1. On 10th November 1930 two partners in a cloth business, named Gaveppa and Rudrappa respectively, were adjudicated insolvents in the Court of the-District Judge of Bellary. They had also, carried on a motor bus business. On 3rd, April 1930 Gaveppa sold four motor buses-to the appellant for Rs. 10,000 and on 29th April 1930 he sold two others for Rs. 2500. On 28th April 1930, he sold a motor shed to the appellant for Rs. 170. On 5th April 1935-the Official Receiver filed an application (I.A. No. 77 of 1935) for an order setting, aside the sales of the motor buses on the; ground that the transactions constituted fraudulent preferences. On 11th February 1935 he filed an application (I.A. No. 86 of 1935) for an order setting aside the sale of the shed on the same ground. The District, Judge dismissed the applications, but on appeal to this Court they were allowed and the transactions set aside by a judgment, dated 18th March 1942.
2. On 17th August 1943, the Official Receiver filed I.A. No. 177 of 1943, in which he asked, for an order directing the appellant to pay mesne profits in respect of the shed at the rate of Rs. 12 per mensem from the date of the alienation. On the same date he filed another application (I.A. No. 178 of 1943)' asking the Court to pass an order directing the appellant to pay into Court Rs. 2500, the price of the two buses sold on 29th April 1930 (he had already paid Rs. 10,000, the price of the four buses first sold) and interest at 12 per cent, on Rs. 10,000 from 3rd April 1930 and at the same rate on Rs. 2500 from 29th April 1930. The appellant opposed these applications on the grounds that they did not lie, that they were barred by the doctrine of res judicata and that they were out of time. The plea of res judicata was based on the fact that, in his applications asking for declarations that the alienations were void on the ground that they constituted fraudulent preferences, the Official Receiver had also asked for mesne profits and interest but no order was passed on these prayers either by the District Court or by this Court on appeal.
3. The District Judge held that the applications did lie and that the doctrine of res judicata did not operate. He did not, however, deal with the question of limitation. Holding that the applications lay, he granted mesne profits in respect of the motor shed at the rate of Rs. 12 per month from 11th February 1935, the date on which the Official Receiver applied for an order under Section 54, Provincial Insolvency Act, in respect of that alienation and interest on Rupees 10,000 and Rs. 2500, at six per cent, from 5th April 1935, the date on which the Official Receiver applied for an order in respect of the alienation of the buses.
4. In this Court the learned advocate for the appellant has conceded that the Court has power to order payment of mesne profits and of interest, but he says that the District Judge erred in giving mesne profits and interest from the dates of his applications under Section 54. He contends that the law of limitation applies and that in respect of mesne profits, he can only recover the amount of Rs. 12 per mensem for three years prior to 17th August 1943 and interest on Rs. 10,000 and Rs. 2500 for six years prior to that date. In respect of the mesne profits he says that Article 109, Limitation Act, applies and in respect of interest Article 120. He further contends that the District Judge erred in rejecting the plea of res judicata.
5. We will deal first with the question of res judicata. The District Judge rejected the plea on the ground that his predecessor and the High Court had not considered the question and, therefore, it must be assumed that it was the intention of the parties to have the question of mesne profits and interest decided at a later stage. As the District Judge who heard the applications under Section 54 dismissed them, the question of mesne profits and interest did not arise. In this Court the only question was whether the transactions amounted to fraudulent preferences and very properly the Court did not enter into a discussion of the amount which the Official Receiver was entitled to recover from the appellant. It was obviously the intention that any further questions should be first decided by the insolvency Court. We agree with the District Judge in holding that there is no substance in the plea of res judicata.
6. The appellant is on much better ground with regard to his plea of limitation. In Muthusami v. Official Assignee, Madras A.I.R. 1936 Mad. 778 a Full Bench of this Court held that an application under Section 7, Presidency Towns Insolvency Act, is equivalent to a suit for the purposes of Section 3, Limitation Act, which applies the articles of the Act to all suits. That was a case under the Presidency Towns Insolvency Act. A mortgagor was adjudicated insolvent in the month of February 1925. In the month of March 1931, the Official Assignee applied under Section 55, Presidency Towns Insolvency Act, for an order setting aside the mortgage. His application wa3 granted in February 1932 and in December 1934 he applied for an order calling on the mortgagee to account for the rents and profits which he had received from the mortgaged property. The Court held that the mortgagee was liable for mesne profits only for the period of three years immediately preceding the Official Assignee's application. That decision was under the Presidency Towns Insolvency Act but obviously the same principles must apply to similar applications under the Provincial Insolvency Act. Consequently, we hold that the Official Receiver is only entitled to mesne profits in respect of the shed at Rs. 12 per mensem for three years immediately preceding 17th August 1943 and to mesne profits at the same rate from that date until, 19th November 1943 when the appellant delivered possession of the shed to him. With regard to interest, the Official Receiver will have interest at six per cent, on RS. 10,000 from 17th August 1937 to 19th August 1942 when he deposited RS. 10,000 in Court. On the Rs. 2500, the Official Receiver will have interest at the same rate from 17th August 1937 until payment. The District Judge's order will be varied accordingly. The appellant has succeeded in part. He will get half his costs in each appeal. The Official Receiver has filed memoranda of cross-objections claiming that he is entitled to rneane profits and. interest from the dates of the alienations. As these claims are unsustainable, the memoranda of cross-objection are dismissed with costs.