Report No. 26

Clause 112

General.-This corresponds to section 17 of the Provincial Act and section 93 of the Presidency Act (subject to certain special points discussed below). The subject-matter is the continuation of proceedings on the death of debtor.

1. Effect of death.-An important point which arises in this connection is, whether the existing language in the Presidency and Provincial Acts as to the effect of deaths on pending insolvency proceedings is clear enough, and, if not, whether any changes are needed.

2. Existing provision.-Omitting, for the present, the difference in the last few words between the Presidency and Provincial Acts, it may be noted that both the Acts (section 93 of the Presidency Act and section 17 of the Provincial Act) provide that "if a debtor by or against whom an insolvency petition has been presented dies, the proceedings in the matter shall, unless the court otherwise orders, be continued.............

Section 112 of the English Act and section 36 of the Australian Act are also in the same terms.

3. Before adjudication applicability.-In decisions under the Provincial Act it has been held that section 17 applies both before and after adjudication. Thus, in a Calcutta case1 a creditor made an application for a debtor being declared insolvent and the debtor dies before the adjudication. The court ordered the proceedings to be continued in the presence of the heirs of the deceased, who were to be brought on the record for realisation, etc., of the assets.

In another Calcutta case2 a creditor presented an application (for adjudging the debtor as insolvent) to the court of the District Judge, Chittagong, which court refused to adjudicate him on the preliminary ground that the petition was filed beyond three months. An appeal against this order was filed before the High Court, but during its pendency, the creditor died and his legal heirs were brought on the record. The question was raised whether the proceedings for adjudicating the debtor as insolvent could continue after his death. The court answered it in the affirmative, relying upon section 17, and observed:

"But the matter of realisation and distribution of the property of the debtor cannot be conducted unless there is a person in whom the property is vested, and the property of the debtor would vest in the receiver only on adjudication. Section 17 therefore by necessary implication authorises the court to pass an adjudication order even after the death of the debtor".

As has been pointed out in a recent Mysore case3, the reason why an adjudication can be passed even after death is that proceedings relating to the realisation, etc., cannot be conducted unless there is person in whom the property is vested; and such vesting cannot take place without adjudication. So far as death before adjudication is concerned, the only uncertainty is that resulting from the Lahore case of Attar Chand, discussed below4.

4. Similarly, in the case of death, after adjudication also, section 17 applies5. It was on this basis that the Bombay High Court6 observed, that section 17 showed that the maxim "actio personalis moritur cum persona" had no application to insolvency proceeding, agreeing with the Allahabad view7 that an appeal against an appellate order setting aside the adjudication of an insolvent did not abate on the death of the insolvent during the pendency of the appeal in the High Court.

5. In an early case8 (Narain Singh), the Lahore High Court had held, that where a debtor is adjudged insolvent on his own petition and the creditors appeal from the order of adjudication and the debtor dies pending the appeal, the appeal abates on his death because the right to sue does not survive. In another case9, (Attar Chand) it held, that where a creditor's petition is dismissed and, during the pendency of the appeal, the debtor dies, the sons could not be impleaded as legal representatives and the appeal abated.

But in a later Full Bench case it held10 that a debtor's appeal against adjudication upon the creditor's petition did not abate on the death of the debtor. (This Full Bench case expressly over-rules the earlier case of Narain Singh, and has been supported by Mulla11). It tries to distinguish the other case of Attar Chand on the ground that in that case "....... successful party had been absolved from all manner of liability under the Insolvency Act" and "It was not therefore a question of liability surviving in consequence of an adjudication, but of the right of the creditors to re surrect the case against the representatives".

6. The second point is as to whether non-abatement is conditional on actual impleading of the legal representatives of the debtor. It has been pointed out in one case12 that under section 17 the court has discretion to continue the proceedings and for that purpose to bring the legal representatives on record, if necessary, in place of the deceased; "in such cases the question of limitation and the application of Article 177 of the Limitation Act would not arise as the provisions of Order 22, Civil Procedure Code do not apply". Of course, if the debtor dies before the adjudication, his legal representatives will practically for all purposes have to be made parties so that the adjudication may bind them.

7. Controversy summarised.-This resume of the case-law13 above shows that the controversy now survives only in relation to the Lahore High Court, and that too in respect of cases (like Attar Chand) where adjudication has been refused and an appeal filed against it. Now, if the correct rule is that the debtor's adjudication is not a matter personal to him but affects his property, which would, but for the adjudication, devolve on his heirs, it is not easy to see why this rule should not apply in cases where the court refuses to adjudicate. It would, therefore, be advisable to make it clear that the provisions of the section apply both before and after adjudication.

8. "As if he were alive".-The next point is about the difference in wording between the two Acts. The Presidency Act, following the English Act, uses the words "as if he were alive", while the Provincial Act uses the expression "so far as may be necessary, etc.". The reason for the difference in language has been explained by the Madras High Court14. As pointed out there, the words "as if he were alive" were avoided because, taken literally, they would mean, for example, that an application for discharge must be made by the debtor under section 43 of the Provincial Act within the time mentioned therein.

It was pointed out, that there were other provisions in the Act regarding conduct of the insolvent. After death, all that is necessary is to see that the assets are realised and distributed, and the court is not interested after his death in considering his conduct except as regards fraudulent preference and fraudulent transfer. In actual practice the words "as if he were alive" have not led to any difficulty under the Presidency Act. Hence those words have been adopted.

[In the notes on clauses appended to the Bill which led to the Provincial, etc., Act, 1920, the reasons were given in these words: -

"Clause 5 amends section 10 to make it clear that the object of continuing proceedings on the death of the debtor is for the purpose only of realising and distributing his property15."]

Nature of order to be passed.-A suggestion has been made that where an insolvent dies after adjudication, the law should authorise the court to pass an order of discharge, leaving the proceedings for realisation and distribution of the property to continue so long as is necessary. It is stated that this is necessary in order to terminate the insolvency proceedings, as otherwise those proceedings will continue indefinitely and have to be shown as pending proceedings in the statement which is put up by the Official Assignee periodically.

(It appears that in the case of the death of the insolvent, it is not regarded as correct to pass an order of annulment, because annulment implies usually that there is some default in the debtor. Where the insolvent has died, no question of default by him can be raised.) It is, however, considered, that this is not a matter which requires a statutory provision. So far as the power to continue the proceedings is concerned, that is amply provided for by the clause under discussion.

1. Ramesh Chandra v. Charu Chandra, AIR 1930 Cal 590.

2. lndo-Burmah Trader's Bank v. Barada Charan, AIR 1944 Cal 370 (371), left hand column (R.C. Mitter and Sharpe JJ.).

3. M.P. Basappa v. Channappagowdas, AIR 1954 Mysore 189 (Vasudevamurthy J.).

4. See notes to clause 112, para, 5.

5. Sripat Singh v. Prodyat Kumar, 1921 ILR 48 Cal 87.

6. Kanti Lal v. Rajni Kant, ILR 1942 Born 175: AIR 1942 Born 159, right hand column.

7. Piarey Lal v. Mohammad Salamatullah, ILR 1937 All 616: AIR 1937 All 435.

8. Narain Singh v. Gurbaksh Singh, ILR 9 Lah 306: AIR 1928 Lah 119.

9. Attar Chand v. Mian Muhammad Mobin, AIR 1932 Lah 121: ILR 13 Lah 396. (Harrison J.).

10. Bhagat Ram v. Firm Dhanpat Mal, AIR 1942 Lah 211 (212), right hand, 213: ILR 1942 Lah 746 (FB) (Tek Chand, Monroe and Muhammad Munir,

11. Mulla, (1958), p. 219, para. 231.

12. Ram Dayal v. Shankar Lal, ILR 1952 Hyd 196: AIR 1952 Hyd 80 FB (Sripat Rao, Qamar Hassan and Srinivas Chari (On corresponding provision in the Hyderabad Act).

13. Notes to clause 112, paras. 1-6, above.

14. Ramathai Anni v. Kanniappa Mudaliar, 1928 ILR 51 Mad 495 (501-502): AIR 1928 Mad 480.

15. See notes on clauses, the Gazette of India, 1918, Pt. V, p. 60.