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Madras High Court
Ponnusami Chettiar vs Kaliaperumal Naicker on 23 February, 1928
Equivalent citations: AIR 1929 Mad 480, 113 Ind Cas 550
Author: Wallace


Wallace, J.

1. This Civil Revision Petition is presented in the following circumstances : The petitioner filed a Small’ Cause suit against the respondent for a. sum of Rs. 332 said to be owing on account of dealings. The plaint was filed on 19th April 1922. On 16th November 1920, the respondent had presented an insolvency petition in the District Court. On 19th March 1921, he entered into a composition with certain creditors. On 20th December 1921, he was adjudged in-solvent. On 29th September 1922, the District Court accepted the composition and annulled the adjudication. The plaintiff’s suit was obviously instituted while the insolvency proceedings were pending, and, therefore, under Section 25, Pro. Ins. Act, could not have been commenced without the leave of the Court.. No leave was obtained. The respondent, therefore, raised a preliminary objection’ that the suit was not maintainable. The lower Court has upheld that objection and’ dismissed the suit, and this civil revisions-petition is against that decision.

2. Petitioner’s contention is that on the annulment of adjudication the insolvency proceedings were at an end, that leave to maintain the action was, therefore no longer necessary and decree should have been given. Two points arise on this: (1) Whether on the annulment of adjudication the insolvency proceedings ceased to-be pending and (2). Whether the initial absence of leave can be condoned or whether leave became unnecessary after the insolvency proceedings had come to an. end, assuming it to be found that they had come to an end. I shall take the latter point first, since what is to my mind the correct view, is sufficient to decide this case.

3. Section 28(2) lay a down that no creditor to whom the insolvent is indebted in respect of any debt provable under the Act shall, during the pendency of insolvency, commence any suit except with leave of the Court. From Section 26, Civil P.C. 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 the leave of the Court is obtained the plaint shall not be entertained. The plaintiff’s 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. That such leave is a mandatory condition precedent to the entertainment of the plaint has been held by a Bench of this Court in Ghouse Khan v. Balasubba Rowther A.I.R. 1927 Mad. 925, with reference to this section of the Provincial Insolvency Act and by one learned Judge of the Bombay High Court in In Re: Dwarkadas Tejbhandas [1916] 40 Bom. 235, under the corresponding section of the Presidency Towns Insolvency Act. The same view had been taken in a case in Sind in Jivanji Mamooji v. Ghulam Hussain [1918] 12 S.L.R. 20, in Rowe & Co. v. Tan Thean Taik A.I.R. 1925 Rang. 105 and in Panna Lal Tassaduq Hussain v. Hira Nand-Jiwan Ram A.I.R. 1928 Lah. 28. No ruling to the contrary in favour of the petition has been cited to me. These rulings clearly lay down that the absence of leave is a bar to the original institution of the suit, and that a suit commenced without leave cannot be continued by obtaining leave at any subsequent stage thereto.

4. No doubt, as was recognized, 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 this strict reading of the section is adopted there will be great embarrassment both to the insolvent and the Insolvency Court. All the creditors could file suits without leave and maintain that the Court should keep these pending until the insolvency proceedings had come to an end on the ground that the initial bar would then be removed. That would be practically overriding Section 28. The insolvent is entitled to the protection of the Court against the commencement of any such suit.

5. Petitioner calls in aid the analogy of cases where plaintiff has been allowed to obtain decrees on causes of action which were not, in fact, in existence on the date of their plaint, but accrued after the plaints had been put in, for example in Subbarayu Chetty v. Nachiar Ammal [1918] 7 M.L.W. 403 where a decree was given for money due on a mortgage-bond which became payable only some days after the institution of the suit, and in Butchiraju v. Seetharamayya A.I.R. 1926 Mad. 377, a somewhat similar Case. But neither of these is a case where the bar to the suit was a statutory bar.

6. It seems to me to make no difference if we assume that the insolvency has now come to an end and, therefore, the suit could be commenced now or continued now without the leave of the Court. The only suit which can be maintained is a suit which was instituted on leave given before its commencement. The present suit ought to have been dismissed in limine, and the plaintiff cannot claim now that he can continue it merely because the only order which could have been passed in it, namely, one of dismissal was not passed before the insolvency proceedings came to an end. I am, therefore, of opinion that the suit is not maintainable and that the lower Court is right in holding so. This is sufficient to dispose of the civil revision petition.

7. On the second point, namely, whether an insolvency proceeding is still pending after the annulment of adjudication under Section 39 it seems to me a question of much difficulty, and as it is not necessary to decide it here, I do not propose to decide it, more especially that I am free to confess that, in spite of the able arguments put before me by both sides, the extremely loose drafting of the Act leaves me still in a state of uncertainty as to what act of the Court really puts an end to the pendency of insolvency proceedings. The petitioner has contended for. the extreme proposition that any and every annulment ipso facto puts an end to the insolvency proceedings. The respondent contends, on the other hand, for the extreme proposition that the annulment of adjudication has no such effect and that what puts an end to the insolvency proceedings is only an order of absolute discharge. It is not difficult, I think, to show that each extreme proposition is not maintainable, and there is certainly no provision in the Act which lays down in terms either proposition. But it is much more difficult to decide or lay down any general proposition as to what is the final act which does put an and to an insolvency proceeding, and it may be that there is no general rule and that each case will have to be decided on’ its own facts. So I will say here nothing more than that 1 only wish to add a word of precaution in reference to a ruling of my own in Alamelu Ammal v. Venkatarama Iyer A.I.R. 1927 Mad. 919, which has been relied on by the petitioner for more than it says in that case I held that an order refusing a final discharge under Section 42 of the Act did not ipso facto terminate the insolvency proceedings in that case, and that these proceedings continued so long as there was property of the insolvent which continued to vest in the Court, and that in that case without an order annulling the adjudication the insolvency proceedings had not come to an end. To that view, I adhere, but I did not in that case, and do not now, wish to lay down that an annulment of adjudication ipso;facto in all cases will put an end to the insolvency proceedings. In the result, I dismiss the civil revision petition with costs.

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