Report No. 26
General.-This is based mainly on section 99 of the Presidency Act. There is nothing corresponding to it in the Provincial Act. Section 79(2)(c) of the Provincial Act does provide for framing of the rules to be followed "where the debtor is a firm"; there is, however, in that Act no substantive provision authorising adjudication of firms. Under the law it is only a person that can be adjudicated, and a firm is not a person but a compendious name for describing all the persons who are partners of the firm.
There are circumstances under which all the partners of the firm might have rendered themselves personally liable to be adjudicated insolvent, and it is only as a matter of convenience that a petition to adjudicate the firm which in substance means all the partners is allowed. Section 99 of the Presidency Act is not concerned with the conditions under which different partners can be adjudicated on a single petition. It assumes that they could be adjudicated, and merely provides that instead of filing a petition against each of the partners, there can be one petition against the firm. It is considered that this provision, which is well-known both under the (English) Bankruptcy Act and under the Presidency Act, should be adopted1. Similar provision is also proposed for petitions against persons carrying on business under an assumed name2.
Sub-clause (1).-Needs no further comments.
Sub-clause (2).-May be explained as follows:-
In England the law is, that even an infant can be adjudicated insolvent where he contracts a debt which is enforceable in law3. The law in India is different. The Privy Council has held4 that a minor's contract is void and no decree can be passed thereon. It, therefore, follows, that under the Indian law a minor can never become a debtor and cannot, therefore, be adjudged insolvent5. When the minor purports to enter into a contract of partnership, that contract again, so far as he is concerned, is void. Therefore, it might be argued that there is no need for this sub-clause.
But a minor in India can be admitted to the benefits of partnership6, and a provision for defining his liability if the firm is adjudged insolvent is desirable. The object of this sub-clause is to make it clear that while the minor's share will be available to the creditors of the insolvent firm, his personal property will not be liable, and he shall not be deemed to have been adjudicated insolvent. This latter clarification is also considered to be desirable.
Sub-clause (3).-Provides that adjudication of a firm has the effect of adjudication of each partner. It has been taken from similar provisions occurring in rules under the P.T.A. and under the English Act.
Sub-clause (4).-See notes above7.
1. The insertion of a provision in the Provincial Act has been suggested by Mulla, (1958), p. 25, para. 28, p. 96, para. 90.
2. Cf. Order XXX, rule 10, C.P.C.
3. Mulla, (1958), p. 90, para. 85, Williams; p. 28.
4. Mohori Bibi v. Dharmodas, (1930) ILR 30 Cal 539 (PC).
5. Mulla, (1958), p. 89, para. 85, middle.
6. Section 30, Indian Partnership Act.
7. Notes under "General", above.
This has been taken from section 94 of the Presidency Act. There is nothing corresponding to it in the Provincial Act. Being a useful provision, it appears to be worth incorporating.
The clause follows the existing sections 4, 5 and 6 in the Presidency Act (including delegation of powers), except that detailed matters as to exercise of jurisdiction have been left to rules1.
1. As to appeals from the officer empowered under this clause, and review, see Mulla, (1958), pp. 737-738, para. 779, and p. 739, para. 782.
This is based on section 96 of the Presidency Act. The Provincial Act has no provision corresponding to this, and it may be said that without this clause, the position would be the same under the general law. But it is desirable that this provision should, by way of abundant caution, be enacted for all areas.