Mysore Insolvency Act, 1925 - Sections 9, 11 and 13; Provincial Insolvency Act, 1920 - Section 13; Mysore General Clauses Act, 1899 - Section 10; Limitation Act, 1908 - Section 4
Raja Pande v. Sheopujan Pande, AIR 1942 All 429, ILR (1943) All 84; Muradan Sardar v. Secy. of State, AIR 1939 Cal 313, ILR (1939) 1 Cal 425; Chenchuramana Reddi v. Arunachalam, AIR 1935 Mad 857, ILR 58 Mad 794; D. Siddaiah v. B. Rudrappa, AIR 1954 Mys 49, ILR (1954) Mys 281; Chintaman Laxman v. Ramgopal Raghunathdas, AIR 1948 Nag. 385, ILR (1948) Nag 523; State v. Govindan Asan and Sons, AIR 1952 Trav-Co 188, 1952 Cri LJ 901; Gopal Pillai v. Sankara Iyer, AIR 1955 Trav-Co 2, 1954 Ker LT 535
(1) This appeal raises an infesting question of law which by no means is free from difficulty.
(2) The appellants, as petitioners applied to the learned District Judge, Shimoga, in Insolvency case No. 1 of 1953 to adjudge the first respondent dictator as an insolvent. The act of insolvency on which the petition in grounded is said to have taken place on 16-2-1953. The petition was presented on 18-5-1953, i.e. on the day when the Court reopened after the summer recess. The Court below has dismissed the petition on two grounds. The first ground on which the petition was dismissed is that the petition was filed under Section 13 of the Provincial Insolvency Act and not under Section 13 of the Mysore Insolvency Act. There is no dispute that on the date, the petition was presented, the law that was in force in the former State of Mysore was the Mysore Insolvency Act (which shall be hereinafter referred to as the 'Act') and not the Provincial Insolvency Act. The second ground on which the petition has been dismissed is that the act of insolvency on which it is grounded had occurred beyond three months before the presentation of the petition.
(3) The Court below was wholly wrong in rejecting the petition on the ground that a wrong provision of law had been quoted therein. Our attention has been invited to I. A. No. 13 filed by the petitioners seeking to amend the petition by showing the correct provision of law. No order at all has been passed on that application. If the provision of law mentioned in the petition is not correct, as admittedly it is not, the Court should have got it corrected and should not have dismissed the petition on that ground.
(4) When we come to the second ground on which the petition has been dismissed, we encounter sharp conflict of judicial opinion. According to the petitioners, Section 9 1) (c) of the 'Act', which is in the same terms as S. 9(1)(c) of the Provincial Insolvency Act, prescribes a period of limitation and therefore, they can take benefit of Section 4 of the Limitation Act. It is alternatively urged that if Section 4 of the Limitation Act is not applicable to the facts of the case, then the petitioners could have the benefit of Section 10 of the Mysore General Clauses Act and, in either case, the petition presented on the reopening day is a validly presented petition.
(5)Two questions that arise for decision in this case are: (1) Whether the period mentioned in S. 9 1) (c) is a period of limitation and 2) whether the presentation of the petition can be considered as an 'act' or 'proceeding' 'directed' or 'allowed' to be done or taken in any Court or office on a certain day within a prescribed period as provided in Section 10 of the General Clauses Act.
(6)The expression 'limitation' is nowhere defined. Whether the period prescribed under an enactment is a period of limitation or a condition precedent has to be decided by taking into consideration the language employed, the scheme of the Act, the object to be achieved etc., while it should not be forgotten that ' limitation' is also a 'condition', the distinction between a period of limitation and a condition though fine, is yet clear. A 'condition precedent' is a part of a cause of action, whereas a :limitation' is a supervening factor. In the case of the former, there is no cause of action, unless the condition is fulfilled. In the case of the latter, the cause of action that has arisen is made unenforceable because of the lapse of the time prescribed. To put it differently, a condition precedent is a constituent part of the act complained of, whereas 'limitation' has only relationship with the remedy allowed under the 'Act', limitation does not touch the cause but bars the remedy.
(7) Acts of insolvency are enumerated in Section 6 of the 'Act. Section 7 says:
' Subject to the conditions in this Act, if a debtor commits an act of insolvency, an insolvency petition may be presented either by a creditor or by the debtor, and the Court may on such petition make an order (hereinafter called an order of adjudication) adjudging him an insolvent.........'
(Underlining (herein ' is ours).
Hence, in order to adjudge a person as an insolvent, it is not sufficient that he had committed any of the acts mentioned in Section 6; the conditions mentioned in the 'Act' must also be fulfilled. The conditions referred to in Section 7 are those set out in Section 9, which says :
' (1) A creditor shall not be entiled to present an insolvency petition against a debtor unless ............................
(a) the debt owing by the debtor to the creditor, or if two or more creditors join the in the petition, the aggregate amount of debts owing to such creditors amounts to five hundred rupees, and
(b) the debt is a liquidated sum 'payable either immediately, or at some certain future time, and
(c) the act of insolvency on which the petition is grounded has occurred within three months before the presentation of the petition ..........'
There is no dispute that clauses a) and (b) of Section 9 (1) stipulate conditions precedent. Clause (c)
finds a place along with clauses (a) and (b). The Marginal note to that section says :
'Conditions on which creditor may petition'.
Therefore, from the scheme of Part II of the 'Act' as well as from the scheme of S. 9 (1), the
reasonable inference is that the Legislature intended clause ) (c) as a 'condition' and not as a
This contention is also supported by the language employed in clause (c). That provision
is not worded as a condition subsequent but as a condition precedent. Evidently, the Legislature
thought that the debtors as well as the alienees from them should not be harassed with stale claims.
For the reasons mentioned above, we are included to think that clause c) of S. 9 (1) is a 'condition',
which enters into the cause of action and not a 'limitation' as contended for the petitioners.
(8)Section 4 of the Limitation Act, in view of Section 29 (2) of that Act, is applicable
'where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed therefor by the first schedule of the Limitation Act'.
(9)If the requirement mentioned in S. 9 (1) (c) is not to be considered as constituting a period of limitation, then Section 4 of the Limitation Act cannot come into play as no period of limitation is prescribed under the 'Act'.
(10) Several High Courts have taken the view that the period mentioned in S. 9(1)(c) is not a period of limitation. A Full Bench of the Madras High Court in Chenchuramana Reddi v. Arunachalam, AIR 1935 Mad 857 (FB), held that Section 9(1)(c) of the Provincial Insolvency Act (which is ad idea with Section 9 (1) (c) of the 'Act'), is a condition precedent to the filling of S. 13 and not a period of limitation. This is also the view taken by a Bench of the Calcutta High Court in Muradan Sardar v. Secy. of State, AIR 1939 Cal 313. The same view was taken by a single Judge of the Nagpur High Court in Chintaman Laxman v. Ramgopal Raghunathdas, AIR 1948 Nag 385.
(11) For the reasons already mentioned, we do not agree with the view taken by the Full Bench of the Allahabad High Court in Raja Pande v. Sheopujan Pande, AIR 1942 All 429 (FB) that the period fixed under S. 9 (1) (c) is a period of limitation nor are we able to accept the view expressed by Iqbal Ahmad, C. J. And concurred with by Plowden. J., that whether the period fixed under section 9 (1) (c) is a period of limitation or not section 10 of the General Clauses Act applied to a petition under section 13. This view runs counter to the specific direction given in the proviso to section 10 of the General Clauses Act which says:
'Provided that nothing in this section shall apply to any act or proceedings to which the Indian Limitation Act, 1877 XV of 1877) applies'.
It is true that section 4 of the Limitation Act and section 10 of the General Clauses Act deal with cognate subjects but they cannot operate simultaneously. Aid of section 10 of the General Clauses Act can be taken only if section 4 of the Limitation Act is inapplicable to the facts of a given case. Section 4 of the Limitation Act extends the period of limitation under certain circumstances whereas section 10 of the General Clauses Act by a fiction of law deems the petition filed on a date subsequent to the period fixed as having been filed within the period fixed.
(12) The next question for decision is whether in view of section 10 of the Mysore General Clauses Act, (which is a faithful reproduction of section 10 of the Indian General Clauses Act) the application filed by the petitioners should be deemed as having been filed within three months from 16-2-1953. Section 10 of the Mysore General Clauses Act is as follows:
'Where by any Mysore Act made after the commencement of this act any act or proceedings is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceedings shall reconsidered as done or taken in due time, if it is done or taken on the next day afterwards on which the Court or office is open;
Provided that nothing in this section shall apply to any Act or proceedings to which the Indian Limitation Act, 1908, applies'. Filing of an application under section 13 is certainly an 'act' and/or at any rate of 'proceeding' contemplated by section 10 of the Mysore General Clauses Act; that 'act' or 'proceeding' is 'allowed' to be done in any Court within the period 'prescribed' in section 9(1)(c). That being the case, we are of the opinion, that section 10 of the General Clauses Act applies in items to an application under section 13.
Dealing with section 10 of the General Clauses Act, this is what Iqbal Ahmad, c. J., says in the above mentioned Raja Pande's case. AIR 1942 All 429 (FB):
'It is well known that the Provincial Insolvency Act of 1920 was modelled on the lines of the English bankruptcy Act of 1914, and indeed, some sections of the Indian Act have been copied verbatim from the English Act. In the English Act there exists a provision similar to section 10, General Clauses Act; vide section 145, Bankruptcy Act. The Legislature did not reproduce section 145 of the English Act in the provincial Insolvency Act for the simple reason that the General Clauses Act governs the Provincial Insolvency Act for the simple reason that the General Clauses Act governs the Provincial Insolvency Act, and, as such the provision of section 10, General Clauses Act, apply to proceedings under the Provincial Insolvency Act. It would be noted that section 10 does not speak of the 'period of limitation' and applies to 'any act or proceeding' which is directed or allowed to be done by any Central Act or Regulation. That the presentation of an insolvency petition under section 9(1)(c), Provincial Insolvency Act, is an 'act or proceeding' within the meaning of section 10 admits of no doubt. I am, therefore, clear that, in view of the provisions of section 10 the petition presented by Sheopujan on the date that the Court reopened was within time:.
That was also the view taken by a Full Bench of the Travancore-Cochin High Court in State v. Govindan Asan and Sons, AIR 1952 Tra-Co 188 (FB). Another Full Bench of the Travancore-Cochin High Court in Gopala Pillai v. Sankara Iyer, (S) AIR m1956 TC 2 affirmed the views expressed in the earlier case, AIR 1952 Tra-Co 188 (FB). The ratio of the decisions in the above mentioned cases commended itself to a Bench of the old Mysore High Court in D. Siddaiah v. B. Rudrappa, AIR 1954 Mys 49.
(13) In Kaku Chenchuramana Reddi's case, AIR 1935 Mad 857 (FB) the leading judgment was delivered by the learned Chief Justice. He merely considered the of section 4 of the Limitation Act to an application under section 13 of the Provincial Insolvency Act. He did not consider the applicability of section 10 of the General Clauses Act. Pandrang Row, J., another member of that bench, agreed with the judgment of the learned Chief Justice. Cornish, J., the other learned Judge continuing the Bench was the only judge who considered the applicability of section 10 of the General Clauses Act to a petition under section 13 of the Provincial Insolvency Act. This is what His Lordship says in that regard:
'Then if as these authorities decided, an act of insolvency ceases after the lapse of three months to be a valid ground of adjudication, it cannot be made so by section 10. General Clauses Act. This section adopts and declares the equitable rule that when a fixed period is given for doing a certain act, and the party bound to do it within that time is prevented by the act of the Court itself in being closed on the crucial date, the party may do the act on the Court's reopening day But no period is fixed by the Insolvency Act for presenting an insolvency petition. What the Act p[revised is that as creditor shall not be entitled to present a petition grounded upon an act of insolvency which occurred more than three months before which is quite a different thing from saying that a petition may be presented within three months from the commission of an act of insolvency'.
The distinction between the creditor not being 'entitled to present petition grounded upon an act of insolvency which occurred more than 3 months before' and the 'petition may be presented within 3 months from the commission of an act of insolvency' with great respect to the learned Judge appears to us to be a distinction without difference. The period of three months mentioned in section 9(1)(c) is clearly a period fixed as mentioned in section 10 of the General Clauses Act.
(14) The object of section 10 of the General Clauses Act is to avoid penalising a party, who could not do the required or allowed act on the day fixed or within the period fixed because of the fact that on the day fixed, or during the period fixed or an on the last day of the period fixed, the Court or office without whose conduction the act could not have been done, was closed, if the act is done on the very day the Court or office opens after the day or period fixed. This is a very reasonable provision, designed to give the concerned parties the full benefit of the period fixed. This prevision does not, really speaking, conflict with the object of the Legislature that those who want to get their debtors adjudged insolvents should act promptly.
(15) This takes us to the proviso to section 9(1)(c) of the Provincial Insolvency Act introduced by the amending Act of 1950. This proviso says:
'Provided that where the said period of 3 months referred to in clause (c) expires on a day when the Court is closed the insolvency petition may be presented on the day on which the Court reopens'. The question is whether this proviso was introduced as an amendment, filling up a lacuna that was existing or was it a legislative interpretation of the law as it stood earlier? The manner in which the proviso is worded leads us to think that it purports to be a amendment of the law. But the view taken by the Legislature as regards the true meaning of section 9(1)(c) is not conclusive. The proviso may well have been introduced as a matter of abundant caution.
(16) For the reasons mentioned above, we are of the opinion that the petition under appeal was filed within the period fixed by section 9 (1) (c) of the 'Act'. Hence the Court below was not right in rejecting the same on the preliminary grounds mentioned above. The appeal is accordingly allowed and the decree of the Court below is set aside and the case remanded to the trial Court for disposal according to law. Costs of this appeal will be consist in the petition and shall be provided fore therein.
(17) Appeal allowed.