The main legal point established in the judgment is that the benefits of Act IV of 1938 are applicable to pending insolvencies, and the debtor must be an insolvent at the time of the application to claim the benefits of the Act.

Wadsworth, J.

1. These three cases have relation to the same transaction and they are to some extent interdependent. We are concerned with a promissory note debt incurred on 4th December, 1930, by the first defendant, in the suit out of which A.S. No. 131 of 1940, arises, in favour of the first plaintiff. This debt was a renewal of two earlier debts incurred by the father of the first defendant. The suit note was assigned by the first plaintiff to the second plaintiff for collection and re-assigned to the first plaintiff in November, 1939. Meanwhile, the first defendant had become an insolvent, his insolvency petition being filed on 6th July, 1932, and the adjudication being four months later. The insolvency was not prosecuted and on 1st November, 1938, the Insolvency Court passed an order annulling the adjudication owing to the default of the insolvent and directing that under Section 37 of the Provincial Insolvency Act, the properties should vest in the Official Receiver. After this order was passed, the first defendant, who is the appellant here, seems to have made some sort of arrangement with certain of his creditors and on the 2nd December, 1938, he filed a civil miscellaneous petition before the Insolvency Court praying for a review of the order vesting the property in the Official Receiver. This application was dismissed on 21st March, 1939 and C.M.A. No. 40 of 1939, was preferred to the District Judge on 27th March, 1939. The first defendant also filed in the Insolvency Court, C.M.P. No. 426 of 1939, in which he prayed the Court to scale down the promissory note debt due to the present respondent, which was the only debt said to be outstanding after the settlement made between the appellant and his creditors. This application was rejected on the ground that the applicant by reason of the insolvency had no saleable interest in agricultural lands on 1st October, 1937, and by reason of the annulment of the insolvency was not entitled to call in aid Section 21 of Act IV of 1938. Against the order in this civil miscellaneous petition another appeal was filed to the District Court. In the District Court, the creditor, who had not been paid, on 21st November, 1939, with, the leave of the Insolvency Court filed a suit for the recovery of his debt. The present appellant pleaded that he was entitled to relief under Act IV of 1938. The learned Subordinate Judge negatived this plea on the basis of his previous order, no stay having been obtained from the District Court. The suit was accordingly decreed. The District Judge shortly afterwards passed orders on the two C.M.As. pending before him. On the appeal against the order rejecting the application for relief under Act IV of 1938, the learned District Judge held that the insolvency continued even after the annulment by reason of the vesting order and that, even assuming that the insolvency did not continue, the ex-insolvent had still a saleable interest in the property vested in the Official Receiver. He therefore directed the trial Court to scale down the debt. On the appeal against the dismissal of the application to review the order vesting the property in the Official Receiver, the District Judge observed that all the creditors except the present respondent had adjusted their claims against the insolvent and that as the debtor was prepared to deposit the amount due to the contesting creditor it had to be scaled down under the contemporaneous proceedings. The District Judge accordingly passed an order vacating the vesting of the property on condition of the deposit of the amount as scaled down within one month of its ascertainment by the trial Court. C.R.P. No. 1098. is preferred by the creditor against the order remanding the application under Act IV of 1938 for the scaling down of the debt. C.R.P. No. 1099, is preferred by the creditor against the review of the order vesting the property in the Official Receiver and the main appeal, A.S. No. 131 of 1940, is preferred