Katragadda Sreeramamma v. Official Receiver

1. This is an appeal against the order of remand passed by the Additional Subordinate Judge of Tenali. An objection was raised in the lower appellate court that as leave of the insolvency court was not obtained under Section 28(2) of the Provincial Insolvency Act, the suit was not maintainable. The appellate Judge permitted the objection to be taken even though it was not raised in the trial court and remanded the case, to give an opportunity to the plaintiff-appellant herein to meet that objection.

2. The main argument addressed by Sri B. Punyakoti Chetty, the learned advocate for the appellant is that, as the objection was not taken in the trial court, the objection must be deemed to have been waived, as held by Bardswell, J. in Satyamma v. Official Receiver, Kistna District 38 Law Weekly 891.. Section 28(2) of the Provincial Insolvency Act is in the following terms:

“On the making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as hereinafter provided and shall income divisible among the creditors and thereafter, except as provided by this Act, no creditor to whom the insolent is indebted in respect of any debt provable under this Act shall during the pendency of the insolvency proceedings have any remedy against the property of the insolvent in respect of the debt, or commence any suit or other legal proceeding, except with the leave of the court and on such terms as the court may impose.”

3. It is clear from the terms thereof that as on the making of an order of adjudication, the estate vests in the receiver, no suit shall be commenced except with the leave of the court. The terms of the section are mandatory and, in my opinion, there can be no question of any waiver of objections to the maintanability of the suit on the part of the parties so as to nullify the effect of the section. Bardswell, J. who took a different view, however states at page 895 thus:—

“No definite authority has been shown as to whether there could be a waiver in such a case…………”

4. No decision has been cited before me in support of that proposition excepting the decision of Bardswell, J. and I do not agree with that decision as in my view the language of section 28(2) is quite clear and there can be no waiver of the mandatory requirements of that section.

5. The learned advocate for the appellant next drew my attention to the decision in Subrahmanyam v. Narasimham in support of the proposition that the absence of leave under Section 16 of the Provincial Insolvency Act (Act III of 1907) corresponding to Section 28 of the present Act, does not render the decree passed a nullity. But in Davood Mohideen Rowther v. Sahabdeen Sahib 1937 2 M.L.J 223. a Bench of the Madras High Court dissented from the decision in Subrahmanyam v. Narasimham and held that on a proper construction of sections 28 and 29 of the Provincial Insolvency Act, the suit is not maintainable, unless leave of the Insolvency Court is obtained prior to its institution. I follow the reasoning of the later judgment and hold that the decision of the lower appellate court is correct.

6. In the result, the Civil Miscellaneous Appeal fails, and is dismissed with costs. No leave.

G.R.N

7. Appeal dismissed.