ALLAMPATI GOPALA REDDY Vs. PONNAVOLU RAGHAVA REDDY

JUDGEMENT

(1.) The petitioner in this C.R.P. is the petitioner-debtor in the court below. The Insolvency Petition being I.P.No. 12/77 was filed against the debtor in connection with the promissory note dated 22-6-1975. The debtor filed the petition under Sections 4 and 5 of the Provincial Insolvency Act read with Section 151 C.P.C. to dispose of I.P.No. 12/77 on the preliminary point about the maintainability of Insolvency Petition as the claim of the respondent on the basis of pronote dated 22-6-1975 is barred by limitation. This application was dismissed by the learned Subordinate Judge on the ground that this can be considered at the time of enquiry of the main petition. On appeal, the learned District Judge disposed of the application on merits holding that the pronote is not barred by limitation when the I.P. was filed and as such the creditor can pursue the insolvency petition notwithstanding the bar of limitation during the pendency of the petition.

(2.) The learned counsel for the petitioner contended that there is no subsisting debt by reason of expiry of three years from the date of execution of the pronote and the debt is barred by limitation and the enforcement of such barred debt, cannot be continued in insolvency proceedings. The learned counsel for the respondents contended that on the date when the I.P. was filed, the pronote was not barred by limitation and in view of doctrine of relation back provided in Section 28 (7) of the Provincial Insolvency Act, the proceedings relate back to the date of filing and the expiry of 3 years during the pendency of the insolvency proceeding, does not hinder the insolvency proceedings.

(3.) The relevant provisions touched upon are sections 28 (7) and 78 (2) of the Provincial Insolvency Act which are as follows : 28 (7) "An order of adjudication shall relate back to, and take effect from the date of the presentation of the petition on which it is made". 78 (2) "Where an order of adjudication has been annulled under this Act in computing the period of limitation prescribed for any suit or application for the execution of a decree (other than a suit or application in respect of which the leave of the Court was obtained under sub-section (2) of Section 28 which might have been brought or made but for the making of an order of adjudication under this Act the period from the date of the order of adjudication to the date of the order of annulment, shall be excluded : Provided that nothing in this section shall apply to a suit or application in respect of a debt provable but not proved under this Act". Section 28 is concerned with the impact of the order of adjudication on the property of the insolvent and the consequential adjustment of legal proceedings. The immunity of the insolvent against any proceedings is postulated and the property shall vest in the court or receiver and shall become divisible amongst the creditors while taking care of the rights of the secured creditor and total embargo on initiation and continuation of any legal proceedings against the property or person of the insolvent except with the leave of the court. Sub-section(7) envisages the doctrine of relation back whereby the order of adjudication pre-dates to the date of presentation of insolvency petition. Section 78 provides for the applicability of Sections 5 and 12 of the Limitation Act and sub-section (2) brings in the exclusion of time in the event of annulment of adjudication and in a situation where the petition for insolvency culminates in adjudication and thereafter annulment, the recourse to common legal remedy and the limitation thereof is lubricated by lifting the time between the date of adjudication and annulment from the bar of limitation. It is pertinent that exclusion of time between date of filing the petition and adjudication is not adverted to.