1. The point taken in this revision is that the District Judge of Agra in his judgment dated 26th February 1936 has erred in dismissing an appeal against an order of annulment in an insolvency proceeding. On 10th July 1931 Bohrey Shankar Lal - who is the applicant before, me - and Ganga Earn applied for an order of adjudication in insolvency against Bansidhar, opposite party 1. On 4th March 1932 Bansidhar was adjudged insolvent and he was directed to apply for discharge within one year. It appears that certain alienations had been made by the insolvent which it was sought to set aside under Section 53 or Section 54 of the Act. On 12th October 1932 notice was sent at the request of the Official Receiver to the two petitioning creditors to pay necessary expenses for proceedings under Section 53 or Section 54. On 26th October 1932 the Official Receiver reported to the insolvency Judge that the creditors had given no proof in support of their application to have the alienations set aside and he prayed that the application be filed. On 7th December 1932 the proceedings for setting aside the alienations were re-opened at the request of the Official Receiver, who had been approached by one or both of the petitioning creditors. On 8th February 1933 the Official Receiver informed the Court that he had fixed the 14th February for attachment of such property as was free from encumbrance (from the proceeds whereof the cost of setting aside alienations was to be met) and that Bohrey Shankar Lal had deposited Rs. 20 as expenses and he requested that information be given to Bohrey Shankar Lal's counsel, The Court directed that information be sent accordingly and that the Official Receiver's report should be submitted by 5th April 1933. Meanwhile on 7th March 1933 the office reported that no application for discharge had been made by the insolvent and that no application for enlargement of time had been made by the petitioning creditors; and on 10th March 1933 the Official Receiver reported that in accordance with the office report the order of adjudication should be annulled under Section 43 of the Act. The Insolvency Court directed that the matter be put up on 15th March and on that date the order of adjudication was annulled apparently in the absence of the petitioning creditors.
2. On 27th April 1933 the petitioning creditors applied to the insolvency Judge to set aside the order of annulment dated 15th March 1933; but the Court disallowed that application and directed that the creditors should file a fresh application for the adjudication of Bansidhar. On 19th May 1933 the petitioning creditors again applied, apparently by way of review, for setting aside the ex parte order of annulment dated 15th March 1933; but on 6th October 1933 the insolvency Court passed an order to the effect that 'The order dated 27th April 1933 must stand'.
3. Thereafter the petitioning creditors appealed to the District Judge and the latter, purporting to act under Order 41, Rule 11, Civil P.C., allowed the appeal without having issued notice to Bansidhar. That order was for obvious reasons set aside by a Bench of this Court of which I was a member and the District Judge was directed to re-hear the appeal. The appeal has now been heard according to law and has been dismissed. It is urged by learned Counsel for the applicant that the insolvency Court was not competent to annul the adjudication without notice to the petitioning creditors and has further argued that under Section 27(2) of the Act, the Court had power to extend the time for discharge even after the expiry of the period allowed to the insolvent for applying for his discharge. Learned Counsel for the applicant has cited authority of various High Courts in support of the latter proposition and I unhesitatingly accept it. On the other hand, my attention has been drawn to Section 43(1) of the Act which provides that:
If the debtor does not appear on the day fixed for hearing his application for discharge or on such subsequent date as the Court may direct, or if the debtor does not apply for an order of discharge within the period specified by the Court, the order of adjudication shall be annulled, and the provisions of Section 37 shall apply accordingly.
4. Acting under the provisions of that section, the Insolvency Court on 15th March 1933 annulled the order of adjudication. It is contended for the opposite party that, where an adjudication has been annulled under Section 43, no extension of time can be granted. It is also argued that under Section 27(2) the petitioning creditors, who were of course aware of the period allowed for discharge, were at liberty to move the Court within that period for an extension of time. This is of course perfectly true. It is also true that after annulment no extension of time can be granted. But the question remains, was the order of annulment good and proper? Bansidhar was adjudged insolvent not on his own petition but on the petition of his creditors, and the latter wanted to have certain alienations set aside and had moved the Official Receiver in this matter. In S.V.A.R.S. Firm v. Maung Pan A.I.R. 1927 Rang 173 a Bench of the Rangoon High Court held that:
Where an application under Section 63, Provincial Insolvency Act, in relation to an alleged fraudulent transfer of property is pending, the Court, before annulling the insolvent's order of adjudication for failure to apply for discharge within the appointed time, should issue specific notice of the course proposed to be adopted to any interested creditor to show cause against such course being adopted.
5. It is true that in the present case proceedings under Section 53 or Section 54 of the Act had not been actually initiated, but preliminary steps were being taken. The 5th April was fixed for submission of the receiver's report, but meanwhile on 15th March the adjudication was annulled because the insolvent had not applied for discharge within the time allowed. The appeal to the District Judge was against the order of 6th October 1933 which affirmed the order of 27th April 1933. Under the latter order the application for setting aside the ex parte order of 15th March 1933 was dismissed. It is pointed out on behalf of the opposite party that an appeal lay from the order of 15th March and from the order of 27th April, but no appeal was filed. This is true, but if the order of 6th October 1933 was wrong and was liable to be set aside, the order of 27th April and the ex parte order of 15th March would automatically fall.
6. I think that Section 43 of the Act should be, read with Section 27, and in the present case I lam of opinion that having regard to the fact that Bansidhar was adjudged insolvent on a petition by his creditors and the fact that steps were apparently being taken with a view to initiate proceedings under Section 53 or Section 54 of the Act, notice ought to have been issued to the petitioning creditors before the adjudication was annulled. I think that there has been a material irregularity and accordingly I allow this application with costs and set aside the lower Court's order dated 26th February 1934 and the order of annulment. The Insolvency Court will issue notice to the insolvent and the petitioning creditors and the Official Receiver to show cause why the adjudication should not be annulled and will then exercise its discretion, having regard to the probability or otherwise of proceedings being taken under Section 53 or Section 54 of the Act, whether or not to annul the said adjudication.