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Nirupama Pal Vs. Kalipada Roy Chowdhury and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberF.M.A. No. 366 of 1981
Judge
Reported inAIR1985Cal346,89CWN945
ActsProvincial Insolvency Act, 1920 - Sections 28(7) and 34(2)
AppellantNirupama Pal
RespondentKalipada Roy Chowdhury and ors.
Appellant AdvocateShyamal Kumar Sen and ;Nileya Mitra, Advs.
Respondent AdvocateTapas Mukherjee, Adv. (for No. 4), ;N.K. Mitra and ;Hiranya Chowdhury, Advs. ( for No. 3)
DispositionAppeal allowed
Cases ReferredOfficial Trustee v. Kissengopal
Excerpt:
- .....incurred at a date prior to the debtor being adjudged an insolvent. or in other words what is the date of adjudication of the debtor as an insolvent. on the plain reading of this subsection it would mean the date of the order adjudging the debtor an insolvent. this had been the view expressed by rangoon high court in the cases of v. chettyer v. collector bassiun, air 1937 rangoon 50 and k.n.k. i. chetty v. b.a. tin, 61 1c 640. same view was expressed by a learned single judge of the bombay high court in the case of jamshetji framji harevalla v. pestonji cavasji gonda, air 1932 bom 511. mr. mitter appearing in support of the order impugned in this appeal has contended that we should adopt this view and there is no reason why we should import the fiction of relation back in terms of.....
Judgment:

Anil K. Sen, J.

1. This appeal under Section 75 of the Provincial Insolvency Act involves a point of law on which judicial decisions are not uniform. The point so involved is as to whether a debt incurred by a debtor who was subsequently adjudged to be an insolvent at a time when the proceeding was pending but the order of adjudication had not been made can be said to be a debt provable under the Act.

2. Facts relevant for our present purpose are not in dispute. On May 22, 1967, the present appellant, Nirupama Pal instituted Insolvency Case No. 2 of 1967 in the Court of the learned District Judge, Hooghly, for adjudging the first respondent Kalipada Roy Chowdhuri as insolvent. It was a proceeding under the Provincial Insolvency Act. An interim receiver was appointed on July 26, 1967. On July 23, 1967, Kalipada executed a Hundi for a sum of Rs. 14,000/- in favour of Amarendra Nath Sen who obtained an ex parte decree against Kalipada in a suit in the original side of this Court on August 9, 1970. On December 20, 1969, the learned District Judge made an order adjudging Kalipada to be an insolvent and the interim receiver was subsequently made the receiver of the estate of the insolvent. Amarendra Nath Sen after an unsuccessful attempt to execute the ex parte decree, filed an application in the insolvency proceeding on March 2,1974, for inclusion of his name in the Schedule of creditors. This application was opposed by the appellant on the ground that the debt to Amarendra being a post insolvency debt is not provable under Section 34 of the said Act and as such cannot be entertained. This objection of the appellant having been overruled the learned District Judge has by the impugned order dated 28-5-79 held that Amarendra's application is maintainable for proving the debt to him for inclusion in the Schedule. That is the decision which is being challenged in the present appeal.

3. Under Section 33 of the said Act when an order of adjudication has been made, all persons claiming themselves to be creditors of the insolvent in respect of debts provable under the Act are required to tender proof of their respective debts for inclusion in the Schedule to be framed. Section 34(2) of the said Act specifies what are the debts that are provable under the Act and it provides as follows : --

'(2) Save as provided by Sub-section (1), all debts and liabilities, present or future, certain or contingent, to which the debtor is subject when he is adjudged an insolvent, or to which he may become subject before his discharge by reason of any obligation incurred before the date of such adjudication, shall be deemed to be debts provable under this Act.'

4. Since the second alternative as specified by this sub-section is not attracted to the facts of the present case, the question which arises for consideration is as to whether the debt was incurred at a date prior to the debtor being adjudged an insolvent. Or in other words what is the date of adjudication of the debtor as an insolvent. On the plain reading of this subsection it would mean the date of the order adjudging the debtor an insolvent. This had been the view expressed by Rangoon High Court in the cases of V. Chettyer v. Collector Bassiun, AIR 1937 Rangoon 50 and K.N.K. I. Chetty v. B.A. Tin, 61 1C 640. Same view was expressed by a learned single Judge of the Bombay High Court in the case of Jamshetji Framji Harevalla v. Pestonji Cavasji Gonda, AIR 1932 Bom 511. Mr. Mitter appearing in support of the order impugned in this appeal has contended that we should adopt this view and there is no reason why we should import the fiction of relation back in terms of Section 28(7) in applying Section 34(2). According to Mr. Mitter Section 28(7) does not govern Section 34(2).

5. But precisely that is the point on which judicial opinions differ. Some of the High Courts including Lahore and Madras High Courts have taken the view that on the scheme of the Act, Section 28(7) is intended to control and govern Section 34(2) as well If this view be accepted then the date of adjudication will relate back to the date of presentation of the petition for adjudication. Mr. Sen appearing in support of this appeal has contended that we should adopt this view and hold that the debt incurred to Amarendra having been incurred after the institution of the proceeding for insolvency is a post insolvency debt not provable under the Act.

6. We have carefully considered the rival contentions put forward before us. So far as this court is concerned, none could draw our attention to a decision where this point had been expressly considered. Mr. Mitter has referred to one earlier decision of this court which we shall discuss hereinafter but there too such a point did not arise for consideration. The Rangoon and Bombay view referred to hereinbefore appears to be based on the observations of Chief Justice Shadilal in the case of Hemraj v. Krishenlal, ILR 10 Lah 106 : (AIR 1928 Lah 361) (FB). The learned Chief Justice in considering the question as to whether Section 53 (as it then stood) is governed by Section 28(7) observed : 'we cannot say that the doctrine of relation back which is embodied in Sub-section (7) of Section 28 was intended to be a universal rule governing and controlling all other provisions of the statute'. A later Full Bench of the Lahore High Court in the case of Kewal Krishan v. Special Official Receiver, AIR 1939 Lah 384, however, rightly pointed out that legislature promptly made its intention clear by amending Sections 51 and 53, Its intention had not been to make Sub-section (7) of Section 28 to govern only the other provisions of Section 28 but to impose disability and restrictions on an adjudged insolvent with effect from the date the proceeding is initiated and protect his assets from all creditors with effect from that date. The Full Bench distinguished its earlier decision in ILR 10 Lah 106 : (AIR 1928 Lah 361) and dissenting from the Rangoon and Bombay view, held that S, 28(7) would govern Section 34 as well. That has also been the view of Madras High Court in the case of Vinaitheertha v. Viwanath, : AIR1954Mad508 . In the case of A. Subramania Iyer v. Meenakshi Sundaram, AIR 1937Mad577, Varadachariar, J. applying Section 28(7) to 34(2) held that a debt recoverable by the creditor on the date of the presentation of the insolvency petition is a proveable debt though it might have become barred on the date of order of adjudication. Same view was taken by the Division Bench of the Bombay High Court in the case of Byramji Bomanji v. Official Assignee, AIR 1936 Bom 130.

7. Preponderance of judicial opinion is in favour of the view that Sub-section (7) of Section 28 is not limited in its application to other provisions of Section 28 only. In the case of Jogendra Nath v. Jogneswar Mandal, AIR 1935 Cal 612, this court held that by operation of Section 28(7) the title of the auction purchaser who purchases the property of the debtor after the admission of the insolvency petition but before the order of adjudication is not absolute but contingent and in case the debtor is adjudged insolvent, the purchaser cannot claim any title against the receiver unless he is a purchaser in good faith. In the case of Rakhai Chandra v. Sudhindranath, (1920) 24 Cal WN 172 : (AIR 1920 Cal 557), this court was considering whether Section 16(6) of Provincial Insolvency Act 1907 (corresponding to Section 28(7)) had any application to Section 36 of that Act which corresponds to Section 53 of the Act of 1920 prior to 1930 Amendment: taking the view that the principle of relation back would apply, this court overruled the objection that the transfer having been made more than two years before the date of the adjudication is not void against the receiver. In the case of U.P. Oil Mills Agency v. S.S.L.O. Mills, : AIR1954All129 , Section 28(7) was held applicable to Section 48 as well so that interest to be proved must be up to the date of presentation of the petition in an insolvency case and not up to the date of adjudication. In our view though incorporated into the statute as a sub-section to Section 28, it was not intended by the legislature to govern the other provisions of Section 28 only. It was incorporated as an independent provision for giving effect to the legislative object that once an insolvency proceeding is initiated the debtor should be rendered incapable of entering into any transaction in respect of his property which will bind the Receiver or of doine or suffering any act which would prejudice the pre-existing creditors. Judicial decisions reviewed hereinbefore mostly supports this view. We, therefore, accept the contention of Mr. Sen and hold that Section 28(7) governs Section 34(2) as well and hence the debt incurred to (by?) Amarendra being post insolvency debt is not proveable under the Act.

8. Before we conclude we have to consider one earlier decision of this court referred to and relied on by Mr. Mitter which we reserved for our consideration hereinbefore. That is the decision in the case of Official Trustee v. Kissengopal, AIR 1930 Cal 459. There the principal question which was considered by this court was as to whether the rent payable by the Receiver for a godown where he held the goods of the insolvent for a period subsequent to his appointment was debt or expense within the meaning of Section 61(3) of the Act. Having held such liability to be covered by Section 61(3) an incidental direction was given to treat the liability for the rent for the period of default by the debtor up to the date of appointment of receiver as debt provable under the Act. Though the point now under consideration by us had not been considered or decided in that case, it has been contended by Mr. Mitter that this court did consider the debt by way of rent incurred between the date of presentation of the petition for insolvency and the date of appointment of receiver as debt proveable under the Act. It is difficult to foresee the reasons which prevailed with the learned Judges in giving such a direction but in our opinion such a direction can well be supported on the basis that such debt though arose after the presentation of the application, did arise by reason of an obligation incurred before the date of such presentation. Hence this decision cannot be read as an authority for the proposition that Section 28(7) would not govern Section 34(2) of the Act, more so in view of the other decisions of this court referred to hereinbefore. We, therefore, respectfully endorse the view expressed by the Lahore Full Bench in the case of Kewal Krishan, (AIR 1939 Lah 384) (supra).

9. In the result the appeal succeeds and is allowed. The impugned order being set aside, we reject the application of Amarendra for inclusion of his name in the Schedule of creditors.

10. No formal decree need be drawn upon in this appeal.

11. Let the order be communicated to the court below and the records be sent down forthwith.

Sudhir Ranjan Roy, J.

I agree.


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