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Shapurji Ruttonji Vs. Byramji Muncherji - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberO.C.J. Appeal No. 12 of 1944 and Insolvency No. 38 of 1943
Judge
Reported inAIR1945Bom165; (1944)46BOMLR871
AppellantShapurji Ruttonji ;In Re: Shapurji Ratanji Tata
RespondentByramji Muncherji;
DispositionAppeal allowed
Excerpt:
insolvency-decree obtained as trustee-insolvency notice issued by creditor not as trustee-title of creditor in decree and in insolvency notice not same-validity of notice- annulment of adjudication order.;it a decree is obtained in one character, but the insolvency notice issued by the decree-holders as creditors describes or indicates their title in another character, the notice is calculated to perplex the debtors and is invalid.;where the respondents had obtained a decree in their character as trustees of a deed of settlement against, the appellants, but in the insolvency notice issued against the appellants the respondents described themselves as judgment-creditors and not as trustees :-;that the insolvency notice was invalid, and that any order of adjudication made on such notice..........claimed by the said byramji muncherji tata and dadiba muncherji tata as being the amount due on a decree obtained by them against you in suit no. 1628 of 1940 in the high court of judicature at bombay dated september 9, 1942... or you must furnish security for payment of the said sum to their satisfaction or you must satisfy this gourti that you have a counter-claim or a set-off against them which equals or exceeds the sum claimed by them and which you could not set up in the suit in which the said decree was obtained....3. on the same day (i.e. on december 16, 1942) the respondents applied for leave to serve the notice on appellant no. 1 by registered post at billimora. leave was granted on december 17, 1942. the notice was served by registered post on appellant no. 1 on december 30,.....
Judgment:

Harilal Kania, Kt., Acting C.J.

1. This is an appeal from the judgment of Mr. Justice Blagden, arising out of insolvency proceedings adopted by the respondents against the appellants.

2. Suit No. 1628 of 1940 was filed by the respondents in their individual names as beneficiaries, against four trustees which included the appellants. The respondents case was that the trustees had committed breaches of trust, had caused loss to the trust estate and they should therefore be removed from the office of trusteeship. There was a prayer for the trustees rendering accounts of the trust properties and for a decree ordering them to make good to the trust estate all loss and damage caused to the estate by their mismanagement and breaches of trust. On August 8, 1941, the Court passed a preliminary decree and made a decretal order of reference, under which the Court appointed three trustees, which included the two respondents. 'The Court ordered that the defendants do transfer and convey to the said new trustee? the immoveable property at Cumballa Hill and made an order of reference to find out the amount due by the trustees. It must be noted that the defendants did not appear at the hearing and this was an ex parte decree. The matter then proceeded' before the Commissioner, and on September 9, 1942, a final decree was passed. The Court confirmed the report of the Commissioner and passed a decree that

the defendants do pay to the plaintiffs as trustees of the deed of settlement dated the 15th day of January 1913 mentioned in the plaint the sum of Rs. 4,46,784-6-0 for debt and interest and their costs of the said Reference and of the application for further directions....

This was also an ex parte decree. On December 9, 1942, the respondents made an application for the issue of insolvency notice. In the title of that application they have not described themselves as trustees but as judgment-creditors. Throughout that application there is nothing to suggest that they were trustees. In paragraph 3 of that application they stated :

We produce a certified copy of a decree against the said judgment debtors and others obtained by us in the High Court of Judicature at Bombay on September 9, 1942, in Suit No. 1628 of 1940.

On that application the insolvency notice wasi issued on December 16, 1942. In the title of that notice also the two respondents are described in their individual names (without adding ' trustees ') as judgment-creditors. The material portion of the body of the notice is in these terms :

Take Notice that within one month after service... you must pay-to Ryramji Muncherji Tata and Dadiba Muncherji Tata the Judgment Creditors above named or either of them at Tata Mansions, ... or their Attorneys Messrs. Eastley Lam and Company ... the sum of Rs. 4,46,784-6-0 for debt and interest... till payment claimed by the said Byramji Muncherji Tata and Dadiba Muncherji Tata as being the amount due on a decree obtained by them against you in Suit No. 1628 of 1940 in the High Court of Judicature at Bombay dated September 9, 1942... or you must furnish security for payment of the said sum to their satisfaction or you must satisfy this Gourti that you have a counter-claim or a set-off against them which equals or exceeds the sum claimed by them and which you could not set up in the suit in which the said decree was obtained....

3. On the same day (i.e. on December 16, 1942) the respondents applied for leave to serve the notice on appellant No. 1 by registered post at Billimora. Leave was granted on December 17, 1942. The notice was served by registered post on appellant No. 1 on December 30, but he did not comply with the same. On March 26, 1943, a petition for adjudicating the two appellants insolvents was filed. The Court made an order on that petition ex parte. On April 10, 1943., a notice of motion for annulment of the adjudication order was taken out by the appellants. At the hearing the appellants contended inter alia (1) that the insolvency notice was invalid and illegal; (2) that it was not properly served, as Shapurji resided at Billimora and was not a British subject; and (3) that the insolvency notice could not be enforced against Shapurji in any event under the circumstances set out in the affidavits. Other defences are raised in the affidavits which, in view of our conclusion, it is not necessary to set out in detail.

4. The contention in respect of the illegality of the notice is based on the fact that while the respondents had obtained the decree in their character as trustees, the notice required the debtors to pay the money to the respondents, in respect of the decree obtained by them. Neither in the title nor in the body of the notice it is stated or suggested that the judgment-creditors had not obtained their decree in their own personal right but in their capacity as trustees. Towards the end of that notice, as I have shown above, the judgment-debtors were called upon to satisfy the Court if they had a counterclaim against the applicants of the insolvency notice, which they could not have raised in the suit. That again shows that if the judgment-debtors had any counterclaim against the applicants, at whose instance the insolvency notice was issu-ed, they had the right to urge that fact. In other words if the judgment-debtors had any personal claim against the present respondents in their personal capacity, they were invited to urge that counterclaim in reply to this notice.

5. In support of their contention that this insolvency! notice is clearly calculated to perplex the judgment-debtors as it did not show in what capacity the respondents had obtained the decree and led them to believe that if they had a counterclaim against the respondents personally, they could put forth the same, the appellants relied on the judgment of Lord Esher M. R. in In re Homes : Ex parte Hughes [1892] 2 Q.B. 628 In that case a suit was filed in the Queen's Bench Division by the Rev. N. T. Hughes and a number of other persons, who were named as co-plaintiffs, against Elizabeth Howes and Mark Howes as defendants. The writ was endorsed with a claim by the plaintiffs, ' as trustees of St. John's Hospital, in the town and county of Northampton, ' for damages! against the defendants for breach of a covenant contained in a lease. No defence having been delivered by the defendants, the plaintiffs obtained interlocutory judgment against the defendants for damages to be assessed. That was headed :

Between the Rev. Nathaniel Thomas Hughes and others, plaintiffs, and Elizabeth Howes and Mark Howes, defendants.

After the damages were assessed, the plaintiffs obtained final judgment, by which it was adjudged that 'the plaintiffs recover against the defendants 166. 11s. Ad. and costs to be taxed.' This judgment was headed in the same way as the interlocutory judgment, there being nothing in it to show that the plaintiffs 'were1 trustees. The bankruptcy notice served on the defendants was

to pay to the Rev. Nathaniel Thomas Hughes and other (trustees of the charity known as St. John's Hospital, Northampton), the sum of 250l 16s. 6d., claimed by them as being the amount due on a final judgment obtained by them against you in the Queen's Bench Division of the High Court dated the 11th day of August 1891 &c.;

The debtors contended that the bankruptcy notice was illegal because it contained the words 'trustees of the charity known as St. John's Hospital, Northampton' which words did not form part of the decree. Lord Esher,. Master of the Rolls, rejected the contention that the bankruptcy notice followed the terms of the judgment. He observed as follows (p. 631) :-

It has made an addition to the judgment which, although it may in law be mere surplusage, is well calculated to perplex the judgment debtor. The judgment was recovered by 'the Rev. Nathaniel Thomas Hughes and others'; the bankruptcy notice requires the debtor to pay, 'to the Rev. Nathaniel Thomas Hughes and others (trustees of the charity known as St. John's Hospital, Northampton). This, as it seems to me, so far alters the character of the creditors as described in the judgment! as to be extremely likely to perplex the judgment debtor.

The principle of law there set out that if a judgment is obtained in one character and the bankruptcy notice is issued by the creditors describing or indicating their title in another capacity the notice is calculated to perplex the debtors has not ever since been disputed in any decision.

6. Mr. Banaji relied on In re Low : Ex parte Gibson [1896] 1 Q. B. 734. In that case the only point was whether, when the judgment was against four 'defendants and in the notice it was stated that it was against the debtor and five others, the notice was bad. Lord Esher M. R. was a party to that decision. In the course of his judgment he observed as follows (p. 736):-

The debtor was well aware of the fact that the action was against all the six persons named, and he also knew that the judgment was against him and three of the other defendants.

In the opinion of the Court this was only a formal defect and not a material defect in the notice. Leave was therefore given to amend and the technicality was not allowed to prevail. There was no question of the character in which the parties sued or were sued. In Re A Debtor (No. 2 of 1912): Ex parte The Debtor (1912) 106 L. T. 895 the amount shown in the margin was different, but in the notice itself the amount claimed was as due under the decree. This was held to be a technical objection and the notice was held to be good. This point, however, is not material because according to Section 9(a) of the Presidency-towns Insolvency Act this defect could be remedied if the point was taken in time. In In re Bates : Ex parte Lindsey (1887) 4 Morrell's Bank, Rep. 192 which was also relied upon by Mr.- Banaji, the only defect in the bankruptcy notice was that in the title the name was not mentioned but in the latter part of the notice the name was clearly mentioned. It is obvious that it was a formal defect. Similarly in In re Murietta : Ex parte South American and Mexican Company (1896) 40 S.J. 317 the notice was considered irregu-iar and not materially defective. The suit was filed in the name of a company in liquidation by its official receiver. Judgment having been obtained, the official receiver issued a notice calling upon the debtor to pay or compound with the official receiver. It was contended that the debt could be compounded with the company and not with the official receiver. The Court pointed out that the debtor could in fact only deal with the official receiver who represented the company in liquidation. Therefore the words used in the notice were not defective. None of these authorities in any way go against the principle laid down by Lord Esher M., R. in In Re Howes ; Ex parte Hughes [1892] 2 Q. B. 628.

7. Mr. Banaji next urged that because the words 'judgment-creditors' were used in the notice the debtors had distinct notice of the character in which the respondents had obtained the decree and the terms of the notice could not therefore be calculated to perplex the debtors. This argument has no substance because in every case the claimants must allege that they were the judgment-creditors. That did not absolve them from the obligation' to correctly describe the character in which they were judgment-creditors. In the present case the difficulty is greater because the suit was filed by the respondents in their individual names as beneficiaries and not as trustees. The insolvency notice was also in their individual names, without describing themselves as trustees. The omission to describe themselves as trustees for the purpose of the insolvency notice is very material because on reading the notice it does not give the least idea to the debtors that the claim was made as trustees. I have already noticed that it would make a material difference to the right of the debtors to make a counterclaim, because if the decree was in favour of the respondents as trustees, the appellants could not make a counterclaim against the, respondents in their personal character as beneficiaries. Having regard to the fact that the consequences of not complying with the insolvency notice are very severe and of a penal nature, it is imperative that the provisions of law should be strictly adhered'to, and the debtors have a right to be informed of the exact character in which the claim is made against them.

8. Mr. Banaji drew our attention to the fact that in the affidavits it was stated that a copy of the decree was served on' the appellants. It must, however, be noticed that there is ribthing to show when'that copy was served. Counsel drew our attention to passages in the evidence of Shapurji, Byramji and Mr. Lam. That evidence showed what happened at the meetings held between the attorneys of parties for settling the decree. Assuming that the debtors knew that ' a decree' was passed against them in favour qf the respondents, and therefore they were negotiating for a settlement, it does not bring home to them the knowledge that the decree was passed in favour of the respondents in their capacity as trustees. In the evidence there is nothing to bring home teethe debtors that knowledge. In my opinion this is a vital thing to be stated in the notice, and the omission to mention those words changes the entire character of the debt claimed by the respondents. The notice, in my opinion, is, therefore, invalid. I apprehend the learned Judge has not attached sufficient importance to this aspect of the case. He treated the words ' as trustees ' as if they were a title or a degree like ' M. A.', as stated in his judgment. The omission to describe a man with his academic degree does not alter his character. In my opinion, this insolvency notice being bad, the order of adjudication should be annulled.

9. Mr. Banaji invited us to express our opinion on the remaining questions raised in the Court below, and on which considerable evidence was led and arguments vsjere advanced. The first step in these proceedings is the validity of the insolvency notice. The other steps follow thereafter. In view of 'our conclusion on the first point, our observations and decision on the remaining points will be clearly obiter, and I do not think that under the circumstances it is right for the Court to express its views on the other points. Therefore, we do not propose to discuss the remaining points argued in the trial Court.

10. We, therefore, allow the appeal and set aside the order of adjudication passed against the debtors. Appellants will get the costs of the appeal from the respondents. Only one counsel allowed in the appeal.

11. As regards the costs before the trial Court, evidence was led on the question whether Shapurji was a resident in British India. An additional question was raised as to whether he was in Bombay when the act of bankruptcy was committed. Shapurji denied that he was here. According to him, he had left Bombay before the relevant date. The learned Judge, who heard the evidence, decided the question against Shapurji, although as regards residence he was in favour of Shapurji. Having taken into consideration the different aspects of the case and having heard counsel on the question of costs before the trial Court, we think that the fair order is that each party should bear his own costs of the proceedings before the trial Court.

Chagla J.

12. I agree. In my opinion the persons who served the insolvency notice in this case were in law entirely different from the persons' who obtained the decree. The decree was obtained by1 the respondents as trustees in their character as trustees and the insolvency notice was taken out by them in their individual capacity. There is nothing whatever to show on the face of the insolvency notice that the respondents were claiming from the judgment-debtors or the appellants as trustees. On the contrary on the face of the insolvency notice it seems as if the respondents were claiming from the judgment-debtors in their individual capacity.

13. Mr. Banaji for the respondents has very strongly relied on two facts : (1) that the insolvency notice describes the respondents as judgment-creditors, and (2) that, according to the affidavit made by his clients, and which was not controverted in the proceedings below, a copy of the decree was served upon the appellants. From this he want us to hold that independently of the insolvency notice the appellants had notice of the decree and of its contents. Assuming that we can impute that knowledge to the appellants, the utmost that can be said on behalf of the respondents is that the appellants knew when the insolvency notice was served upon them that the respondents had obtained a decree against them as trustees. But the knowledge of the decree does not further impute a knowledge to the appellants that the respondents were claiming the amount as trustees or, to my mind what is equally important, that at the date when they took out the insolvency notice the respondents were still trustees in which capacity alone they had the right to execute the decree.

14. Mr. Banaji has further emphasized the fact that Lord Esher, Master of the Rolls,, in In re Howes : Ex parte Hughes [1892] 2 Q.B. 628 to which the learned Chief Justice has referred, based his judgment on the particular language of the English statute which was before the learned Judge in that case. Mr. Banaji has drawn our attention to the fact that whereas Section 4, Sub-section (1)(g), of the Bankruptcy Act of 1883 (46 & 47 Vic. c. 52), required the notice to be in accordance with the terms of the judgment, Bombay Act No. XV of 19391 does not in terms require the insolvency notice to be served to be in accordance with the judgment; and Mr. Banaji argues that whereas in the case before Lord Esher, Master of the Rolls, in In re Howes : Ex parte Huges, the insolvency notice was clearly not in accordance with the judgment, here, even if it is not in accordance with the judgment, as the statute does not require it, it is merely a technicality or irregularity to which we should attach no importance. Now I do not base my judgment on the mere fact that the respondents have failed in the insolvency notice to comply with the terms of the judgment. If it was merely a question of non-compliance, the matter might have been different. But to use the language of Lord Esher in the case to which I have just referred, the result of taking out the notice in, the form in which the respondents have taken out is really to alter the character of the creditors as described in the judgment. I do not think that any insolvency notice where a judgment-creditor describes himself in a manner which alters his character can be allowed to stand. It goes to the question of the very title of the judgment-creditor and it is much more important and much more vital than mere non-compliance with the judgnjent. After all, a judgment-debtor is entitled to take advantage of every technicality which the law permits him especially in the law of insolvency. To use the language of Lord Justice Bowen in the very case in In re Howes : Ex parte Hughes (p. 632):-

I do not regard this as a merely technical matter, for bankruptcy proceedings are of a peculiar character. They involve quasi-penal consequences to the debtor, and it is essential that all those forms, the object! of which is to prevent injustice, should be strictly fallowed. Such a notice as this would be simply a trap for the debtor.

15. I, therefore, agree with the learned Chief Justice that the notice taken out by . the respondents was invalid and must be set aside and the order of adjudication; based on that notice should be equally set aside, and the appeal should be allowed.


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