1. This is a petition for revision of an order made by a learned District Judge refusing to grant an insolvent a protection order.
2. The petitioner was adjudicated an insolvent. His only indebtedness was to the State in respect of Income-tax and the State were heard during the adjudication proceeding. Having been adjudged insolvent the petitioner was arrested as the State had taken certificate proceedings against him in respect of income-tax due.
3. The petitioner then applied to the Court for protection under Section 31 of the Provincial Insolvency Act. Before the learned Judge it was contended that Section 31 had no application to Crown debts. But the learned Judge was of opinion that the section was so framed as to coyer all debts whether due to the State or to private persons. The learned Judge however was of opinion that he should not make a protection order because even after discharge the petitioner would still be liable for this debt. It was on that ground that the learned Judge refused to make a protection order.
4. Mr. Atul Gupta on behalf of the petitioner has contended that this was a case in which a protection order should have been made. He has contended that Section 31 is framed in the widest possible terms and must include State debts. Section 31 is in these terms:
'1. Any insolvent in respect of whom an order of adjudication has been made may apply to the Court for protection, and the Court may on such application make an order for the protection of the insolvent from arrest or detention.
2. A protection order may apply either to all the debts of the debtor, or to any of them as the Court may think proper, and may commence and take effect at and for such time as the Court may direct; and may be revoked or renewed as the Court may think fit.
3. A protection order shall protect the insolvent from being arrested or detained in prison for any debt to which such order applies, and any insolvent arrested or detained contrary to the terms of such an order shall be entitled to his release:
Provided that no such order shall operate to prejudice the rights of any creditor in the event of such order being revoked or the adjudication annulled.4. Any creditor shall be entitled to appear and oppose the grant of a protection order'.
5. It will be seen that a protection order may apply either to all the insolvent's debts or to some of them. It draws no distinction between classes of debts, that is debts due to the State or to Corporation or Municipalities or private persons. It appears to me that the Court below was right in holding that this section applies to debts due to the State.
6. Mr. Meyer however on behalf of the Union of India contended that this section would not bind the State as the State is not bound by a statute unless the statute so provides. However it appears to me that Section 31 does not impose any obligation whatsoever on the State. Certain creditors are by law given a right in certain circumstances to have an unfortunate debtor imprisoned for failure to pay his debt. It is a form of execution recognised by the Code of Civil Procedure. The State can take advantage of these provisions and it appears to me that the fact that a protection order might be made is not an obligation imposed on the State. All that the section provides is that the rights of creditors to imprison a debtor may be curtailed if the debtor has been adjudicated insolvent. I do not think it can be said that the section imposes any obligation on the State. It does not require the State to do anything at all, it merely protects the insolvent from arrest in certain circumstances. That being so I think the Court is bound to hold that Section 31 applies to State debts.
7. No special reason has been given why this unfortunate insolvent should be imprisoned. He has been declared an insolvent by a competent Court and all his property is now vested in the Official Receiver. Prima facie he has, no property with which to discharge any debt and indeed he could not discharge the debt even if he wanted to. Nevetheless in these circumstances the Income Tax Authorities think that this is a proper case where he should be imprisoned and punished because that can be the only object of imprisoning him. Nothing can be recovered from him because all his assets are now vested in the Official Receiver. Of course if it is the policy to punish persons who cannot pay their debts then a protection order should be refused. However execution by way of arrest can only be had where a person has means to pay the decretal debt, but neglects or refuses to. do so. Here prima facie the insolvent has no means at all and this objection to a protection order can only mean of two things -either the taxing authorities want to punish this man for his misdeeds or want to bring pressure upon his relations to discharge this debt in order to obtain the unfortunate man's release. Had there been proof that this debtor has concealed assets or such like possibly different considerations would arise. But even in such a case the person really concerned is the Official Receiver. But it is unnecessary to consider that any further. In my view there were no grounds whatsoever in this case for refusing to grant this insolvent protection. He was indebted it is true. But as he had been stripped of all his property and that had become vested in the Official Receiver whose duty it was to discharge this very debt no Court' should in my view refuse him protection.
8. The learned Judge appears to have thought that because the insolvent after his discharge would still be liable for this State debt no protection should be given. But I wholly failed to understand that reasoning. After the insolvent's discharge he woud be the owner of any property which he acquired. With that property he could pay his debts. If he had sufficient property to pay his debts and would not, he could be imprisoned. Why should that be a reason for refusing him protection when he has, as I have said, been stripped of all his property which has by law vested in an official whose fluty it is to discharge the insolvent's debts to the best of his inability. It appears to me that what happens after his discharge cannot affect the matter in any way. At the moment, this insolvent with the best intention in the world has nothing to discharge this debt and cannot. That being so I see no reason why he should not be protected from arrest which cannot in the circumstances be 'boha fide'.
9. Mr. Meyer also contended that we could not interfere under Section 115 of the Code of Civil Procedure because this is a discretionary matter and the learned Judge had exercised his discretion and it could not be said that he had not exercised it judicially. There might be difficulty in interfering with this order under Section 115 of the. Code of Civil Procedure. But we now can interfere under the powers given to this Court under Article 227 of the Constitution of India. Interference under that Article should only be resorted to in rare cases where real injustice would be done if the Court could not interfere. In my view unless a protection order is given in this case this insolvent would be imprisoned when, it would be impossible to justify the imprisonment on any ground whatsoever. That being so this Court can and should interfere under Article 227 of the Constitution of India.
10. In the result therefore I would allow this petition, set aside the order of the learned District Judge and grant the insolvent a protection order in respect of this debt which is owed to the State in respect of Income-Tax. The order will commence from to-day's date and will continue until the insolvent is discharged.
11. The Rule is accordingly made absolute with costs, hearing fee being assessed at five gold mohurs.
12. I agree.