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Davood Mohideen Rowther Vs. Sahabdeen Sahib - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1937Mad667; 173Ind.Cas.285; (1937)2MLJ223
AppellantDavood Mohideen Rowther
RespondentSahabdeen Sahib
Cases ReferredIn Ghouse Khan v. Bala Subba Rowther
Excerpt:
- - 3. unhampered by authority, reading both sections together and giving the words their plain and natural meaning the following propositions are clearly deducible: , held that leave of the insolvent court is a condition precedent to the institution of a suit and failure to obtain such leave is a defect which cannot be cured and leave subsequent to the institution of the suit cannot be given. rose innes says that the jurisdiction of the courtis limited to actions commenced before the bankruptcy proceedings are initiated but i do not think so, for the words are perfectly general. 85 is not treated as an authority for the exercise of such a power under section 10(2). it is therefore not safe to construe section 29 in the light of the decision of brownscombe v......literally means 'begun but not yet carried out or finished'. therefore when section 29 speaks of a suit pending, it refers to a suit already begun but not finished when the order of adjudication is made. (see subramanyam v. narasimham (1928) 56 m.l.j. 489.) in the view that under section 28 leave of the court is a condition precedent to the right of action, no other interpretation of section 29 is possible. if leave is a condition precedent, the want of it is a defect fatal to the suit and subsequent leave cannot validate it. if it be held that leave can be given under section 29 to continue a suit commenced without the leave of the insolvency court, it would be rendering section 28 nugatory. to illustrate, suppose a district court before which proceedings in insolvency are pending.....
Judgment:

Venkataraman Rao, J.

1. The facts sufficient for the disposal of these revision petitions are fully stated in the order of reference and it is unnecessary to repeat them. On those facts the question arises whether, after a person is adjudged an insolvent, a suit filed by a creditor for the recovery of a debt provable in insolvency without the leave of the Insolvency Court is maintainable and can the Court in which the suit is instituted give leave to continue it? The sections of the Provincial Insolvency Act relevant to this question are Sections 28 and 29. Section 28, Clause 2 runs thus:

On the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a Receiver as hereinafter provided, and shall become divisible among the creditors, and thereafter, except as provided by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceedings, except with the leave of the Court and on such terms as the Court may impose.

2. Section 29 runs thus:

Any Court in which a suit or other proceeding is pending against a debtor shall, on proof that an order of adjudication has been made against him under this Act, either stay the proceeding, or allow it to continue on such terms as such Court may impose.

3. Unhampered by authority, reading both sections together and giving the words their plain and natural meaning the following propositions are clearly deducible:

(i) Section 28(2) is mandatory and after an order of adjudication is made, no suit or other proceeding can be instituted against the insolvent or his property without the leave of the Insolvency Court and such leave is a condition precedent to the right of action; and

(ii) where any suit or other proceeding is pending on the date of the adjudication in any Civil Court, such Court on being apprised of the order of adjudication can in its discretion either stay the suit or proceeding or give leave to continue the same.

4. It will be seen that Section 27 which deals with the power of Insolvency Courts to make an order of adjudication is the first of the sections enacted under the heading 'Order of adjudication'. The succeeding sections deal with the legal consequences which follow from the order of adjudication. Thus the point of time in relation to which both Sections 28 and 29 speak is the date of the order of adjudication. Section 28 deals with proceedings not pending on the date of the order of adjudication and Section 29 deals with proceedings then pending. The term 'pending' literally means 'begun but not yet carried out or finished'. Therefore when Section 29 speaks of a suit pending, it refers to a suit already begun but not finished when the order of adjudication is made. (See Subramanyam v. Narasimham (1928) 56 M.L.J. 489.) In the view that under Section 28 leave of the Court is a condition precedent to the right of action, no other interpretation of Section 29 is possible. If leave is a condition precedent, the want of it is a defect fatal to the suit and subsequent leave cannot validate it. If it be held that leave can be given under Section 29 to continue a suit commenced without the leave of the Insolvency Court, it would be rendering Section 28 nugatory. To illustrate, suppose a District Court before which proceedings in insolvency are pending refuses to grant leave to a creditor to institute a suit against an insolvent; after such refusal the creditor files a suit in the District Munsif's Court and it can grant leave to continue the suit; this means the District Munsif will be sitting as it were in judgment against the order of the District Judge, a state of affairs which could never have been in the contemplation of the legislature in enacting the Provincial Insolvency Act, whatever may be the English Law or the law of insolvency which governs the presidency towns about which we shall presently deal.

An argument based on hardship to the creditor resulting from this interpretation was addressed to us relying on certain decisions. (Vide Subramanyam v. Narasimham (1928) 56 M.L.J. 489 and Bhimaji v. Chunilal Jhaverchand I.L.R. (1931) Bom. 623.) It is this: a creditor for no fault of his in ignorance of the adjudication files a suit; it would be unjust to dismiss the suit for want of leave and it may be at the time of dismissal his claim may be barred and he will be practically remedyless. When the words the statute are plain, a Court of law cannot refuse to give them their natural meaning because of a possibility of hardship or injustice; moreover, as pointed out by Wallace, J., in Ponnusami v. Kaliaperuma : AIR1929Mad480 there is really no such hardship As observed by him at page 481:

The gazette notification of insolvency is presumed to be notice to all the creditors and they cannot be heard to plead want of notice or ignorance-On the other hand, unless this strict reading of the section is adopted there will be great embarrassment both to the insolvent and the Insolvency Court-

5. There is preponderance of Indian authority in support of the view we are taking. In Ghouse Khan v. Bala Subba Rowther : AIR1927Mad925 Odgers and Curgenven, JJ., held that leave of the Insolvent Court is a condition precedent to the institution of a suit and failure to obtain such leave is a defect which cannot be cured and leave subsequent to the institution of the suit cannot be given. They followed the decision in in re Dwarka-das Tejbhandas I.L.R. (1915) Bom. 235 given on an analogous provision in the Presidency Towns Insolvency Act (Section 17). In Ponnusami v. Kalia-peruma : AIR1929Mad480 Wallace, J., held that even subsequent annulment of insolvency would not cure the initial defect. It must be noticed that Wallace, J., was inclined to take a different view in cases of ignorance of the creditor of the insolvency. (See Subramanyam v. Narasimham (1928) 56 M.L.J. 489). In Maya Ookeda v. Kuverji (1931) 34 Bom. L.R. 649 Blackwell, J., following in re Dwarkadas Tejbhandas I.L.R. (1915) Bom. 235 dismissed a suit instituted without such a leave. (See also Panna Lal-Tassaduq Hussain v. Hira Nand-Jivan Ram I.L.R. (1927) Lah. 593 and Rowe & Co. v. Tan Thean Taik I.L.R. (1924) Rang. 643.) We may point out that in Ghouse Khan v. Bala Subba Rowther : AIR1927Mad925 in re Dwarkadas Tejbhandas I.L.R. (1915) Bom. 235 and Panna Lal-Tassaduq Hussain v. Hira Nand-Jivan Ram I.L.R. (1927) Lah. 593 the creditor filed the suit in ignorance of the order of adjudication and yet this circumstance did not affect the decision in these cases.

6. We shall now deal with the argument in support of the contrary view based mainly on an English decision in Browns combe v. Fair (1887) 58 L.T. 85 and Mahomed Haji Essack v. Abdul Rahiman I.L.R. (1916) Bom. 312 which followed it. It is contended that the words in Section 29 are general and wide enough to cover suits instituted before and after the date of the order of adjudication; and such a construction was adopted in construing Section 10(2) of the English Bankruptcy Act of 1883 where the language was similar. Sections 9 and 10 of the English Bankruptcy Act of 1883 so far as they are relevant for the present discussion are in these terms:

Section 9. (1) On the making of a receiving order an Official Receiver shall be thereby constituted receiver of the property of the debtor, and thereafter, except as directed by this Act, no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the debtor in respect of the debt, or shall commence any action or other legal proceedings unless with the leave of the Court and on such terms as the Court may impose.

Section 10. (1)* * *

Section 10. (2) The Court may at any time after the presentation of a bankruptcy petition stay any action, execution or other legal process against the property or person of the debtor, and any Court in which proceedings are pending against a debtor, may, on proof that a bankruptcy petition has been presented by or against the debtor, either stay the proceedings, or allow them to' continue on such terms as it may think just.

7. It does not appear from the report of Brownscombe v. Fair (1887) 58 L.T. 85 whether the order was passed under the first portion of Section 10(2) or under the later portion thereof. But from the arguments of Mr. Read and Mr. Rose Innes it may be taken that the order was made under the later provision of Section 10(2) which is similar in language to Section 29 of the Provincial Insolvency Act and Section 18(3) of the Presidency Towns Insolvency Act. The following observations of Willis, J., in that case do lend countenance to the argument at the Bar:

Mr. Rose Innes says that the jurisdiction of the Courtis limited to actions commenced before the bankruptcy proceedings are initiated but I do not think so, for the words are perfectly general.

8. With due respect, we may point out that the plain language of the section does not warrant this interpretation. Section 9 deals with proceedings not pending on the date of the receiving order and Section 10 with proceedings so pending. That this is the correct view seems to be borne out by the observations of Stirling, J., in In re Berry: Duffield v. Williams (1896) 1 Ch. 939:

Section 9 prohibits the 'commencing' of actions or proceedings, except with the leave of the Court; and I agree with the opinion expressed by Worth, J., in In re Wray (a Solicitor) (1887) 36 Ch. D. 138 that it has no reference to proceedings actually pending against the debtor at the date of the receiving order. Such receiving proceedings are dealt with by Section 10, Sub-section 1 of which applies to the interval between the presentation of a bankruptcy petition and the making of a receiving order ; while Sub-section 2 applies to any time after the presentation of a bankruptcy petition. The scheme appears to be that actions and other proceedings are to go on against the debtors unless either the Court of Bankruptcy or the Court in which the proceedings are pending sees fit to interfere in the exercise of the discretion vested in it.

9. It may be noted that in Halsbury's Laws of England, Vol. 2 at p. 63 Brownscombe v. Fair (1887) 58 L.T. 85 is cited as an authority for the proposition that: actions which are commenced after the receiving order without the leave of the Court may be stayed but in the footnote it is added 'They are stayed under the Bankruptcy Act, 1883, Section 9'. (See also Vol. 2, Hailsham's Ed., p. 90.) Similarly in William's Bankruptcy Practice (14th Ed. 1932), at p. 70, the same case is given as an authority for the said proposition under Section 7 of the English Bankruptcy Act, 1914, corresponding to Section 9 of Act of 1883 which is the same as Section 28 of the Provincial Insolvency Act and Section 17 of the Presidency Towns Insolvency Act. Thus it will be seen that Brownscombe v. Fair (1887) 58 L.T. 85 is not treated as an authority for the exercise of such a power under Section 10(2). It is therefore not safe to construe Section 29 in the light of the decision of Brownscombe v. Fair (1887) 58 L.T. 85. The decision in Mahomed Haji Essack v. Abdul Rahiman I.L.R. (1916) Bom. 312 is a decision under Section 18, Clause 3 of the Presidency Towns Insolvency Act and Sections 17 and 18 are a reproduction of Sections 9 and 10 of the English Bankruptcy Act, 1883. Sir Basil Scott, C.J., follows Brownscombe v. Fair (1887) 58 L.T. 85 without any discussion and the decision cannot be relied on as an authority on Section 29 of the Provincial Insolvency Act. Two other cases of the Bombay High Court were cited, namely, the decision of Fawcett, J., in Bheraji Samrathji v. Vasantrao (1928) 31 Bom. L.R. 981 and the decision of Tyabji, J., in Bhimaji v. Chuni-lal Jhaverchand I.L.R. (1931) Bom. 623. Both the learned Judges followed in Mahomed Haji Essack v. Abdul Rahiman I.L.R. (1916) Bom. 312 but Fawcett, J., observed that if the matter were res integra a different view might be open and he referred to Panna Lal-Tassaduq Hussam v. Hira Nand-Jivan Ram I.L.R. (1927) Lah. 593 in support of that view. The decision in Subramanyam v. Narasimham (1928) 56 M.L.J. 489 is distinguishable. There the question was whether a decree passed in a suit instituted without leave in the absence of any objection being taken on that score is a nullity. It is unnecessary to deal with the correctness of that decision but we must express our dissent from the observations contained in the judgment in regard to the interpretation of Sections 28 and 29 of the Provincial Insolvency Act in so far as they purport to be based on the theory of ignorance of the creditor of the proceedings in insolvency. Tiruvenkata-chariar, J., in that case observes that the word 'commenced' must be construed as 'knowingly commenced'. Wallace, J., seems inclined to this view though he says that having regard to the preponderance of authority he would not dissent from the view he took in Ponnusami v. Kaliaperuma : AIR1929Mad480 . It seems to us that there is no warrant for importing into the section words which are not there. In Ghouse Khan v. Bala Subba Rowther : AIR1927Mad925 there is no doubt an observation of Odgers, J., at page 839 to the effect that leave may be obtained under Section 29 though the suit might have been instituted without the leave of the Insolvency Court but it is an obiter dictum which was not necessary for the case. Further the observation is irreconcilable with the view taken by him in regard to Section 28 of the Act that want of leave is fatal to the suit.

10. We are therefore of opinion on a proper construction of Sections 28 and 29 of the Provincial Insolvency Act that leave of the Insolvency Court not having been obtained prior to its institution, the present suit is not maintainable and the learned Subordinate Judge had no power to grant leave to continue the suit. We therefore reverse the decision of the lower Court and dismiss the suit but in the circumstances we direct each party to bear his own costs.

11. C.R.P. No. 1167 of 1936.

12. This Civil Revision Petition arises out of an application for the execution of a decree obtained by the respondent against the petitioner in Small Cause Suit No. 219 of 1934 on the file of the Sub-Court, Tanjore. In the judgment delivered to-day in C.R.P. No. 1295 of 1935 we decided that the said suit was not maintainable, set aside the decree and dismissed the suit. This Civil Revision Petition must therefore be allowed and the execution petition dismissed, but in the circumstances we direct each party to bear his own costs both here and in the Court below.


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