Kushalbhai v National Bank of India Ltd (Criminal Appeal No. 8 of 1927) [1927] EACA 3 (1 January 1927)

## COURT OF APPEAL FOR EASTERN AFRICA.

Before SIR T. S. TOMLINSON, C. J. (Zanzibar); PICKERING, J., and SHERIDAN, J. (Kenya).

CHATURBHAI KUSHALBHAI, joint Receiver in the Insolvent Estate of the E. A. Produce Co. (Appellant) (Original Applicant)

$\boldsymbol{v}$ .

## THE NATIONAL BANK OF INDIA, Ltd. (Respondent) (Original Respondent). C. A. $8/1927$ .

Provincial Insolvency Act, 1907-Payments made between the filing of a petition and adjudication—date of order of adjudication.

$Held:$ That such payments are protected by Section 38 of the Act.

A sum of Sh. 5,000 was remitted on 4th September, 1924, by Messrs. Gillespie Brothers & Co., of London, to the Standard Bank of South Africa, Ltd., Nairobi, for the credit of the East African Produce Co. (Export Department), and on or about the 7th September, 1924, the Standard Bank of South Africa sent the above sum to the National Bank of India, Ltd., Nairobi, for the credit of the East African Produce Co.

The petition in Bankruptcy was presented on the 30th August, 1924, and an order of adjudication against the East African Produce Co. was made on the 12th September, 1924.

The National Bank of India failed to hend over the said sum of Sh. 5,000 to the Receivers who thereupon filed an application (Insolvency Cause No. 7 of 1924) for an order on the Bank to pay the sum of Sh. 5,000, and certain other monies in their possession, to the Receivers.

the 14th March, 1927, STEPHENS, J. (Kenya) gave $\mathbf{On}^-$ Judgment as follows:—

On the ruling I have already given with respect to the protection of bona fide transactions, and after hearing evidence for the National Bank of India, Ltd., I hold that the payment to them of Sh. 5,000 was a protected transaction within the meaning of the Insolvency Ordinance. Costs out of the estate.

Against this Judgment the present appeal was filed, on the grounds that: -

1. The decision of the learned Judge was wrong in law.

2. The learned Judge was wrong in holding that the date of adjudication did not relate back to the presentation of the Petition.

The learned Judge was wrong in holding that a bona 3. fide payment made by an insolvent to a creditor between the date of the petition and the date of the order of adjudication was a good payment.

Schwartze for appellant.

Hamilton for respondent.

SIR T. S. TOMLINSON, C. J.-Section 38 of the Provincial Insolvency Act which is applied to the Kenya Colony and Protectorate enacts that, subject to certain exceptions, nothing contained in the Act shall invalidate certain payments, etc., provided that any such transactions take place before the date of the order of adjudication. Under section 16 (6) of the same Act an order of adjudication shall relate back to the date of the presentation of the petition on which it is based. In this case a debtor of the insolvent transmitted money to the Standard Bank of South Africa which came into their hands shortly after the date of the petition but before adjudication. This Bank, at which the insolvent had no account, following the precedent of a former payment from the same source, paid over the money to the respondents who were the insolvent's Bankers, who appear to have credited it against the insolvent's overdraft or other indebtedness to them. After adjudication the Receivers applied for an order against the respondents for payment to them of the sum of money on the ground that under section $16$ (2) all property of the insolvent vested in them and that the vesting related back to the date of the petition. The learned Judge in the Court below held that this transaction was one of those referred to in section 38, and that having taken place before the date of the order of adjudication it was not invalidated by the other provisions of the Act.

The grounds of the appeal which has been preferred against the decision are two: That the date of adjudication relates back to the date of the presentation of the petition; and, secondly, that the Court below was wrong in holding that a bona fidepayment made by an insolvent between the date of the presentation of the petition and the date of the order of adjudication is a good payment. We are not here concerned with the merits of the dispute, and the points for decision are purely a question of law and in my view depend entirely upon the true construction to be placed on the words at the end of section 38 "the date of the order of adjudication ".

It has been contended for the appellant that the principle of relation back ought to be applied and that the date of the order of adjudication should be read as though it were the date

of the presentation of the petition, or in other words that the order of adjudication must be regarded as ante-dated. Had the expression been "before the adjudication", or "before the debtor is adjudicated " insolvent, the argument might have had some force, but I feel that I am unable to disregard the words actually used by the legislature with specific reference to the date of the order, especially when contrasted with the other expressions used in other sections of the Act. I am strengthened in this view by a comparison with the corresponding sections of the Indian Presidency Towns Insolvency Act in which the further condition as to notice is included but which is otherwise in exactly similar terms. It is true that in that Act relation back is to the act of insolvency and not to the petition, but if the doctrine of relation back applied the provision with regard to notice of an act which had not then occurred would be absurd, and it is clear that the date of the order of adjudication means exactly what it says and refers to the date upon which the order is in fact made.

It has been pointed out that this construction leaves a gap between the date of the presentation of the petition and the adjudication in which preferential payments can be made which will not be void as against the Receiver. This may be so but I do not find myself able on this ground to depart from what the legislature has so clearly enacted.

The appeal is dismissed with costs.

SHERIDAN, J.-I have had the advantage of reading the Judgment of the learned Chief Justice of Zanzibar and I concur with it. Whether wisely or unwisely the Legislature, by section 38 of the Provincial Insolvency Act, decided to protect. as against the Receiver, certain transactions taking place " before the date of the order of adjudication". One of those transactions is stated as " any payment by the insolvent to any of his creditors". There is no question of fact in issue in this appeal, merely the construction of the words of the section first quoted. The meaning to be placed on those words can in my opinion be but one, and that is that they mean literally what they say.

PICKERING, J.-In this appeal the matter for decision is what meaning is to be attached to the words "the date of the order of adjudication " where those words occur in sections 16, 34. and 38 of the Provincial Insolvency Act. In 1920 I had occasion to construe those words in the case of $Moynagh v$ . Sakunabhai and I came to the conclusion that although the apparent meaning of the words would be "the date upon which the order of adjudication was actually made ", yet because such a meaning would in practice render nugatory the terms of the preceding section (section 37), which deals with preferential payments, I came to the conclusion that the form of the words did not avoid the provision for the relation back of the effect of the order to the date of the presentation of the petition, and that the construction to be put upon the words "the date of the order of adjudication" was in fact the date of the presentation of the petition upon which an order of adjudication had been made.

In the consideration of this appeal I have come to the conclusion that the view expressed by me in that case is untenable. The words to be construed appear in section 16 (4) in connexion with the word "forthwith" which does not seem to be consistent with the meaning I attached to the words in 1920. But I have been more impressed by the terms of the corresponding section in the Presidency Insolvency Act. In section 57 of that Act the proviso runs: "Provided that any such transaction takes place before the date of the order of adjudication and that the person with whom such transaction takes place has not at the time notice of the presentation of any insolvency petition by or against the debtor". It is manifest that the wording of this proviso is quite inconsistent with any contention that the words "the date of the order of adjudication" relate back to the date of the presentation of the petition. Where the same phrase is found in complementary statutes, as the Provincial and Presidency Towns Insolvency Acts are, it is highly inexpedient that the phrase should be held to have one meaning in one statute and another meaning in the other. That section 38 was put into its present form for the protection of all payments by the insolvent to his creditors between the presentation of a petition and his adjudication is an intelligible enactment of the legislature; it is startling because it leaves the door open for preferential payments between the presentation of a petition and an adjudication.

For these reasons I agree that this appeal fails. $I$ should like to express my regret at the fate of this appeal because it would appear that I have been partly responsible for the appellant's decision to bring the matter before this Court.