Judgment:
ORDER
S. Ananda Reddy, J.
1. This civil revision petition is filed by the petitioner/plaintiff aggrieved by the order passed by the Additional Senior Civil Judge, Srikakulam in I.A.No. 250/2000 in O.S. No. 52/1997, dated 24-11-2000, under which an application filed under Order XIV Rule 12(2) read with Section 151 C.P.C., praying the Court to frame preliminary issue regarding the maintainability of the suit, was allowed, and consequently, it was declared that the suit is specifically barred and not maintainable.
2. The petitioner herein filed the suit for recovery of certain amount from the respondents, who were impleaded as defendants in the suit. The said suit was filed in the year 1997, which was numbered as O.S.No. 52/1997 for recovery of amount of Rs. 93,940/- with interest. During the pendency of the suit, it is stated that the respondents 1 and 2, who were the defendants, filed I.P.No. 1/1998 and I.P.No. 2/1998, seeking declaration that they have become insolvents, and the Principal Senior Civil Judge, Srikakulam, before whom those LPs were filed, allowed the said petitions declaring them as insolvents, by orders dated 27-6-2000 and 31-12-1999 respectively.
3. It is the case of the respondents that in the said I.Ps. the present plaintiff was impleaded as 156th respondent and the suit schedule property, being a house bearing Door No. 3-3/1-21, Indiranagar Colony, Konna Veedhi, near Bhimeswaraswamy Temple of Srikakulam was shown as the schedule properties in the said I.Ps. In view of the declaration of the respondents/defendants as insolvents, the present suit, filed for recovery of money, cannot be proceeded with; therefore, I.A.No. 250/2000 was filed seeking to declare the maintainability of the suit as a preliminary issue. The said application was contested by the petitioner/plaintiff, contending that the suit was filed much before the filing of the insolvency petitions and in fact, the plaintiff has obtained temporary injunction against the above referred schedule property. In view of the fact that the present suit was filed long before filing of the insolvency petitions, as well as the declaratory orders, the present suit is not affected or barred by any of the specific provisions, therefore, sought to dismiss the application.
4. The Court below heard elaborately by referring to various decisions, which are not relevant for the purpose of deciding the issue, as to the maintainability of the suit, even after adjudication of the defendants as insolvents, and finally held that in view of the fact that the defendants are declared as insolvents, therefore, the plaintiff is not entitled to proceed with the suit, in view of the provisions of Sub-section (2) of Section 28 of the Provincial Insolvency Act, 1920 (for short 'the Act'). The Court below also has come to the conclusion that since the schedule property vested in the Court or official receiver, the plaintiff cannot proceed with the said schedule property, therefore the application was allowed. Aggrieved by the same, the plaintiff has come up with the present revision petition.
5. Sri T. Rajesekhar Rao, Counsel for the petitioner, contended that the Court below has committed grave error in not only framing an issue in terms of Order XIV, but also in deciding against the plaintiff, holding that the suit is not maintainable. It is contended by the learned Counsel that the present suit was instituted long before the filing of the insolvency petitions, as well as declaratory orders, passed by the Court. Insofar as the proceedings, which are already instituted against the insolvents, are not affected. The learned Counsel also contended what is prohibited by Section 28(2) of the Act is only institution of any proceedings without the leave of the Court. Since this proceeding has already been instituted much before the insolvency proceedings, such requirement is not to be complied with, as it is incapable of compliance. The learned Counsel also contended that since there is an attachment of the suit schedule property, the petitioner/plaintiff would be treated as a secured creditor of the insolvent, therefore, by virtue of provisions of Section 28(6) of the Act, the plaintiff is entitled not only to proceed with the suit, but also to recover the decretal debt, if a decree is passed by proceeding against the property attached during the pendency of the suit. The learned Counsel, in support of his contentions, relied upon decisions in K. Somaraju v. Ch. L. Satyanarayana : 1998(2)ALD96 , Vasavi and Company v. Nampally Padma : 1999(2)ALD309 and Sankar Ram and Company v. Kasi Naicker 2003 AIR SCW 3732.
6. Though notices are served on the respondents, none appeared, and therefore, the revision petition is disposed of on merits.
7. The simple issue in the present revision petition is whether the suit, which was filed prior to the filing of the insolvency petitions, can be proceeded with or is there any specific bar to proceed with such suit.
8. Admittedly, the present suit was filed in the year 1997, being O.S. No. 52/1997. Subsequent to the filing of the present suit, the defendants filed I.P.No. 1/1998 and I.P.No. 2/1998 and they were declared as insolvents by proceedings of the Principal Senior Civil Judge, Srikakulam, dated 27-6-2000 and 31-12-1999 respectively. Consequent to the said adjudication of the defendants as insolvents, they have filed the present application, seeking declaration that the present suit is not maintainable in terms of Section 28(2) of the Act. For the sake of convenience, the same is extracted here :
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 become divisible among the creditors, and thereafter, except as provided by this Act, no creditor to whom the insolvent 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.
9. A perusal of the above provision shows that on making an order of adjudication, the whole of the property of insolvent shall vest in the Court or with the Official Receiver, and thereafter, except as provided under the Act, no creditor to whom the insolvent is indebted which is provable as provided under the Act, shall commence a suit or other legal proceedings, except with the leave of the Court and on such terms as the Court may impose. But, however, with reference to the secured creditors, Sub-section (6) of the Section 28 of the Act makes an exception, giving liberty to proceed against the security as the secured creditor thinks it appropriate for realization of the secured debt. From the above provision, it is clear that what is barred is from the institution of a suit or other legal proceedings after making of an order of adjudication except with the leave of the Court, but there is no specific provision under the Act, which bars an already instituted suit or other legal proceedings. Therefore, though the respondents relied upon Section 28(2) of the Act to contend that there is a bar to proceed with the suit instituted by the petitioner, which was accepted by the Court below, but a perusal of the said provision shows that there is no such prohibition or bar from proceeding with an already instituted suit even by the date of the filling of the insolvency petition, leave alone the adjudication of the defendants as insolvents.
10. Though the learned Counsel for the petitioner relied upon the judgments referred to earlier, but none of the judgments are specifically dealing with the issue in question. The first decision in the case of K, Somaraju v. Ch. L. Satyanarayana (supra), is dealing with a suit filed by a secured creditor in terms of Section 28(6) of the Act, where it was held that the secured creditor has liberty to proceed with for realization of the decretal amount by proceeding against the properties of the insolvent. The second decision in the case of Vasavi and Company v. Nampally Padma (supra), is a case where an order was passed in a review application, considering the provision of Sections 2(e) and 28(6) of the Act and Order 38 Rules 5 and 11 of C.P.C. In this case, a creditor, who obtained an attachment before judgment, sought to be proceeded with after the decree, on the ground that the said attachment passed before the judgment would continue and in that process, the decree holder would become a secured creditor in view of an order or attachment, that was passed prior to the decree, which continued after the decree. Though the Counsel for the petitioner relied upon the said judgment, contending that there is an order of attachment in the present case also, therefore, the petitioner/plaintiff should be treated as a secured creditor, but the said contention is clearly devoid of merit. The impugned order shows that only an injunction order was obtained by the petitioner/plaintiff against the respondents in respect of the suit schedule property. Further, a perusal of the definition of 'Secured Creditor' as contained in Clause 2(1)(e) shows 'Secured Creditor' means a person holding a mortgage, charge or lien on the property of the debtor or any part thereof as a security for a debt due to him from the debtor. It does not refer to any order of attachment as is contended by the Counsel for the petitioner. Further it was specifically held in Smt. Kamala Bala Dasi v. Surendra Nath Ganguly AIR 1937 Cal. 517, that existence of an attachment in favour of a creditor does not constitute that creditor a secured creditor. An attachment only means that the property in respect of which it is made is not free, at any rate, to this extent that it cannot be made the subject of a private sale. In view of the above decision, as well as absence of any reference to an order of attachment in the definition of 'Secured Creditor', there is no merit in the contention of the petitioner that the petitioner/plaintiff can be treated as 'Secured Creditor'.
11. The third decision referred to by the Apex Court in Sankar Ram and Company v. Kasi Naicker (supra), is a case dealing with the transfer of asset made by the debtor/insolvent in favour of third party/bona fide purchaser. It was held that Section 55 of the Act protects such bona fide transferee for consideration without notice of the pendency of insolvency proceedings. Therefore, the above decision, relied upon by the Counsel for the petitioner, is not of any assistance in support of his contention as to the maintainability of the suit, but however, as already referred to the provisions of Sub-section (2) of Section 28 of the Act, the bar/restriction as to the institution of the suit of legal proceedings applies only to the proceedings, which are sought to be instituted after the adjudication of the debtor as an insolvent, but not before the adjudication as such insolvent.
12. In the present case, admittedly, the suit was instituted long before the adjudication, as well as institution of insolvency proceedings. Therefore, the bar has no application to the present suit. The Court below was in error in applying the provisions of Section 28(2) of the Act to the present suit.
13. Under the above circumstances, the impugned order is set aside and the Court below is directed to proceed with the suit and adjudicate the same, however, after impleading or issuing notice to the official receiver.
14. The civil revision petition is, accordingly, allowed. No order as to costs.