RAMCHANDRA BEHARILALL FIRM Vs. PANU SINGH

JUDGEMENT

(1.) This is an appeal against an order passed by the District Judge, Cuttack, dismissing the petition of the creditor in insolvency proceedings praying for distribution of the assets of the insolvent. In Misc. case no. 17 of 1939, one Panu Singh alias Pranbandhu Singh was adjudicated insolvent on 12th February 1940. On 2lst December 1940, the creditor filed a petition for the purpose of avoiding some sales alleged to have been made by the insolvent just before the presentation of the petition in insolvency, and by its order dated, 17th May 1941, the Courts set aside the sales. The purchaser went up in appeal to the High Court but his appeal was dismissed on 26th April 1945. The insolvent was a party to this appeal. Meanwhile, however, the date fixed for the application for discharge had expired and the insolvent had failed to apply for discharge within the time fixed by the Court. Consequently, on 16th March 1942, the District Judge passed an order of annulment and the adjudication of Panu Singh as insolvent was annulled. On 17th May 1947, the present appellant, one of the creditors of the insolvent, filed a petition before the District Judge for directing the Receiver appointed in the proceedings to sell the properties of the insolvent Page 1 of 3 Ramchandra Beharilall Firm vs. Panu Singh (05.12.1949 - ORIHC) and distribute the assets among the creditors. The learned District Judge accepted the contention of the creditor that the Court bad jurisdiction to so direct the receiver but held that Section 78 (2), Provincial Insolvency Act was a bar to his exercise of that power.

(2.) The point for determination is whether, when an unconditional order of annulment is passed, the insolvency Court still retains seisin over the properties of the insolvent to enable it to make an order relating to his properties and to make the assets available for distribution among the various creditors. In this case the order of annulment is unconditional. Section 37, Provincial Insolvency Act, lays down that when an order of annulment is passed the properties of the debtor shall vest in such person as the Court may appoint, or, in default of such appointment, shall revert to the debtor to the extent of his right or interest therein on such conditions if any--as the Court may by order in writing declare. Admittedly, no order vesting the properties in an appointee of the Court was passed simultaneously with the order of annulment. On a plain reading of the section, it appears to me that in the absence of any conditions imposed by the Court the properties would automatically revert to the insolvent as soon as the order of annulment is passed. But the question is does the Court become functus officio so as to be incapable of passing a subsequent order in order to make the properties formerly vested in the Insolvency Court available for distribution among the creditors? Section 5 (1) Insolvency Act, defines the general power vested in a Court of insolvency and it provides that the insolvency Court shall have the same power as it has in the exercise of original civil jurisdiction. Section 151, Civil P. C. empowers the Court to pass orders in the exercise of its inherent jurisdiction to prevent abuse of process and otherwise to work out the equities between the parties ex debtio justitia. This principle has been extended to orders under the Provincial Insolvency Act by a decision reported in Chouthmall Bhagirath v. Jokhi Ram Surajal, A. I. R. (20) 1933 pat. 84 : (12 Pat. 163) and which has also been followed by the Calcutta High Court in the case reported in Abdul Latif v. J. R Percival, A.i.r. (23) 1936 Cal. 573 : (I. L. R. (1937) 1 Cal. 254). This reasoning appealed to the learned District Judge himself and he held that it was within his jurisdiction to direct the receiver to proceed to sell the properties which were the subject-matter of the appeal before the High Court. Were it not for the fact that the learned Judge took an erroneous view of the applicability of Section 78 (2) of the Act we have no doubt, he would have granted the relief prayed for by the creditor in these proceedings. Unfortunately, however, we are unable to see what application this section has in this case. All that Section 78 (3) lays down is that in computing the period of limitation prescribed for a suit or an application for the execution of a decree, the period from the date of the order of adjudication to the date of the order of annulment shall be excluded. That sub-section has no application to the exercise of the power by the Court. We are accordingly unable to accept that part of the learned Judge's order.

(3.) We have therefore arrived at the conclusion that limitation is no bar to the exercise of the power by the Court and that it has got the jurisdiction to make such order as it may choose to make on the application of the creditor.