BHERAJI SAMRATHJI AND CO Vs. VASANTRAO GOVINDRAO PRABHAKAR

JUDGEMENT

(1.) In this suit the Official Assignee has appeared by counsel and has objected that the suit is barred by Section 17 of the Presidency-towns Insolvency Act, 1909. That section provides that : On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the official assignee and Bhall become divisible among his creditors, and thereafter, except as directed by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt or shall commence any suit or other legal proceeding except with the leave of the Court and on such terms as the Court may impose...

(2.) In the present case the suit was brought without any such leave and, in fact, the plaint does not mention that the defendant was insolvent. It was stated by Mr. Lalji that at the time of the filing of the suit the Official Assignee was not aware of that fact. Mr. Munshi cited the ruling in In re Dwarkadas Tejbhandae to the effect that bringing a suit, without getting the leave mentioned in Section 17 in a case to which that section applies, is an absolute bar to the suit and that; leave cannot be granted after its institution one other hand, Mr. Lalji for the plaintiffs relied upon Mahomed Haji Easack V/s. Abdul Rahiman (1916) I.L.R. 41 Bom. 312, s. c. 18 Bom. L.R. 198 where it was held that the wording of Sub-section (3) of Section 18 of the Presidency-towns J Insolvency Act of 1909 is wide enough to justify a stay of proceedings in an action, which was not pending on the date of the order of adjudication. In that particular case the suit was filed after the order of adjudication and without leave to file the suit, but subsequently such leave was obtained under Section 17, When the suit came on for hearing Macleod J. stayed the proceedings in the suit until further orders. On appeal from that order, one of the questions argued was that Sub-section (3) of Section 18 was the only provision which could apply as justifying the stay order, and that it only covered a case where a suit had been instituted before the adjudication order was made. The learned Chief Justice Sir Basil Scott and Mr. Justice Heaton, however, overruled this objection, following the observations of the Division Court in England in Brownscombe V/s. Fair (1887) 58 L.T.N. Section 85 where the opinion was expressed that the corresponding words of Section 10 of the English Bankruptcy Act, which are practically identical with those of Section 18 (8) of the Presidency-towns Insolvency Act, were wide enough to justify a stay of proceedings in an action which was not pending at the time of the order of adjudication. Mr. Munahi asked me to distinguish this ruling on the ground that in that case leave to file a suit had been actually obtained under Section 17. It is to be remarked that if the decision in In re Dwarkadaa Tejbhandas is correct, the leave that was granted after the suit was filed was ultra vires and of no effect, But, even apart from that, it is clear that their Lordships did not, in any way, base their ruling upon the fact of leave having been granted but upon the opinion as to Section 10 of the Bankruptcy Act, which had been expressed in Brownseombe V/s. Fair (1887) 58 L.T.N. Section 85. In that case an objection was taken to an action against the bankrupt on the ground that the bankruptcy petition had been presented by the defendant and that the action, being in respect of a debt provable in the bankruptcy, had been commenced without the leave of the Court. Both the Master and the Judge in chambers refused to make a stay-order as prayed, and the defendant appealed. The Court held that the appeal ought to be allowed and the action restrained, as there were no special or exceptional circumstances which would entitle the Court to allow it to continue. In his judgment Wiles J. remarked (p. 85): Mr. Rose Innes says that the jurisdiction of the court is limited to actions commenced before bankruptcy proceedings are initiated. ; bat I do not think so, foe the words are perfectly general .

(3.) In those remarks he was referring to the provisions of Sub-section (2) of Section 10 of the Bankruptcy Act, which are practically identical with those in Sub-section (3) of Section 18. I think that is perfectly clear from the report, although I notice that in Halsbury a Laws of England, Vol. II, Art. 196, p. 63, foot-note (6), it is said that stay orders in the case of actions commenced after the receiving orders are passed under Art. 9 of the Bankruptcy Act of 1883, which has now been superseded by Section 7 the Bankruptcy Act of 1914. Possibly, it was considered safer to pass such orders under Section 9, rather than Section 10. And this view seems to be still accepted because the case of Brownscoinbe V/s. Fair (1887) 58 L.T.N. Section 85 is cited in William's Bankruptcy Practice, 12 Edn., at page 65, in regard to Section 7 of the Bankruptcy Act of 1914.