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Damodar Mukherjee and ors. Vs. Bonwarilal Agarwalla and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. (F.M.A.) No. 28 of 1958
Judge
Reported inAIR1960Cal469,64CWN89
ActsCode of Civil Procedure (CPC) , 1908 - Section 96; ;Provincial Insolvency Act, 1920 - Sections 28(2) and 59
AppellantDamodar Mukherjee and ors.
RespondentBonwarilal Agarwalla and ors.
Appellant AdvocatePankaj Coomar Ghose, Adv.
Respondent AdvocateSyamacharan Mitter and ;Manan Kumar Ghose, Advs.
DispositionAppeal dismissed
Cases ReferredMalan Devi v. Amritsar National Bank Ltd.
Excerpt:
- banerjee, j. 1. this appeal is directed against an order passed by the learned district judge of purulia, exercising jurisdiction under the provincial insolvency act. by that order, the learned district judge allowed an application by one kaluram lodha, alias kalooram marwari, for including himself as a creditor, in respect of a debt under a decree amounting to rs. 5381/-, in a pending insolvency proceeding.2. there is no dispute about the facts herein-below stated:kalooram, the father of respondent no. 1, was an assignee of a promissory note, executed by the appellants nos. 2 and 3. he instituted a suit, in the court of the subordinate judge at purulia, on the said promissory note, on 31-7-1936, and obtained a decree. the debtors, who are the present appellants nos. 2 and 3, preferred an.....
Judgment:

Banerjee, J.

1. This appeal is directed against an order passed by the learned District Judge of Purulia, exercising jurisdiction under the Provincial Insolvency Act. By that order, the learned District Judge allowed an application by one Kaluram Lodha, alias Kalooram Marwari, for including himself as a creditor, in respect of a debt under a decree amounting to Rs. 5381/-, in a pending insolvency proceeding.

2. There is no dispute about the facts herein-below stated:

Kalooram, the father of respondent No. 1, was an assignee of a promissory note, executed by the appellants Nos. 2 and 3. He instituted a suit, in the court of the Subordinate Judge at Purulia, on the said promissory note, on 31-7-1936, and obtained a decree. The debtors, who are the present appellants Nos. 2 and 3, preferred an appeal against the aforesaid decree in the court of the District Judge at Manbhum-Singhbhum. The learned District Judge reversed the decree passed by the trial court and dismissed the claim made by Kalooram. The date of the appellate decree was 11-6-1937.

3. While the appeal was pending before the court of the District Judge, three creditors, who are respondents Nos. 2 to 4 in this appeal, filed an application, on 14-10-1936, for adjudication of the appellants Nos. 2 and 3 as insolvents. There was an order, dated 14-6-1937, passed on the said application adjudging the appellants Nos. 2 and 3 as insolvents.

4. On 2-8-1937, Kaluram preferred a second appeal, before the High Court of Judicature at Patna, against the appellate decree dismissing his claim on the promissory note. The aforesaid appeal was registered as S. A. No. 390 of 1937. By a judgment, dated 21-10-1938, Wort and Agarwalla> JJ. allowed the appeal with costs and decreed Kaluram's claim ou the promissory note. The decree passed by the Patna High Court is printed at pages 5 and 6 of the Supplementary Paper Book in this appeal.

5. Thereafter, on 27-10-1941, Kalooram filed an affidavit, in the aforesaid insolvency case, in proof that a sum of Rs. 5381/- was due to him under the aforesaid decree on promissory note, inclusive of interest and costs.

6. On February 4, 1943, Kaluram filed a petition praying for admitting his claim in the schedule of debts, after service of notice under section 33(3) of the Provincial Insolvency Act. We need mention here that in the schedule to the petition, dated October 14, 1936, filed by the respondents Nos. 2 to 4, for adjudication of appellants Nos. 2 and 3 as insolvents, Kaluram's name was already included as a creditor, but the money due to him was shown only as Rs. 3530/-.

7. Two objections were filed to the aforesaid application, one by the insolvents and the other by the Receiver, appointed in the aforesaid insolvency proceeding.

8. The objections in substance were two-fold, (i) the appeal before the Patna High Court having had been filed, without the leave of the insolvency court first had and obtained, under Section 28(2) of the Provincial Insolvency Act, the decree passed in that appeal was a void decree and the sum due under a void decree should not be allowed to be proved in insolvency, (ii) the Receiver, appointed in the insolvency proceeding, not having had been made a party to the appeal before the Patna High Court, the debt due under the decree was not realisable out of the assets of the insolvent vested in the Receiver, and the decree should be treated as void against the Receiver.

9. Kaluram died after having filed the objection. His son, the respondent No. 1, proceeded with the objection.

10. The court below overruled the objections and allowed the application by Kaluram filed on 4-2-1943, for admitting his claim in the schedule of debts. I quote below two extracts from the order made by the court below as to why it rejected the objections:

(a) 'As to the first ground of objection, the decision would rest on the finding whether Second Appeal is included in the expression 'other legal proceedings' in Section 28(2) of the Provincial Insolvency Act. The learned lawyer for the projectors contended that 'appeal' came within the mischief of that section. On the other hand, the Advocate for the creditor argued that it was not so and that no leave of the Insolvency Court was necessary inasmuch as the Second Appeal in this case was a mere continuation of the original money suit. Section 28(2) 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 property in the insolvency proceedings. In the present case, the money Suit had been decreed by the trial court long before the initiation of the present insolvency proceeding. So, there was no commencement of any suit or other legal proceeding. Moreover, the execution debt had already been mentioned in the insolvency petition. The second appeal preferred was a mere continuation of the suit which had already been decreed.'

(b) 'The second contention, namely, that the decree passed in second appeal was void as the receiver was not a party is eqaully unsustainable. Under Section 28(2) of the Act no creditor to whom the insolvent is indebted in respect of any debt provable under this Act has any remedy against the property of the insolvent in respect of the debt. It was not till the suit was decreed finally in second appeal that the creditor could come for inclusion of the judgment-debt. The judgment-debt on the basis of the trial court's judgment was already included in the petition for insolvency. I fail to see what additional advantage could have been reaped by the objectors if the creditors would have obtained the leave of insolvency court and made the official receiver a party in the Second Appeal. The money suit was not in respect of any property. Considering the particular facts and circumstances of this case I decide that the decree passed in Second Appeal is not null and void for not making the Receiver a party.'

11. The propriety of the order passed by the court below is being disputed in this appeal.

12. Mr. Pankoj Coomar Ghose, learned Advocate for the appellants, argued with great emphasis that the court below was in error in overruling the objections taken and in allowing the application made by Kaluram. He contended that the filing of the appeal before the Patna High Court was the commencement of a new proceeding and the same should not be regarded as a continuation of the suit. The appeal having had been filed without the leave of the Insolvency Court was fait by the provisions of Section 28(2) of the Provincial Insolvency Act. He further contended that in any event the aforesaid decretal debt was not realisable out of the properties vested in the Receiver, firstly because the appeal before the Patna High Court had been filed without the leave of the Insolvency Court and secondly, because the Receiver had not been made a party to the appeal.

13. In support of his argument that the filing of the appeal before the Patna High Court was the commencement of a new proceeding within the meaning of Section 28(2) of the Provincial Insolvency Act, Mr. Ghosh tried to draw analogy from the following authorities:

(a) A decision reported in Hit Narayan v. Brij Nandan, AIR 1931 Pat 357 decided by Kulwant Sahay and Macpherson, JJ. In that case the question arose whether the presentation of an application for execution amounted to commencement of a proceeding within the meaning of Section 28(2) of the Provincial Insolvency Act. Their Lordships observed in that connection as herein below quoted: 'It is contended on behalf of the appellantthat a disability was imposed upon him by theconcluding portion of Sub-section (2), Section 28, whichdebars a creditor from commencing any suit orother legal proceeding, except with the leave of the Court. An application for execution of a decree is certainly the commencement of a legal proceeding; and therefore an application for execution comes within the mischief of the second part of Sub-section (2) Section 28. ........Having regard to theexpress terms of Sub-section (2), Section 28, Provincial Insolvency Act, I am of opinion that the decree-holder was under a disability from taking any step in execution of his decree until leave had been obtained.' (b) A case reported in Prankishna v. Jnananda Roy : AIR1942Cal47 , decided by Edgley and Biswas, JJ. In that case a suit for ejectment of a tenant had been decreed. The tenant appealed. While the appeal was pending, the Bengal Non-Agricultural Tenancy (Temporary Provisions) Act, 1940, came into force and thereupon the appellant himself applied for stay of the appeal, under the provisions of that Act. In that context their Lordships observed as follows:

'An appeal undoubtedly arises out of a suit, and may in a sense be regarded as a proceeding in the suit itself, in the same way as an execution proceeding may be so regarded. It does not follow, however, that the word 'suit' must, therefore, in every case and for all purposes include an appeal. Whether it will or will not include an appeal, will, in my opinion, depend on the subject and context in connection with which the word is used . . . the Code clearly recognises the distinction between a suit and an appeal, which are in fact regarded as representing two distinct proceedings, and while it may be that in regard to certain matters no separate provision is expressly made for appeals, the context will probably show that in these respects appeals are intended to be governed by the same provisions as apply to suits. ......... . . To hold that an appeal was included within the word 'suit' would be to hold that even where the appeal was by the tenant against a decree for ejectment, it should have to be regarded as a proceeding for ejectment, which ex hypothesi it is not. In my opinion, any construction which would lead to such a result ought to be avoided.' (c) A case reported in In re: Mazdas Private Ltd., 1958 Cal LJ 233 decided by H. K. Bose, J, In that case, observing on the scope and effect of Section 446 of the Companies Act, 1956, His Lordship expressed the following view: 'It appears, however, that the petitioner Bank before making this application for restoration of possession has not obtained any formal leave of the Winding up Court to institute this proceeding as is required under Section 446 of the Indian Companies Act. The Provisional Liquidator had already been appointed on the 10th December, 1957 and so it was incumbent upon the petitioner to obtain leave before making the present application. But it has been held by a Division Bench decision of this Court, Suresh Chandra v. Bank of Calcutta. 54 Cal WN 832, which was presided over by Chief Justice Harries and Mr. Justice Banerjee differing from a Single Bench decision ofi Mr. Justice Panckridge, that subsequent leave can cure such a defect; but it has also been pointed out both by English Courts as also the Courts in India that the matter of granting this leave as contemplated by Section 171 of the old Act and Section 446 of the new Act is one resting in the discretion of the Court and I do not propose to exercise that discretion in favour of the petitioner ...... It may be pointed out also in this connection that it has been held that the expression 'other legal proceeding' in Section 446 of the Indian Companies Act should not be construed ejusdem generis with word 'suit', preceding it, but the expression includes all legal proceedings'.

14. In support of his other contention that the leave of the Insolvency Court should have been obtained for the purpose of filing the second appeal before the Patna High Court and that the Receiver should have been made a party to the appeal and without having done so the assets in the hands of the Receiver could not be made liable for the decretal debt, Mr. Ghosh sought to place reliance on the following authorities:

(i) a decision reported in AIR 1931 Pat 3571 decided by Kulwant Sahay and Macpherson, JJ., in which their Lordships observed:

'It is next contended that the bar as against the commencement of any suit or other legal proceeding must refer to a suit or proceeding against the property of the insolvent which is dealt with in the first part of Section 28, Sub-section (2). In my opinioa there is no justification for such an interpretation. The first part deals with remedies against the property of the insolvent and the second part deals with all remedies including the remedy against the person of the insolvent.' (ii) a decision reported in B. N. Rly. Employees' Urban Bank Ltd. v. Erie Walter Seager, AIR 1942 Pat 307, decided by Harries, C. J. and Monohar Lal, J. In that case an applicant tor a loan from a Credit Society agreed to give as security his salary bills, which would be due from time to time from his employer the Railway Company. The application was granted and the bond giving his future salary bills as security, was executed by him in favour of the Society and ha agreed to pay the loan with interest in instalments. There was no agreement in the bond that the instalments would be paid by deduction from his salary, which would be due to him form his employer, but there was a letter written to his employer by the applicant authorising the former to deduct from his salary bills or other sums due to him, all or any sum of money that the credit society might ask for payment towards the principal or interest of the loan. The debtor thereafter became an insolvent, but there was no receiver appointed, in whom the property of the insolvent could vest. An application by the Credit Society to be declared a secured creditor was refused by the Insolvency Judge. Holding, in an appeal against the aforesaid order of refusal, that the documents did not constitute an equitable charge in favour of the Credit Society in respect of the salary, their Lordships further observed;

'He was adjudged as insolvent by an order, dated 12th April, 1940. So the provisions of Section 28, Sub-section (4) now come into operation, that is to say, all property which is acquired by or devolves on the insolvent after the date of the order of adjudication .......shall forthwith vest in the Court and the provisions of Sub-Section (2) provide that on the malting of an order of adjudication the whole of the property of the insolvent shall vest in the Court. As in the present case no receiver has been appointed, so, ......... the future property which devolves upon the insolvent after the date of the application, that is to say, the salary which he earns thereafter has vested in the Court and therefore, the appellant cannot be entitled to any charge on that property, even it it is assumed that there is a document creating a charge in his favour.' (iii) A decision reported in Ponnusami Chittiar v. Kaliaperumal Naicker, AIR 1929 Mad 480, decided by Wallace J. His Lordship made the following observations in that case:

'Section 28(2) lays down that no creditor to whom the insolvent is indebted in respect of any debt provable under the Act shall, during the pendency of the insolvency, commence any suit except with the leave of the Court. From Section 26, Civil Procedure Code and Order 4, Rule 1. it is clear that a suit commences with the presentation of a plaint. Therefore, Section 28(2) implies that until leave of the Court is obtained, the plaint shall not be entertained. The plaintiffs' plaint, therefore, should have been rejected in limine, and I do not think he can claim to maintain the suit now because it can now be presented without the leave of the Court. ..... A suit commenced without leave cannot be continued by obtaining leave at a subsequent stage. No doubt, as was recognised this may work hardship in certain cases, for example, where the plaintiff is ignorant of the insolvency proceedings altogether. But after all, 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 the strict reading of the Section is adopted there will be great embarrassment both to the insolvent and the Insolvency Court.' (iv) a decision reported in Ratnavelu v. Franciscu Udayar, AIR 1945 Mad 388, decided by Somayya, J. Mr. Ghose placed particular reliance on the following observation by his Lordship:

'The Official Assignee being the person in whom the estate had vested, he alone could represent the estate. A suit conducted without him on record is not effective and the decree and execution sale would not bind the estate: See ILR 42 Cal 72; (AIR 1914 PC 129), Ragunath Das v. Sundar Das and , Kala Chand v. Jagannath.' We have quoted, hereinbefore, the relevant extracts from the authorities relied on by Mr. Ghose, so as to scrutinise, if any of them will apply to the facts of the instant case.

15. Turning now to the first branch of the submission made by Mr. Ghose, namely, that the filing of an appeal is commencement of a proceeding, within the meaning of Section 28(2) of the Provincial Insolvency Act we find that none of the cases cited by Mr. Ghose is a direct authority on the proposition of law, which Mr. Ghose contended for. In the case reported in AIR 1931 Pat 357, it was decided that the commencement of an execution proceeding was the commencement of a legal proceeding and as such came within the mischief of Section 28(2) of the Provincial Insolvency Act. The cases reported in : AIR1942Cal47 and. (1958) Cal L. J. 233 were not cases under the Provincial Insolvency Act, the earlier one was a case under the Bengal Non-Agricultural Tenancy (Temporary Provisions) Act, 1940 and the latter one was a case under the Companies Act, 1956. It is not right, in the first place, to refer to or rely on the provisions of one statute in construing those of another, particularly when they are not in pari materia. In the next place, the consideration which ultimately weighed with their Lordships in the case reported in : AIR1942Cal47 was that an appeal by a tenant against a decree for ejectment was not a continuation of a suit for ejectment. In the present case the appeal before the Patna High Court was by the creditor, who as plaintiff had commenced the suit. This is a distinction, which makes the observations in : AIR1942Cal47 not strictly applicable to the case with which we are concerned. In the decision reported in (1958) Cal. L. J. 233, the observation that the expression 'other legal proceeding' in Section 446 of the Companies Act includes all legal proceedings is only a general statement without particular reference to the question. with which we are concerned, namely whether an appeal is a commencement of a new proceeding, or merely a continuation of the suit. The decisions relied on by Mr, Ghose are, therefore, not of much-assistance.

16. There are, on the other hand, weighty authorities in support of the proposition that an appeal is a continuation of the suit and not commencement of a new proceeding. Reference may be made in this connexion to the Full Bench decision of the Madras High Court reported in Chappan v. Moidin Kutti ILR 22 Mad 68 in which Subramania Ayyar, J. observed as follows, at page 80 of the report:

'Now, according to Webster's Dictionary the first meaning, in law, of the noun 'appeal' is 'the removal of a cause of a suit from an inferior to a superior Judge or Court for re-examination or review'. The explanation of the term in Wharton's Law Lexicon, which is only different in words, is 'the removal of a .cause from an inferior to a superior Court for the purpose of testing the soundness of the decision of the inferior Court.' And in consonance with this broad meaning of the word, 'appellate jurisdiction' means 'the power of a superior Court to review the decision of an inferior Court'. (Ib), Here the two things, which are required to constitute appellate jurisdiction, are the existence of the relation of superior and inferior court and the power on the part of the former to review decisions of the latter. This has been well put by Story:-- 'The essential criterion of appellate-jurisdiction is, that it revises and corrects the proceedings in a cause already instituted and does not create that cause. In reference to judicial tribunals an appellate jurisdiction, therefore, necessarily implies that the subject-matter has been already instituted and acted upon by some other court whose judgment or proceeding are to be revised,' (Section 1761, Commentaries on the Constitution of the United States)'.

17. Reference may also be made to the decision reported in Gobind Chunder v. Guru Churn, ILR 15 Cal 94 in which Ghosh, J. in deciding a question of lis pendens, observed as follows:--

'The decree passed in the 'suit was the final decree pronounced on the 20th September, 1883. The proceedings in the Appellate Court were but a continuation of the proceedings in the suit, and although for a time there was a decree in favour of the present plaintiffs predecessor in title, yet that was a decree which was open to appeal, and the decree having been appealed against, we ought to take it that the decree of the Appellate Court was the decree in suit, and the sale at which the plaintiff purchased having taken place pending the suit in which that decree was pronounced, we think that the doctrine of lis pendens does apply to the case.'

The view quoted above was subsequently referred to with approval by Rampini and Pratt JJ. in a case reported in Dinonath Ghosh v. Shama Bibi, ILR 28 Cal 23.

18. In a much more recent case reported in Samed Sheikh, v. Naba Nepal Ghosh, 19 Cal WN 359: (AIR 1914 Cal 614) Mookerjee and Beach-croft JJ. reiterated the same view in the following language:

'The learned Vakil for the appellant has not disputed that the term 'suit' includes the appellate stage. This indeed is clear from the decision, in the case of Gagan Chand v. Casperz 4 Cal WN 44 and Batasa Sarkar v. Jaiti Bewa 3 Cal WN 62 n. In fact it has been held in the case of Shyama Churn y. Debendra Nath. ILR 27 Cal 484, that the term 'suit' includes even the execution proceedings based on the final decree made in the suit.'

19. If it was necessary for us to dismiss this appeal on the ground that the appeal before the Patna High Court was a continuation of the suit, filed by Kaluram against the present insolvent appellants, we might have been inclined to do so and might have in that case held that the suit having had been filed prior to the adjudication of the appellants Nos. 2 and 3 as insolvents, there could not be any question of seeking leave from the Insolvency Court under Section 28(2) of the Provincial Insolvency Act and of making the Recei-ver-in-insolvency a party to the suit and consequently might have further held that it was not necessary to take the leave of the court or to make the Receiver a party to the appeal before the Patna High Court, which was a mere continuation of the suit. But, nevertheless, it would always be open to a Receiver to have himself added as a party respondent, if the claim in an appeal related to the property of the insolvent, within the meaning of Section 59(d) of the Provincial Insolvency Act.

20. There are, in our opinion, much more cogent grounds why this appeal must fail. In this connection we shall examine the second branch of the submission advanced by. Mr. Ghosh.

21. We are of the opinion that the words 'or commence any suit or other legal proceeding, except with the leave of the Court', in the last portion of Section 28(2) of the Provincial Insolvency Act, are controlled by the earlier part of that section and the words ''suit or other legal proceeding' mean suit or other legal proceeding against the property of the insolvent, which vests in the Receiver and the remedy against which is controlled by that Sub-section. Section 28(2) has no application in respect of any suit or appeal which is merely a personal action against the insolvent, for example, a suit for bare claim of money against the insolvent, of the type with which we are concerned in the present appeal. The cases relied on by Mr. Ghosh, 'excepting the case reported in AIR 1931 Pat 357, did not advert to this aspect of the matter and are therefore of little assistance.

22. We propose now to consider some of the authorities on the point.

23. The case reported in A. B. Miller v. Budh Singh, ILR 18 Cal 43, decided by Petheram C. J. and Rampini J. was one. in which there was a suit brought against an insolvent for recovery of a certain sum of money. The plaintiff in that suit made an application for bringing the Official Assignee, in whom the property of the insolvent stood vested, on the record. The application was allowed and a decree was passed against the Official Assignee. At the material time the law in force was not the present Insolvency Act but an earlier Act known as Insolvent Act (11 and 12 Vict.. Cap. 21). Petheram C. J. and Rampini J. observed as follows, in deciding an appeal, against the money decree, at the instance of the Official Assignee:

'The first order putting Mr. Miller's name on the record was, in our opinion, wrong. There is nothing in the Insolvency Act which enables a suit of this kind to be continued against the Official Assignee when the defendant has become insolvent, and this is not the case of the assignment of any interest, within the meaning of Section 372 of the Code of Civil Procedure, such as would enable the plaintiff to proceed against the Official Assignee. We think, therefore, that the Subordinate Judge was wrong in placing Mr. Miller's name on the record; but his name having been wrongly placed there, we think that the judgment against him in this form must be wrong, and the reason is that such a judgment would work manifest injustice and prevent the beneficial operation of the Insolvency Sections of the Act, because a judgment of this kind, as against Mr. Miller, comes to this, that he is to pay the money out of the estate in his hands, and that this man, the plaintiff, is entitled to get the whole of his claim, and that is to be paid in full if the whole estate of the insolvent is sufficient to pay him. This is clearly wrong,'

24. In another case reported in Chandmull v. Ranee Soondery, ILR 22 Cal 259, also a case under the Insolvent Act (11 and 12 Vict., Cap 21), the husband of the defendant was adjudicated an insolvent in 1891 and the usual order was made vesting his estate in the Official Assignee. He subsequently died without having filed his schedule and no schedule had ever been filed. After his death a suit was brought by a creditor against the defendant as the 'widow, heiress, legal representative' of the deceased insolvent, in which suit there was a decree made against her with the direction that the amount was to be levied out of the assets of the deceased in her hands. An application was made by the defendant to have the decree set aside, inter alia, on the ground that the Official Assignee was a necessary party to the suit. In deciding that application, Sale, J. observed that the Official Assignee was not a necessary party to any suit to recover a money debt from a person who was either an insolvent at the time the suit was; instituted or became an insolvent pending the suit. But a decree, made against an insolvent under such circumstances should be restricted in form so as not to allow the judgment-creditor by means of execution to obtain an advantage over the general body of creditors.

25. The observations in ILR 18 Cal 43, and ILR 22 Cal 259, were referred to with approval by Bhashyam Ayyanger, J. in a case reported in Puninthavelu Mudaliar v. Bhashyam Ayyangar, ILR 25 Mad, 406 (at page 421) which we quote below:

'The decree, in so far as it is a mere money decree, is perfectly valid against the insolvent and I agree with the decision of the Calcutta High Court (in ILR 18 Cal 43 followed in ILR 22 Cal 259) that in an action purely 'in personam' against the insolvent, whether he was adjudged an insolvent prior to the institution or during the pendency of the suit, the Official Assignee need not be made a defendant either in addition to or in lieu of the insolvent.'

The above judgment was a concurring judgment of White, C. J. and Bhashyam Ayyangar., J. But curiously enough White C. J. was not prepared to accept the observation in ILR 18 Cal 43 referred to above in its entirety.

26. In a more recent decision, under the present Provincial Insolvency Act, reported in Arunachalam v. Sabaratnam, ILR (1939) Mad 585: (AIR 1939 Mad 572) Leach, C. J., observed:

'This Section meaning Section 28(2) refers only to the property of the insolvent and the prohibition against the institution of legal proceedings without the leave of the Court refers to proceedings with regard to insolvent's property.'

27. To the similar effect is the view expressed by Mukherji and Bennet, JJ. in a case reported in Harnam Chandar v. Rup Chand : AIR1932All382 . We quote below a relevant extract:

'Learned Counsel argued that this appeal was a legal proceeding and as the appellant had not got the permission of the Insolvency Court, therefore, the appellant was not entitled to commence this appeal. We consider however that the words 'commence any suit or other legal proceeding' must be read in conjunction with something else in the sub-section, for if they were read independently, they would prevent a creditor from indulging in any litigation at all. The expression in the subsection which must govern this clause is 'have any remedy against the property of the insolvent in respect of the debt' '.

28. Before leaving this tonic we desire to quote a very good summary of the law on this point to be found in Mulla's Law of Insolvency (Tagore Law Lectures, 1929). In the Second Edition of the Book, at pages 690, 691 the following passage appears:

'Where a suit is brought against a defendant in respect of a money demand, e.g., a debt or damages for breach of contract, and the defendant becomes insolvent, the plaintiff is not entitled to join the Official Assignee or Receiver as a party to the suit. The suit is not one relating to the property of the insolvent, and the Official Assignee or Receiver is neither a necessary nor a proper party to the suit'.

29. The view that we take on this point finds additional support from the provisions of Section 59(d) of the Provincial Insolvency Act. We quote below the relevant portion of the section:

(Section 59). 'Subject to the provisions of this Act, the Receiver shall, with all convenient speed, realise the property of the debtor and distribute dividends among the creditors entitled thereto, and for that purpose may-

(a) x x x x (b) x x x x(c) x x x x (d) institute, defend, or continue any suit or other legal proceeding relating to the property of the insolvent.'

30. If Section 28(2) of the Provincial Insolvency Act had contemplated all kinds of suits, even personal claims against the insolvent, the receiver's right to defend would not have been limited to suits or other legal proceeding relating to the property of the insolvent.

31. Mr. Ghose attempted to get rid of this difficulty by contending that a claim for money against the insolvent personally, if decreed, ultimately affects the property of the insolvent because the decretal dues will surely be sought to be realised from the property of the insolvent, vested in the Receiver. It would be to the interest of the Receiver to defend such a claim and consequently even such suits must be treated as suits 'relating to the property of the insolvent'.

32. The argument of Mr. Ghose is misconceived, A complete answer to the argument is to be found in a decision reported in Subbarayar and Bros. v. Muniswami Iyer and Sons AIR 1926 Mad 1133. In that case Kumarasami Sastri, C. J. and Curgenven, J. observed as follows:

'Turning to this Section, what we have to see is what under Clause (d) is the meaning of the term, 'Relating to the property of the insolvent'. Is it a suit which directly or immediately affects the property of the insolvent or is it a suit or legal proceeding which might ultimately result in a decree, which if executed or sought to be enforced would be payable out of the assets of the insolvent and thereby affect the property? The argument of Mr. Krishnaswami Iyer is that it should be such as directly and immediately affects the property and that we cannot hold 'Relating to the insolvent's property' to mean 'affecting the property, because that construction would result in, every cause of action which the insolvent had, being continued or defended by the Official Receiver for the benefit of the insolvent, while the law clearly is that so far as regards merely personal actions the receiver cannot continue them but he can continue actions which are not personal. .....We do not think there is any authority for holding that the words 'Relating to' must be taken, to mean 'affecting'. Mr. Ananatakrishna Iyer himself admits that such a construction, which would give the Official Receiver power to conduct suits of a purely personal nature, which no Court has yet allowed to be done, would be placing an undue stretch on the Section.'

33. We respectfully agree with the aforesaid observations and overrule the contention of Mr. Ghose.

34. In our opinion the claim in the appeal before the Patna High Court being for a bare claim for money against the insolvent in personam did not fall within the mischief of Section 28(2) of the Provincial Insolvency Act and it was not necessary in that appeal either to obtain leave of the Insolvency Court or to make the Receiver a party. That decree, in our opinion, is a valid decree and the decretal debt may be proved in insolvency. The order made by the Court below, by which it allowed the application of Kaluram praying for admitting his claim under the decree, in the schedule, was, therefore, a correct order.

35. We are further of the opinion that the view expressed in the case reported in AIR 1931 Pat 357, in so far as the same is contrary to our view in this respect, should not be regarded as a correct statement of the law.

36. Mr. Syama Charan Mitter, learned Advocate for the respondent no. 1, argued on the authority of a decision reported in Malan Devi v. Amritsar National Bank Ltd., AIR 1936 Lah 286, that the defence as to the want of leave under Section 28(2) of the Provincial Insolvency Act not having had been specifically taken in the appeal before the Patna High Court, the appellants should have been debarred from agitating the point, at a time subsequent to the High Court decree, before the Insolvency Court, on the principle of waiver. We need not, however, consider this point because of the view already expressed by us.

37. For the reasons aforesaid, we dismiss this appeal and affirm the order passed by the lower court. We, however, make no order as costs of this appeal.

38. Before we close Our judgment, we desire to observe that the Receiver appellant No. 1, may not have been well advised in not taking any step so long for the realisation of the property of the insolvent and distribution of the dividends amongst the creditors entitled thereto. It was not certainly worth the while for him to join with the insolvent appellants Nos. 2 and 3 in this appeal.

39. We hope that the learned District Judge will look into his conduct and pass appropriate orders against him. if the Receiver be found guilty of any misconduct or dereliction of duty.

40. Let the records be sent down as early as possible.

Guha, J.

41. I agree.


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