Report No. 26
General.-This is based on section 16 of the Provincial Act and section 92 of the Presidency Act.
Opening part.-Has been re-drafted to make it clear that it applies to creditor's petition only.
Proviso.-The proviso is new and has been added as useful provision. The corresponding provision in the English Bankruptcy Act, 1914, is section 111. A question which arises for decision under this section is whether a substitution can be ordered thereunder, if the original petition was incompetent. In Re Maugham, 21 QBD 21, the petitioning creditors were found to have assented to the deed of assignment which was relied on as an act of insolvency, and the petition was accordingly dismissed as incompetent.
A petition was thereafter presented by other creditors (who had not assented to the deed) to revive the proceedings and to continue them, and that was dismissed, as not maintainable. In Re Maund, (1895) 1 QB 194,1 the debts due to the petitioning creditors did not come up to the statutory amount. Three months after the act of insolvency, the creditors who had the requisite qualification applied to continue the petition, but that was refused.
In Venkata v. Gangayya, 1928 ILR 51 Mad 594,2 the application for substitution was made by a creditor whose claim was alive on the date of the original petition, but became time barred on the date of the application. It was held, that he was entitled to be substituted. In the course of the judgment, the court referred to the decision in Re Maund and observed, "In Re Maund the original petition was filed by a creditor not entitled to file it. It was not a valid petition. It was sought to be amended by the addition of other petitioners.
The court held that this could not be done. This decision does not touch the present case". In Venkataratnam v. Venkatayya, ILR 1942 Mad 316, it was held that even if the creditor who filed the petition should turn out not to have been qualified to do so, that cannot prevent another creditor from being substituted and taking advantage of the debt and the act of insolvency mentioned in the petition. This decision purports to follow the principle enunciated in Venkata v. Gangayya, but (in view of the observations already referred to) does not appear to be correct.
It being a well-established principle of insolvency law that no petition for adjudication should be entertained after the expiry of a specified period from the date of the act of insolvency, it would be inconsistent with that principle to hold that a substitution can be ordered when an independent petition on that date would be barred, simply because there was at that time pending a petition which was incompetent under the law. The proviso is intended to settle the law as laid down in Re Maund, (1895) 1 QB 194.
1. See also Williams, p. 492.
2. See also Mulla, (1958), p. 215.
This is based upon section 8 of the Provincial Act. (Compare section 107 of the Presidency Act.)
The clause has been made "subject" to the clause regarding adjudication of firms, to avoid the possible interpretation that a petition cannot be presented against a firm, which is an "association". It may be noted, that, a firm can be registered under the Partnership Act.
This is based on section 95 of the Presidency Act. There is nothing corresponding to it in the Provincial Act. It has been incorporated as a useful provision.