1. Part of the property of one S.A. Ananthanaryana Chetty consisted of two stables in Madura. These stables were usufructuarily mortgaged by him to his son-in-law on 11th April, 1923. On 11th February, 1925, S.A. Ananthanarayana Chetti was adjudicated insolvent. In March, 1931, the Official Assignee applied under Section 55 of the Presidency Towns Insolvency Act to have the mortgage deed set aside and an order was duly passed in his favour in February, 1932. Having thus had the mortgage deed annulled the Official Assignee made a further application under Sections 7 and 36 of the Act in December, 1934, to call upon the mortgagee to account for the rents and profits which he had received from the mortgaged property. Our learned brother Mockett, J., who heard this application has held under Section 7 that the mortgagee is liable to account for the whole of the rents and profits which he has received since the mortgage was effected. Against this order the mortgagee appeals, contending in his memorandum of appeal that he is not liable to account at all.
2. At the hearing of the appeal this extreme contention was abandoned, and the only argument advanced was that the appellant was liable for mesne profits only for the period of three years immediately preceding the Official Assignee's application i.e., from December, 1931. This argument we think, is a sound one and must prevail.
3. The authority upon which this argument was based is an English decision. Re Mansell ex parte Norton (1892) 66 L.T. 245 In that case a trustee in bankruptcy applied under Section 72 of the Bankruptcy Act of 1869 to recover certain rents from one Norton more than six years after Norton should have paid them. Norton pleaded the statute of limitation and it was held by all three learned Judges (Lord Esher, M.R. Fry, L.J., and Lopes, L.J,) that this plea was a good one, the reason being that the application was equivalent to an action. The exact words of Lord Esher M.R. are 'A motion in Bankruptcy such as this is equivalent to an action,' and what Fry, L.J., says is this:
It is plain that when the legislature by Section 72 of the Bankruptcy Act gave power to the Court of Bankruptcy to decide all questions, whether of law or of fact, arising in any case of bankruptcy, that transference of jurisdiction was not intended to alter the liabilities and rights of persons proceeding in the Court of bankruptcy. This case therefore is just the same as if the trustee were suing in an ordinary Court of law.
4. Now this decision was duly brought, to the notice of Mockett, J., but he held that it afforded him no assistance, and that 'as the law of limitation' in India is contained within the four walls of an Act, unless it is possible to place a particular proceeding within one of the articles of that Act, the Act does not apply. With respect we are unable to see why the decision should not be followed in the present case. Section 7 of the Presidency Towns Insolvency Act is admittedly the equivalent in India of Section 72 of the Bankruptcy Act in England. We are therefore, we think, justified in holding that an application under Section 7 is equivalent to a suit and equivalent to a suit for the purposes of Section 3 of the Limitation Act which applies the articles of the Act to all suits. After all, as has been pointed out in the full Bench ruling, Official Assignee of Madras v. Narasimha Mudaliar : (1929)57MLJ145 a claim for money under Section 7 against a stranger to the insolvency is only an alternative to a suit, and an alternative which the insolvency Court should not permit except in simple cases capable of easy and speedy proof (see p. 731). It would indeed be an anomaly if the Insolvency Court by granting this permission should automatically confer upon the Official Assignee power to claim debts which would be irrecoverable by suit.
5. We need not, however, pursue this particular point any further as Mr. Sampath Aiyangar who appeared for the Official Assignee before us, abandoned any contention that the Limitation Act did not apply merely because this was a proceeding in insolvency. He attempted instead to distinguish Re Mansell ex parte Norton (1892) 66 L.T. 245 from the present case on the ground that the Official Assignee did not here represent the insolvent at all but was applying on the strength of a right higher than any the insolvent would have had. In arguing so Mr. Sampath Aiyangar appeared to be obsessed by the fact that as a preliminary to the present application the Official Assignee had had to have the mortgage transaction set aside, and that the former application was one which the insolvent himself could never have made. No doubt that is so, but the two applications must nevertheless be very clearly distinguished. When the mortgage has been set aside what is the result? It surely is that, in spite of the mortgage, the ownership of the mortgaged property and the right to receive its rents and profits have in law remained throughout part of the insolvent's estate. When the insolvent's estate became vested in the Official Assignee by reason of the insolvency the right to receive these rents and profits must be deemed to have vested in him. It is to us clear, beyond all argument, that in claiming by this application to recover these rents and profits the Official Assignee is claiming as representing the insolvent's estate, and is not putting forward any claim hostile to the insolvent. We consider accordingly that Mr. Sampath Aiyangar's argument on this point provides no sound reason to induce us not to follow Re Mansell (1892) 66 L.T. 245.
6. Only a brief final reference is necessary to a ruling reported in Jagannath Prasad v. U.P. Flour and Oil Mills Co., Ltd. I.L.R. (1916) 38 All. 347, which our attention has been drawn by Mr. Sampath Aiyangar. That decision shows that in certain circumstances a liquidator can recover from the share-holders of a company in liquidation unpaid calls the rights to which would be barred by limitation if the company itself were to file a suit to recover them. But this is no true analogy to the present case. The decision in Jagannath Prasad v. U.P. Flour and Oil Mills Co. Ltd. I.L.R. (1916) 38 All. 347, turned upon the interpretation of specific provision in the Companies Act which defined the share-holders' liabilities. There are no such provisions in the Presidency Towns Insolvency Act which can be used against the appellant. And it is further made clear in Jagannath Prasad v. U.P. Flour and Oil Mills Co. Ltd. I.L.R. (1916) 38 All. 347, that but for these specific provisions the liquidator would have had no higher right to resist the bar of limitation than the company itself. In the present case, as we have already pointed out, the Official Assignee makes his application as representing the insolvent's estate and in that capacity only.
7. In the result, then this appeal must be allowed in part with costs throughout and appellant's liability to account be reduced to the period of three years immediately preceding the Official Assignee's application.