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1928 Supreme(Mad) 406
IN THE HIGH COURT OF MADRAS
Wallace, T Achariar
Donepudi Subramannyam
Versus
Nune Narasimham And Ors.
Decided On : 14 November, 1928
A suit by an attaching creditor under Order XXI, Rule 63 is not a suit for the recovery of any property vested in the Receiver. Asking for a declaration that the property belonged to the judgment-debtor is not asking for a relief against the property of the judgment-debtor.
Headnote:
PROVINCIAL INSOLVENCY ACT (III OF 1907), SECTION 16(2)(6) - SUIT BY ATTACHING CREDITOR TO SET ASIDE ORDER ON CLAIM PETITION - WHETHER LEAVE OF INSOLVENCY COURT NECESSARY - INTERPRETATION OF SECTION 16(2)(6) - JURISDICTION OF COURT TO ENTERTAIN SUIT WITHOUT LEAVE - EFFECT OF WANT OF LEAVE ON DECREE PASSED IN SUIT.
Fact of the Case:
The 1st defendant held a decree against defendants Nos. 2 to 4. In execution of that decree he applied for attachment of certain properties. The attachment was ordered on 22nd June, 1915, and was effected on 25th June, 1915. Between these dates on 24th June, 1915, an insolvency petition was presented by defendants Nos. 2 and 3. An adjudication followed on 16th November, 1915. Plaintiff, alleging a sale of these properties to him by defendants Nos. 2 to 3 on 11th March, 1915, had filed a claim petition against the attachment on 28th July, 1915. That was allowed on 8th November, 1915. On 3lst March, 1916, 1st defendant sued to set aside the order on the claim petition making the plaintiff and the insolvent parties but not joining the Official Receiver. His suit failed in the trial Court, but he succeeded in the District Court on appeal, and a second appeal to the High Court was dismissed. The plaintiff then in 1920 brought the present suit to declare the decree of the District Court void because incompetent.
Finding of the Court:
1. The suit brought by the 1st respondent was not one for which leave of the insolvency Court was necessary under Section 16(2) of the Provincial Insolvency Act of 1907. 2. Assuming that leave of the Insolvency Court was necessary for the institution of the suit, the fact that no such leave was obtained does not render the decree passed therein a nullity.
Issues: 1. Whether the suit brought by the 1st respondent was one for which leave of the insolvency Court was necessary under Section 16(2) of the Provincial Insolvency Act of 1907? 2. If such leave was necessary, does the fact that the suit was instituted without leave render the decree passed therein a nullity?
Ratio Decidendi: 1. Section 16(2)(6) of the Provincial Insolvency Act III of 1907 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 insolvents estate by the Insolvency Court in the insolvency proceedings. 2. A suit by an attaching creditor under Order XXI, Rule 63 is not a suit for the recovery of any property vested in the Receiver. Asking for a declaration that the property belonged to the judgment-debtor is not asking for a relief against the property of the judgment-debtor. 3. The words of the subsection no creditor shall commence any suit or other legal proceeding are very wide, but they should be construed as applying only to suit brought by creditors which seek any relief against the property or person of the judgment-debtor or which can in any manner prejudice the administration of the insolvents estate by the Insolvency Court or the rights of the Receiver as representing the general body of creditors. 4. The suit brought by the 1st respondent was not a suit falling under Section 16(2) of the old Act or Section 28(2) of the present Act. 5. The fact that no leave was obtained for the institution of the suit does not render the decree passed therein a nullity. The word "Jurisdiction" is often used in a loose sense. A Court is said to be acting without jurisdiction not only when it has no power or authority to hear and determine the cause at all, but also when in the exercise of its authority to decide, it acts or decides erroneously.
Final Decision: The appeal was dismissed with costs.
Wallace, J.
1. This Letters Patent appeal is against the judgment of Phillips, J. in second appeal dismissing the plaintiffs suit.
2. The 1st defendant held a decree against defendants Nos. 2 to 4. In execution of that decree he applied for attachment of certain properties. The attachment was ordered on 22nd June, 1915, and was effected on 25th June, 1915. Between these dates on 24th June, 1915, an insolvency petition was presented by defendants Nos. 2 and 3. An adjudication followed on 16th November, 1915. Plaintiff, alleging a sale of these properties to him by defendants Nos. 2 to 3 on 11th March, 1915, had filed a claim petition against the attachment on 28th July, 1915. That was allowed on 8th November, 1915. On 3lst March, 1916, 1st defendant sued to set aside the order on the claim petition making the plaintiff and the insolvent parties but not joining the Official Receiver. His suit failed in the trial Court, but he succeeded in the District Court on appeal, and a second appeal to the High Court was dismissed. The plaintiff then in 1920 brought the present suit to declare the decree of the District Court void because incompetent. His grounds are two: first, that the valuation of the 1st defendants suit was beyond the jurisdiction of the District Court in appear and secondly, that the 1st defendants suit was within the mischief of Section 16(2)(6) of the Provincial Insolvency Act III of 1907 which was then in force and that since leave of the Insolvency Court had not been obtained neither the District Munsifs court nor the District Court had jurisdiction to entertain the suit. Plaintiff lost in the original Court, won in the Appellant Court, lost again before Phillips J, and now appeals.
3. The first ground of attack on 1st defendants suit seems to me without substance. No doubt in that suit the value of the decree which 1st defendant was seeking to execute against the property declared to be the plaintiffs was over Rs. 5,000 but the value of the property itself was said to be Rs. 4,000. The valuation of the appeal was clearly the value not of the decree but of the property sought to be recovered to satisfy the debt The District Court, therefore, had jurisdiction. In any case it is clearly a matter which cannot now be urged in a collateral proceeding. No objection was taken before the District Court at the time of hearing of the appeal. Therefore, under Section 11 of the Suits Valuation Act the objection could not be taken in appeal from the District Court. A fortiori it cannot be taken in a collateral proceeding.
4. The second point is one on which reliance has been placed by the appellant. It depends on the interpretation of Section 16(2)(6), of the Provincial Insolvency Act III of 1907, the terms of which, so far as is relevant to this case, are that on the making of an order of adjudication...no creditor to whom the insolvent is indebted m respect of any debt provable under this Act shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt or commence any suit or other legal proceeding, except with the leave of the Court. The question is whether this prohibition covers the 1st defendant s suit to set aside the order on the claim petition. The suit was admittedly filed after the adjudication and without leave of the Insolvency Court. The insolvency proceedings are still pending.
5. Clearly the language of the prohibition is not intended to have such a wide meaning as it might imply. "Shall not commence any suit or other legal proceedings cannot mean that every creditor of an insolvent after adjudication cannot file a suit or take legal proceedings against any one at all. What then is the nature of the restriction which this section seeks to impose? Clearly at all events the suit or legal proceedings must have some relation to the insolvency. The language used is the same as in, and has been taken from, Section 9 of the English Bankruptcy
