PARSU VITHOBA PATIL Vs. BALAJI VISHWANATHRAO RANGARI

JUDGEMENT

(1.) THIS matter arises out of insolvency proceedings. The applicants have lost in both the lower Courts, the applicants being the quondam insolvents who have been discharged. Their contention is that on adjudication all their property vested in the Court by act of law and that on discharge it, went back to them. This result is based on the following chain of reasoning: The law transfers the assets of a debtor who is adjudicated insolvent to the insolvency Court for the purpose of enabling the Court to settle his debts. Section 44, Provincial Insolvency Act, provides in Sub-section (2) as follows: Save as otherwise provided by Sub-section (1), an order of discharge shall release the insolvent from all debts provable under this Act.

(2.) THEREFORE when an insolvent is discharged, the purpose for which his property has been vested in the Court, that is to say, the settlement of his debts, is at an end and so his debts are at an end, and as the purpose is at an end it follows that the law impliedly revests in him the unexpended assets. That is the argument. If the English Bankruptcy Act is referred to it will be seen that Section 26(1), Bankruptcy Act (as amended in 1926), provides for the discharge of a bankrupt. The provisions are more complicated and numerous than those of Section 41, Provincial Insolvency Act, but are similar. Sub-section (9) of the English Act, provides that:

(3.) WE are of the opinion that the reason which reconciles the Court's retaining title to the bankrupt's assets while the bankrupt is released from all his provable debts is to be found in the fundamental purpose of bankruptcy jurisdiction. If Williams on Bankruptcy, Edn. 15, is referred to, it will be seen that he heads Part 2 with the words "Administration of Property" and in that entitling is to be found the real object of the jurisdiction, which is to administer the property which the law has transferred to the Court so as to do equity amongst all the creditors of the insolvent; accordingly, the Court having obtained the assets takes the necessary steps to get in proofs of the various debts, determine the priorities and dispose of the assets subject to the rights of those who are otherwise secured according to law. That duty is not complete until the Court has realised all the insolvent's assets and has distributed those assets in accordance with law to those creditors who during the course of the insolvency proceedings have proved. Those proceedings may continue until the administration of the estate is complete and long after the insolvent has got his discharge--discharge may be a great advantage, it may, for example, enable the person discharged to contract debts. He no longer need disclose that he is an undischarged insolvent, but it does not secure to him the property which, on adjudication, the law transfers to the Court. In our opinion it accordingly follows that, so far as the debts that are proved up to the date of discharge are concerned, it is not accurate to say that they are discharged under Section 44(2). They have ceased to be provable debts and have become proved claims. As debts they have ceased to be and have become claims before a Court administering an estate. Those claims the Court through its appropriate officer will discharge in a certain order out of the assets in its hands after all proper expenses and prior burdens have been provided for. In those circumstances we are of opinion that the Courts below have arrived at the right conclusion. This revision therefore fails and is dismissed with costs.