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Saturday, February 13, 2016

Order 7 Rule 11 r/w.Sec.151 CPC, for rejection of plaint on the ground that the same is barred under law. It is the case of petitioner that he has already filed insolvency petition which is pending in I.P.No.34 of 2010, seeking to declare him as insolvent and soon after receipt of summons in the aforesaid I.P., the 1st respondent/plaintiff has filed suit for recovery of money. Precisely, it is the case of petitioner that in view of pendency of insolvency proceedings in I.P.No.34 of 2010, the suit filed by the 1st respondent is barred under Section 28(2) of the Provincial Insolvency Act, 1920.=Section 28 deals with the effect of an order of adjudication by the competent Court. From a reading of the provision under Section 28(2) of the said Act, it is clear that, on making of an order of adjudication, the whole of the property of the insolvent shall vest in the Court or in a receiver as provided in the said Section and shall become divisible among the creditors, and thereafter, after adjudication, it is not open to any creditor to commence any suit or other legal proceeding, except with the leave of the Court and on such terms as the Court may impose. It is clear from the said provision that Section 28(2) comes into effect only after adjudication of the application filed by the applicant under the provisions of the Provincial Insolvency Act, 1920. Therefore, after adjudication of the application filed by the applicant seeking to declare him as insolvent and during pendency of further proceedings for division of properties to the creditors, no creditor can institute any suit or commence any legal proceedings without the leave of the Court. Pendency of proceedings as referred under Section 28(2) of the Act refers to the pendency of proceedings subsequent to adjudication of the application, but not on mere filing of application seeking declaration of applicant as insolvent. 6. Coming to the judgments relied on by the learned counsel for petitioner, Kalamalla Babakkas case (2 supra) deals with the issue of date of vesting of properties of insolvent in the receiver of the Court. Further, in Pentala Githavardhana Raos case (1 supra), a Division Bench of this Court has considered the scope of Section 28(2) of the Act and held that the intendment and purpose of Section 28(2) is broadly two-fold; (i) to make the entire estate of the insolvent vest in the Court or in a receiver the moment an order of adjudication is made and to make it available for distribution among the body of creditors, and (ii) to prohibit any creditor of the insolvent from proceeding against his property in respect of his debt or commence any suit or other legal proceeding, without the leave of the insolvency Court during the pendency of the insolvency proceedings. So, even in this judgment, it is not held that the provision under Section 28(2) of the Act comes into play on mere filing of application for declaration of petitioner as insolvent.

HONBLE SRI JUSTICE R. SUBHASH REDDY        

CIVIL REVISION PETITION No.2003 of 2015  

19-06-2015

M. Linga Murthy...Petitioner
       
R.M.Rama Devi & others...Respondents.  

For petitioner :Sri M. Satish Kumar, Advocate.

For Respondents:None appeared.

<Gist:

>Head Note:

?CITATIONS:

1. AIR 1973 AP 245
2. AIR 1973 AP 312


HONBLE SRI JUSTICE R. SUBHASH REDDY        

CIVIL REVISION PETITION No.2003 of 2015  

ORDER :
        This civil revision petition is filed under Article 227 of the
Constitution of India, by the petitioner in I.A.No.777 of 2014 in
O.S.No.2577 of 2010, aggrieved by order dated 03.02.2015, passed by
the V-Senior Civil Judge, City Civil Court, Hyderabad.
2.      Respondent No.1 herein has filed the aforesaid suit in
O.S.No.2577 of 2010 against the petitioner herein and three others, for
recovery of an amount of Rs.5,00,000/-.  In the aforesaid suit, the
petitioner/1st defendant has filed the present application in I.A.No.777
of 2014 under Order 7 Rule 11 r/w.Sec.151 CPC, for rejection of
plaint on the ground that the same is barred under law.  It is the case
of petitioner that he has already filed insolvency petition which is
pending in I.P.No.34 of 2010, seeking to declare him as insolvent and
soon after receipt of summons in the aforesaid I.P., the 1st
respondent/plaintiff has filed suit for recovery of money.  Precisely,
it is the case of petitioner that in view of pendency of insolvency
proceedings in I.P.No.34 of 2010, the suit filed by the 1st respondent is
barred under Section 28(2) of the Provincial Insolvency Act, 1920.
3.      The 1st respondent herein has filed counter affidavit in the I.A.,
denying the various allegations made by the petitioner and specifically
pleading that the suit is filed in the year 2010 and after sufficiently
dragging the proceedings for a long time, only to protract the
litigation, the present application is filed though there are no grounds
for rejection of plaint.  It is the case of 1st respondent/plaintiff that in
the absence of any adjudication in the insolvency application, there is
no need to obtain leave of the Court to file the suit.  The civil Court,
by impugned order dated 03.02.2015, has dismissed the petition.  As
against the same, the present revision is filed.
4.      In this civil revision petition, it is contended by Sri M.Satish
Kumar, learned counsel appearing for petitioner that since the
insolvency petition filed by the petitioner is pending consideration, in
the absence of obtaining leave from the insolvency Court, it is not
open to any creditor to file a suit and pursue the same, and in this
case, as there is no leave granted by the competent Court, the suit filed
by the 1st respondent is barred under law.  It is submitted that in view
of the provision under Order VII Rule 11(d) of CPC, the Court below
ought to have rejected the plaint by allowing the petition filed by the
petitioner.  Learned counsel, in support of his contentions, has placed
reliance on the Division-Bench-judgments of this Court in Pentala
Githavardhana Rao & others v. The Andhra Bank Ltd. & others
and in Kalamalla Babakka & another v. Official Receiver,
Cuddapah & another .
5.      Having perused the affidavit and counter affidavit and on
hearing the learned counsel, I have closely examined the provision
under Section 28 of the Provincial Insolvency Act, 1920.  Section 28
deals with the effect of an order of adjudication by the competent
Court.  From a reading of the provision under Section 28(2) of the
said Act, it is clear that, on making of an order of adjudication, the
whole of the property of the insolvent shall vest in the Court or in a
receiver as provided in the said Section and shall become divisible
among the creditors, and thereafter, after adjudication, it is not open to
any creditor to commence any suit or other legal proceeding, except
with the leave of the Court and on such terms as the Court may
impose.  It is clear from the said provision that Section 28(2) comes
into effect only after adjudication of the application filed by the
applicant under the provisions of the Provincial Insolvency Act, 1920.
Therefore, after adjudication of the application filed by the applicant
seeking to declare him as insolvent and during pendency of further
proceedings for division of properties to the creditors, no creditor can
institute any suit or commence any legal proceedings without the
leave of the Court.  Pendency of proceedings as referred under Section
28(2) of the Act refers to the pendency of proceedings subsequent to
adjudication of the application, but not on mere filing of application
seeking declaration of applicant as insolvent.
6.      Coming to the judgments relied on by the learned counsel for
petitioner, Kalamalla Babakkas case (2 supra) deals with the issue
of date of vesting of properties of insolvent in the receiver of the
Court.  Further, in Pentala Githavardhana Raos case (1 supra), a
Division Bench of this Court has considered the scope of Section
28(2) of the Act and held that the intendment and purpose of Section
28(2) is broadly two-fold; (i) to make the entire estate of the insolvent
vest in the Court or in a receiver the moment an order of adjudication
is made and to make it available for distribution among the body of
creditors, and (ii) to prohibit any creditor of the insolvent from
proceeding against his property in respect of his debt or commence
any suit or other legal proceeding, without the leave of the insolvency
Court during the pendency of the insolvency proceedings.  So, even in
this judgment, it is not held that the provision under Section 28(2) of
the Act comes into play on mere filing of application for declaration
of petitioner as insolvent.  Both the aforesaid judgments would not
render any assistance in support of the case of petitioner in the present
case, as much as the application of the petitioner seeking declaration
as insolvent, is still pending and the same is not yet adjudicated.
Apart from the same, it is clear from the material on record that the
suit is filed in the year 2010 and nearly two long years after filing of
the suit, written statement is filed and instead of proceeding with trial
in the suit, it appears, the petitioner herein is trying to protract the
litigation by filing this kind of applications nearly after more than 3
years of filing suit.
7.      For the aforesaid reasons, I do not find merit in this revision
and the same is accordingly dismissed.  No costs.
     Pending miscellaneous applications, if any, shall stand closed.
__________________  
R. SUBHASH REDDY, J    
19th June 2015

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