VIJAYA COMMERCIAL BANK LTD Vs. NADELLA SIVARAMAKRISHNAYYA

JUDGEMENT

(1.) This is an application under section 45-A and 45-B of the Banking Companies Act (X of 1949 as amended by Act LIII of 1953) for a declaration that the proceedings in I.P. No. 19 of 1958, on the file of the sub-Court, Masulipatam, and the order of adjudication passed therein are null and void and not binding, on the Vijaya Commercial Bank, Ltd. (in liquidation). The facts giving rise to this application are these : The Vijaya Commercial Bank, Ltd. (hereinafter referred to as 'the banking company') was wound up by an order of the High Court of Judicature, Madras, made in O.P. No. 417 of 1953. As Nadella Sivaramakrishnaiah (hereinafter referred to as ' the debtor') was, on the date of the winding up order, indebted to the banking company, he was included in the list of debtors prepared by the liquidator. By an order of the Madras High Court, dated 7th December, 1954, he was directed to pay a sum of Rs. 7,692-9-9 with further interest and a certificate was accordingly issued under section 45-B (6) of the Banking Companies Act (hereinafter referred to as 'the Act'). The debtor, having defaulted to pay the amount within the time allowed, the liquidator initiated proceedings in execution and an extent of Ac 3-35 cents, of which he was the owner, was attached on the 19th October, 1957, in E.P. No. 43 of 1957 on the file of the Sub- Court, Masulipatam. While so, on the loth October, 1958, Nadella Rama Subbiah (and respondent) who, it is alleged, is closely related to the debtor, filed a petition under section 11 of the Provincial Insolvency Act for the adjudication of the debtor as an insolvent. The 2nd respondent alleged that the debtor and another owed him a sum of Rs. 1,200 under a promissory note executed by them and that the debtor had fraudulently executed a mortgage deed in favour of one Basaviah.

(2.) The debtor was adjudged insolvent by an order of the Sub-Court, dated 7th January, 1959. It would appear that notice of the insolvency proceedings was not given to the banking company. Pursuant to the order of attachment obtained by him, the liquidator attempted to bring to sale the properties of the debtor. At this juncture, the Official Receiver, Krishna, moved the Sub-Court for stay of the sale on the ground that the debtor had been adjudged insolvent and that his properties had vested in him. Thereupon the Court stayed the sale and dismissed the execution petition filed by the liquidator. It is contended by the liquidator before me that the order of adjudication passed by the Sub-Court, Masulipatam, in I.P. No. 19 of 1958 is null and void in view of sections 45-A and 45-B of the Act. The debtor, on whom notice of this application was served, remained exparte The Official Receiver, Krishna, to whom also notice was given took no interest in the matter.

(3.) The 2nd respondent filed a counter-affidavit contending inter alia that sections 45-A and 45-B of the Act could not be invoked by the banking company, that if the company was aggrieved by the order of adjudication passed by the Sub-Court, it should have filed an appeal against that order, and that the relief sought by the applicant in the present application is misconceived. On these contentions, the question for decision is whether the order adjudging the debtor an insolvent passed by the Sub-Court, Masulipatam, in I.P. No. 19 of 1958 is null and void by reason of sections 45-A and 45-B of the Act. For appreciating the point in controversy it is necessary to refer to the relevant statutory provisions. With the object of consolidating and amending the law relating to the Banking Companies, the Banking Companies Act (X of 1949) was enacted. One of the stated objects of the legislation was to provide a machinery by which proceedings in liquidation of banking companies could be expedited and speedily terminated. It was found, however, that the Act of 1949, as originally enacted, was inadequate to achieve that purpose. It was in this situation that on the 19th September, 1949, the Banking Companies (Amendment) Ordinance, 1949, was promulgated. The Ordinance was later replaced by the Amendment Act of 1950 which introduced into the Act an entire Chapter, Part III-A, consisting of sections 45-A to 45-H under the heading 'Special provisions for speedy disposal of winding up proceedings '. However, the necessity for amending the new provisions was very soon felt and the Act was further amended by the Central Ordinance of 1953, later replaced by the Banking Companies (Amendment) Act (LII of 1953.)