TaxTMI 
TaxTMI 
1959 (8) TMI 57
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....decree. The debtors, who are the present appellants Nos. 2 and 3, preferred an appeal against the aforesaid decree in the court of the District Judge at Manbhum-Singhbhum. The learned District Judge reversed the decree passed by the trial court and dismissed the claim made by Kalooram. The date of the appellate decree was 11-6-1937. 3. While the appeal was pending before the court of the District Judge, three creditors, who are respondents Nos. 2 to 4 in this appeal, filed an application, on 14-10-1936, for adjudication of the appellants Nos. 2 and 3 as insolvents. There was an order, dated 14-6-1937, passed on the said application adjudging the appellants Nos. 2 and 3 as insolvents. 4. On 2-8-1937, Kaluram preferred a second appeal, before the High Court of Judicature at Patna, against the appellate decree dismissing his claim on the promissory note. The aforesaid appeal was registered as S. A. No. 390 of 1937. By a judgment, dated 21-10-1938, Wort and Agarwalla> JJ. allowed the appeal with costs and decreed Kaluram's claim on the promissory note. The decree passed by the Patna High Court is printed at pages 5 and 6 of the Supplementary Paper Book in this appeal. 5. Thereaf....
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....Appeal in this case was a mere continuation of the original money suit. Section 28(2) 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 insolvent's property in the insolvency proceedings. In the present case, the money Suit had been decreed by the trial court long before the initiation of the present insolvency proceeding. So, there was no commencement of any suit or other legal proceeding. Moreover, the execution debt had already been mentioned in the insolvency petition. The second appeal preferred was a mere continuation of the suit which had already been decreed." (b) "The second contention, namely, that the decree passed in second appeal was void as the receiver was not a party is equally unsustainable. Under Section 28(2) of the Act no creditor to whom the insolvent is indebted in respect of any debt provable under this Act has any remedy against the property of the insolvent in respect of the debt. It was not till the suit was decreed finally in second appeal that the creditor could come for inclusion of the judgment-debt. The ju....
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.... application for execution of a decree is certainly the commencement of a legal proceeding; and therefore an application for execution comes within the mischief of the second part of Sub-section (2) Section 28. ........Having regard to the express terms of Sub-section (2), Section 28, Provincial Insolvency Act, I am of opinion that the decree-holder was under a disability from taking any step in execution of his decree until leave had been obtained." (b) A case reported in Prankishna v. Jnananda Roy AIR1942Cal47 , decided by Edgley and Biswas, JJ. In that case a suit for ejectment of a tenant had been decreed. The tenant appealed. While the appeal was pending, the Bengal Non-Agricultural Tenancy (Temporary Provisions) Act, 1940, came into force and thereupon the appellant himself applied for stay of the appeal, under the provisions of that Act. In that context their Lordships observed as follows: "An appeal undoubtedly arises out of a suit, and may in a sense be regarded as a proceeding in the suit itself, in the same way as an execution proceeding may be so regarded. It does not follow, however, that the word 'suit' must, therefore, in every case and for all ....
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....nstrued ejusdem generis with word 'suit', preceding it, but the expression includes all legal proceedings". 14. In support of his other contention that the leave of the Insolvency Court should have been obtained for the purpose of filing the second appeal before the Patna High Court and that the Receiver should have been made a party to the appeal and without having done so the assets in the hands of the Receiver could not be made liable for the decretal debt, Mr. Ghosh sought to place reliance on the following authorities: (i) a decision reported in AIR 1931 Pat 3571 decided by Kulwant Sahay and Macpherson, JJ., in which their Lordships observed: "It is next contended that the bar as against the commencement of any suit or other legal proceeding must refer to a suit or proceeding against the property of the insolvent which is dealt with in the first part of Section 28, Sub-section (2). In my opinion there is no justification for such an interpretation. The first part deals with remedies against the property of the insolvent and the second part deals with all remedies including the remedy against the person of the insolvent." (ii) a decision reported i....
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....ion 28(2) lays down that no creditor to whom the insolvent is indebted in respect of any debt provable under the Act shall, during the pendency of the insolvency, commence any suit except with the leave of the Court. From Section 26, Civil Procedure Code 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 leave of the Court is obtained, the plaint shall not be entertained. The plaintiffs' 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. ..... A suit commenced without leave cannot be continued by obtaining leave at a subsequent stage. No doubt, as was recognised 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 the strict reading of the Section is adopted there will be great embarrassment both to the insolvent a....
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....edings is only a general statement without particular reference to the question. with which we are concerned, namely whether an appeal is a commencement of a new proceeding, or merely a continuation of the suit. The decisions relied on by Mr. Ghose are, therefore, not of much-assistance. 16. There are, on the other hand, weighty authorities in support of the proposition that an appeal is a continuation of the suit and not commencement of a new proceeding. Reference may be made in this connexion to the Full Bench decision of the Madras High Court reported in Chappan v. Moidin Kutti ILR Mad 68 in which Subramania Ayyar, J. observed as follows, at page 80 of the report: "Now, according to Webster's Dictionary the first meaning, in law, of the noun 'appeal' is 'the removal of a cause of a suit from an inferior to a superior Judge or Court for re-examination or review'. The explanation of the term in Wharton's Law Lexicon, which is only different in words, is 'the removal of a .cause from an inferior to a superior Court for the purpose of testing the soundness of the decision of the inferior Court.' And in consonance with this broad meaning of the....
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....the term "suit" includes even the execution proceedings based on the final decree made in the suit." 19. If it was necessary for us to dismiss this appeal on the ground that the appeal before the Patna High Court was a continuation of the suit, filed by Kaluram against the present insolvent appellants, we might have been inclined to do so and might have in that case held that the suit having had been filed prior to the adjudication of the appellants Nos. 2 and 3 as insolvents, there could not be any question of seeking leave from the Insolvency Court under Section 28(2) of the Provincial Insolvency Act and of making the Receiver-in-insolvency a party to the suit and consequently might have further held that it was not necessary to take the leave of the court or to make the Receiver a party to the appeal before the Patna High Court, which was a mere continuation of the suit. But, nevertheless, it would always be open to a Receiver to have himself added as a party respondent, if the claim in an appeal related to the property of the insolvent, within the meaning of Section 59(d) of the Provincial Insolvency Act. 20. There are, in our opinion, much more cogent grounds ....
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....ving been wrongly placed there, we think that the judgment against him in this form must be wrong, and the reason is that such a judgment would work manifest injustice and prevent the beneficial operation of the Insolvency Sections of the Act, because a judgment of this kind, as against Mr. Miller, comes to this, that he is to pay the money out of the estate in his hands, and that this man, the plaintiff, is entitled to get the whole of his claim, and that is to be paid in full if the whole estate of the insolvent is sufficient to pay him. This is clearly wrong," 24. In another case reported in Chandmull v. Ranee Soondery ILR Cal 259, also a case under the Insolvent Act (11 and 12 Vict., Cap 21), the husband of the defendant was adjudicated an insolvent in 1891 and the usual order was made vesting his estate in the Official Assignee. He subsequently died without having filed his schedule and no schedule had ever been filed. After his death a suit was brought by a creditor against the defendant as the "widow, heiress, legal representative" of the deceased insolvent, in which suit there was a decree made against her with the direction that the amount was to be levied ....
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.... this appeal. We consider however that the words 'commence any suit or other legal proceeding' must be read in conjunction with something else in the sub-section, for if they were read independently, they would prevent a creditor from indulging in any litigation at all. The expression in the subsection which must govern this clause is 'have any remedy against the property of the insolvent in respect of the debt' ". 28. Before leaving this tonic we desire to quote a very good summary of the law on this point to be found in Mulla's Law of Insolvency (Tagore Law Lectures, 1929). In the Second Edition of the Book, at pages 690, 691 the following passage appears: "Where a suit is brought against a defendant in respect of a money demand, e.g., a debt or damages for breach of contract, and the defendant becomes insolvent, the plaintiff is not entitled to join the Official Assignee or Receiver as a party to the suit. The suit is not one relating to the property of the insolvent, and the Official Assignee or Receiver is neither a necessary nor a proper party to the suit". 29. The view that we take on this point finds additional support from the provisi....
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....nt, while the law clearly is that so far as regards merely personal actions the receiver cannot continue them but he can continue actions which are not personal. .....We do not think there is any authority for holding that the words 'Relating to' must be taken, to mean 'affecting'. Mr. Ananatakrishna Iyer himself admits that such a construction, which would give the Official Receiver power to conduct suits of a purely personal nature, which no Court has yet allowed to be done, would be placing an undue stretch on the Section." 33. We respectfully agree with the aforesaid observations and overrule the contention of Mr. Ghose. 34. In our opinion the claim in the appeal before the Patna High Court being for a bare claim for money against the insolvent in personam did not fall within the mischief of Section 28(2) of the Provincial Insolvency Act and it was not necessary in that appeal either to obtain leave of the Insolvency Court or to make the Receiver a party. That decree, in our opinion, is a valid decree and the decretal debt may be proved in insolvency. The order made by the Court below, by which it allowed the application of Kaluram praying for admitting h....