KAZIM ALI SHAH Versus UNITED BANK LIMITED

The facts relevant for the purpose of disposal of this petition revision of the order of the learned Senior Civil Judge, Faisalabad dated the 25th April, 1983, dismissing the insolvency petition under section 7 of the Provincial Insolvency Act, 1920, moved by the petitioner for getting himself adjudged as insolvent and of the learned District Judge, Faisalabad, dated the 25th October, 1986, affirming in appeal the decision of the learned trial Court may be shortly stated. Kazim Ali Shah, petitioner, secured some loan from United Bank Limited, respondent, against the pledge of goods. For his failure to repay the loan the respondent initiated action against him and obtained decree for realization of Rs.1,70,290.00 from the Special Court (Banking), Rawalpindi. The petitioner, expressing his inability to pay the decretal amount, filed insolvency petition. The respondent contested the petition and, inter alia, took exception to its maintainability in view of the provisions of section 8 of the Provincial Insolvency Act, 1920. The learned trial and the appellant Courts below, influenced by the respondent's objection, formed the view that no insolvency petition lay against the respondent which was a company registered under the Companies Act, 1908.

2. The learned counsel for the petitioner contends that the learned Courts below did not properly grasp the import of the provisions of section 8 of the Provincial Insolvency Act, 1920, which prevent filing of insolvency petition for getting any corporation, association or company registered under any enactment adjudged insolvent but does not debar any person from initiating insolvency action in respect of the debt that he owes to such a corporation, association or company. He maintains that section 8 does not imply as has been thought of by the learned Courts, that no petition by a person for getting himself adjudged as insolvent lies when a corporation or company is, for procedural requirements, arrayed as respondent in the petition.

3. The philosophy of section 8, as explained in Ringwood's celebrated treatise on the Principles of Bankruptcy, is that the winding up affairs of a corporation or company are regulated by the procedure laid down in the Companies Act and, therefore, it is not made amenable to the procedure provided in the Bankruptcy (Insolvency) Act. This fact is also evident from the perusal of para 219 under the title Bankruptcy in Volume 3 of Halsbury's Laws of England (fourth edition) which exempts a corporation, association or company registered under the Companies Act from the liability of bankruptcy proceedings under the Bankruptcy Act. The view of the learned Courts does not fit in, with the true interpretation of the provisions of section 8 of the Insolvency Act. The mere fact that the respondent company was impleaded as party to the petition and the petitioner wanted to escape liability of payment of its debt would not have rendered the petitioner's application incompetent. The impugned orders of the learned Courts being not in consonance with law cannot stand the test of scrutiny by this Court. This petition is accepted, the impugned orders are set aside and the case is remanded to the learned trial Court for deciding it afresh according to law. There will be no order as to costs.

H.B.T./K‑72/L Case remanded.