The payment made by the debtor to the creditor during insolvency proceedings is protected only if the creditor had no notice of the insolvency petition.

Subheda, A J C—On the application of his creditors, presented on 22nd June 1922, one Sundersa was adjudged an insolvent on 23rd June 1926. During the pendency of the aforesaid application, but before the order of adjudication, the debtor paid Rs. 2650 to the appellant creditor in satisfaction of a debt due on a promissory note dated 12th September 1922. After the order of adjudication the respondent was appointed a receiver to take charge of the insolvent's estate. On 13th July 1928 the respondent filed an application, claiming from the appellant a refund of Rs. 2,650 and interest thereon on the ground that the latter had received the payment with knowledge of the pendency of the application for insolvency against the debtor. The appellant opposed the application on several grounds but unequivocably admitted that he had notice of the filing of the insolvency petition against the debtor at the time when he received the payment. The insolvency Court passed an order for refund against the appellant but allowed no interest. On appeal the District Judge confirmed the order for refund and on the cross-objection of the respondent also allowed interest at Rs. 9 per cent per annum on the amount claimed from 22nd February 1924 till realisation. It is against this order that the present appeal is filed by the creditor. It was firstly urged that Section 56 (3), Provincial Insolvency Act, under which the order for refund was apparently made by the two Courts below, was wrongly applied to the facts of the present case and that the receiver's remedy,. if any, to claim the refund was by a separate suit. In my opinion this contention is unsound. The case is fully covered by S.55 (a), Provincial Insolvency Act, which says :

Subject to the foregoing provisions of this Act With respect to the effect of insolvency on an execution, and with respect to the avoidance of: certain transfers and preferences, nothing in this Act shall invalidate in the case of an insolvency.

(a) any payment by the insolvent to any of hit creditors * * *

2. Provided that any such transaction takes place before the date of the order of. adjudication, and that the person with whom such transaction.takes place has not at the time notice of the presentation of any insolvency petition by or against the debtor.

3. It therefore follows that the payment of money by the debtor to his creditor between the commencement of the insolvency proceedings and the date of the order of adjudication is only protected if the person who receives the money has no notice of the presentation of an insolvency petition by or against the debtor. But if the money is received by the creditor with notice of the presentation of the insolvency petition, it is not protected and the creditor may be compelled to return it to the receiver. By the order of adjudication the property of the insolvent vests in the Court or the receiver and Sunder S.28, Provincial Insolvency Act, the order relates back to the date of the filing of the insolvency petition, As the payment of Rs. 2,650 was admittedly received by the appellant from the insolvent in violation of the provisions of S.55 (a) of the Act the money received by him continued to belong to the estate of the insolvent, which vested in the receiver. S.56 (3), Provincial Insolvency Act, states:

Where the Court appoints a receiver, it may remove the person in whose possession or custody any such property as aforesaid is from the possession or custody thereof.

4. This provision read with S.4 of the Act undoubtedly gave jurisdiction to the insolvency Court to pass an order against the appellant to refund the amount of Rs. 2,650 which appertained, in the eye of the law, to the estate of the insolvent : of 18 N L J 14 Dhudhohand. v. Shripad,1934 18 NLJ 14. The next point urged was that the award of interest was illegal. This contention appears to me to be partially correct. The claim for refund made by the receiver not being based upon any contract the Courts below c