GADDIPATI VENKAYYA Vs. CHUNDURU SAMBAYYA

JUDGEMENT

(1.) The petitioner is one of the creditors in the insolvency of one Chunduri Sambayya (I.P. No. 77 of 1931 on the file of the Subordinate Judge's Court, Tenali). He applied on the 9 July, 1937, under Section 25 of the Madras Debt Conciliation Act, 1936, praying that all further proceedings in the insolvency may be stayed pending disposal of his application to the Debt Conciliation Board. The application was dismissed by the Sub-Judge on the ground that the application of the petitioner to the Conciliation Board was itself prohibited by Section 28(2) of the Provincial Insolvency Act and therefore his application for stay of the insolvency proceedings was incompetent. It is argued that this view of the Subordinate Judge is not according to law but I am not satisfied that the objections to that view are well founded.

(2.) Section 25 of the Debt Conciliation Act says: When an application has been made to a Board under Section 4, any suit or other proceedings then pending before a Civil Court in respect of any debt for the settlement of which application has been made shall not be proceeded with until the Board has dismissed the application.

(3.) It may be mentioned in this connection that the application made by the petitioner to the Board has since been dismissed, and that the petitioner has filed an application for the restoration of his previous application which is still pending. I am of opinion that the application contemplated in Section 25 is an application which is not prohibited by law or in contravention of any statutory provision. In this case there can be no doubt that the application was in contravention of Section 28(2) of the Provincial insolvency Act which declares that no creditor to whom an insolvent is indebted in respect of any debt provable under the 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 and on such terms as the Court may impose. It is admitted that the leave of the Insolvency Court was not obtained for making the application to the Debt Conciliation Board. It must therefore be held that the application to the Debt Conciliation Board was one made in contravention of a statutory provision and it is impossible to accept the view that an application which is in direct contravention of a statutory provision gives a right to the very person who made such an application without the leave of the Insolvency Court to approach the Insolvency Court and demand that the insolvency proceedings should be stayed by reason of such an application. The legislature must be deemed to have meant only an application not otherwise contrary to law in Section 25 of the Debt Conciliation Act. I do not think it can be said that the application to a Board is not a legal proceeding. The scheme of the Act shows that it is a legal proceeding or at least the initiation of a legal proceeding. Applications under Section 25 of the Debt Conciliation Act come within the mischief provided against in Section 28(2) of the Provincial Insolvency Act. The object of the provision in Section 28(2) of the Provincial Insolvency Act is that once a person has been adjudged insolvent and his property is vested in the Official Receiver all claims of creditors in respect of debts provable under the Insolvency Act should be decided by the Insolvency Court itself except in exceptional cases where for special reasons the Insolvency Court gives leave to carry on legal proceedings elsewhere in respect of such debts.