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Ex Parte: Girdharlal Shankar Dave - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai High Court
Decided On
Case NumberPetn. Nos. 69 and 89 of 1965
Judge
Reported inAIR1971Bom362; (1971)73BOMLR397; 1971MhLJ652
ActsPresidency Towns Insolvency Act, 1909 - Sections 11; Married Women's Property Act, 1882 - Sections 1(5); Bankruptcy Act, 1869; Bankruptcy (Amendment) Act, 1914 - Sections 1(2)
AppellantEx Parte: Girdharlal Shankar Dave
Appellant AdvocateM.L. Palan, Adv.
Respondent AdvocateM.S. Sanghvi, Adv.
Excerpt:
presidency-towns insolvency act (iii of 1909), section 11(b) - business carried on within jurisdiction of court whether continues until all its liabilities are discharged notwithstanding want of assets--[english] bankruptcy act of 1914.;for the purpose of section 11(6) of the presidency-towns insolvency act, 1909, a business which was admittedly carried on by the debtor within the limits of the ordinary original civil jurisdiction of the court, will be deemed to be continued to be carried on until all the trade or business liabilities have been discharged notwithstanding that there might be no assets available for the discharge of the said liabilities.;in re dagnall. ex parte soan and morley [1896] 2 q.b. 407, theophile v. the solicitor-general [1950] a.c. 186, reynolds, in re. white..........at the instance of the petitioning creditors against the debtor. the admitted facts are that the debtor carried on business in bombay as a partner in the firm of m/s j. m. dave & co. in export and import. the petitioning creditors filed a suit no 193 of 1961, in this court against the said firm of m/s j. m. dave & co. to respect of certain amounts borrowed by the said firm from the petitioning creditors for the purpose of its business. on 22nd august 1961 a decree on admission was passed in favour of the petitioning creditors against the said firm. on 18th may 1965 the petitioning creditors got issued an insolvency notice being no. n/89 of 1965 against the debtor. on 10th june 1965 the petitioning creditors obtained an order for substituted service of the said insolvency notice against.....
Judgment:
ORDER

1. The debtor, one Girdharlal Shankar Dave, has taken out two Notices of Motion both dated 18th November 1965, one of which is for setting aside the order of adjudication passed in petition No. 69 of 1965 against the debtor on 19th October 1965 and the other for setting aside the insolvency notice dated 18th May 1965 which was issued at the instance of the petitioning creditors against the debtor. The admitted facts are that the debtor carried on business in Bombay as a partner in the firm of M/s J. M. Dave & Co. In export and import. The petitioning creditors filed a suit No 193 of 1961, in this Court against the said firm of M/s J. M. Dave & Co. to respect of certain amounts borrowed by the said firm from the petitioning creditors for the purpose of its business. On 22nd August 1961 a decree on admission was passed in favour of the petitioning creditors against the said firm. On 18th May 1965 the petitioning creditors got issued an insolvency notice being No. N/89 of 1965 against the debtor. On 10th June 1965 the petitioning creditors obtained an order for substituted service of the said insolvency notice against the debtor. On 22nd September 1965 the petitioning creditors filed a petition being Petition No. 69 of 1965 for an order of adjudication against the debtor and on 19th October 1965 an order of adjudication was passed against the debtor. In the affidavits filed by the debtor in support of the two Notices of Motion he has made certain allegations about his not having received the insolvency notice or notice of petition. At the hearing, however, Mr. Palan for the debtor, made it clear that the debtor did not challenge the correctness of the order for substituted service which was obtained by the petitioning creditors or contend that the order of adjudication or the insolvency notice were bad on the ground of want of service. It may be pointed out that the registered packet containing the insolvency notice was returned by the postal authorities with an endorsement 'Refused' made on 22nd June 1965. The disputes as to whether the debtor received the insolvency notice or the notice of the petition are not relevant because Mr. Palan has made it clear that the only ground on which he challenges both, the order of adjudication and the insolvency notice is that the Court had no jurisdiction either to issue the insolvency notice or to entertain the petition against the debtor.

2. The provision in the Presidency Towns Insolvency Act, 1909, which deals with the question of restrictions on jurisdiction is Section 11 and the relevant portion of that Section is as follows:

'The Court shall not have jurisdiction to make an order of adjudication unless-

(a) xxxxx

(b) the debtor, within a year before the date of the presentation of the insolvency Petition, has ordinarily resided or had a dwelling house or has carried on business either in person or through an agent within the limits of the ordinary original Civil jurisdiction of the Court.'

3. Both the Notices of motion were called together with the consent of the parties and the parties have also agreed that as the same question is involved in both the Notices of Motion, the evidence taken should be treated as common. The evidence of the debtor, which had been taken on commission, was tendered in evidence and has been taken on record as Ex. A. In his evidence the debtor has stated that since May 1961 he has been residing at Calcutta, but that prior to that time he was residing in Bombay with his family in a flat in Khira Bhavan. The debtor stated that prior to May 1960 he was doing export-import business in Bombay as a partner in the firm of M/s J. M. Dave and Co. which carried on business at 529 Kalbadeyi Road, Bombay 2, within the jurisdiction of this Court. He stated that this business resulted in a loss and he closed it in 1960. He further stated that there were no outstandings to be recovered by that firm but that there were debts which remained to be paid. He went on to say that the debts of this firm of M/s J. M. Dave & Co. were tune barred by the time the evidence was recorded which was in September 1966. The debtor deposed that he had no flat or place in Bombay in his name. In the course of cross-examination by Mr. M. S. Sanghavi, who appeared for the petitioning creditors, the debtor stated that the tenancy of the flat at Khira Bhavan, in Bombay, where he used to live, belonged to his cousin, M. R. Dave, who was a partner with him in M/s J. M. Dave & Co. and that M. R. Dave had gone away to Japan in 1953 and had since then been residing in Japan. The debtor stated that for quite some time no. member of his family except for his daughter Jyoti, lived in the flat at Khira Bhawan and that this flat was now occupied by one Ratilal Joshi, a brother-in-law of the debtor who paid the rent of the said flat. There is some discrepancy in the evidence of the debtor as to who has been paying the rent of the said flat at Khira Bhavan in Bombay. But, this question is not relevant for the decision of these Notices of Motion. The debtor reiterated in cross-examination that the partnership business was closed in 1960 and that there were no transactions in that business after that date, but admitted that no written deed of dissolution was executed between the parties, and that the accounts between the partners had not been made up. He further stated that as the business of the partnership was closed, he surrendered the partnership premises to the landlord.

4. Mr. Palan has examined before me one Vadilal Ranchhodbhai Shah, who is a partner in the firm of M/s Vadilal R. Shah. Vadilal stated in his evidence that the debtor was employed by him in the firm of M/s Vadilal R. Shah in Bombay but that in 1961 the debtor was transferred to Calcutta and was working thereafter as the Manager of the branch of M/s Vadilal R. Shah at Calcutta. Vadilal further deposed that this branch of M/s Valilal R. Shah at Calcutta was located at 54, Ezra Street, Calcutta and that from 1961 till August 1969, when he retired, the debtor resided at 54, Ezra Street, Calcutta in the premises of M/s Vadilal R. Shah.

5. The petitioning creditors have not led any evidence in support of their case.

6. On the evidence which has been led it is clear that the debtor has not ordinarily resided within the ordinary original civil jurisdiction of this Court since 1961 and had, therefore, not resided within the said jurisdiction for more than one year prior to the date of presentation of the insolvency petition or even the application for the issue of the Insolvency notice. It is not the case of the petitioning creditors in their affidavits that the debtor had a dwelling house in Bombay during the relevant period and, therefore, the question of this Court having jurisdiction on that ground also does not arise.

7. The main question, however, which arises in these Notices of Motion is whether the debtor carried on business within the limits of the ordinary original civil jurisdiction of this Court viz. In Bombay, within a year before the date of the presentation of the insolvency petition or the application for the issue of the insolvency notice herein, the said notice having been applied for by an application dated 17th April 1965. As pointed out by Mr. Sanghavi, it is admitted by the debtor that, although the debtor alleges that the business of M/s J. M. Dave & Co. In which he was a partner, was closed or came to an end in 1960, certain debts admittedly remained payable in respect of the business of that firm. It is true that the debtor has stated that, by the time his evidence was recorded in September 1966 those debts had become time-barred. But this fact is of no relevance, because there is no evidence that at the time when the insolvency petition was filed, or at any earlier date, those debts had become barred by the law of limitation. Moreover, even if the debts were barred by the law of limitation, all that might result is that the creditors would not be entitled to take proceedings in a Court to recover the same, but the debts would still continue to exist. In any event, as far as the debt due to the petitioning creditors is concerned, it cannot be suggested that it was barred by the law of limitation, The question that has to be decided is whether it can be said that the business which was carried on by the debtor as a partner in the firm of M/s J. M. Dave & Co. continued for the purposes of Section 11(b) of the Presidency Towns Insolvency Act, because of the fact that the debts of that business were not discharged till the presentation of the petition.

8. The question of interpretation of the phrase 'carrying on a trade', which has been used in Section 1(5) of the Married Women's Property Act, 1882 in England which runs as follows:

'Every married woman carrying on a trade separately from her husband shall, in respect of her separate property, be subject to the bankruptcy laws in the same way as if she were a fame sole'

came up for consideration in the case reported in in re Dagnall (1896) 2 QB 407. In that case, the debtor, Mrs. Dagnall, who was a married woman, carried on, separately from her husband, the trade of licensed victualler at the Railway Hotel, Crawley. On 15th December 1894, she sold the goodwill of the hotel and gave up possession of the premises to the purchaser. On 2nd January 1895 she committed an act of insolvency and the question arose whether she was carrying on a trade at the time when her business had been disposed of but the trade liabilities in respect of the same had not been fully discharged. Vaughan Williams J., in the course of his judgment, observed (Page 410) :--

'It seems to me that trading is not completed until you have performed all the obligations that the fact of trading imposed upon you'.

It was held by the learned Judge in that case that the 'carrying on' of the trade continued so long as the debts of the trade remained unpaid. It was pointed out by the learned Judge in the course of his judgment that the decision which had been given by the English Courts on the meaning of the phrase 'being a trader', which was used in the Bankruptcy Act, 1869, were not binding in the interpretation of the phrase 'carrying on a trade' in 'Section 1(5) of the Married Women's Property Act, 1882. The decision in in re Dagnall (1896) 2 QB 407 was approved by the House of Lords in the leading case of Theophile v. The Solicitor-General 1950 AC 186 in which it was held that a debtor who had carried on business in England continued 'carrying on business in England' within Section 1(2)(c) of the Bankruptcy Act, 1914 until all the trade debts were paid. It appears from the facts of the case which have been set out in the report that the debtor was a citizen of Rumania. For some years before the proceedings in question were taken, he carried on a leather business in England. On 1st January 1946 certain notices of assessment were issued against him and on 14th November 1947 a bankruptcy petition at the instance of the Crown, was issued in respect of the non-payment of the assessment dues. It appears that the debtor had disposed of his business by the end of 1046 and left England on 31st October 1946 residing in Eire thereafter. One of the main points which arose for consideration was whether the debtor was 'a debtor' within the meaning of the said expression in Section 1 (2) of the Bankruptcy Act, 1914, which runs as follows :--

'(2) in this Act, the expression 'a debtor', unless the context otherwise implies, includes any person, whether a British subject or not, who at the time when any act of bankruptcy was done or suffered by him-

(a) was personally present in England: or

(b) ordinarily resided or had a place of residence in England; or

(c) was carrying on business in England, personally, or by means of an agent or manager; or

(d) was a member of a firm or partnership which carried on business in England'.

It was held in that case that the debtor was a debtor within the meaning of the said expression in Section 1 (2) of the Bankruptcy Act, 1914, as the debtor continued 'carrying on business in England' within the meaning of that Sub-section until all the trade debts were paid. Lord Porter in the course of his speech approved the decision in in re Dagnall, 1896 2 QB 407 referred to above and observed (page 201)-

'.....In a sense it is true that the appellant was not actively carrying on business within three months of the presentation of the petition, but there is a series of cases beginning with in re Dagnall (1896) 2 QB 407 and ending with in re Reynolds (1915) 2 KB 186, which in unbroken sequence have decided that trading does not cease when, as the expression is, 'the shutters are put up' but continues until the sums due are collected and all debts paid'.

It was pointed out by Lord Porter in the course of his speech that although the previous cases in England related to the interpretation of the phrase 'carrying on a trade' as used in Section 1 (5) of the Married Women's Property Act, 1882, this provision related to the question of the liability of a married woman to be adjudicated or proceeded against in Bankruptcy and that the same meaning should be given to the phrase 'carrying on business' which is used in Section 1 (2) of the Bankruptcy Act. 1914. I may point out that the same principle has been laid down in in re Reynolds (1915) 2 KB 186 although that was a case in which the debtor continued to realise the assets of the business and was getting in the debts due at the relevant time. In view of the above decision it is clear that it has been consistently held by the Courts in England that for the purposes of the Bankruptcy law once a debtor has carried on business within the jurisdiction of the Court then that business is not considered as having come to an end till the assets of the business have been realized and the trade debts paid. Until the Vade debts have been paid it cannot be said that the business has ceased from the point of view of the Bankruptcy law.

9. The same question came up for consideration before a Division Bench of the Madras High Court in Goverdhandoss v. Parry & Co. ILR 48 Mad 795 = AIR 1925 Mad 1249 in which it was held that a firm should be deemed to be carrying on business within the meaning of Section 11(d) of the Presidency Towns Insolvency Act so long as its business debts remain undischarged. Spencer J. who delivered the judgment followed the judgment in in re Dagnall 1896 2 QB 407 and specifically approved the observation of Vaughan Williams J., which I have set out earlier, to the effect that trading was not completed until all the obligations that the fact of trading imposed upon the trader were performed.

10. Mr. Palan has strenuously urged that the decisions given by the Courts in England on the meaning of the phrase 'carrying on a trade' or the phrase 'carrying on buisiness' are of no relevance in the interpretation of the phrase 'carried on business' hi Section 11 (b) of the Presidency Towns Insolvency Act. because, according to him, the Bankruptcy Court in England has a wider jurisdiction than the jurisdiction of the Insolvency Court in India under that Act Even if this is so, which appears doubtful, I do not see any reason why the phrases 'carrying on a trade', 'carrying on business' or 'carried on business' for the purposes of insolvency law or bankruptcy law, should have different interpretation in India and England. Mr. Palan has himself cited the decision in, Kesavan Nair v. Babu Naidu : AIR1954Mad892 where it has been observed that the word 'business' has no technical meaning, but is to be read with reference to the object and intent of the Act in which it occurs. it cannot be seriously disputed that the object of the two Acts, namely, the English Bankruptcy Act of 1914 and the Presidency Towns Insolvency Act, 1909, in India is broadly the same, that the assets of the insolvent should be realised and distributed amongst the creditors. There seems to be no reason to interpret the phrase differently if the phrases have to be interpreted in the light of the object or intent of the Acts. Mr. Palan next urged that the main purpose of the Presidency Towns Insolvency Act is the distribution of the assets of the in-solvent and that, as in the present case there were no assets belonging to the debtor or the said firm within the jurisdiction of the Court, it could not be said that business was being carried on by the debtor within such jurisdiction. It cannot be suggested that the jurisdiction of the Insolvency Court should depend on the availability of assets of the debtor within the jurisdiction of that Court, because, the question as to whether there are assets available for distribution can be determined only after proper investigation, and, even, if the assets are available, not within such jurisdiction, but elsewhere, the same could be utilised for distribution amongst the creditors. It appears to me that for the purpose of Section 11(b) of the Presidency Towns Insolvency Act, 1909, a business which was admittedly carried on by the debtor, within the limits of the ordinary original civil jurisdiction of the Court, would be deemed to continue to be carried on until all the trade or business liabilities have been discharged, notwithstanding that there might be no assets available for the discharge of the said liabilities. In the present case, it is admitted that the trade liabilities of the business carried on by the debtor as a partner of M/s J. M. Dave & Co. were not discharged either one year prior to the date of presentation of the petition or the issue of the insolvency notice or the application for the issue thereof. In the circumstances, I am of the view that this Court did have jurisdiction to issue the insolvency notice as well as to entertain and dispose of the insolvency petition.

11. in the result, I dismiss both the Notices of Motion with costs.

12. Motion notices dismissed.


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