents the costs incurred in a suit, they being in the discretion of the Court cannot be taken into account as a decree has not yet been passed in that suit. The real difficulty is with regard to the item of Rs. 1,000. Can it be regarded as a debt or not
10. Shri Kalele relies on a decision of Rao and Bhutt JJ. in Mohammad Hassan Khan v. Ahmad Hafiz Khan Miscellaneous Appeal No. 117 of 1952 of the Nagpur High Court in which it was held that in the absence of a specific definition of the term 'debt', it has to be given the ordinary connotation of a loan which, as commonly understood, is an advance of money or in kind at interest, and that normally the word debt does not include a claim for damages, though it includes a claim for a liquidated money demand.
11. 'Debt' has been defined thus in Wharton's Law Lexicon:
A sum of money due from one person to another' and it is explained: 'An action of debt lay where a person claimed the recovery of a liquidated or certain sum of money affirmed to be due to him, and it was generally founded on some contract alleged to have taken place between the parties; or on some matter of fact from which the law would imply a contract between them..
In Ballentine 's Law Dictionary debt is defined thus:
Liability by one person to pay money or other thing of value to another. An obligation or demand arising out of contract, express, implied or quasi. A common law action which lies for the recovery of a fixed and definite sum of money or for a sum of money which can be ascertained from fixed data by computation, or is capable of being readily reduced to certainty.
We are not concerned with the last portion of this definition or with the explanation which follows the definition given by Wharton because they relate to a form of action which prevails in other jurisdictions. It would seem therefore that the essence of a debt is that it must be a sum certain which was due from one person to another and would, therefore, exclude a claim for money which arises solely upon the allegation of the breach of a contract.
12. In Ibrahimbhai v. Fletcher ILR(1896) 21 Bom. 827 a Pull Bench of this Court considered the nature of the rights of parties in respect of earnest money. In the judgment in that case, the learned Judges cited with approval the following observations of Pollock B. in Collins v. Stimson (1883) 11 Q.B.D. 142:
According to the law of vendor and purchaser the inference is that such a deposit is paid as a guarantee for the performance of the contract, and where the contract goes off by default of the purchaser, the vendor is entitled to retain the deposit (p. 853)
Dealing with this matter Lord Shaw has stated in Kunwar Chiranjit Singh v. Star Swarup AIR P.C. 1:
Earnest money is part of the purchase price when the transaction goes forward, it is forfeited when the transaction falls through, by reason of the fault or failure of the vendee.
In the Bombay case just quoted it has been held that if the seller is in default, the buyer refusing to complete is entitled to a refund of the earnest money. No doubt, the right to refund earnest money is a legal right and does not depend on any equitable consideration. But before being entitled to the refund of earnest money the buyer has to establish that a breach of a contract has been committed by the seller. Where a claim for the return of money is dependant upon the determination of the question as to who is in breach of the contract, it is difficult to see how it can be regarded as a debt within the meaning of the word in Section 9 of the Provincial Insolvency Act until it has matured into a decree. Clearly, therefore, it was the duty of the Insolvency Court to ascertain whether each and every item specified in the petition was a debt within the meaning of Section 9 thereof.
13. From what I have said above, it would be seen that the amount of Bs. 1,642 cannot be regarded as a debt upon which the petition for adjudicating the debtor as an insolvent is founded. Since that is so, it is to be wholly left out of account. Once this amount is left out of account, the balance would clearly bring the petition within the jurisdiction of the Insolvency Court. That being so, I hold that the Court at Mehkar had jurisdiction to entertain the petition, and consequently the District Judge had power to transfer it to the Court at Buldana for adjudication.
14. Upon the view, I take, it is not necessary for me to consider the other question which was argued before the District Judge and which was also argued before me by the learned Counsel. For these reasons, I dismiss this application with costs.