MACHANJEERI AHMED Vs. KGOVINDA PRABHU

JUDGEMENT

(1.) This is an application to revise the decree of the Subordinate Judge in Small Cause No. 732 of 1926. The contention for the petitioner is that the suit is barred by limitation and that Section 78 of the Provincial Insolvency Act does not apply to this case. The Subordinate Judge held that the suit was not barred inasmuch as the insolvency proceedings were pending at the time of the suit. The question is whether a person who brings a suit against an insolvent during the pendency of the insolvency proceedings is entitled to the benefit of Section 78. Section 78 says: 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.

(2.) The benefit of Section 78 can only be invoked by a party who wants to proceed against an insolvent after the adjudication has been annulled, It does not say anything about the proceedings during the pendency of the insolvency proceedings, Section 28(2) of the Act says: No creditor to whom the insolvent is indebted in respect of any debt proveable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceeding except with the leave of the Court on such terms as the Court may impose.

(3.) When a debtor is adjudicated insolvent the creditor is not entitled to proceed against him except with the leave of the Court. This does not entitle the plaintiff to come years after the order of adjudication is made and file a suit against the insolvent in the ordinary Court and claim the benefit of Section 78. So long as the insolvency proceedings are pending, the period of limitation is suspended, provided the claim was not barred on the day of adjudication, and if the order of adjudication is annulled, the right to proceed against the insolvent would revive and the period during which the insolvency proceedings were pending would be excluded if the, person wishes to proceed against the insolvent or his property. The case in In re Benson. Bozver V/s. Chetwynd (1914) 2 Ch. 68 is a clear authority for the position that a person who wants to sue in the ordinary Courts for relief against an insolvent cannot claim the benefit of Section 78. As observed by Channell, J.: A debt does not become barred by lapse of time if it was not so barred at the commencement of the bankruptcy, and of this there can be no doubt, but this is only in the bankruptcy.