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Muradan Sardar Vs. Secretary of State - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Reported inAIR1939Cal313
AppellantMuradan Sardar
RespondentSecretary of State
Cases ReferredChenchuramana Reddi v. Arunachalam
Excerpt:
- .....mad. 857.5. the next contention of the senior government pleader is that as the notice of the insolvency application was served on the respondent within three months from the date of the presentation of the petition, the appellant ought to be adjudged insolvent, inasmuch as the service of that notice is an act of insolvency within the meaning of the act. his argument is that by serving this notice of the filing of the insolvency case, the appellant must be taken to have given notice of the suspension of payment of his debts to his creditors. it may be mentioned here that this is not the specific case made by the respondent in his petition for insolvency. it is true that in clause (b) of para. 4 of the amended petition the fact of the service of the notice of the insolvency case.....
Judgment:

Nasim Ali, J.

1. This is an appeal against the order of the District Judge of 24-Par-ganas dated 25th August 1936 adjudicating the appellant an insolvent under the provisions of the Provincial Insolvency Act on the petition of the Secretary of State for India in Council, the respondent in the present appeal. The acts of the insolvency alleged to have been committed by the appellant, so far as they are material for the purposes of the present appeal, are (1) that the appellant himself applied to be adjudged an insolvent in the fourth Court of the Subordinate Judge at Alipur on 29th May 1934, and (2) that notice of this petition for insolvency was served on the respondent on 23rd July 1934. The application by the respondent for adjudicating the appellant an insolvent was filed on 6th October 1934. It is therefore clear that the first act of insolvency was committed by the appellant beyond three months from the date of the presentation of the petition by the respondent. The learned District Judge did not discuss this question as he was of opinion that this Court decided this matter in favour of the respondent, when the case came up on appeal to this Court at a previous stage. We have gone through the judgment of this Court in that appeal. It is clear from that judgment that this Court did not come to any decision on this matter. This Court simply allowed the respondent to amend his application for adjudicating the appellant an insolvent.

2. The learned Senior Government Pleader contended that under the provisions of Section 78, Provincial Insolvency Act, the respondent is entitled to an extension of time for presenting his petition in view of the provisions of Section 9, Sub-section (1)(c), Provincial Insolvency Act, read with the provisions of Section 5, Limitation Act. Section 9, Sub-section (1) provides:

A creditor shall not be entitled to present his insolvency petition against a debtor unless (a) the debt owing by the debtor to the creditor, or, if two or more creditors join in the petition, the aggregate amount of debts owing to such creditors, amount to Rs. 5000; (b) the debt is a liquidated sum payable either immediately or at some certain future time, and (c) the act of insolvency on which the petition is grounded has occurred within three months before the presentation of the petition.

3. The contention of the Senior Government Pleader is that the period of three months from the date when the act of insolvency is committed is the period within which the petitioning creditor is entitled to present his application and as Section 5, Limitation Act, applies to such a petition by virtue Section 78, Provincial Insolvency Act, the respondent is within time, as he had no notice of the application for insolvency before 23rd July 1934. The point for determination, therefore, is whether this period of three months is a period of limitation to which the provisions of the Limitation Act are attracted or it is a period within which the particular act of insolvency, on which the petitioning creditor wants to found his petition, must be committed in order that it may be avail, ed of as a ground for making an application for adjudication. In other words, the question is whether, after three months have expired from the date when an act of insolvency is committed, that act still continues to be an act of insolvency in order to enable the petitioning creditor to take advantage of it. Clauses (a) and (b) of Section 9, Sub-section (1) evidently lay down the conditions precedent to the filing of an application by the petitioning creditor. Clause (c) therefore must be also taken as laying down the third condition which must be fulfilled before the petitioning creditor can present an application. The marginal note to Section 9 states 'conditions on 'which creditor may petition.'

The side-note although it forms no part of the Section is of some assistance, inasmuch as it shows the drift of the Section : Per Collins, Master of Rolls, in Bushell v. Hammond (1904) 2 K.B. 563.

4. I am clearly of opinion that Clauses (a), (b) and (c) of Section 9 lay down the three conditions on which a petitioning creditor is entitled to found his petition. The period of three months mentioned in Clause (c) does not refer to the presentation of the petition, but : it refers to the act of insolvency on which the petition is to be grounded. Section 6 of the Act lays down what are the acts of insolvency within the meaning of the Act. That Section however must be read subject to Clause (c) of Section 9. In other words, the acts of insolvency must occur within three months before the presentation of the petition. Section 7 of the Act gives right to the petitioning creditor to file an application for insolvency, but that right is subject to the conditions specified in this Act and these conditions have been laid down in Section 9. If the object of the Legislature was to provide any period of limitation within which the application is to be presented, they would have said so in Section 7. In my opinion there is no period of limitation prescribed in the Provincial Insolvency Act within which the petitioning creditor is to present his application. The question of the applicability of Section 78 of the Act read with Section 5, Limitation Act, does not therefore arise in this case. This view finds support from the Pull Bench decision of the Madras High Court in Chenchuramana Reddi v. Arunachalam (1935) 22 A.I.R. Mad. 857.

5. The next contention of the Senior Government Pleader is that as the notice of the insolvency application was served on the respondent within three months from the date of the presentation of the petition, the appellant ought to be adjudged insolvent, inasmuch as the service of that notice is an act of insolvency within the meaning of the Act. His argument is that by serving this notice of the filing of the insolvency case, the appellant must be taken to have given notice of the suspension of payment of his debts to his creditors. It may be mentioned here that this is not the specific case made by the respondent in his petition for insolvency. It is true that in clause (b) of para. 4 of the amended petition the fact of the service of the notice of the insolvency case started by the appellant is mentioned but in Clause (c) of the said paragraph, it is definitely stated that by the filing of the said insolvency case and proceeding with the case on several dates of hearing, the appellant gave notice of the suspension of payment of his debts to his creditors. It is therefore clear that the filing of the petition for insolvency and not the service of the notice of this application is stated to be the appellant's notice of suspension of payment of debts. Further, Clause (g) of Section 6 lays down that the debtor must give notice that he has suspended payment. The mere service of notice by the Insolvency Court informing the creditor of the (date on which the insolvency petition is to be heard cannot amount to giving notice by the debtor to his creditors that he has suspended payment. The respondent cannot therefore be heard to say that the service on him of the notice of the date of the hearing of the insolvency petition by the Insolvency Court amounted to a notice of suspension of payment of debts. The grounds on which the respondent founded his application are not therefore sustain, able in law. In fact the conditions precedent not having been fulfilled, the petition of the respondent for adjudging the appellant as insolvent must be dismissed. The result therefore is that this appeal is allowed, the order of the District Judge adjudging the appellant insolvent is set aside. The petition of the respondent for adjudging the appellant insolvent is dismissed. The appellant will get his costs in this appeal. The hearing fee is assessed at two gold mohurs.

Sen, J.

6. I agree. I wish to add a few words as this appeal raises a question regarding the interpretation of Section 9, Provincial Insolvency Act, which, as far as I am aware, has not been considered by this Court before. The facts which give rise to this appeal are as follows:

On 29th May 1934 the appellant applied to be adjudicated insolvent in the Court of the Subordinate Judge, 24-Parganas. On 23rd July 1934 notice of the date of the hearing of the application was served on the Secretary of State for India in Council, who was one of the creditors. On 7th September 1934 this application for adjudication was dismissed. Thereafter on 6th October 1934 the Secretary of State for India in Council applied that the appellant should be adjudicated insolvent. The learned District Judge dismissed the application on various grounds one of them being that the application was not within time. Against this order of dismissal there was an appeal to this Court and this Court remanded the case for rehearing to the District Judge with certain directions whereby the Secretary of State was permitted to amend his application for adjudication. Then the case was heard by the learned District Judge. The appellant raised the question that the petition for adjudication had been filed more than three months after the alleged act of insolvency. The learned District Judge refused to hear this plea on the ground that this Court had already decided that the application was within time. Thereafter he adjudicated the appellant insolvent. Against this order the present appeal has been filed.

7. On behalf of the appellant it is contended that the learned District Judge was in error in holding that the question whether the petition had been made in time had already been decided by this Court. I have seen the order of remand by this Court. It is clear there from that this question was left open and it should therefore have been entertained by the learned District Judge. The sole point for decision before us is whether this petition has been filed within three months of the alleged act of insolvency. In this Court two acts of insolvency are relied upon by the respondent. The first act is the presentation of petition for insolvency by the appellant on 29th May 1934 and the second act relied upon is the service of notice of the hearing of this petition upon the Secretary of State for India in Council on 23rd July 1934. I shall take up for consideration first whether service of this notice would amount to an act of insolvency within the meaning of Section 6, Provincial Insolvency Act.

8. The learned Senior Government Pleader contends that the service of this notice amounts to the debtor giving notice to his creditors that he had suspended payment or that he was about to suspend payment of his debts. In other words, he contends that it amounts to the act of insolvency defined in Section 6, Sub-section (g), Provincial Insolvency Act. In my opinion this contention of the learned Government Pleader is not correct. This notice was not served by the debtor at all and it is not a notice saying that the debtor has suspended payment. The notice which was served upon the Government on 23rd July 1934 is before us. It is not accompanied by the petition for adjudication. It is merely a notice to the Government stating that the insolvency petition will be considered on a certain date. It is a notice which is contemplated in Section 19, Sub-section (2), Provincial Insolvency Act. Section 19, Sub-section (1) says:

Where an insolvency petition is admitted, the Court shall make an order fixing a date for hearing the petition;

9. and Section 19, Sub-section (2) says:

Notice of the order under Sub-section (1) shall be given to creditors in such manner as may be prescribed.

10. This notice therefore is a notice of the date of the hearing and I do not think that it would be proper for us to read words into the notice and to construe it to mean a notice by a debtor to his creditors that he has suspended payment. There remains the other act of insolvency, namely the filing of the insolvency petition. Clearly that act was committed more than three months before the filing of the present petition by the Secretary of State for India in Council. The learned Senior Government Pleader invokes the aid of Section 5, Limitation Act : he says that the respondent did not know of the filing of the insolvency petition until 23rd July 1934 and points out that this application has been brought within three months of the date of knowledge. In my opinion Section 5, Limitation Act, has nothing whatsoever to do with this question. Section 9, Provincial Insolvency Act, lays down the conditions under which a creditor may file a petition for the adjudication of a debtor. The conditions laid down are three. First, the debt owing by the debtor to the creditor must amount to at least five hundred rupees. Secondly, the debt must be a liquidated sum payable either immediately or at some certain future time; and thirdly, the act of insolvency on which the petition is grounded must have occurred within three months of the presentation of the petition. It is the last clause which is the subject matter of controversy before us. The learned Senior Government Pleader contends that this clause lays down the period of limitation within which a petition for insolvency should be filed and he argues that if that is so, the provisions of Section 5 would be attracted by virtue of the provisions of Section 78, Provincial Insolvency Act.

11. As I read Section 9, I do not think that it lays down the period of limitation within which a creditor should bring his petition for adjudication. It merely lays down the conditions precedent which must co-exist before a creditor may petition for the adjudication of a debtor. One of those conditions is that the act of insolvency must have occurred within three months of the presentation of the petition. If the Legislature intended to lay down a period of limitation, it could have done so in express terms by saying that the petition should be (presented within a certain time. This the Legislature has not done. The provisions of this Act must be construed strictly, inasmuch as the status of the subject is sought to be affected thereby. The ordinary construction of Clause (c) of Section 9, Sub-section (1) would be that a person is not entitled to institute a petition for adjudicating a debtor insolvent unless he established inter alia that the act of insolvency took place within, three months before the presentation of the petition for adjudication. This view is supported by the decision of the Full Bench of the Madras High Court in Chenchuramana Reddi v. Arunachalam (1935) 22 A.I.R. Mad. 857. His Lordship the Chief Justice in considering Section 9 (1)(c) makes the following observation:

On the other hand, 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 that date only, what acts of insolvency are available to him; and he cannot make use o any act of insolvency which has been committed outside the-period of three months.

12. An act of insolvency by itself does not entitle a creditor to apply for the adjudication of his debtor. There must be certain other conditions present and those conditions are laid down in Section 9. One of those-conditions is that the act of insolvency relied upon must be one which had been committed within three months of the petition for insolvency. In the present case-there was no such act of insolvency. The petition was therefore incompetent. For the reasons stated above, I agree with the order passed by my learned brother.


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