Bombay High Court
Nagindas Bhukhandas vs Ghelabhai Gulabdas on 1 December, 1919
Equivalent citations: (1920)ILR 64BOM673
JUDGMENT Crump, J.
1. The appellant in this case appeals against an order of the District Judge of Surat sentencing him to three months' simple imprisonment under Section 43 of the Provincial Insolvency Act (III of 1907).
2. The facts are shortly as follows: The appellant Nagindas was in the employ of the B. B. & C.1: Railway Company. On November 3, 1909, he was adjudged an insolvent under Section 16 of the Act, and a Receiver was appointed. In January 1918, he resigned his-appointment with the Railway Company and drew from them a Sum of Rs. 2,000 odd which stood to his credit in the books of the Railway Provident Fund. This money was not paid over to the Receiver and in the lowers, Court it was alleged that Rs. 1,600 out of this sum had been paid by the insolvent to his wife. It is with reference to this transaction that the learned District Judge has held him guilty of a fraudulent act within the meaning of Section 43 (2) of the Act.
3. The reasoning of the learned District Judge may be summarized as follows : The protection afforded to the monies in the Provident Fund by Section 16 (2) (a) of this Act ceased as soon as these monies came into the hands of the insolvent, and they forthwith vested in the Receiver and became divisible among the creditors as provided by Section 16(4). But in accordance with the doctrine, in Cohen v. Mitchell (1890) 25 Q.B.D. 262 the insolvent was entitled to retain the money received from the Provident Fund unless and until the Receiver intervened, and had he merely retained them he would not have been guilty of any fraud. But he had advanced a false story to prove that the money had been paid to his wife in satisfaction' of a legal claim. This allegation amounted to a fraudulent transfer. punishable under Section 43.
4. The case of Cohen v. Mitchell (1890) 25 Q.B.D. 262 is not a decision on the Provincial Insolvency Act but on the English bankruptcy Act (46 & 47 Vict. c. 52), and the decisions on which the learned District Judge has relied for extending the applicability of the doctrine therein laid down to the case before him are decisions incases arising in the Presidency Towns prior to the Presidency Towns Insolvency Act 1909. These cases are governed by the provisions of the Indian Insolvency Act of 1848. It is, therefore, necessary in the first instance to examine the terras of the relevant Statute.
5. It is not disputed that the deposit with which we are now concerned was a compulsory deposit as defined in Section 2 of the Provident Funds Act 1897, and it is clear that at the date of the adjudication order it was not at the disposal of the insolvent for his own benefit. Therefore it was not at that date "property" within the definition contained in Section 2...(1)(e) of the Provincial Insolvency Act and did not, therefore vest, in the Receiver under Section 16 (2). But, apart from the provisions of Section 4 of the Provident Funds Act, 1897, it became "property "as soon as the money was paid to the insolvent, and was thus property acquired by him after the date of the order of adjudication. Under Section 16 (4) such property'" shall fort with, vest in the Court or Receiver and become divisible among the creditors in accordance with provisions of Sub-section (2), "Clause (a)". At first sight it would appear that these words in their literal construction are free from any doubt.
6. But there are grounds for holding that these words should not be literally construed. In-Cohen v. Mitchell (1890) 25 Q.B.D. 262 the Court declined to follow the literal construction of Sections 44 and 54 of the English Bankruptcy Act on the ground of inconvenience and the Courts in India in dealing with the analogous provisions of Section 7 of the Indian Insolvency Act (11 & ,12 Vict. c. 24 have allowed themselves the same measure of freedom"' (aee Alimahmad v. Vadilal . These Acts are in pari materia, and the considerations which. have led the Courts to reject a literal construction are equally present in the case of the Provincial Insolvency Act. Nor is there so great a difference between the words employed by the Legislature as to permit of any distinction. It mast therefore follow that in the present case also the doctrine in Cohen v; Mitchell (1890) 25 Q.B.D. 262 is applicable.
7. But it remains to consider the effect of Section 4 of the Provident funds Act, 1897. So far as the section bears upon the facts of this case it runs as follows: "Neither the Official Assignee nor a Receiver appointed under Chapter XX of the Code of Civil Procedure shall be entitled to, or have any claim on any such compulsory deposit (i.e., any compulsory deposit in any Railway Provident Fund.)" By virtue of Section 59 of the Provincial Insolvency Act the reference to Chapter XX of the Code of Civil Procedure must, for the purposes of this case, be construed as applying to section l6 of the former Act. What then is the force of the words shall be entitled to or have any claim on any such-compulsory deposit"? "We are, not here concerned with cases of attachment under a. decree or order of a Court, and it is unnecessary to refer to the provisions of the code of Civil Procedure to which reference is. made in Section 16 of the Provincial Insolvency Act, We have a specific provision applying directly to the case of a Receiver appointed under that Act! The question is whether the learned District Judge is right in holding that the protection afforded by the section ceases when the money comes into the hands, of the depositor. In my opinion that is too restricted a construction. The words used are very wide. No Receiver has any claim on such compulsory deposits. If that is so how can he claim to receive the money when it is paid into the hands of the depositor? The case of Official Assignee of Madras v. Mary Dalgairns (1902) 26 Mad. 440 is here in point. That decision was prior to the Amendment of the Provident Funds Act in 1903 whereby Clause 2 was added to Section 4, and is therefore a decision as to the effect of Clause (1) of the section. It was held that the effect of Clause (1) was to deprive the Official Assignee of the right which had otherwise vested in him to receive the sum standing to the credit of the insolvent on the insolvent's retirement from the service. That decision is with reference to Section 7 of the Indian Insolvency Act, but it is equally applicable to the present case. In my opinion that decision is correct and should be followed. The result is that neither the Receiver nor the creditors have any claim to the money drawn by the insolvent, and therefore there could be no fraudulent dealing such as is made punishable by Section 43 of the Provincial Insolvency Act.
8. In this view of the case it is unnecessary to deter-.mine whether on the basis of the findings of the X) strict Judge any fraudulent dealing is established. It may however be remarked that it is difficult to reject the defence specifically pleaded by the insolvent that he was under a bona fide belief that the amount was not attachable and consequently did not vest in the Receiver. Even if it be assumed that the learned District Judge has correctly apprehended the law, the point is surrounded with so much doubt that the insolvent may well have entertained a bona fide belief that the amount in question, was entirely at his disposal.
9. For these reasons I would set aside the order of imprisonment. The respondent to bear the costs throughout. The bail bond to be discharged.
Shah, J.
10. I concur.