1950 (1) TMI 19 - HC - Indian Laws

Constitutional Validity of Insolvency Amendment Act Upheld

The court upheld the constitutional validity of the Provincial Insolvency Amendment Act, 1948, finding it intra vires of the Dominion Legislature. It ... - Issues Involved:1. Constitutional validity of the Provincial Insolvency Amendment Act, 1948.2. Power of the Official Receiver to sell the shares of family members other than the insolvent.3. Interpretation and application of Section 28A of the Provincial Insolvency Act.4. Finality of the decision by a competent court.5. Scope of the sale deeds executed by the Official Receiver.Detailed Analysis:1. Constitutional Validity of the Provincial Insolvency Amendment Act, 1948:The plaintiff-respondent challenged the constitutional validity of the Provincial Insolvency Amendment Act, 1948, arguing that it encroached upon the forbidden field reserved for the Provincial Legislature under the Constitution Act. The court referred to multiple precedents to establish that a particular Act might be intra vires of both the Provincial and Dominion Legislatures, depending on its 'pith and substance.' The court concluded that the 'pith and substance' of the Provincial Insolvency (Amendment) Act, 1948, is covered by item 12 of List III, 'bankruptcy and insolvency,' and thus, the Act is intra vires of the Dominion Legislature.2. Power of the Official Receiver to Sell the Shares of Family Members Other Than the Insolvent:The court examined whether the Official Receiver had the power to sell the shares of family members other than the insolvent. The lower court had held that the Official Receiver had no such power. However, the Provincial Insolvency Amendment Act, 1948, declared that the power of the father to sell his son's shares was property within the meaning of Section 28 of the Provincial Insolvency Act. The court upheld this provision, stating that the 'pith and substance' of the Amending Act is within the scope of item 12 of List III.3. Interpretation and Application of Section 28A of the Provincial Insolvency Act:Section 28A was introduced to clarify that the property of the insolvent includes the capacity to exercise powers over property as might have been exercised by the insolvent for his own benefit. The court rejected the plaintiff's argument that the powers of the insolvent could not vest in the Official Receiver because such powers would not be outstanding in him at the commencement of his insolvency. The court held that the entire property, including the powers mentioned in Section 28A, vests in the receiver at the commencement of the insolvency.4. Finality of the Decision by a Competent Court:The plaintiff argued that the decision of the subordinate judge, which was under appeal, constituted a 'final decision by a competent court' within the meaning of the first proviso to Section 28A. The court disagreed, stating that a 'final decision by a competent court' can only mean the decision of the court that ultimately disposes of the suit. Since an appeal was pending, the subordinate judge's decision could not be considered final.5. Scope of the Sale Deeds Executed by the Official Receiver:The plaintiff contended that the sale deeds executed by the Official Receiver only conveyed the interests of the first defendant. The court examined the sale deeds and concluded that they conveyed not only the father's interest but also the interests of the sons. The court noted that the sale notices and the schedules annexed to the sale deeds indicated that the entire family estate was conveyed.Conclusion:The appeal was allowed with costs throughout, and the memorandum of objections was dismissed with costs. The court also granted leave under Section 205 of the Government of India Act, recognizing that a substantial question of law as to the interpretation of the Act arose in this case.