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Donepudi Subramanyam Vs. Nune Narasimham and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported inAIR1929Mad323; (1929)56MLJ489
AppellantDonepudi Subramanyam
RespondentNune Narasimham and ors.
Cases ReferredIn Raghunath Das v. Sundar Das Khetri
Excerpt:
- - his suit failed in the trial court, but he succeeded in the district court on appeal, and a second appeal to the high court was dismissed. 4,000. the valuation of the appeal was clearly the value not of the decree but of the property sought to be recovered to satisfy the debt. in any case it is clearly a matter which cannot now be urged in a collateral proceeding. 6. clearly the language of the prohibition is not intended to have such a wide meaning as it might imply. clearly at all events the suit or legal proceedings must have some relation to the insolvency. the object clearly is to prevent an insolvent being harassed by extraneous proceedings elsewhere, when his liabilities, vis a vis his creditors, are the subject of proceedings in the insolvency court, since all efforts by.....wallace, j.1. this letters patent appeal is against the judgment of phillips, j., in second appeal dismissing the plaintiff's suit.2. the 1st defendant held a decree against defendants 2 to 4. in execution of that decree he applied for attachment of certain properties. the attachment was ordered on 22nd june, 1915 and was effected on 25th june, 1915. between these dates on 24th june, 1915 an insolvency petition was presented by defendants 2 and 3. an adjudication followed on 16th december, 1915. plaintiff, alleging a sale of these properties to him by defendants 2 to 4 on 11th march, 1915, had filed a. claim petition against the attachment on 28th july, 1915. that was allowed on 8th november, 1915. on 31st march, 1916 1st defendant sued to set aside the order on the claim petition making.....
Judgment:

Wallace, J.

1. This Letters Patent Appeal is against the judgment of Phillips, J., in Second Appeal dismissing the plaintiff's suit.

2. The 1st defendant held a decree against defendants 2 to 4. In execution of that decree he applied for attachment of certain properties. The attachment was ordered on 22nd June, 1915 and was effected on 25th June, 1915. Between these dates on 24th June, 1915 an insolvency petition was presented by defendants 2 and 3. An adjudication followed on 16th December, 1915. Plaintiff, alleging a sale of these properties to him by defendants 2 to 4 on 11th March, 1915, had filed a. claim petition against the attachment on 28th July, 1915. That was allowed on 8th November, 1915. On 31st March, 1916 1st defendant sued to set aside the order on the claim petition making the plaintiff and the insolvents parties but not joining the Official Receiver. His suit failed in the Trial Court, but he succeeded in the District Court on appeal, and a Second Appeal to the High Court was dismissed. The plaintiff then in 1920 brought the present suit to declare the decree of the District Court void because incompetent. His grounds are two : first, that the valuation of the 1st defendant's suit was beyond the jurisdiction of the District Court in appeal, and secondly, that the 1st defendant's suit was within the mischief of Section 16 (2) (b) of the Provincial Insolvency Act (III of 1907) which was then in force and that since leave of the Insolvency Court had not been obtained neither the District Munsif's Court nor the District Court had jurisdiction to entertain the suit. Plaintiff lost in the Original Court, won in the Appellate Court, lost again before Phillips, J., and now appeals.

3. The first ground of attack on 1st defendant's suit seems to me without substance. No doubt in that suit the value of the decree which 1st defendant was seeking to execute against the property declared to be the plaintiff's was over Rs. 5,000, but the value of the property itself was said to be Rs. 4,000. The valuation of the appeal was clearly the value not of the decree but of the property sought to be recovered to satisfy the debt. The District Court therefore had jurisdiction. In any case it is clearly a matter which cannot now be urged in a collateral proceeding. No objection was taken before the District Court at the time of hearing of the appeal. Therefore under Section 1,1 of the Suits Valuation Act, the objection could not be taken in appeal from the District Court. A fortiori, it cannot be taken in a collateral proceeding.

4. The second point is one on which reliance has been placed by the appellant. It depends on the interpretation of Section 16 (2) (b) of the Provincial Insolvency Act (III of 1907), the terms of which, so far as is relevant to this case, are that

on the making of an order of adjudication,...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 proceeding, except with the leave of the Court....

5. The question is whether this prohibition covers the 1st defendant's suit to set aside the order on the claim petition. The suit was admittedly filed after the adjudication and without leave of the Insolvency Court. The insolvency proceedings are still pending.

6. Clearly the language of the prohibition is not intended to have such a wide meaning as it might imply. 'Shall not commence any suit or other legal proceeding' cannot mean that every creditor of an insolvent after adjudication cannot file a suit or take legal proceedings against any one at all. What then is the nature of the restriction which this section seeks to impose? Clearly at all events the suit or legal proceedings must have some relation to the insolvency. The language used is the same as in, and has been taken from, Section 9 of the English Bankruptcy Act of 1883, but there is a dearth of authority as to the meaning of it. The only useful cases from English Courts brought to our notice are three. In In re Wray (1887) 36 Ch.D. 138 North, J., held that this prohibition under Section 9 does not stand in the way of proceedings being taken against an insolvent under the Debtors Act. This was followed In re W. A. Edye (1891) 63 L.T. 762 and in Fasey, In re Trustees (1892) 2 Ch. 1, in which latter case Kekewich, J., whose judgment was upheld in appeal, interpreted the phrase in Section 9 'in respect of any debt' as meaning 'in the sense of being intended to enforce payment of that debt.' That, if I may say so with respect, gives a common-sense interpretation to the section; that is, the prohibition is against a creditor enforcing against his debtor del hors the insolvency proceedings a payment of his debt after his debtor has been adjudged insolvent, unless and until he has obtained leave of the Insolvency Court. The object clearly is to prevent an insolvent being harassed by extraneous proceedings elsewhere, when his liabilities, vis a vis his creditors, are the subject of proceedings in the Insolvency Court, since all efforts by creditors after an adjudication to obtain payment of their debts should be taken in the Insolvency Court and should be under the control of, and be dealt with by, that Court. It may be noted that while Section 28 of the new Provincial Insolvency Act (V of 1920) corresponds to Section 16 of the old Act, Section 29, which follows Section 10(2) of the Bankruptcy Act of 1883 has been introduced to allow of a similar order for stay of a suit already begun and pending on the date of adjudication, and in that section the language used is 'pending against the debtor.' I think the same idea must be imported into the old Section 16 (2) (b).

7. Of rulings in this country on the exact meaning of the prohibition in Section 16 (2) (b) there are none which have been brought to our attention except Vasudeva Kamath v. Lakshminarayana Rao I.L.R. (1918) M. 684 : 1918 36 M.L.J. 453 with which I shall deal later. There are other rulings wherein the section or the same wording in Section 17 of the Presidency Towns Insolvency Act (III of 1909) has been invariably applied in practice to suits in which the judgment-creditor is seeking directly to recover his debt from his judgment-debtor. See Cuddappa Ghouse Khan v. Bala Subba Rowther : AIR1927Mad925 , In re Dwarka Das Tejbhandas I.L.R. (1915) B. 235, Pannalal Tassaduq Hussain v. Hiranand Jiwan Ravi I.L.R. (1927) Lah. 593 and Haji Umar Sharif v. Jwala Prasad 79 Ind.Cas. 662 or to execution proceedings against the insolvent--see Easwara Aiyar v. Govindarajulu Naidu I.L.R. (1915) M. 689. I have myself in an unreported case, C.R.P. No. 170 of 1926, so applied it to a suit to recover a debt following Cuddappa Ghouse Khan v. Bala Subba Rowther : AIR1927Mad925 , and the case in In re Dwarka Das v. Tejbhandas I.L.R. (1915) B. 235 My general conclusion then is that Section 16 (2) (b) prohibits without leave of the Court a creditor from commencing any suit or other legal proceeding which would by its nature hamper or affect prejudicially the administration of the insolvent's estate by the Insolvency Court in the insolvency proceedings. Unless the suit or other legal proceeding thus interferes with the insolvency proceedings, there is no reason why the Insolvency Court should have control over its institution. A party's ordinary civil rights should not be reduced unless by clear statutory authority.

8. Two points then fall to be decided : first, was the 1st defendant's suit one which falls within the prohibition in Section 16 (2) (b) so interpreted, and secondly, if it does, does the fact that leave was not obtained entail a total want of jurisdiction in the Court which decided it? The answer to point 1 depends on a consideration of the nature of 1st defendant's suit. By the order on the claim petition the property had been declared to be not the property of the insolvent at all from the date of the transfer to the plaintiff, namely, 11th March, 1915. Therefore neither on the date of the insolvency petition nor on the date of the adjudication was this property the property of the insolvent. The adjudication therefore did not vest this property in the Official Receiver. On the date of the 1st defendant's suit it was the property of the plaintiff vesting in him alone. The 1st defendant sued to have it declared that the property was not the plaintiff's but was the property of the insolvent and available for his decree. A perusal of his palint Exhibit G will show that it asserted in effect not that the sale to the plaintiff was a real transfer though fraudulent, but that it was a sham transaction, no consideration having passed and the possession still remaining with the vendors, and that therefore the property remained the property of the vendors in spite of the sale. But I do not think that makes any essential difference to the legal position. The suit proceeded and had to proceed on the footing that the property was not the property of the judgment-debtor, unless and until the contrary was proved. So long as the sale stood unavoided by proper proceedings the property did not vest in the Official Receiver, nor could he have taken possession of it.

9. As noted, the 1st defendant's suit was dismissed in the Trial Court and decreed in the Appellate Court. The appellate decree (Exhibit G-2) declared that the insolvent's right to the suit property was established and that the property was liable to be attached in execution of the 1st defendant's decree. It is clear that that suit was not in terms a suit by a creditor against his judgment-debtor to enforce payment of his debt, nor is the declaration which the 1st defendant obtained by his decree the sort of declaration which could have been obtained by him collaterally in the insolvency proceedings. It is no doubt the case that as this alleged sham sale was within two years prior to the insolvency petition the Official Receiver might have moved under Section 36 of Act III of 1907 to have it declared void against him. But that to my mind is not exactly the same relief as was sought for by the 1st defendant in his suit. It has to be remembered, for example, that, if the adjudication was for any reason annulled the result of any successful motion by the Official Receiver to have this sale set aside would not enure to the benefit of individual creditors and would not for the 1st defendant's purposes take the place of the decree which he obtained. He had to be prepared or thought it necessary to be prepared for such a contingency by seeking the decree which he obtained. Therefore he was not to my mind seeking in his suit a relief which he could have obtained in the insolvency proceedings itself. By supporting a motion under Section 36 by the Official Receiver the exact relief he sought could not have been obtained by him in the insolvency proceedings. It may be noted further that this is not a suit in which the insolvent's estate is involved or is likely to be involved in defence or in costs. It is really a suit prosecuted by the 1st defendant on behalf of the estate and either at his own cost or at the cost of the holders of the property. Neither the insolvent nor the Official Receiver is really a necessary party to it. Again the 1st defendant's suit is not one which could have been filed and conducted by the Official Receiver himself. A suit to set aside an order on a claim petition must be brought by the party against whom the order has been made or by his legal representative. The Official Receiver is in no sense the legal representative of the 1st defendant. This is not a suit to recover assets in the hands of third parties, such as was the suit in Sanyasi Charan Mandal v. Krishnadhan Banerji . It is a suit to declare that the property in the hands of third parties is part of the assets of the insolvent and no more. Hence the 1st defendant's suit cannot be considered to be of such a nature as would hamper or prejudicially affect the administration of the insolvency, and therefore, on the lines I have laid down above, it was not a suit for which the leave of the Court under Section 16 (2) (b) had necessarily to be obtained.

10. The learned Judge, whose decision is now under appeal, has no doubt held to the contrary, but if I have read his judgment aright he did so with some hesitation. He felt himself pressed by the decisions of two Benches of this Court in Vasudeva Kamath v. Lakshminarayana Rao I.L.R. (1918) M. 684 : 1918 36 M.L.J. 453 and Mariappa Pillai v. Raman Chettiar I.L.R. (1918) M. 322. The case in Mariappa Pillai v. Raman Chettiar I.L.R. (1918) Mad. 322 is the converse of the present. There the claim of the person who claimed the property attached by the creditor was dismissed and a suit was filed to establish his claim. It was held in effect that the dismissal of the claim only availed for the benefit of the successful parties to the claim petition and not for the benefit of the Official Receiver, and that therefore the property did not vest in the Official Receiver unless and until he himself avoided the transfer. The appeal, which was by the purchaser from the Official Receiver, was dismissed by the High Court on the ground that the dismissal of the claim did not amount to an avoidance of the transfer by the Official Receiver, that such avoidance can only be by motion under Section 36 of the Act and that, in the absence of such avoidance a purchaser from the Official Receiver has no locus standi, that is, the Official Receiver cannot by proxy attack a fraudulent transfer in collateral proceedings. This does not seem to me a decision which affects the present case. The successful attaching creditor in the claim petition was not the appellant and his rights were not under consideration. As I read the decision, it does not mean that a suit like the present is not maintainable without leave of the Court, which is the proposition at present under discussion.

11. As to the case in Vasudeva Kamath v. Lakshminarayana Rao I.L.R. (1918) M. 684 : 1918 36 M.L.J. 453 it was there held that a suit under Section 53 of the Transfer of Property Act to set aside a transfer as in fraud of creditors cannot after an adjudication be instituted without leave of the Court. The discussion is meagre and the decision rests on a proposition that such a suit by a judgment-creditor would enable him to obtain satisfaction of his decree out of the property declared in the suit to be the property of the insolvent. With respect, I do not think this is a correct statement. A suit under Section 53 of the Transfer of Property Act proceeds on the footing that there has been a transfer although fraudulent, that is, the property has passed from the judgment-debtor. The decree in the suit will not declare that the property transferred is not the property of the transferee but that the transferee's rights are postponed to the rights of the creditors, who are entitled to have their debts satisfied out of it, first of all; if any balance of money or property is left by the creditors after satisfaction it will go not to the judgment-debtor but to the purchaser. As is indicated in Mariappa Pillai v. Raman Chettiar I.L.R. (1918) M. 322 the decree in such a suit does not enure for the benefit of the Official Receiver who must himself move under Section 36 if he wants the transfer set aside. I do not therefore see why the Insolvency- Court should require to exercise any control over such a suit, at least until after it has reached the stage of a decree and execution is being taken out against the property. If the principles to be held applicable to the present suit which I have stated are correct then the decision in Vasudeva Kamath v. Lakshminarayana Rao I.L.R. (1918) M. 684 : 1918 36 M.L.J. 453 has been, set out in too broad terms, but in any case it is distinguishable from the present suit as not being a suit to set aside an order on a claim petition.

12. It may be noted that even if the application of Section 16 (2) (b) is restricted to the extent which I have indicated, there will undoubtedly still be cases of hardship as has been in fact recognized in several of the reported cases already quoted. Where a creditor files his suit in ignorance of the adjudication, and the Court is equally ignorant, it is undoubtedly hard that the plaintiff's suit should be dismissed when later on the adjudication comes to light. However, the balance of authority is in favour of that view and I am not prepared at present to canvass it. But it is an added reason why one should not enlarge the scope or the prohibition more than is absolutely necessary on a reasonable interpretation of the section, and for this reason also I would restrict its application to cases where the creditor is suing directly to recover his debt from the insolvent. It will be particularly hard to enlarge the scope of the prohibition and apply it to a suit like 1st defendant's where the creditor must by force of Rule 63 of Order 21 file his suit to set aside the claim order within one year of that order. He has therefore no time to waste or time to wait until he sees whether the Official Receiver is going to move under Section 36 or not. For the reasons above given I would hold that 1st defendant's suit was not one for which leave of the Court was necessary under Section 16 (2) (b). On this finding the discussion of point (2) becomes academic but I shall deal with it shortly.

13. Before doing so, 1 shall deal first very briefly with an argument which has been put forward by Mr. T. M. Krishna-swami Aiyar for the respondent, namely that the institution of a suit by an unsuccessful claimant is not a 'commencement of a suit' but merely a continuation of the original claim proceedings. It has no doubt been held so for certain purposes; for example, lis pendens and Court-fees--see Krishnappa Chetty v. Abdul Kader Sahib I.L.R. (1913) M. 535 : 1913 26 M.L.J. 449 and the Privy Council ruling in Phul Kumari v. Ganshyam Misra , but that is a proposition which is easily pressed too far. It seems to me contrary to the spirit as well as the letter of Section 16 (2) (b) that a suit should 'commence' at some time earlier than the filing of the plaint in it. If this argument is accepted, an appeal, for example, against the decision in a suit would not require leave although the result of it would be just as hampering to the insolvency proceedings as the original suit itself. If the nature of the claim suit be examined, it is also clear that it is not entirely a continuation of the claim; it embraces something more. The claim enquiry merely settles whether the claimant is in possession of the property on his own behalf or on behalf of the judgment-debtor; but the claimant in his suit has to establish the right which he claims to the property; that is, the question of title is also raised for decision. The suit is therefore really in part a new legal proceeding, and is not entirely restricted to the questions within the scope of the claim enquiry. I am not therefore prepared to accept this argument,

14. The final question is whether, if leave is necessary the lack of it cuts at the root of the Court's jurisdiction to entertain the suit. The balance of authority is in favour of the position that where leave has not been obtained before the suit was begun it cannot be subsequently obtained--see In re Dwarka Das Tejbandas I.L.R. (1915) B. 235 and Cuddappa Ghouse Khan v. Bala Subba Rowther : AIR1927Mad925 . The former of these decisions refers to the similar wording under Section 17 of the Presidency Towns Insolvency Act. In Easwara Aiyar v. Govindarajulu Naidu I.L.R. (1915) M. 689 it was clearly held that the omission to get leave is fatal. A ruling in Pannalal Tassaduq Hussain v. Hiranand Jiwan Ram I.L.R. (1927) L. 593 categorically lays down that initial absence of leave is fatal to the suit even when both the plaintiff in the suit and the Court are in ignorance of the adjudication. It admits that such a ruling will work hardship. The learned Judges in Cuddappa Ghouse Khan v. Bala Subba Rowther : AIR1927Mad925 and Haji Umar Sharif v. Jwala Prasad 79 Ind.Cas. 662 indicate that for such a hardship the present Section 29 may be a remedy but the learned Judges in Pannalal Tassaduq Hussain v. Hiranand Jiwan Ram I.L.R. (1927) L. 593 will not allow even that. So far as direct authority goes it is therefore against the remark of Phillips, J., that in cases under this section 'it has been held and consistently held that a suit instituted without leave can be validated by obtaining leave subsequently.'

15. Much discussion at the Bar has been devoted to argument from analogies, but I must confess that I find such analogies of little use. The wording of section to be interpreted in the case of such analogies is of course different and it is on the exact wording of this section that we have to make up our minds. The language employed in the consideration of the points at issue in some of these rulings at times falls, it appears to me, into tautology. If some preliminary sanction or leave is essential before the Court can try a suit, then of course the Court has no jurisdiction without it, while if that preliminary can be 'waived' then it does not affect the jurisdiction. That seems to me merely saying the same thing in two different ways. I therefore do not propose to discuss here the 'essential nature,' for example, of leave under Section 12 of the Letters Patent, or the sanction which has to be obtained under Section 92, Civil Procedure Code or of a notice under Order 21, Rule 22 in an execution petition, since to attempt to interpret other sections with different wordings only increases difficulties and is more of a danger than a help. I would say this, however, on this point that the prohibition in Section 16 is directed not to the Court but to the party, and that therefore, when the party was wholly ignorant of the adjudication it is difficult to penalise him for not bringing to notice a matter of which he was wholly ignorant. It surely has not to be laid down that every person suing in the capacity of a creditor must add to his plaint a verification that his debtor has not yet been adjudged an insolvent. What is required is that a defence by way of a plea of want of leave shall not be denied to the debtor in the suit if he really has been adjudicated insolvent, and, if he does raise the defence of want of leave, then the Court shall dismiss the suit or permit it to proceed upon terms; but if he does not raise the defence, it appears to me the proper order would be to rule that the objection has been waived and cannot be later pressed. There is not really here any inherent want of jurisdiction. The prohibition is merely a restraint on the exercise of jurisdiction, and is a matter of procedure. In any case it appears to me that the party who is really restrained by Section 16 (2) (b) is the party who is in a position then and there to collect his debt and who is actually trying by means of the suit or legal proceeding to do so.

16. For the reasons given above I would not interfere with the decision given by the learned Judge and I would dismiss this appeal with costs.

Thiruvenkatachariar, J.

17. The questions raised in this appeal relate to the scope and effect of Sub-section (2) of Section 16 of the Provincial Insolvency Act of 1907. In execution of a money decree which the 1st respondent had obtained against defendants 2 to 4, he attached on the 25th June, 1915, certain properties as belonging to his judgment-debtors. Thereupon the appellant preferred a claim to those properties on the 28th July, 1915, the claim-being based on a sale-deed executed in his favour by the judgment-debtors on the 11th March, 1915. The claim was allowed on the 8th November, 1915 and the properties were released from the attachment. On the 16th November, 1915 respondents 2 and 3 were adjudged insolvents. On the 31st March, 1916 the 1st respondent filed a suit under Order 21, Rule 63, Civil Procedure Code impleading as defendants therein the appellant and respondents 2 to 4. In that suit he prayed for a decree declaring that the attached property belonged to his judgment-debtors (defendants 1 to 3 in the suit) and was liable to be attached in execution of the decree obtained by him against them. The Official Receiver was not made a party to that suit. The Trial Court dismissed the suit, but on appeal to the District Court of Kistna that decree was set aside and a decree was passed in favour of the 1st respondent as prayed with costs. From the appellate decree a Second Appeal was preferred to the High Court which was dismissed. The appellant then brought the present suit in the District Munsif's Court of Bezwada impleading as defendants not only respondents 1 to 4 who were the other parties in the previous suit, but also the Official Receiver of Kistna as the 5th defendant in this suit. He prays for a declaration that the decree in the previous suit is null and void and for an injunction restraining the 1st respondent from executing the decree. His case is that the decree in the previous suit which was brought by the 1st respondent against him was passed without jurisdiction. As respondents 2 and 3 had already been adjudged insolvents that suit could not be filed without the leave of the Court obtained therefor under Section 16 (2) of the Provincial Insolvency Act, 1907, and as such leave was not obtained the Court had no jurisdiction to entertain it and the decree passed therein is null and void, notwithstanding that no objection was raised in that suit itself to its maintainability on the ground of want of leave of the Insolvency Court under Section 16 (2) of the Act. The Trial Court dismissed the suit. On appeal therefrom, the Sub-Court of Kistna set aside that decree and passed a decree in plaintiff's favour as prayed. Against that decree the 1st respondent preferred a Second Appeal to this Court which came on for hearing before Phillips, J. The learned Judge held that the plaintiff (appellant) is not entitled to> the declaration asked for and that his suit must be dismissed.

18. This appeal is filed under the Letters Patent against that judgment. The main questions considered by the learned Judge are : (1) whether the present suit instituted by the 1st respondent was one for the filing of which the leave of the Insolvency Court was necessary, and (2) if so, whether the fact that no leave was obtained therefor would render the decree passed in the suit a nullity.

19. On the first question the learned Judge holds that it was a suit falling within Section 16 of the Provincial Insolvency Act and that the leave of the Court should have been obtained for instituting the same.

20. On the second question he holds that the absence of leave did not affect the inherent jurisdiction of the Court to try the suit. A suit instituted without leave can be validated by the leave being granted subsequently. The absence of leave may be put forward as a defence to the suit, but if the defendant does not raise that defence he must be deemed to have waived it and a decree passed after such a waiver cannot be deemed to be a nullity. He further observes that the decree obtained by the appellant (plaintiff) only gives him a declaration and that he cannot execute it against the insolvent. He holds also that the Official Receiver was not a necessary party to the previous suit and the only result of his not being made a party thereto is that he is not bound by any decree passed therein.

21. The questions which arise for consideration are:

(1) Was leave of the Insolvency Court under Section 16 (2) of the Provincial Insolvency Act of 1907 necessary for the commencement of the suit brought by the 1st respondent to contest the order passed in the appellant's favour allowing his claim to the properties attached by the former as judgment-creditor of the respondents 2 to 4?

(2) If such leave was necessary, does the fact that the suit was instituted without leave render the decree passed therein a nullity?

22. After a full consideration of the arguments on both sides I am of opinion that both the questions should be answered in the negative. With reference to the first question the nature of the suit has to be considered. It is, as pointed out by Phillips, ]., a suit under Order 21, Rule 63, Civil Procedure Code. Such a suit whatever may be the form of relief prayed in it is really a suit to set aside a summary order passed in a claim proceeding which if not set aside by the aggrieved party by bringing a suit to establish the right which he claims to the property in dispute becomes conclusive as between the claimant and the attaching decree-holder as to the title of the property. See Phul Kumari v. Ghanshyam Misra .

23. Under Article 11 of the Limitation Act the suit has to be brought within one year from the date of the summary order. Where the claim has been allowed, the suit can be brought only by the attaching creditor and in such a suit he acts only for himself and not on behalf of the creditors generally and any adjudication passed therein will be binding only as between him and the claimant. It will not affect the rights of the other creditors or of the Official Receiver in whom the judgment-debtor's estate has vested either prior to the institution of the suit or subsequent thereto. It has also been held that to such a suit brought by an attaching creditor the judgment-debtor is not a necessary party nor the Official Receiver where the judgment-debtor has been adjudged an insolvent after the summary order has been passed. See Chaudhri Ahmad Baksh v. Seth Raghubar Dayal (1905) L.R. 32 IndAp 229 : I.L.R. 28 A. 1 : 1905 15 M.L.J. 432 and Annapurni Ammal v. Subramanian Chettiar I.L.R. (1908) M. 347 which is a decision of Wallis, J. (as he then was) and Munro, J. The usual relief claimed in such a suit is a declaration that the property attached was the property of the judgment-debtor and not that of the claimant. The attaching decree-holder cannot in that suit pray for any further relief. If he succeeds in getting the declaration that the property belongs to the judgment-debtor he has thereafter to apply to the Court executing the decree to proceed further on his application for execution, the obstacle in the way which was created by the order allowing the claim having been removed. It is only in such an application when made, the judgment-creditor seeks relief against the property of the judgment-debtor.

24. The institution of the suit under Order 21, Rule 63 is merely for the purpose of removing the obstacle which lies in the way of his making such an application and the suit is not one in which any relief is sought against the property of the judgment-debtor. This is the view taken by Phillips, J., himself in the order appealed from. I respectfully think that the logical consequence of this view is to hold that the suit brought by an attaching creditor under Order 21, Rule 63 is not one which conies within the purview of Section 16 (2) of the Act. But the learned Judge is of opinion that though the suit does not seek any remedy against the property of the insolvent, it is a suit in respect of what is alleged to be the property of the insolvent and therefore it appears to come within the meaning of Section 16 (2) and that the leave of the Court should be obtained. That such a suit in so far as it prays for a declaration that the attached property belongs to the judgment-debtor is not obnoxious to Section 16(2) is supported by the case in Annapurni Ammal v. Subramanian Chettiar I.L.R. (1908) M. 347 already referred to. In that case, the judgment-debtor was adjudged an insolvent during the pendency of the claim proceedings. The claim being allowed the attaching decree-holder sued under Section 283, Civil Procedure Code (now Order 21, Rule 63) making the Official Receiver also a party. An objection was taken to the maintainability of the suit on the ground that as the insolvent's property had vested in the Official Receiver, he alone could bring a suit and that the suit by the attaching creditor was not maintainable. The objection was overruled, the learned Judges observing that the decree-holder against whom the order has been passed had a statutory right of suit to set aside the order passed in the claim proceeding. The Official Receiver is not a necessary party to such a suit. As to the relief the plaintiff is entitled to, they observe as follows:

The decree-holder, however, after the judgment-debtor's insolvency is not entitled to a decree declaring the property liable to be attached; but he is entitled to a decree declaring that the property is that of the judgment-debtor.' See Annapurni Ammal v. Subramanian Chettiar (1908) I.L.R. 31 M. 347.

25. Though in that case the question did not arise under Section 16 (2) of the Provincial Insolvency Act of 1907, as the insolvency took place before that Act was passed, yet, I respectfully think that the distinction which the learned Judges draw between granting a mere declaration that the property belongs to the judgment-debtor and granting a further declaration that the property is liable to attachment is one which is equally applicable to Section 16 (2) of the Act of 1907. In the previous suit brought by the attaching decree-holder, he got both those declarations. But for his purposes it would have been quite sufficient if the declaration that the property belonged to the judgment-debtor alone is maintainable. It may also be pointed out that as the Official Receiver was also a party to the suit in Annapurni Animal v. Subramanian Chettiar I.L.R. (1908) M. 347, the declaration that the property was liable to attachment ought not to be granted as after the adjudication of the judgment-debtor, the judgment-creditor has no right to attach the property but will be entitled to such relief as he can get in the insolvency proceedings, and that portion of the decree which would be binding on the Official Receiver as a party to the suit had therefore to be struck out. But in the previous suit with which we are here concerned, the Official Receiver was no party and the declaration that the property was liable to be attached in execution of the plaintiff's decree will not affect the rights of the Official Receiver.

26. Turning to the provisions of Section 16 (2) I am unable to find anything in it which brings a suit under Order 21. Rule 63 within its purview. It provides that on the making of an order of adjudication:

(1) All the properties of the insolvent shall vest in the Court or the Receiver.

(2) No creditor of an insolvent in respect of any debt provable in the insolvency has during the pendency of the insolvency proceedings any remedy against the property of the insolvent in respect of the debt.

(3) That no such creditor can commence any suit or other legal proceeding except with the leave of the Court and on such terms as the Court may impose.

27. Does the suit under Order 21, Rule 63 infringe any of these provisions? It is clearly not a suit for the recovery of any property vested in the Receiver. According to the order on the claim petition if not set aside, the property did not belong to the judgment-debtor. Secondly, the asking for a declaration that the property belonged to the judgment-debtor is not asking for a relief against the property of the judgment-debtor. To determine the nature of the suit, we have to look at the relief which is prayed for in the suit and not to the ulterior consequences that may result from the granting of the relief. This is the View taken in Annapurni Ammal v. Subramanian Chettiar I.L.R. (1908) M. 347 which is already referred to. But as against this view the case in Vasudeva Kamath v. Lakshminarayana Rao I.L.R. (1918) M. 684 : 1918 36 M.L.J. 453 is relied on. In that case certain creditors of the insolvent sued under Section 53 of the Transfer of Property Act for setting aside a sale of property which had been made by the debtor prior to insolvency. Wallis, C.J., delivering the judgment of the Court, held that the suit fell within the purview of Section 16 (2). The learned Chief Justice observes that under the corresponding provisions of English Law, a judgment-creditor may sue in respect of his debt alone and obtain satisfaction for it. If the same rule is to be applied to a suit by the judgment-creditor under Section 53 of the Transfer of Property Act it follows that if he obtains a decree in his favour he can also enforce it in those proceedings. That would clearly bring the suit within the purview of Section 16 (2) under which a creditor has no remedy against the property of the judgment-debtor. But the learned Chief Justice says further:

even as regards a suit by a creditor who was not a judgment-creditor to declare a transfer void against creditors generally I think the words of the sub-section 'or commence any suit or other legal proceeding' are sufficiently wide to cover a suit to make property available as the property of the judgment-debtor and to forbid the institution of such a suit as this without the leave of the Court.

28. In taking this view, the learned Judge seems to me to have overlooked the distinction drawn by himself in Annapurni Animal v. Subramanian Chettiar I.L.R. (1908) M. 347 between a relief by way of a declaration that the property belongs to the judgment-debtor and a further relief that the property is liable for attachment and that the latter relief alone would be obnoxious to the policy of Insolvency Law. Moreover in this case in Vasudeva Kamath v. Lakshminarayana Rao I.L.R. (1918) M. 684 : 1918 36 M.L.J. 453 there was no question of the rights of an attaching creditor against whom an order has been passed in the claim proceedings which would be conclusive against him unless and until it is set aside by a suit instituted by him. No doubt the words of the sub-section 'no creditor shall commence any suit or other legal proceeding' are very wide, but they should be construed as applying only to suits brought by creditors which seek any relief against the property or person of the judgment-debtor or which can in any manner prejudice the administration of the insolvent's estate by the Insolvency Court or the rights of the Receiver as representing the general body of creditors. It is difficult to see how a suit by an attaching creditor under Order 21, Rule 63 can prejudice the rights of the Receiver. If the suit is successful the Receiver cannot be prejudiced thereby even if he cannot derive any advantage from such a decision. If, on the other hand, it is unsuccessful it will not be binding on the Receiver and it is still open to him to sue for the recovery of the property. But so far as the attaching creditor is concerned he is bound by an adjudication against him and if he does not institute a suit under Order 21, Rule 63, within one year, he runs the risk of altogether losing his right to attach the property for the recovery of his debt, even if the adjudication is annulled.

29. The question may also be looked at in another way. Section 16 (2) of the Provincial Insolvency Act, 1907, is re-enacted in Section 28 (2) of the present Provincial Insolvency Act and so far as this point is concerned, the wording is exactly the same. The scope and operation of Section 28 (2) cannot but be the same as that of Section 16 (2) of the old Act. In the present Act there is a new provision Section 29, which also bears on the question. Section 29 says:

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.

30. This new section makes it quite clear that the suit or other legal proceeding which is dealt with by Sub-section (2) of Section 28 is one against a debtor for the recovery of the debt. Sections 28 and 29 of the present Act correspond to Sections 7(1) and 9 (1) of the English Bankruptcy Act, 1914, the language of which also is almost identical. In Section 9 (1) of the English Act the proceedings against the debtor which are to be stayed on proof of bankruptcy are referred to as 'any action, execution, or other legal process against the property or person of the debtor.' There can be hardly any doubt that the suit or other legal proceeding which fall within the purview of Section 28 of the Provincial Insolvency Act (corresponding to Section 16 of the Act III of 1907) is an action, execution, or other legal process against the person or property of the debtor. It follows therefore that a suit by an attaching creditor under Order 21, Rule 63 in which no relief is sought against a debtor but in his favour and to which neither the debtor nor the Receiver is a necessary party cannot be held to be a suit falling under Section 16 (2) of the old Act or Section 28 (2) of the present Act. I am therefore of opinion that the previous suit brought under Order 21, Rule 63 was not a suit for which leave of the Court was necessary under Section 16 (2) of the old Act.

31. On the second question I agree with the learned Judge that assuming that leave of the Insolvency Court was necessary for the institution of the suit, the fact that no such leave was obtained does not render the decree passed therein a nullity. The word 'jurisdiction' is often used in a loose sense. A Court is said to be acting without jurisdiction not only when it has no power or authority to hear and determine the cause at all, but also when in the exercise of its authority to decide, it acts or decides erroneously.

32. But as pointed out by Mookerjee, C.J., in Hriday Nath Roy v. Ram Chandra Barna Sarma I.L.R. (1920) C. 138 there is a clear distinction between the jurisdiction of the Court to hear and determine a matter and the erroneous action of that Court in the exercise of that jurisdiction. The authority to decide a cause at all, as observed by the same learned Judge, and not the decision rendered therein is what makes up jurisdiction, and when there is jurisdiction of (over) the person and subject-matter, the decision of all other questions arising in the case is but an exercise of that jurisdiction. If the Court has no power to act at all, its doing so will be a mere usurpation of authority and its decree will be a nullity, but if it merely acts erroneously in the exercise of its jurisdiction the error can be set aside only by taking further proceedings in the action itself by way of appeal or otherwise. It can be avoided only in that way and if not so avoided its correctness cannot be questioned collaterally in other proceedings.

33. In the present case the previous suit was one which the Court in which it was instituted was competent to try. It had jurisdiction over the parties as well as the subject-matter of the suit. The question whether the suit could be maintained without the leave of the Insolvency Court did not affect the competency of the Court to try the suit, but it was only a question which might have been raised for determination in the suit. Supposing that point had been raised in that suit itself, whether leave of the Insolvency Court was necessary, it was quite open to the Trial Court to decide that question in the affirmative or in the negative and its decision may be right or erroneous. But it cannot be said that it had no jurisdiction to decide it. An erroneous decision on that point can be avoided only by an appeal against a decree passed in that suit. If the point had not been raised at all it would on principle make no difference. The Court's inherent jurisdiction to try the suit is not thereby affected. The question whether leave of the Insolvency Court for the institution of the suit is necessary is not a question which arises on the face of the plaint itself if the insolvency is not referred to therein. It depends on extraneous circumstances of which neither the plaintiff nor the Court may be aware. Suppose the plaintiff, for no fault of his, is not aware of the adjudication and therefore files his suit without getting leave of the Insolvency Court. Is his suit liable to be dismissed on the ground that he has commenced it without leave of the Court? Such a conclusion will be obviously unjust and I can see nothing in the wording of the section to justify such a conclusion. The material words are : 'No creditor shall commence his suit without leave of the Insolvency Court.' It is clear that the leave of the Insolvency Court has to be obtained for the commencement of the suit. I think that the direction given to the creditors of an adjudged insolvent by those words proceeds on the assumption that the creditor is aware of the adjudication. If, being aware of it, he fails to obtain leave he is penalised and properly so; but if for no fault of his, he is not aware of the adjudication, and of the consequent necessity for obtaining leave of the Court he cannot be said to have commenced, i.e., knowingly Commenced the suit without leave and he ought not therefore to be treated as if he were in default. That this is the correct view to take seems to me to be supported by the decisions in the analogous cases arising out of Section 43 of the old Civil Procedure Code corresponding to Order 2, Rule 2 of the present Code.

34. In Amanat Bibi v. Imdad Husain their Lordships of the Privy Council observe that a plaintiff cannot be held to have omitted to sue for a right of which he was not aware when he instituted the suit and that such an omission does' not preclude him from maintaining a subsequent suit for the portion so omitted. In other words, the omission ought to be an intentional omission with knowledge of the facts. Des Raj v. Dunichand 60 Ind.Cas. 588 is also an authority on the point. In that case Mr. Justice Broadway has held that a suit instituted by a creditor without notice of the adjudication cannot be dismissed on the ground that leave of the Insolvency Court was not obtained. In this case no question appears to have been raised as to whether the plaintiff before fee instituted the previous suit had knowledge of the adjudication. The question is therefore relevant only for this purpose, viz., that obtaining leave is not a condition precedent to the competency of the Court to try the suit. It is only available as a defence to the suit if well-founded and the decree of the Court on the point will be binding on the parties and if erroneous can be set aside only by an appeal or some appropriate proceeding in the suit itself. If the plea is not set up in the suit or proceeding as it happened in the present case, the decree passed in it cannot be challenged in any subsequent proceeding on the ground of want of leave for the institution of the suit. It has been so held in cases falling under Clause (12) of the Letters Patent in which the leave of the Court is necessary for the institution of the suit in the High Court, but the suit is instituted without leave. In such cases the plea as to the jurisdiction of the Court on the ground of want of leave if raised by the defendant would be fatal to the suit but if it is not raised and the suit is tried and decreed the decree cannot subsequently be attacked as a nullity. See Ganesh Narayan Sahi Deo v. Manik Lal Chandra 76 Ind.Cas. 194. I have only to add that both under Clause (12) of the Letters Patent and Section 16 (2) of the Provincial Insolvency Act, 1907, the leave required has to be obtained before the suit is instituted and the observation of the learned Judge that a suit instituted without leave can be validated by obtaining leave subsequently does not appear to be correct nor his statement that it has been consistently so held borne out by any authorities cited to us; but that error does not vitiate his conclusion on the question. Lastly as to two cases, Easwara Aiyar v. Govindarajulu Naidu I.L.R. (1915) M. 689 and Raghunath Das v. Sundar Das Khetri which were strongly relied on by the appellant's Advocate in support of his contention on this question.

35. In the first case all that this Court decided was that after the adjudication of the judgment-debtor by the High Court under the Presidency Towns Insolvency Act (III of 1909) his judgment-creditor cannot apply for execution of the decree by arrest of the insolvent without obtaining the leave of the Insolvency Court, i.e., the High Court. In this case the Presidency Small Cause Court which passed the decree was aware of the adjudication. Nevertheless it entertained an application for the execution of the decree by the arrest of the insolvent and the latter got himself released by getting a surety to execute a bond for his appearance. The order of the Small Cause Court proceeded on the view that Section 17 of the Presidency Towns Insolvency Act only took away the creditor's remedy against the property of the insolvent and not also his remedy against the person of the insolvent as in the corresponding Section 16 (2) of the Provincial Insolvency Act. Against the order allowing execution there was an application to the Full Bench of that Court for a new trial and owing to a difference of opinion between the Judges constituting the Full Bench the question was referred to the High Court whether after the adjudication the Court could entertain the application for execution of the decree by arrest and the bond taken from the surety could be enforced. The learned Judges who heard the reference (Napier and Sadasiva Aiyar, JJ.) held that after the adjudication of the judgment-debtor the Small Cause Court had no power to entertain the application for the execution of the decree whatever may be the relief claimed and in that view the order must be set aside. This is a case which arose directly between the creditor and the insolvent and the surety and the order passed therein was questioned and set aside as illegal in a new trial application preferred against it. In other words, the illegal order was vacated by an appeal against it.

36. In Raghunath Das v. Sundar Das Khetri the property of an insolvent which had been attached by his judgment-creditor prior to his adjudication was after the adjudication sold in execution of the decree and purchased by the decree-holder himself who also got possession thereof. After the adjudication the Official Assignee was, on the application of the decree-holder, added as a party to the suit but no application was made under Section 248 (old Code) (now Order 21, Rule 16) to execute the decree against him as representative of the judgment-debtor (insolvent). The Official Assignee subsequently sold the property and the purchaser brought a suit to recover possession of the property from the decree-holder purchaser. Their Lordships held that the Official Assignee was not bound by the sale held in execution proceedings to which he was not made a party and which he could have successfully opposed and that the title to the property which had vested in him prior to the sale was not therefore affected by the sale. The question as to the validity of the sale as against the Official Assignee was no doubt raised in a subsequent proceeding but the case decided no more than this that a person's title to property cannot be affected by any proceedings to which he is no party. It lends no support to the contention that an order passed by a Court in a matter over which it has jurisdiction against a person who is made a party to the proceedings in which the order is passed is open to attack collaterally in a subsequent proceeding as a void order.

37. I am opinion that the answer to the second question also should be in the negative.

38. I therefore concur in the order proposed by my learned brother.


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