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Report No. 26

Clause 136

1. This mainly follows section 120 of the Presidency Act.

2. State debts.-A question which has been discussed under this topic (under the Provincial Act) is whether section 31 (protection) applies to Crown debts1. Two principles are well-settled, (i) The Crown is not bound by any statute unless it is so expressly provided by the statute, (ii) Crown debts have priority. Section 44(1) of the Provincial Act and section 45(1) of the Presidency Act provide that the order of discharge does not release the insolvent from any debt due to the Government, and section 61 of the Provincial Act enacts that debts due to the Government shall be paid in priority.

These provisions show that the Government is to be subject to the Act, for otherwise there was no need for such provision& Section 120 of the Presidency Act provides that certain provisions of the Act are binding on the Government, and priority of debts and effect of discharge are among them. That means that the Act is not generally applicable to Crown debts. (There is nothing corresponding to section 120 in the Provincial Act.) In this state of the law, the section for protection may not, in the Presidency towns, apply to debts due to the State. It is, however, considered that the provision for protection should apply to them; and hence the clause under discussion (corresponding to section 120, Presidency Act)' enlarges its scope so as to include remedies against the person of the insolvent2.

1. See Aswin Kumar v. Dominion of India, AIR 1952 Cal 251 (Harries C.J.) and elkyab v. Raw Tun U, ILR 5 Rang 806: AIR 1928 Rang 81 (83).

2. Mulla, (1958), p. 304, middle, takes the view that section 31, Provincial Act, applies to State debts.

Clause 137

Section 82 of the Provincial Act provides that nothing in the Act shall affect the Presidency Act or apply to cases to which Chapter IV of the Dekhan Agriculturists Relief Act, 1879 is applicable. The Dekhan Agriculturists, etc., Act was repealed in the erstwhile State of Bombay by the Bombay Agricultural Debtors Relief Act, 1947 (Bombay Act 28 of 1947), section 56 as amended. Hence very little remains of the Act when the provisions peculiar to the (old) State of Bombay are omitted. However, since there are laws relating to the relief of agricultural indebtedness in almost all the States (see entry 30 of the State List in the Seventh Schedule to the Constitution), it is desirable to save the provisions of such laws. Necessary changes have been made accordingly.

The omission of the reference to the Presidency Act need not be explained.

Clause 138

General.-This is based on section 79 of the Provincial Act, and sections 112, 113 and 114 of the Presidency Act.

Supreme Court.-It is considered that, in order to achieve uniformity in the rules, the rules should be made by the Supreme Court (after consulting the High Courts) instead of by the High Courts as at present. Compare section 643, Companies Act. Necessary change has been proposed.

Sub-clause (1).-Needs no further comments.

Sub-clause (2).-Consequential changes have been made.

Section 79(2)(c) of the Provincial Act speaks of the procedure to be followed where the debtor is a firm. As to such cases, a separate clause1 contains a specific provision, and hence the language of section 112(2)(c). Presidency Act-"conduct of proceedings under this Act in the name of a firm"-will suffice and has been adopted2.

As a provision for giving insolvency notice has been added3, power has been given to make rules as to the form and manner of giving such notice. Compare section 79(2)(aa) of the Provincial Act as amended in Bombay by Bombay Act 15 of 1939. Power to make rules regarding costs of maintaining the debtor in prison is added4.

Sub-clause (3).-Follows modern legislative practice, by omitting the words "as if enacted in this Act", etc.

Sub-clause (4).-Compare section 643(3), Companies Act, saving existing rules.

1. Clause 108.

2. This is thus consequential on clause 108.

3. See clause 3(3).

4. This is at present dealt with in section 76, Provincial Act. It is considered that it may be left to rules.

Clause 139

This is a repeal clause. It has been considered desirable to repeal local Amending Acts also, expressly.

Elaborate savings provisions for old insolvencies, as well as transitional provisions, have been considered necessary and are embodied in the clause.

First Schedule

1. Deals with procedure at meetings and follows the First Schedule to the Presidency Act. There are no such detailed provisions in the Provincial Act.

2. In rule 8, the words "any meeting" have been replaced by "every meeting of creditors", for precision.

3. In rule 4(1), the period of notice is raised from 3 to 7 days, as the existing period is rather short.

4. In rule 12, for "security", the words "in respect of any security" are substituted, for precision.

Second Schedule

General.-This is based on the Presidency Act, Second Schedule. Contrast section 33(1), main para., Provincial Act. Under that section, it is the court that has to frame the Schedule. Under section 80(1)(b) of that Act, that is a matter which can be delegated to the Official Receiver, in which case it is he who has to decide whether the debt should be included in the Schedule or not, his decision being subject to appeal to the court under section 68 of the Act. The question whether, now that the appointment of an Official Receiver is obligatory, the work of framing the Schedule should not be entrusted in the first instance to him has been considered and it has been decided to adopt the scheme in the Presidency Act.

Rules 1-27.-Follow the Presidency Act. Rule 5 is elaborated as in the English Act1.

Rule 28.-Follows section 33(3), Provincial Act, to some extent. There is no such provision2 in the Presidency Act.

Section 33(3) of the Provincial Act provides that a creditor may tender proof of his debt at any time before the discharge of the insolvent. On the language of this section, the question has been discussed whether a creditor is entitled to prove his claim after an order of discharge has been made. One view is, that so long as there are assets available for distribution in an insolvency, the creditor is entitled to come in and prove his debt, that he cannot disturb dividends already made, but that he is entitled to come in and prove his debt, that he cannot disturb dividends already made, but that he is entitled to participate in the future dividends and in the distribution of these dividends he is entitled to be paid an amount equal to what had been paid to the other creditors who had proved their debts.

That is the law as laid down in the English courts3-4, and is the view taken in Sivasubramania Pillai v. The Ethiappa Pillai, 1924 ILR 47 Mad 120: AIR 1924 Mad 163 and Arpin Das v. Marchi Telineee, ILR (1937) 1 Cal 127: AIR 1936 Cal 434. The contrary view has been taken by the Allahabad High Court in Jagdamba Pande v. Ram Khelawan Upadiya, ILR 1942 All 848 and by the Rangoon High Court in Bank of Chettinad Ltd. v. Ko Tin, ILR 14 Rang 529 : AIR 1936 Rang 393, and is based on the language of section 64, Provincial Act. A creditor should be allowed to prove the debt and share in the distribution so long as there are any assets remaining to be distributed. It is only when a final dividend has been declared that his right must be held to cease. To make this clear beyond all controversy, for the words "before the discharge of the insolvent", words referring to the declaration of the final dividend have been substituted.

Section 33(3), Provincial Act, speaks of notice to the insolvent; but the insolvent should not have a right to contest the proof. That part has, therefore, been removed. The Official Assignee is the proper person to be heard5.

Third Schedule

1. This deals with orders which are appealable to the High Courts, and follows the Schedule to the Provincial Act. There is no such Schedule in the Presidency Act, which is confined to High Courts.

2. Decision of a dispute as to whether a person summoned is indebted, etc., to the insolvent or is in possession of property of the insolvent is made appealable, as such decisions decide rights of third parties.

1. See Williams, p. 558.

2. As to practice in Presidency towns, see Mulla, (1958), p. 416, and para. 446 and also p. 697, para. 707.

3. Vide the judgment of Vaughan Williams, LJ. in Re Mc Murdo, (1902) 2 Ch 684 (699).

4. Mulla, (1958), p. 697.

5. Cf recommendation of the Civil Justice Committee, 1925, Ch 14, para. 21.

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