Case: Hans Raj Vs. Rattan Chand, Etc

1941 Mad 75 , the expression "proceedings under S. 4" had been used while in Heerabai v. Official Receiver, Krishna, AIR 1963 Andh Pra 296, the petitioner before the High Court, mother of the two insolvents, laid a claim to 1/3rd share in the properties which the Official Receiver sold on 16th April 1960 purporting to be those of the insolvents. According to the judgment "the petitioner filed I. A. No. 1900 of 1960 on 28th June 1960 purporting to be under Ss. 4 and 68 of the Provincial Insolvency Act." She also filed T. A. No. 1899 of 1960 for condoning the delay in filing this application as ordinarily "the appeal under S. 68 should have been filed by her on or before 5th July 1960". The insolvency Court held in the proceedings under S. 68 that there could be no condonation of delay but failed to ascertain with reference to the nature of I. A. No. 1900 of 1960 whether it fell under S. 4 of the Provincial Insolvency Act. The learned Judge found that the petitioner had not made any claim before the Official Receiver and even if she chose to make any such claim the Official Receiver had no power whatever to decide upon such claim petitions. It was observed:"Therefore, an application such as I. A. No. 1900 of 1960 cannot be taken in any sense to be an appeal against the act of the Official Receiver as such. On the other hand, when the petitioner herein wanted that her share should be untouched, it is certainly a case where the petitioner approached the Court to determine the question of her title which it is competent to do only under S. 4 of the Provincial Insolvency Act. Therefore, in my view, it is idle to contend that I. A. No. 1900 falls within the purview of S. 68, and that it should be taken to be an appeal and not an application which is contemplated and competent under S. 4 of the Provincial Insolvency Act." It is difficult to accept the soundness of some of the dicta in the above judgment. The Official Receivers act in selling the property on 16th April 1960 may have been wholly wrong? but if the petitioner wanted the same to be set aside, she could either have made an application under S. 68 to the Court or she could have filed a suit for relief under the ordinary law of the land. She could not, after a period of 21 days, start a proceeding in the insolvency Court describing it as one under S. 4 so as to get out of the bar of limitation imposed by S. 68. She need not have waited till the sale of property. She might have applied to the Court as soon as the receiver took the first step by attaching the property. 15. In our opinion, Jai Lal, J. correctly pointed out the correlation between Ss. 4 and 68 in Daulat Ram v. Bansilal, AIR 1937 Lah 2. The appellant had a money decree against the insolvents which he executed by attachment of a moiety of a share in a house which he alleged belonged to the judgment-debtors. This was before the order of adjudication. An objection was raised by the respondent, Bansilal that he was a purchaser for consideration of the attached property. The objection having been allowed, a suit was filed under O. 21, R. 63, C. P. C. by the attaching decree-holder and ultimately decreed, it having been held that the sale by the judgment-debtors was fraudulent as against the creditors. The receivers in insolvency then took possession of the property attached by the appellant and sold the same in the insolvency proceedings. Bansilal thereupon made an application under S. 63 on the ground that the action of the receivers was illegal. The District Judge allowed the application holding that the decree passed in the suit under O. 21, R. 63 was operative only so far as the execution proceedings were concerned and that it did not enure for the benefit of the other creditors. He, therefore, set aside the sale by the receivers. The creditors including the appellant came up in appeal from the order of the District Judge. An objection was raised by the respondents that no appeal lay without the leave either of the District Judge or of the High Court. In disposing of this, Jai Lal, J. observed:"I am inclined to think that though the District Judge was moved under S. 68 which is not one of the sections mentioned in Sch. 1, the investigation, which he is expected to make in a case like the present, should be under S. 4, Provincial Insolvency Act, and any order passed by him under S. 4 is appealable as of right to this Court." An observation similar to the above was made by the same learned Judge in Mul Raj v. Official Receiver, AIR 1937 Lah 297. This point was also brought out in Ganda Ram v. Shiv Nand Ganesh Das, AIR 1937 Lah 757. The scope of the two sections was brought out even more clearly in a judgment of the Rangoon High Court in Ma Sein v. U Mg. Mg., AIR 1934 Rang 97, where it was said:"Now, S. 4 defines the powers of the Insolvency Court to decide questions of law and fact arising in insolvency proceedings, but it does not lay down how the Court is to be moved to exercise those powers.......Of course, the powers of the Court in deciding such an application are defined in S. 4 but this does not mean that the application itself is made under S. 4, and clearly it cannot be for S. 4 contains no provision as to how the Court is, to be moved to exercise its powers, and for the mode of invoking the authority of the Court other provisions of the Act, such as Ss. 53, 54 and 68, have to be consulted."

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]5. It will be noted from the above that S. 4. sub-s. (1) lays down the ambit of the powers of the court exercising insolvency jurisdiction. Its primary object is to empower such courts to decide all questions whether of title or priority or of any nature whatsoever and whether involving matters of law or fact which may arise in any case of insolvency coming within the cognizance of the court. In other words, the aim of this provision is that all questions of title or priority arising in insolvency should primarily be disposed of by the insolvency courts so as to achieve expedition. It will be noted at once that resort to ordinary courts of law is not proscribed and at the same time the legislature provided that a person could resort to the insolvency court if the matter arose in insolvency proceedings. Under sub s. (2) however every such decision arrived at by the insolvency court was to be final and binding for all purposes as between on the one hand, the debtor and the debtors estate and, on the other hand, all claimants against him or it and all persons claiming through or under them or any of them. This provision is however subject to the other provisions of the Act and notwithstanding anything contained in any other law for the time being in force.It is also to be noted that this section does not lay down what procedure or what steps should be taken by any person who is aggrieved by any order of the insolvency court or of any act of omission or commission of the receiver7. Leaving aside the decisions which were cited at the Bar, it appears to us, on a plain reading of the sections mentioned above and in particular, Ss. 4 and 68, that there can be no doubt that a person (like the appellant before us) complaining of the receiver taking possession of or attaching property in which the insolvent has no interest, must apply for relief within 21 days of the wrongful act of the receiver. He cannot be heard to say that his application is not under S. 68 but under S. 4 and thus seek to avoid the short period of limitation prescribed under S. 68.Moreover, sub-s. (1) and sub-s. (2) of S. 4 both start with the phrase "subject to the provisions of this Act" and even if it was possible to construe that S. 4 envisaged the making of an application for relief, such application would be subject to S. 68 of the Act11. These decisions, in our opinion, do not assist the appellant on whose behalf it was argued that an application might be made either under S. 68 or under S. 4 of the Act. It is clear from the above decisions that a person complaining of the act of the receiver may either apply under S. 68 or proceed under the ordinary law of the land. Section 4 does not prescribe any application for relief under that section. Its object is to define the limits of jurisdiction of the Courts exercising powers in insolvency. It is not correct to say that a person aggrieved by an act of the receiver has the choice of making an applications under S. 4 or under S. 68. Section 4 comes into operation whenever any question of the nature mentioned therein is sought to be canvassed before a Court exercising insolvency jurisdiction. Such questions may arise because of acts or decisions of the receiver complained of. A question as to whether an insolvent has any Interest in the property attached by the receiver would fall within the purview of S. 4, but the application for the adjudication of such a question when the receiver acts otherwise than under the order of a Court would be covered by S. 68 and as such the period of limitation of twenty-one days would be attracted to any such applicationThe last portion of the above paragraph was quoted as supporting the proposition that an application lay under S. 4 of the Act. That is not what the learned Judges of the Madras High Court meant. In our view, what was meant was that the claimant might make an application to the District Judge who would under S. 4 of the Act have jurisdiction to pass a proper order thereonIt is difficult to accept the soundness of some of the dicta in the above judgment. The Official Receivers act in selling the property on 16th April 1960 may have been wholly wrong? but if the petitioner wanted the same to be set aside, she could either have made an application under S. 68 to the Court or she could have filed a suit for relief under the ordinary law of the land. She could not, after a period of 21 days, start a proceeding in the insolvency Court describing it as one under S. 4 so as to get out of the bar of limitation imposed by S. 68. She need not have waited till the sale of property. She might have applied to the Court as soon as the receiver took the first step by attaching the property15. In our opinion, Jai Lal, J. correctly pointed out the correlation between Ss. 4 and 68 in Daulat Ram v. Bansilal, AIR 1937 Lah 2The appellant had a money decree against the insolvents which he executed by attachment of a moiety of a share in a house which he alleged belonged to the. This was before the order of adjudication. An objection was raised by the respondent, Bansilal that he was a purchaser for consideration of the attached property. The objection having been allowed, a suit was filed under O. 21, R. 63, C. P. C. by the attachingr and ultimately decreed, it having been held that the sale by thes was fraudulent as against the creditors. The receivers in insolvency then took possession of the property attached by the appellant and sold the same in the insolvency proceedings. Bansilal thereupon made an application under S. 63 on the ground that the action of the receivers was illegal. The District Judge allowed the application holding that the decree passed in the suit under O. 21, R. 63 was operative only so far as the execution proceedings were concerned and that it did not enure for the benefit of the other creditors. He, therefore, set aside the sale by the receivers. The creditors including the appellant came up in appeal from the order of the District Judge. An objection was raised by the respondents that no appeal lay without the leave either of the District Judge or of the High Court. In disposing of this, Jai Lal, J. observed"I am inclined to think that though the District Judge was moved under S. 68 which is not one of the sections mentioned in Sch. 1, the investigation, which he is expected to make in a case like the present, should be under S. 4, Provincial Insolvency Act, and any order passed by him under S. 4 is appealable as of right to this Court."An observation similar to the above was made by the same learned Judge in Mul Raj v. Official Receiver, AIR 1937 Lah 297. This point was also brought out in Ganda Ram v. Shiv Nand Ganesh Das, AIR 1937 Lah 757. The scope of the two sections was brought out even more clearly in a judgment of the Rangoon High Court in Ma Sein v. U Mg. Mg., AIR 1934 Rang 97, where it was said:"Now, S. 4 defines the powers of the Insolvency Court to decide questions of law and fact arising in insolvency proceedings, but it does not lay down how the Court is to be moved to exercise those powers.......Of course, the powers of the Court in deciding such an application are defined in S. 4 but this does not mean that the application itself is made under S. 4, and clearly it cannot be for S. 4 contains no provision as to how the Court is, to be moved to exercise its powers, and for the mode of invoking the authority of the Court other provisions of the Act, such as Ss. 53, 54 and 68, have to be consulted."