M/S.Uma Trade Logistics vs Vegesna Kamala
2023 Latest Caselaw 1225 AP

                                                                                RC,J
                                                                  CRP No.212 of 2023
                                          1

                    HON'BLE SRI JUSTICE RAVI CHEEMALAPATI

                    CIVIL REVISION PETITION No. 212 of 2023

ORDER:

The present Revision Petition is filed aggrieved by the order dated

18.10.2022 passed in I.P.S.R.No.1348 of 2022 on the file of the Court of

the learned Senior Civil Judge, Narasapur, West Godavari District.

2. The second petitioner is the Managing Partner of the 1st

petitioner, which is a registered firm registered under the Indian

partnership Act. The petitioners filed Insolvency Petition on the file of the

Court of the learned Senior Civil Judge, Narsapur under Sections 10 and 13

of the Provincial Insolvency Act, 1920 against the respondents to declare

the petitioners as insolvents. At the time of scrutiny, the Court returned

the petition raising an objection regarding its maintainability in view of the

decision in Tummalacherla Srinivasa Rao v.Sri Krishna Tulasi

Theatre, Pedana, Krishna District and 10 others1.

3. Aggrieved thereby, the petitioner preferred this revision petition,

contending that the court below erred in not taking on file the Insolvency

Petition on the ground that no Insolvency Petition can be instituted by the

stake holders of the firm as no rules were framed under Section 79(2)(c)

. (2013) 3 ALD 545 RC,J CRP No.212 of 2023

of the Provincial Insolvency Act, 1920 ('Act', for short), relying on the

citation in Tummalacherla Srinivasa Rao vs. Sri Krishna Tulasi,

which is per-incuriam, since the earlier judgment in Kancherla Achiraju

vs. Kusumanchi Rayulu 2 is neither referred nor taken into

consideration.

3. Heard Sri D.V.V.S.S.N.H.Bhujanga Rao, learned counsel for the

revision petitioner.

4. The learned counsel for the petitioner, inter alia, contends that in

Kancherla Achiraju this Court has clearly held that partnership firm can

be proceeded under the Act and the petitions can be filed by or against a

firm under Rule 28, however the said decision was neither referred to nor

taken into consideration in Tummalacherla Srinivasa Rao , wherein it

was held that since no rules under Section 79(2)(c) of the Provincial

Insolvency Act, 1920 are made and the Court below erred in returning the

I.P. on the ground that no insolvency petition can be instituted since no

relevant rules are made in the State of Andhra Pradesh under Section

79(2) (c) of the Provincial Insolvency Act, 1920. Hence, the return

endorsement dated 18.10.2022 made in I.P.S.R.No.1348 of 2022 is

unsustainable and the same has to be set aside and prayed to allow the

. AIR 1964 AP 498 RC,J CRP No.212 of 2023

revision directing the court below to number the I.P. filed by the

petitioners.

5. Perused the record.

6. Section 8 of the Act deals with exemption of corporation etc.,

from insolvency proceedings. For clarity, Section 8 of the Act is extracted

hereunder:

"8. Exemption of corporation, etc. from insolvency proceedings:- No insolvency petition shall be presented against any corporation or against any association or company registered under any enactment for the time being in force."

6. Thus, Section 8 specifies that no insolvency petition shall be

presented against any corporation or against any association or company

registered under any enactment. As per this section, no insolvency petition

shall be filed against the company. However, this section no way

proscribes a company or corporation or association from instituting

insolvency proceedings. Further, in the instant case, the 1st petitioner is a

registered partnership firm that filed the insolvency petition under Section

10 of the Act, but not a company or corporation or association. Hence,

section 8 of the Act is not applicable to the present facts of the case.

7. In the decision relied on by the Court below in Tummalacherla

Srinivasa Rao, this Court held as follows:

RC,J CRP No.212 of 2023

"Even though an insolvency petition against a firm - debtor is maintainable under Section 99 of the Presidency-towns Insolvency Act, 1909, there is no provision akin to the said provision in the Provincial Insolvency Act, 1920. Section 79(2)(c) of the Act of 1920 provides for rules to be made by the High Court as to the procedure to be followed when the debtor is a firm. Alhabad High Court made relevant rules under the said provision making provision for adjudication of a firm - debtor, as insolvent. In the State of Andhra Pradesh, there are no similar rules framed by the High Court of Andhra Pradesh under Section 79(2)(c) of the Act of 1920. Therefore, an insolvency petition cannot be filed and entertained for the relief of adjudicating a firm - debtor as insolvent in the State of Andhra Pradesh. In that view of the matter, the above verdict of the Supreme Court has no application to the state of Andhra Pradesh where no rules under Section 79(2)(c) of the Provincial Insolvency Act, 1920 are made in this regard."

8. As per the above observations, it is evident that even though an

insolvency petition against a firm is maintainable, since the High Court of

Andhra Pradesh did not make any rules under Section 79(2)(c) of the

Provincial Insolvency Act, 1920, an insolvency petition cannot be filed and

entertained for the relief of adjudicating a firm- debtor as insolvent in the

State of Andhra Pradesh.

9. The decision relied on by the learned counsel for the petitioners in

Kancherla Achiraju which was delivered earlier in point of time to the

decision relied on by the Court below makes the things clear and the

observations made in paras-7 and 8 of the said decision are relevant and

they are extracted hereunder:

"7. If the Legislature wanted that no insolvency petition can be filed against a partnership firm registered under the Partnership Act, there was no difficulty in mentioning it along with the corporation or associations or RC,J CRP No.212 of 2023

company specifically mentioned in Sec. 8. By necessary implication therefore it has to be inferred that the Legislature did not think such a prohibition necessary in case of partnership firms. As stated above partnership firm can be proceeded under the Act and petitions can be filed by or against a firm under R. 28. I am not therefore prepared to say that sub-rule (5) of the R. 28 prohibits in any manner the adjudication of the firm as insolvent. Interpretation of R. 28(5) contrary to the one stated above will immediately raise a question as to whether R. 28(5) is not Inconsistent with S. 8 of the Act and that it transgresses the limits set down in Sec. 79(2)(c) of the Act as it would not be a procedural matter to say that a Firm cannot be adjudged insolvent. It would amount to legislate on the lines of S. 8 of the Act which cannot be said to be the function of a delegated legislator authority.

8. I need not express any concluded opinion on this aspect as in my judgment the true interpretation of R. 28(5) is that its effect is not to prohibit the Court from adjudging a Firm as insolvent. As correctly observed by the learned author, Mulla, at page 96 extracted above, sub- rule (5) of R. 28 is ambiguous and it would be better to clarify, the position making it clear that a firm also can be adjudicated insolvent as is contemplated both under the Presidency-towns Insolvency Act as well as the Provincial Insolvency Act."

10. Rule-28 of the Andhra Pradesh Provincial Insolvency Rules

prescribes the procedure to be followed for filing insolvency petition by or

against a firm. Hence, it is evident that relevant Rules have been made

under section 79(2)(c) of the Act by Andhra Pradesh High Court as to the

procedure to be followed when the debtor is a firm.

11. In view of the observations made in the decision referred to

supra, it is evident that partnership firms are not precluded from filing

Insolvency Petition and hence partnership firm can be proceeded under the

Act and petitions can be filed by or against a firm. Further, Rule 28(3) of

the Andhra Pradesh Provincial Insolvency Rules carves out the procedure RC,J CRP No.212 of 2023

when a firm of debtors file an insolvency petition. Thus, it is evident that a

partnership firm can file an insolvency petition and the same can be

adjudicated as insolvent under the Provincial Insolvency Act.

12. In view of the above, the objection taken by the Court below

regarding maintainability of the Insolvency Petition placing reliance on the

decision in Tummalacherla Srinivasa Rao, is not sustainable and the

same is liable to be set aside, for the reason that the High Court of Andhra

Pradesh has made Rule-28 prescribing the procedure to be followed when

the proceedings by or against a firm are instituted.

13. Therefore, the impugned return endorsement dated 18.10.2022

whereby and whereunder the Insolvency petition filed by the petitioners

was returned in so far as it relates to maintainability for want of relevant

Rule, is set aside. The Court below is directed to receive the petition and

number the same, if it is otherwise in order as per Rule-XXVIII of the

Andhra Pradesh Provincial Insolvency Rules, and subject to compliance of

other objections. There shall be no order as to costs.

As sequel thereto, miscellaneous petition, if any, pending shall stand closed. Interim orders, if any, shall stand vacated.

_________________________ JUSTICE RAVI CHEEMALAPATI 2nd March, 2023 RR RC,J CRP No.212 of 2023

HON'BLE SRI JUSTICE RAVI CHEEMALAPATI

CIVIL REVISION PETITION No.212 of 2023

2nd March, 2023

RR