SINNADRI VENKATANARASAYYA Vs. OFFICIAL RECEIVER

JUDGEMENT

(1.) The first point urged in this case by Mr. Lakshmanna for the appellant is one of law and the appeal is from the order of the District Judge of Godavari on a petition under Section 53, Provincial Insolvency Act, asking for the cancellation of a certain mortgage-deed executed by the insolvent in favour of the respondent on the 26 July 1920, Ex. 1. The point of law is that although the mortgage-deed in question was executed on the 26 July 1920, and the adjudication was on the 24 October 1922, the petition for adjudication is dated the 25th April 1922 or within two years of the execution of the mortgage-deed in question. So that it comes to this; that if the provisions of Section 28 (7) Provincial Insolvency Act, which says that 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, are to be applied to Section 53, then the transaction in question is clearly within the section. If, on the other hand, the provisions of Section 28 (7) are not to be applied to Section 53, then the transaction is out of the reach of the insolvency Court by reason of having taken place more than two years from the date of the adjudication. Now Mr. Lakshamanna frankly admits that there is one case of this Court Sankaranarayana Iyer V/s. Alagiri Iyer [1918] 35 M. L. J. 296 against him, which was a decision of a Bench consisting of Oldfield and Sadasiva Iyer, JJ.. under the old Provincial Insolvency Act 3, 1907, the wording of which, however, as far as is Material, is precisely the same as in the Act of 1920. There the learned Judges have held that having regard to Section 16 (6) of the Act of 1907 the adjudication referred to in Section 36 must be treated as made on the date of presentation of the petition in which the insolvency proceedings originated. Two other High Courts have, however, apparently come to an opposite view namely the Bombay High Court, in Nagindas V/s. Gorhandas A. I. R. 1925 Bom. 480 and the Lahore High Court in Ghulam Muhammad V/s. Panna Ram A. I. R. 1924 Lah. 374 so that what Mr. Lakshmanna asks us to do is in view of these two decisions, to refer the matter to a Full Bench to see if the decision of this Court already referred to in Sankaranarayana Iyer V/s. Alagiri Iyer [1918] 35 M. L. J. 296 is correct or not. It has to be pointed out that that decision received further support from a recent case before Devadoss and Sundaram Chetty, JJ., reported in Rangiah V/s. Appaji Rao A. I. R. 1927 Mad. 163 In that case the learned Judges came to the conclusion that the decision of the Bombay and Lahore High Courts referred to above could not be supported. There is further the authority of the Calcutta High Court in Rakhal Chandra Purkait V/s. Suddhindranath Bose [1919] 46 Cal. 991 and of Sheonath Singh V/s. Munshi Ram [1920] 42 All. 433 which supports the view hitherto taken in Madras. The Calcutta decision was under the Provincial Insolvency Act, but as already pointed out, the wording of the two as regards this point is the same. The same remark will apply to the Allahabad case. Now a word must be said about the Bombay case which is relied on to cast a doubt on the soundness of the Madras decision. The reasoning turns on the difference in language which undoubtedly exists between Secs.53 and 54. The learned Chief Justice of Bombay says that he cannot infer that owing to the difference in the language in the two sections Section 53 was intended to attract the provisions of Section 28 (7). He also seems to base his decision on Section 42 of the English Act which runs: Any settlement of property ......... shall, if the sestlor becomes bankrupt within two years after the date of settlement, be void against the trustee in bankruptcy, and the decision of Wright, J., is quoted in, Ex-parte Clough [1904] 1 K. B. 451 to the effect that the words "becomes bankrupt" mean a date on which an available act of bankruptcy has been committed by the bankrupt. With great deference I do not see how this construction contended for by the learned Chief Justice is right, because if the commencement of bankruptcy or an insolvency is to be the fact of an available act of bankruptcy, it appears to me that that must occur at some time, however short, before the presentation of a petition in insolvency which must, if it is going to have any weight at all, be based on an allegation of an available act of bankruptcy or insolvency in this country. The learned Chief Justice seems to realize that harm and injustice might result from taking the opposite view, but he says that any such fear cannot provide sufficient grounds for interpreting the words in Section 53 otherwise than according to their clear meaning.

(2.) It appears to me that the object of both Secs.53 and 54 is really to decide (as in fact the heading at the top of Section 51 makes clear, i. e., what is the effect of insolvency on certain antecedent transactions by the insolvent) what property is to vest in the receiver and it is clear that you must set some limit of time with respect to transactions which you are going to allow to be impeached on the ground that they are in fraud of creditors and that the properties sought to be alienated ought in fact to form part of the assets of the insolvent which on his adjudication pass to the Official Receiver of his estates. So that, if you are going to make the date of adjudication the crucial test as pointed out in Rangiah V/s. Appaji Rao A. I. R. 1927 Mad. 163 this may take place a very long time after not only the presentation of the petition, but any act of bankruptcy committed by the insolvent. In face of two clear authorities in this Court and of the authorities mentioned in Calcutta and Allahabad it seems to me quite clear that the provisions of Section 28 (7) are attracted to Section 58. I have not referred in detail to the decision in Lahore, Ghulam Muhammad V/s. Pama Ram A. I. R. 1924 Lah. 374 which approve Jokhan Singh V/s. Deputy Commissioner Fyzabad [1914] 23 I. C. 924 a judgment by one of the Commissioners of the Nagpur Court in disapproving the body of authority which I have referred to, namely Sankaranarayana Iyer V/s. Alagiri Iyer [1918] 35 M. L. J. 296 Sheonath Singh V/s. Munshi Ram [1920] 42 All. 433 and Rakhal Chandra Purkait V/s. Sudhindra Nath Bose [1919] 46 Cal. 991 The learned Judges in the Lahore ease observed that the Act cannot be interpreted with reference to what the framers of the Act intended to do and based their decision on the difference in the language of the sections. In face of all this authority in favour of the incorporation of Section 28 (7) in Section 53, I must say that, speaking of myself, I entertain no doubt as to the correctness of the Madras decisions reinforced, as they are, by the opinions of the Calcutta and Allahabad High Courts and I see no reason for referring this case to a Full Bench. (The judgment then discussed the evidence and concluded as follows.) The learned District Judge has come to the conclusion that Ex. 1 was executed in hot haste in order to make the attachment before judgment a nullity and in my opinion we have been shown nothing here on appeal or in the evidence which would enable one to say that he was not justified in coming to that conclusion. In my opinion the appeal must be dismissed with costs. Curgenven, J.

(3.) I agree, and I have very little to add to what my learned brother has said on the first point raised with regard to the applicability of Section 53, Provincial Insolvency Act. The question is whether the two years provided by that section should be reckoned from the date of the alienation up to the date of the petition or up to the date of the adjudication. For the former we have specially been referred to Nagindas V/s. Gorhandas A. I. R. 1925 Bom. 480 The main ground for that decision lay in a comparison between the language of Secs.53 and 54, There is no doubt that that is a consideration to be weighed, but having regard to the existence and terms of Section 28 (7), I do not think it can be called a conclusive test. The view that time should run up to the date of adjudication appears to me to have nothing in reason to recommend it. It seems incontestable that the critical date should be, if not, as in English Law, the point of time when the debtor becomes bankrupt, then at latest when the petition is filed. The length of the interval thereafter up to adjudication depends largely upon accidental circumstances which can have no logical connexion with the conduct of the debtor up to the time when his affairs passed into the hands of the insolvency Court. It is true that it is not for us to say what the law should be, but we are entitled in case of doubt to reject an alternative which must lead to undesirable if not to anamalous results. The other alternative is to read Section 28 (7) with Section 53, and for this Court we have the authority of the judgments of two Benches of this Court, Sankaranarayana Iyer V/s. Alagiri Iyer [1918] 35 M. L. J. 296 and Rangiah V/s. Appaji Rao A. I. R. 1927 Mad. 163 besides the views of Calcutta and Allahabad High Courts. I respectfully express my preference for this view over that taken by the High Courts of Bombay and Lahore. (The judgment then discussed the evidence and concluded that the appeal should be dismissed.)