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Shakuntala Chawla and anr. Vs. Official Assignee, Bombay - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai High Court
Decided On
Case NumberInsolvency Petn. No. 45 of 1969
Judge
Reported inAIR1981Bom443
ActsPresidency Towns Insolvency Act, 1909 - Sections 17; Provincial Insolvency Act, 1920 - Sections 28(2); Companies Act, 1956 - Sections 446; Indian Companies Act, 1913 - Sections 171 and 179
AppellantShakuntala Chawla and anr.
RespondentOfficial Assignee, Bombay
Appellant AdvocateV.V. Tulzapurkar, Adv.
Respondent AdvocateParty in person
Excerpt:
.....be granted before the commencement of the suit or the proceeding and it could also be granted in a suit or proceeding instituted after the adjudication of insolvent - - order 1. this petition raises an interesting question with regard to the scope and powers of the court to grant leave to prosecute legal proceedings in a pending suit, under section 17 of the presidency towns insolvency act (3 of 1909). 2. insolvent ramgopal khanna was adjudicated insolvent by this court in insolvency petition no. 5. the official assignee has opposed the granting of the leave under section 17 of the said act, firstly on the ground that the applicants were well aware of the fact that ramgopal khanna had been adjudicated insolvent in the year 1969 i. according to the official assignee, leave ought to..........to obtain leave before institution of the proceeding entails dismissal of the proceeding. the suit or proceeding instituted without leave of the court may, in our judgment, be regarded as ineffective until leave is obtained, but once leave is obtained the proceeding will be deemed instituted on the date granting leave.'11. section 17 of the p. t. i. act provides :--'17. on the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the official assignee and shall become divisible among his creditors, and thereafter, except as directed by this act, no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the.....
Judgment:
ORDER

1. This petition raises an interesting question with regard to the scope and powers of the Court to grant leave to prosecute legal proceedings in a pending suit, under Section 17 of the Presidency Towns Insolvency Act (3 of 1909).

2. Insolvent Ramgopal Khanna was adjudicated Insolvent by this Court in Insolvency Petition No. 45 of 1969 on 1st July, 1969.

3. The Applicants filed a suit in the Court of the Civil Judge (Senior Division), Thane, being Civil Suit No. 145 of 1975, inter alia, against the heirs land legal representatives of the Insolvent who were joined as defendants 1 to 6 in the suit. The suit had been filed by the Applicants against the heirs and legal representatives of the Insolvent for the purpose of recovering vacant and peaceful possession of certain premises described in the Plaint therein, and for other ancillary reliefs. It may be pointed out that the suit was filed in the year 1975 and applicants were aware of the fact that Ramgopal Khanna had been adjudicated Insolvent in the year 1969, a fact which is borne out in the plaint itself.

4. The applicants have now filed this petition for leave under Section 17 of the Presidency Towns Insolvency Act, 1909 (hereinafter referred to as 'the said Act') and for a prayer that leave be granted to them to join the Official Assignee as party-defendant No. 8 to the said suit pending in the Thane Court.

5. The Official Assignee has opposed the granting of the leave under Section 17 of the said Act, firstly on the ground that the applicants were well aware of the fact that Ramgopal Khanna had been adjudicated Insolvent in the year 1969 i.e. much prior to the filing of the suit in the year 1975. The second ground which the Official Assignee has urged while opposing this application is that this Court is not empowered under Section 17 of the said Act to grant leave in a suit which is already pending in the Court. According to the Official Assignee, leave ought to have been sought for by the applicants before the filing of the suit and since they failed to obtain such leave they are not entitled to seek leave at this stage. The Official Assignee has relied upon three rulings of this Court in support of his contention. In Re. Dwarkadas Tejbhandas, reported in 17 Bom LR 925 : AIR 1915 Bom 134, a question arose as to whether leave ought to he obtained before the commencement of the suit and if not obtained, whether it could be granted after the suit was filed, for the continuation of the said suit. Davar, J. was pleased to observe:--

'The words of the section are so clear and unambiguous that there is no possibility of construing them in any way other than that leave must be obtained before the commencement of the action.

The words of the section are so clear and explicit that they leave no room for any construction other than the one I have placed upon them. No creditor shall commence a suit except with leave. This provision clearly negatives the suggestion that a suit commenced without leave can be continued by obtaining leave at any stage thereof.'

6. A similar question arose in the case of Maya Ookeda v. Kuverji Kurpal reported in 34 Bom LR 649 : AIR 1932 Bom 338, wherein Blackwell, J. following the observations of Davar, J. cited above, decided that a creditor of an insolvent could not be permitted to bring a suit against the insolvent without first obtaining leave to sue from the la-solvency Court, under Section 17 of the P. T. I. Act, 1909.

7. Lastly in Jehangir Cursetji Mistri v. Kastur Pannaji Oswal, reported in : AIR1939Bom344 , the Court was again faced with a similar question, viz., whether leave could be granted in a pending suit. The question there arose under Section 28(2) of the Provincial Insolvency Act (V of 1920). That section, however, is identical in terms with Section 17 of the P. T. I. Act, 1909. Beaumont, C. J. followed the previous rulings of Davar, J. and Blackwell, J. and held that leave ought to be obtained only at the commencement of the suit and could not be granted in a suit which has already been filed.

8. It may be pointed out that in Bhimaji Bhibhutmal v. Chunilal Javerchand, reported in 34 Bom LR 683 : AIR 1932 Bom 344, Tyabji, J. took a different view from that taken by Davar, J. In that case the question of leave arose under Section 28(2) of the P. I. Act, 1920. Tyabji, J. held that leave to commence or to continue the suit could be obtained either before the suit was commenced or during the pendency of the suit.

9. The Official Assignee has finally relied upon a decision of this Court in the case of The Eastern Steampship Pvt. Ltd. v. Putco Pvt. Ltd., reported in : (1970)72BOMLR697 . There the question arose under Section 446 of the Companies Act, 1956 as to whether in case of a suit which was already filed the Court could grant leave, and the Court held that under Section 446 no suit could be commenced against the Company if the Winding up Order had been made except by the leave of the Court. In such cases leave could only be granted before the suit was commenced and no leave could be granted to continue the suit if it was commenced after the date of the Winding-up Order. Nain, J. relying upon the provisions of Section 17 of the P. T. I. Act, 1909 and of Section 28(2) of the P. I. Act, 1920 which were analogous to the language of Section 446 of the Companies Act, came to the conclusion that no leave could be granted in a suit which was instituted after the date of the Winding-up Order. Nain, J. was pleased to observe:--

'The provisions of Section 17 of the P. T. I. Act, 1909 and Section 28(2) of the P. I. Act, 1920 are similar in respect of suits instituted after the Winding-up Order to the provisions of Section 446 of the Comp. Act (1 of 1956) and we take the same view as has been taken by Davar J., Blackwell, J. and Beaumont, C. J. in the cases referred to above.'

10. Shri Tulzapurkar, the learned Advocate appearing on behalf of the applicants has relied upon the ruling of the Supreme Court in the case of Bansidhar Shankarlal v. Mohd. Ibrabim, reported in : [1971]2SCR476 . In that case the Court was considering the question of granting leave under Section 171 and Section 179 of the I. Comp. Act, 1913. Their Lordships were pleased to observe (at pp. 1294, 1295):--

'If the sanction of the Court has been obtained for the prosecution of the suit, it would be plainly unnecessary to obtain fresh sanction to the institution of the execution proceedings at the instance of the successful party. It is true that the sanction obtained by the liquidators is granted under Section 179 of the Comp. Act to initiate or enforce a claim of the Company or to defend an action, whereas the leave of the Court to institute or to continue a suit against the company in winding up is obtained under Section 171. It would be giving effect to a technicality divorced from the true object of the section to hold that, even in a suit filed or prosecuted with the sanction of the Court, the decree may not be enforced by a successful party without leave under Section 171 of the Act.

Even granting that sanction under Section 179 does not dispense with the leave under Section 171 of the Act, to institute a proceeding in execution against a company ordered to be wound up, we do not think that there is anything in the Act which makes the leave a condition precedent to the institution of a proceeding in execution of a decree against the company and that failure to obtain leave before institution of the proceeding entails dismissal of the proceeding. The suit or proceeding instituted without leave of the Court may, in our judgment, be regarded as ineffective until leave is obtained, but once leave is obtained the proceeding will be deemed instituted on the date granting leave.'

11. Section 17 of the P. T. I. Act provides :--

'17. On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the official assignee and shall become divisible among his creditors, and thereafter, except as directed by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt or shall commence any suit or other legal proceeding except with the leave of the Court and on such terms as the Court may impose.'

It is true that in the three Judgments of this Court cited heretofore it has been held that leave envisaged under Section 17 of the said Act must be taken at the commencement of the proceeding and that leave could not be granted once the proceeding had been initiated. It is, however, pertinent to note that the learned Judges in the case The Eastern Steamship Pvt. Ltd. v. Putco Pvt. Ltd. : (1970)72BOMLR697 were faced with the question of obtaining leave under Section 446 of the Comp. Act, 1956. Their Lordships relied upon the various rulings of this Court on the question of leave under Section 17 of the said Act and came to the conclusion that since the provisions of Section 17 of the said Act were analogous to those of Section 446 of the Comp. Act, 1956, leave to continue a suit which was instituted' after the date of the Winding-up Order could not be granted. That decision, however, does not appear to be good law any longer in view of the decision of the Supreme Court in Bansidhar Shankarlal's case : [1971]2SCR476 cited above.

12. Section 446 of the Comp. Act. 1956 provides:--

'446. (1) When a winding-up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with against the company, except by leave of the Court and subject to such terms as the Court may impose.'

IN Bansidhar Shankarlal's case : [1971]2SCR476 the Supreme Court observed that there was nothing in the Comp. Act which made leave a condition precedent to the institution of a suit against the company and that failure to obtain leave before institution of the proceeding entailed dismissal of the proceeding. The Supreme Court further went on to observe that a suit or proceeding instituted without leave of the Court would be regarded as ineffective until leave was obtained. But once the leave was obtained, the proceeding would be deemed instituted on the date of granting leave. Since the provisions of Section 17 of the P. T. I. Act are pan material with the provisions of Section 446 of the Comp. Act, 1956 the reasoning of their Lordships of the Supreme Court must also apply to leave to be obtained under Section 17 of the said Act. I have, therefore, come to the conclusion that in view of the observations of the Supreme Court in Bansidhar Shankarlal's case : [1971]2SCR476 it can no longer be held that leave under Section 17 of the P. T. I. Act could not be granted in a case which was instituted after the date of the adjudication of the insolvent. I, therefore, negative the objection raised by the Official Assignee and I hold that under the provisions of Section 17 of the said Act leave can be granted before the commencement of a suit or a proceeding and it can also be granted in a suit or a proceeding which is instituted after the adjudication of the insolvent. The petition is, therefore, made absolute in terms of prayer (a). There will be no order as to costs

13. Petition allowed.


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