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The Pathinen Grama Ariya Vaisya Bank, Ltd. by Its Managing Director, S.V. Krishnamurthi Chettiar Vs. S.S.K. Nagaswami Chettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported inAIR1956Mad257; (1956)1MLJ380
AppellantThe Pathinen Grama Ariya Vaisya Bank, Ltd. by Its Managing Director, S.V. Krishnamurthi Chettiar
RespondentS.S.K. Nagaswami Chettiar and ors.
Cases Referred and Jagannath v. Board of Revenue
Excerpt:
- - 1. this civil revision petition raises an interesting question of law, namely, whether after the amendment of section 9(1)(c) of the provincial insolvency act, by act iii of 1950, by adding a proviso as follows: general arguments like, the law compels no man to do that which he cannot possibly perform 'and 'an act of the court shall prejudice no man 'are irrelevent and quite powerless to take away vested rights. that he agreed with the learned subordinate judge that the acts would have been acts of insolvency, if the insolvency petition had been filed in time, is irrelevant, as facts, like the truth of a debt and its not being repaid, cannot be gone into when the proceedings are unsustainable in law, as barred by limitation, etc......with reference to which a petition was not filed within three months, as the last day of the three months' period happened to be a holiday and so the petition was presented on the next working day, will be an ' act of insolvency ' for the purpose of that petition, which is pending after 21st february, 1950, and can be relied on for adjudicating a person an insolvent. here, the acts relied on, namely, the alienations were committed on 17th january, 1948 and 29th february, 1948, but the insolvency petition was filed only on 16th june, 1948, the reopening day of the court which was closed from 17th april, 1948 to 15th june, 1948.2. a full bench ruling of this court, in chenchu ramana v. arunachalam : (1935)69mlj283 ., (a very similar case, where too the insolvency petition was filed on the.....
Judgment:

Panchapakesa Ayyar, J.

1. This Civil Revision Petition raises an interesting question of law, namely, whether after the amendment of Section 9(1)(c) of the Provincial Insolvency Act, by Act III of 1950, by adding a proviso as follows:

Provides that where the said period of three months referred to in Clause (c) expires on a day when the Court is closed, the insolvency petition may be presented on the day on which the Court reopens,

an alleged act of insolvency committed before the coming into operation of the amendment, on 21st February, 1950, but with reference to which a petition was not filed within three months, as the last day of the three months' period happened to be a holiday and so the petition was presented on the next working day, will be an ' act of insolvency ' for the purpose of that petition, which is pending after 21st February, 1950, and can be relied on for adjudicating a person an insolvent. Here, the acts relied on, namely, the alienations were committed on 17th January, 1948 and 29th February, 1948, but the Insolvency Petition was filed only on 16th June, 1948, the reopening day of the Court which was closed from 17th April, 1948 to 15th June, 1948.

2. A Full Bench ruling of this Court, in Chenchu Ramana v. Arunachalam : (1935)69MLJ283 ., (a very similar case, where too the insolvency petition was filed on the reopening day, after three months had elapsed) has held that the period of three months fixed in Section 9(1)(c) of the Provincial Insolvency Act is not a period of limitation but is a condition precedent to adjudication and the test to be applied for finding out whether the act would be 'an act of insolvency' or not. Accordingly, the alleged act of insolvency which had, in that case also, occurred more than three months prior to the presentation of the petition, was held to be not ' an act of insolvency ' and not available as a ground for adjudication. Beasley, C.J., observed:

As soon as the three months' period had expired, the transaction ceased to be impeachable under the Insolvency Act, and, in my view, therefore, the transfer ceases on that day to be an act of insolvency.

Again, at the end of page 798 he observed:

I am of the view that Section 9(1)(c) is a condition precedent to the filing of the petition, that is to say, the petitioning creditor must, on the day when he presents his petition, have in view some act of insolvency which the debtor has committed within the preceding three months. He has to see on that date and on that only, what acts of insolvency are available to him; and he cannot make use of any act of insolvency which has been committed outside the period of three months, as that ceased to be an act of insolvency.

Act III of 1950, when making the amendment, did not say that it was to have retrospective effect. It specifically stated:

The following proviso shall be added (that is, from now on).

3. It is not as if it said that the law of insolvency has always been as stated in the proviso added. Nor is there any indication in this Amending Act that the proviso was to be applied in all pending Insolvency Petitions. As the alleged insolvent could rely on the Full Bench ruling, and allege that the acts relied on had ceased to be ' acts of insolvency ' as the insolvency petition was not filed within three months of those acts, such an indication was essential to prevent such a plea. General arguments like, ' The law compels no man to do that which he cannot possibly perform ', and 'An act of the Court shall prejudice no man ' are irrelevent and quite powerless to take away vested rights. The petitioner could, and should, have filed the petition in time. It was not impossible for him to do so. The second principle will only help the alleged insolvent, as the Court should not prejudice him by taking away his vested right. The argument that the amendment related only to adjectival law, or procedure, is of no avail, as a right had become vested and could not be divested without authority. The rulings of the Supreme Court in Shyabuddinsab v. Municipality of Gadag, Batgeri (1955)S.C.J.316, and Shamrao v. District Magistrate, Thana : 1952CriLJ1503 , and the rulings in Chavan v. Bombay State : AIR1955Bom334 , and Jagannath v. Board of Revenue, U.P. : AIR1955All432 , have no relevancy at all to the matter now in question. They only State that, after the amendment, the amended law should be applied, obviously from the date of the amendment, unless the amendment had been made retrospective, (which is not the case here), and that in any particular case Courts should scrutinies the amendment and see whether it was intended to apply to pending proceedings. Here, the amendment was certainly not intended to apply to pending proceedings. In view of the observation in the Full Bench case that the act ceases to be an ' act of insolvency ' the moment the three months have passed, and that the Court has to see whether the petitioner in the insolvency petition had, on the expiry of the three months, any, 'acts of insolvency' available to him, it follows that, before 21st February, 1950, when the amendment came into operation and the proviso was added, any insolvency petition should be filed within three months, holiday or no holiday at the expiry of that period, of the act, if it is to be relied on as an act of insolvency for purposes of adjudication, and that the act would cease to be an ' act of insolvency ' if the petition was not filed within those three months. In other words, the respondent who is sought to be adjudicated will get a vested right at the expiry of three months for urging that the acts will not be ' acts of insolvency ' if they were not committed within three months before the filing of the petition. Nothing in the added proviso or in Act III of 1950, effecting the amendment, has said anything to the contrary. Simply because an insolvency petition was pending (no litigant can be held responsible for the pendency, and Courts alone are in law held liable for it) by the time the added proviso became law, the new proviso cannot be made applicable to it, since it was not made retrospective, or any direction given, expressly or impliedly, in Act III of 1950, that, when considering the question of 'an act of insolvency ' under Section 9(1)(c) in any pending insolvency petition, the proviso should be applied by Courts, even though the three months' period had lapsed long before the proviso became law, especially when the legislature was aware, or must be held to have been aware, of the Full Bench ruling quoted above. Therefore, the learned District Judge was right in the view he took and in reversing the decision of the learned Subordinate Judge. That he agreed with the learned Subordinate Judge that the acts would have been acts of insolvency, if the insolvency petition had been filed in time, is irrelevant, as facts, like the truth of a debt and its not being repaid, cannot be gone into when the proceedings are unsustainable in Law, as barred by limitation, etc. That circumstance can, if at all, be considered only for the purpose of costs, as the lower appellate Court has done.

4. I may add that Balakrishna Ayyar, J., had to consider this same question of law in C.R.P. No. 586 of 1953. In his order dated 16th November, 1954, he took the same view as I have done. This petition deserves to be and is hereby dismissed. But, in the peculiar circumstances, I direct the parties to bear their own costs in his petition.


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