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Allampati Gopalareddy Vs. Ponnavolu Raghava Reddy - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberC.R.P. No. 709 of 1982
Judge
Reported inAIR1985AP12
ActsProvincial Insolvency Act, 1920 - Sections 28(7), 34(2), 78 and 78(2)
AppellantAllampati Gopalareddy
RespondentPonnavolu Raghava Reddy
Appellant AdvocateK. Ranga Rao, Adv.
Respondent AdvocateM.V.S. Suresh Kumar, Adv.
Excerpt:
.....was no subsisting debt by reason of expiry of three years from date of execution of pronote so debt barred by limitation - combined effect of sections 28 (7), 34 (2) and 78 is that on adjudication live debts as on date of filing insolvency petition can be proved and if debt is not barred on date of filing petition it can be proved and enforced notwithstanding fact that such debt is barred by limitation during period between date of presentation of insolvency petition and adjudication - in instant case promissory note not time-barred as on date of filing insolvency petition and proceedings for adjudication are pending - event of bar of limitation after insolvency petition does not preclude petitioner from pursuing proceedings. - - it is therefore not possible to say with..........does not follow in the absence of adjudication. if the insolvency petition is rejected the debt barred by limitation during the period between the date of insolvency petition and the date of adjudication, is not saved as the doctrine of relation back is a sequel to adjudication only. the exclusion of time between the date of adjudication and annulment is provided under s. 78. it is useful to refer to the decision in re: benzon: bower v. chetynd, (1914) 2. ch 68 wherein it is held as follows: - 'ex parte ross shows 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, and of this, there can be no doubt, but this is only in the bank ruptcy.' 7. in the instant case, the promissory note is not barred by.....
Judgment:
ORDER

1. The petitioner in this C.R.P. is the petitioner debtor, in the Court below. The Insolvency Petition being I.P. 12/77 was filed against the debtor in connection with the promissory note dated 22-6-1975. The debtor filed the petition under Ss. 4 and 5 of the provincial Insolvency Act read with S. 151 C.P.C. to dispose of I.P. 12/77 on the preliminary point about the maintainability of insolvency petition as the claim of the respondent on the basis of pronote dated 22-6-1975 is barred by limitation. This application was dismissed by the learned Subordinate judge on the ground that this can be considered at the time of enquiry of the main petition. On appeal the learned District Judge disposed of the application on merits holding that the pronote is not barred by limitation when the I.P. was filed and as such the creditor can pursue the insolvency petition notwithstanding the bar of limitation during the pendency of the petition.

2. The learned counsel for the petitioner contended that there is no subsisting debt by reason of expiry of three years from the date of execution of the pronote and the debt is barred by limitation and the enforcement of such barred debt cannot be continued in insolvency proceedings. The learned counsel for the respondents contended that on the date when the view of doctrine of relation back provided in s. 28(7) of the provincial Insolvency Act, the proceedings relate back to the date of filing and the expiry of 3 years during the pendency of the insolvency proceeding, does not hinder the insolvency proceedings.

3. The relevant provisions touched upon are Ss. 28(7) and 78(2) of the Provincial Insolvency Act are as follows: -

28(7): 'Where an order of adjudication has been annulled under this Act in computing the period of limitation prescribed for any suit or application for the execution of a decree 9other than a suit or application in respect of which the leave of the Court was obtained) under sub-sec. (2) of S. 28 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: Provided that nothing in this section shall apply to a suit or application in respect of a debt provable but not proved under this Act.'

Section 28 is concerned with the impact of the order of adjudication on the property of the insolvent and the consequential adjustment of legal proceedings. The immunity of the insolvent against any proceedings is postulated and the property shall vest in the Court or receiver and shall become divisible amongst the creditors while taking care of the rights of the secured creditor and total embargo on initiation and continuation of any legal proceedings against the property or person of the insolvent except with the leave of the Court. Sub-sec. (7) envisages the doctrine of relation back whereby the order of adjudication pre-dates to the date of presentation of insolvency petition. Section 78 provides for the applicability of Ss. 5 and 12 of the Limitation Act and sub-s. (2) brings in the exclusion of time in the event of annulment of adjudication and in a situation where the petition for insolvency culminates in adjudication and thereafter annulment, there course to common legal remedy and the limitation thereof is lubricated by lifting the time between the date of adjudication and annulment from the bar of limitation. It is pertinent that exclusion of time between date of filing the petition and adjudication is not adverted to.

4. In Subramania v. Meenakshisundaram, AIR 1937 Mad 577 decided on 5-2-1937, the issue considered by the Division Bench consisting of Varadachariar and King JJ. Is whether the debt which became barred by the date of order of adjudication can be proved as a debt. The learned Judges reviewed several decisions and held as follows at page 577:

'Having heard the point fully argued, we think it right to say that if the matter were res integra we should have hesitated to come to the conclusion reached or suggested in the cases above referred to.'

It is further held as follows: -

'The Provincial Insolvency Act, however, has not wholly followed the scheme of the English Act, 1883, nor only has it not introduced the intermediate stage of a 'receiving order', but it has departed from modern English practice in fixing the date of the presentation of the insolvency petition as the material date for most purposes. In the notes appended to the Bill of 1905, it was stated that this was considered to be 'in accordance with the law in force in the presidency Towns' (11 and 12 Vict. C. 21). Further the Act provides for the relation back, not of the trustee's title or of the commencement of the insolvency but of the order of the Court. It is therefore not possible to say with confidence how far the Legislature in this country intended to dissociate or has in the result dissociated questions like the one now before us from the doctrine of 'relation back' in the sense in which it has been introduced by the Act. In a matter where certainty and uniformity of practice are more important than the practical unassailability, we do not feel justified in dissenting from the view which has been expressed or assumed in the several cases above referred to in several provinces.'

Strongly relying upon these observations, the learned counsel for the petitioner says that fresh look is necessitated particularly in the absence of any decision of this Court. In this connection, it is necessary to refer to another Division Bench decision of the Madras High Court in Samgayya v. Pedda Subbayya, (1937) 2 Mad LJ 703: (AIR 1938 Mad 19) decided on 13-8-1937 wherein the creditor filed a petition for insolvency on 7-11-1922 on the basis of two pronotes dated 7-5-1922. The order of adjudication was passed on 21-3-1923. Subsequently the adjudication was annulled on 5-4-28. Thereafter the suit was filed on the basis of pronotes on 23-12-1930. The plaintiff sought to get over the bar of limitation by stating that he was entitled to exclude the whole period during which the proceedings of insolvency were pending i.e., from the date of filing 7-11-22 to 5-4-28 the date of adjudication. The Division Bench consisting of pandurang Row and Venkataramana Rao JJ. While holding that the period between the date of adjudication and date of annulment alone can be excluded and the suit is barred observed as follows at page 707 (of Mad LJ): (at pp.20-21 of AIR):

'The statute of limitation for the maintenance of an action at law, once it has commenced to run, will continue to run in spite of the presentation of the petition in insolvency. If the order of adjudication is made, the operation of statute of limitation is suspended till the date of the annulment and if the adjudication is annulled, the period between the date of the adjudication and that of annulment is excluded and the statute begins to run immediately on annulment. If no order of adjudication is made, the insolvency does not save the claim from being barred by limitation. So, under the law as it stands a prudent creditor in order to keep his debt alive, will be obliged to file a suit to save it from the bar of limitation in spite of insolvency. No doubt, it may in a sense be futile if an order of adjudication takes place; but he runs the risk of losing the claim altogether if no adjudication is made.'

The learned counsel seeks to distinguish this decision by stating that this decision is concerned solely with exclusion of time between the dates of adjudication and date of annulment, and hence not applicable to the situation arising in the instant case and the observation extracted above, are obiter. It is true that the earlier decision in AIR 1937 Mad 577 (supra) is not referred to and the decision is directly concerned with the applicability of exclusion of time provided in S. 78(2) of the Act.

5. The doctrine of relation back embodied in s. 28(7) of the Act, is comprehensive enough to take in all situations. In the event of petition for insolvency culminating in adjudication the order of adjudication must be considered to have enveloped all attendant reliefs and events commencing from the date of filing the insolvency petition. This principle is in consonance with general maxim that the reliefs are available from the date of initiation of case. The time consuming process in the course of adjudication in the Courts should not be permitted to imperil the litigant and put to disadvantage. The essence of the contention of the learned counsel for the petitioner is that though the petitioning creditor sets in motion the insolvency proceedings, he should also file la suit as a stand-by when the debt is about to be barred before the event of adjudication. This results in driving the litigant to avail two remedies simultaneously and the proceedings for insolvency based on the acts of insolvency will be futile and superfluous. When the petition for insolvency based upon acts of insolvency results in adjudication the benefits of such adjudication should be made available and this explicitly provided by doctrine of relation back in s. 28(7). This provision is aided by S. 34(2) which is as follows: -

Section 3492): 'Save as provided by sub-sec. (1) 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 under this Act.'

6. The combined effect of Ss. 28(7), 34(2) and 78 is that on adjudication the live debts as on the date of filing the insolvency petition, can be proved and if the debt is not barred on the date of filing the petition, it can be proved and enforced notwithstanding the fact that such debt is barred by limitation during the period between the date of presentation of insolvency petition and adjudication. The same situation does not follow in the absence of adjudication. If the insolvency petition is rejected the debt barred by limitation during the period between the date of insolvency petition and the date of adjudication, is not saved as the doctrine of relation back is a sequel to adjudication only. The exclusion of time between the date of adjudication and annulment is provided under S. 78. It is useful to refer to the decision in re: Benzon: Bower v. Chetynd, (1914) 2. Ch 68 wherein it is held as follows: -

'Ex parte Ross shows 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, and of this, there can be no doubt, but this is only in the bank ruptcy.'

7. In the instant case, the promissory note is not barred by limitation as on the date of filing insolvency petition and the proceedings for adjudication are pending. The event of bar of limitation after the insolvency petition is filed does not preclude the petitioner from pursuing the proceedings. Ultimately if the order of adjudication in not passed the pronote will be barred by limitation unless a separate suit is filed within time. If the proceedings result in adjudication order the creditor is entitled to prove the debt.

8. In the result, the order of the Court below is confirmed. C.R.P. dismissed. No costs.

9. Revision dismissed.


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