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Report No. 26

Clause 98

Sub-clause (1).-This follows section 11 of the Presidency Act, which is more precise and detailed than section 11, main paragraph of the Provincial Act. Cf. section 6(1)(d), English Act. The provision for firms is particularly useful in view of the proposed addition of a specific clause1 for adjudication of firms. Mention of "orders" (besides decrees) has been added.

Explanation-is required for High Court.

Sub-clause (2).-This deals with the jurisdiction of Indian Courts in regard to persons who are not citizens of India. It must be taken along with the definition of "debtor"2. That definition and this sub-clause follow section 1(2) and section 4(1)(d) of the English Act. Under the rules of private international law (as administered in England) an order of adjudication of a person as insolvent can be passed only by the courts of the State of which he was a subject3-4, since it affects his status. An exception, however, has been recognised to this rule when the debtor, though a foreigner, has been residing or carrying on business in England-in which case English courts have jurisdiction to make an order of adjudication.

It is this exception that is embodied in sections 1(2) and 4(1)(d) of the English Act5-7. It will be noticed, that the two provisions aforesaid relate to two different aspects of the question. Section 1(2) of the English Act has reference to the status of the debtor when he commits an act of insolvency, and section 4(1)(d) of the English Act has reference to the conditions which must be fulfilled before the creditor can take proceedings against the debtor. It has been observed, that these provisions are cumulative, and that before a person who is a subject of a foreign country is adjudged insolvent, both of them ought to be satisfied7.

There is nothing corresponding to these provisions either in the Presidency Act or in the Provincial Act, and that is probably due to the fact that there was no question of any Indian citizenship during the British regime; but now that India is a sovereign State, it is desirable that the law should be comprehensive and provide, conformably to the rules of private international law stated above, for the adjudication of foreigners who become debtors in this country.

The definition of "debtor"8, as proposed, corresponds to section 1(2) of the English Act, and has reference to the status of the foreign subject at the time when the act of insolvency is committed, while the sub-clause now under discussion has reference to the conditions under which proceedings can be taken by a creditor, and corresponds to section 4(1)(d) of the English Act. It may be noted, that while the sub-clause should, if the scheme of the English Act is strictly followed, be incorporated in the clause relating to the conditions on which a creditor may file a petition, it has been considered that, under the scheme of the present Act, such a provision might more properly be brought within this clause.

Sub-clause (3).-This is based on the proviso to section 11 of the Provincial Act. There is nothing corresponding to it in the Presidency Act. Section 98(3) of the English Bankruptcy Act, 1914, which provides for the court in which bankruptcy petition has to be presented, also enacts that nothing in that section will invalidate a proceeding by reason of its being taken in a wrong court. It was accordingly held that a proceeding taken in a wrong court could be transferred to the proper court, but not when it is wilful, vide ex parte Mnay, (1885) 14 QBD 37; Re French, (1890) 24 QBD 63; and Williams, (17th Edn.), pp. 460-461. The provision in section 11 of the Provincial Act is in consonance with the principle enacted in section 21 of the Civil Procedure Code, and it has been adopted.

1. See clause 108.

2. See clause 2, "debtor".

3. See Dicey Conflict of laws, (1958), p. 670, rule 131.

4. See also Bloom Cooper Bankruptcy in Private International Law, (1954), p. 46.

5. See discussion in Mulla, (1958), p. 88, bottom.

6. Theophile v. Solicitor General, 1950 AC 186.

7. Williams, p. 55, and p. 3.

8. Clause 2-"debtor".

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