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Morarjee Gokuldas and Co. Vs. the Sholapur Spinning and Weaving Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberO.C.J. Insolvency No. N 19 of 1940
Judge
Reported inAIR1941Bom37; (1940)42BOMLR948
AppellantMorarjee Gokuldas and Co.
RespondentThe Sholapur Spinning and Weaving Co. Ltd.
DispositionApplication dismissed
Excerpt:
.....of execution.;under rule 52b(2) of the bombay insolvency rules, 1910, a debtor having a counter-claim or set-off must, within the time specified in the insolvency notice, file an affidavit with the insolvency registrar, but it is not incumbent upon him to file the affidavit personally as he can do so: by his constituted attorney.;a debtor against whom an insolvency notice has been issued by several judgment-creditors, cannot set up against them counter-claims and sets off which tie has only against one of the judgment-creditors.;re molesworth (1907) 51 s. j. 653 and g. e. b., in re [1903] 2 k. b. 340 referred to.;order xxi, rule 11, sub-rule (2) (f), civil procedure code, only requires that the results of previous applications for execution must be stated in a further application for..........of ramdhandas jhajharia and eight other partners, brought suit no. 368 of 1933 agalnsst the sholapur spinning & weaving co., ltd., and five other persons who were defendants nos. 2 to 6. defendants nos. 2 and 3 were struck out, leaving in the suit in addition to defendant no. 1 defendants nos. 4, 5 and 6. that suit was brought for a declaration among other things that the firm of morai-jee goculdas & co. were entitled to act as managing agents of the sholapur spinning & weaving company, ltd., and to receive the commission and benefits due to them, for an injunction to restrain the judgment-creditors and the officers and servants of the sholapur spinning & weaving company, ltd., from acting upon or giving effect to the termination of the managing agency, or from preventing the firm.....
Judgment:

Blackwell, J.

1. This is an application to set aside an insolvency notice. Two preliminary objections were taken to the hearing of the matter. The first objection was that the affidavit in opposition to the insolvency notice must be filed within seven days of the service thereof as provided by Rule 52 B(3) of the Bombay Insolvency Rules and that it had not been so filed. The insolvency notice was, as appears from the affidavit of service, served on February 29, 1940. The affidavit was filed on March 8, 1940. As, however, March 7 was a public holiday the filing of the affidavit on the next day was in order, and the affidavit was in time. This objection fails.

2. The next objection was that the affidavit was not filed by the judgment-debtor as required by the Rules. The affidavit was sworn by one Nandkishore Ramdhandas, the son and constituted attorney of Ramdhandas Jhajharia, a partner in the firm of Morarjee Goculdas & Co. Mr. Munshi contended that Ramdhandaa Jhajharia himself ought to have made the affidavit. Rule 52B(2) provides that the debtor must within the time specified in the notice file an affidavit with the Insolvency Registrar. There is nothing in the rule which makes it incumtent upon the debtor to file the affidavit personally, and I see no reason why he should not file an affidavit by his constituted attorney. If he does, in my opinion he complies sufficiently with the rule, Mr. Munshi further contended that assuming that a constituted attorney could swear the affidavit the power-of-attorney did not authorize the constituted attorney to swear an affidavit in answer to an insolvency notice. A copy of the powerof-attorney was produced. Mr. Munshi did not object to a copy being put in instead of the original, and a copy of this power-of-attorney and a number of other documents, which were referred to on the hearing of this insolvency notice, were enumerated in a list which was handed in and marked (X), and all the documents referred to in that list, or copies thereof, have been put in by consent and marked exhibit (B). In my opinion Clause 25 of that power-of-attorney, which I need not refer to in detail, is wide enough to authorise the constituted attorney to make the affidavit in this matter. Consequently, that objection also fails.

3. The circumstances in which the insolvency notice came to be taken out may be shortly stated.

4. The firm of Morarjee Goculdas & Co., which consisted of Ramdhandas Jhajharia and eight other partners, brought suit No. 368 of 1933 agalnsst the Sholapur Spinning & Weaving Co., Ltd., and five other persons who were defendants Nos. 2 to 6. Defendants Nos. 2 and 3 were struck out, leaving in the suit in addition to defendant No. 1 defendants Nos. 4, 5 and 6. That suit was brought for a declaration among other things that the firm of Morai-jee Goculdas & Co. were entitled to act as managing agents of the Sholapur Spinning & Weaving Company, Ltd., and to receive the commission and benefits due to them, for an injunction to restrain the judgment-creditors and the officers and servants of the Sholapur Spinning & Weaving Company, Ltd., from acting upon or giving effect to the termination of the managing agency, or from preventing the firm of Morarjee Gokuldas & Co. from acting as agents of the Sholapur Spinning & Weaving Company, Ltd., and, in the alternative, for the recovery of Rs. 50 lakhs as damages or such other sum as the Court might fix by way of damages. That suit was heard and dismissed with costs on February 15, 1938. There was an appeal and that appeal was dismissed with costs on October 12, 1938.

5. The insolvency notice calls upon the judgment-debtors, Messrs. Morarjee Goculdas & Co., to pay to the Sholapur Spinning & Weaving Co., Ltd., and the three other defendants who remained as defendants in the suit, or to Messrs. Payne & Co. for the judgment-creditors, the sum of Rs. 29,940-5-0. and the sum of Rs. 7,171-0-8, aggregating Rs. 37,111-5-8. It will be observed that the judgment-debtors are a firm and they are called upon to pay four judgment-creditors any of whom are entitled to enforce payment of the decrees for costs.

6. The affidavit in opposition to the insolvency notice raises a number of alleged counter-claims and sets-off on behalf of the firm of Morarjee Goculdas & Co., and a firm of Jhajharia Dhandhania & Co., of which Ramdhandas Jhajharia is now the sole proprietor, not against all the judgment-creditors but against one of them, viz., the Sholapur Spinning & Weaving Co., Ltd. Mr. Munshi put forward a number of contentions in respect of these alleged counter-claims and sets-off. He contended that they must be against all the creditors applying and not one only, that they must be mutual and due in the same right, and that they must be effective in the sense that they must be sufficiently quantified as necessarily to equal or exceed the amount of these decrees for costs, and he contended that none of the alleged counter-claims or sets-off fulfilled any of these conditions.

7. Mr. Munshi referred to Halsbury's Laws of England, 2nd edn., Vol. II, at p. 44, where it is stated that the counter-claim relied on must be mutual and due in the same right. The authority cited in support of that proposition was referred to by Mr. Munshi, namely, Re Moksworth (1907) 51 S. J. 653, where the Court held that in answer to a judgment obtained against him by executors it was not open to the debtor on a bankruptcy notice to set up a claim against the testator's estate. Mr. Munshi also referred to G. E. B, In re [1903] 2 K. B. 340 in the same connection. In my opinion the fact that these alleged counter-claims and sets-off are set up against one of the creditors only, viz., the Sholapur Spinning & Weaving Co., Ltd., is fatal to this insolvency notice, seeing that any one of the other three judgment-creditors has a right to enforce the decrees.

8. As however a number of other points have also been argued, I propose to refer to certain matters set out in the affidavit in opposition to the insolvency notice and deal with them shortly. In paragraph 5 it is alleged that in execution of the decree dated February 15, 1938, the judgment-creditors have levied attachment pursuant to a warrant of attachment issued on May 29, 1939, on the right, title and interest of Ramdhandas Jhajharia in 198 debentures of the face value of Rs. 1,000 each and four debentures of the face value of Rs. 100 each standing in the name of Morarjee Goculdas & Co., of the Sholapur Spinning and Weaving Co., Ltd., and it is submitted that the judgment-creditors having levied attachment on the assets of the judgment-debtors' firm execution of the decree was stayed in law. Mr. Tarapore-walla referred me to Order XXI, Rule 11, Sub-rule (2), which deals with what must be contained in the written application for execution, sub-paragraph (f), where the applicant must state whether any, and (if any) what, previous applications have been made for the execution of the decree, the dates of such applications and their results. Mr. Taraporewalla submitted that the words ' their results ' implied that no further application for execution could be entertained so long as one was pending, arguing that the words 'their results' meant completed results. I am unable to attach this meaning to the words ' their results ', I think the Sub-section would be complied with if in a further application for execution the result of a previous application was stated whatever the result might have been as, for instance, that it had been completely infructuous. Order XXI, Rule 30, provides that every decree for the payment of money may be executed by the detention in the civil prison of the judgment-debtor, or by the attachment and sale of his property, or by both. There is no statutory prohibition against a number of executions proceeding concurrently. Accordingly, in my opinion, the mere fact that execution has already been levied under these decrees certainly does not operate as a stay of execution of the decree in law.

9. Paragraph 6 of the affidavit refers to an alleged counter-claim and set-off for interest in arrears on certain debentures belonging to the firm of Morarjee Goculdas & Co., which is alleged to come to the sum of about Rs. 13,500 up to December, 1939, and it is contended that the firm of Morarjee Goculdas & Co. has a set off against the decretal amount of Rs. 37,111-5-8 to the extent of about Rs. 13,500. It is to be observed that the alleged set-off is against the first creditor only, being in respect of debentures of the Sholapur Spinning & Weaving Co., Ltd. I have already held that such a set-off cannot be relied on in answer to an insolvency notice where four judgment-creditors have the right to enforce payment of the decrees. The matter as regards this interest, however, does not stop there. It is alleged in paragraph 5 of the affidavit of Ramkumar Shrinivas dated March 18, 1940, in reply, that Ramdhandas Jhajharia and others assigned their right, title and interest in the debentures together with all interest accrued and to accrue: to the persons named in that: paragraph and that notice of the assignment was given to the company on May 28, 1939. This allegation is not denied in the affidavit in rejoinder. Further it is to be observed that the amount of the alleged counter-claim and set-off does not equal or exceed the amount of the decree but is far less. Accordingly, they cannot be relied upon.

10. Paragraph 7 of the affidavit alleges that pursuant to a scheme under which the debentures were issued, the Sholapur Spinning & Weaving Co., Ltd., were bound to pay Rs. 30 on each debenture every year in reduction of the principal sum, that the aggregate amount now comes to Rs. 40,000 and the Sholapur Spinning & Weaving Co., Ltd., have wrongfully declined to pay to Messrs. Morarjee Goculdas & Co. that sum, and it is alleged that Morarjee Goculdas & Co. have a set-off against the judgment-creditors to the extent of Rs. 40,000. Again it is to be observed that that set-off, if available at all, is available only against the Sholapur Spinning & Weaving Co., Ltd. Moreover, under Clause 13 of the scheme, which is one of the documents put in, the debentures in question were to be paid off only after all the debentures of the same series held by the public had been paid in full, and this event has not happened. Accordingly this set-off cannot be relied on.

11. In paragraph 8 of the affidavit it is alleged that Ramdhandas Jhajharia is the owner of sixty-one shares in the Sholapur Spinning & Weaving Co., Ltd., of the face value of Rs. 1,000 and that each of the shares is quoted in the market at Rs. 3,690. The Sholapur Spinning & Weaving Co., Ltd., it is alleged, have released fifty-six shares but have claimed as security a lien on the remaining five shares and other shares held by the joint family in respect of the payment of the decretal amount of Rs. 37,111-5-8. It is further alleged that suit No. 707 of 1939 has been filed by Ramdhandas Jhajharia and others against the Sholapur Spinning & Weaving Co., Ltd., for a declaration that the Sholapur Spinning & Weaving Co., Ltd., have no lien on the shares held by them. Having regard to the matters alleged in paragraph 9 of the affidavit, to which I will presently refer, it will be convenient to refer to the plaint in that suit. Paragraph 2 refers to the agreement dated February 19, 1931, under which the firm of Jhajharia Dhandhania & Co. were appointed the selling agents of the defendant company on certain terms and conditions embodied in the agreement. Paragraph 3 refers to the assignment under which plaintiff No. 1 in the suit became the sole proprietor of the firm of Jhajharia Dhandhania & Co. That assignment was put in and marked exhibit (A). In paragraph 6 it is alleged that certain interest was to be paid by the company to the selling agents in consideration of the fact that they were responsible for payment to the company of the price of all goods taken delivery of by the buyers. Then in paragraph 9 it is alleged that in the year 1933 certain disputes arose between the selling agents and the defendant company both as regards interest payable under Clause 21 of the agreement and also as regards commission on certain goods also referred to in the agency agreement. The plaint goes on to allege that those disputes were referred to arbitration and the arbitration proceedings dragged out and in fact are still proceeding. Then it is alleged that the selling agents removed 433 bales from the mill premises without payment, and that they were liable to pay a sum of Rs. 1,69,371-11-0, and as they failed to pay that sum the company had purported to exercise its lien on the shares. Then in paragraph 21 the plaintiffs allege that on proper accounts being taken nothing would be found to be due by them as selling agents to the defendant company, but the defendant company would be found indebted to them and that the defendant company would be found liable in two sums of Rs. 98,593 and Rs. 84,080-9-9 in respect of interest and commission. The prayers in. the plaint were for a declaration that the defendant company had no lien and for an injunction restraining the company its officers and servants from exercising the lien.

12. In their written statement the defendants among other things alleged that the claims of the selling agents for the two sums which I have mentioned were false and unsustainable and that on accounts being taken no such sums would be found to be due. The allegations in paragraph 8 of the plaint refer to various disputes which were existing between the plaintiffs in suit No. 707 of 1939 and the Sholapur Spinning & Weaving Company. No question of any counter-claim or set-off is raised in that paragraph, but the disputes therein mentioned are relevant in connection with certain matters raised in paragraph 9 of the affidavit to which I will now refer. That paragraph alleges that the firm of Jhajharia Dhandhania & Co., as selling agents, have large claims against the Sholapur Spinning & Weaving Co., Ltd., for interest for grace days and for the balance of the selling agency commission. It is alleged that the claims in respect of interest for grace days and commission alone amount to about Rs. 25,000 and that those claims are also the subject-matter of arbitration proceedings which are pending. The termination of the selling agency is referred to and is alleged to be wrongful and it is alsoallged that the firm of Jhajharia Dhandhania & Co. has made a further claim against the Sholapur Spinning & Weaving Co., Ltd., for a sum of Rs. 14,00,000 as damages for the wrongful termination of the selling agency which is the subject-matter of the arbitration proceedings. These claims of Ramdhandas Jhajharia as the assignee from Jhajharia Dhandania & Co. are relied on as a counter-claim against the judgment-creditors which is alleged far to exceed the sum of Rs. 37,111-5-8. It is again to be observed that that counter-claim is against the Sholapur Spinning & Weaving Co. Ltd., only and not against the other judgment-creditors. Mr. Munshi contended that that counter-claim, if it was available, was not in the same right. Having regard to the opinion I have already expressed, that these counterclaims and sets-orf being against only one of the judgment-creditors the insolvency notice is bad, it is not necessary for me to express an opinion on the question whether Mr. Munshi's argument that the claim of Ramdhandas Jhajharia as an assignee of the firm of Jhajharia Dhandania & Co. cannot be availed of by him as not being in the same right. I am inclined to the view that it would, be available. Every member of the firm of Morar-jee Goculdas & Co. would be liable to pay the judgment debt. It is a joint and several liability, and it seems to me that if any member of the firm had acquired a right to a set-off or a counter-claim in his personal capacity which could not be set off in the suit the subject-matter of the decree it would be open to him to avail himself of such a set-off or counter-claim. But I merely express that as an opinion. I give no decision upon the point.

13. Mr. Munshi further contended that the claims relied upon in paragraph 9 of the affidavit were not quantified, and that Ramdhandas Jhajharia cannot say that he has a counter claim or set-off equalling or exceeding the amount claimed. In this connection Mr. Munshi referred to the questions on the differences which have arisen between Jhajharia Dhandhania & Co. and the Sholapur Spinning and Weaving Co., Ltd., which have been referred, to arbitration which questions were put in as part of exhibit (B). Question 11 raises the point as to what is the amount which the company should be ordered to pay to the selling agents on the final making up of all accounts between the company and the selling agents having regard to the findings of the arbitrators on the matters mentioned. It is true that in suit No. 707 of 1939 it is alleged that the two specific sums of Rs. 98,593 and Rs. 84,080-9-9 are specifically set up as quantified claims. Those sums are not, however, in terms referred to in the affidavit in opposition to the insolvency notice, though other sums are specifically mentioned in paragraph 9 of the affidavit. However, inasmuch as it appears from the questions submitted to the arbitrators, that the figures mentioned in paragraph 9 of the affidavit are the subject-matter of accounts referred to arbitration, I am inclined to the view that it is not open to Ramdhandas Jhajharia to rely either on the two specific figures to which I have referred or to any of the figures mentioned in paragraph 9 of the affidavit by way of counter-claim in this matter. I do not think that it can be said that he has an effective counter-claim in this regard. Mr. Munshi referred to A Bankruptcy Notice, In re [1934] 1 Ch. 431 where Lord Hanworth at p. 438 in reference to the claim which was made in that case said:-

It is certainly not a claim which can be at the moment so definitely quantified as to be described as necessarily equalling or exceeding the amount of the judgment debt. It is a claim which may inure to the benefit of the plaintiff, and he may be able ultimately to receive a sum, but, so far as the position can be taken at the present time, it is difficult to say that it equals or, exceeds the amount of the judgment debt.

Applying those observations to the alleged counter-claims set up in paragraph 9 of the affidavit it appears to me that the matters in dispute are questions of account and that it is impossible to say that Ramdhandas Jhajharia has any effective counter-claim available at the moment even against the Sholapur Spinning & Weaving Co., Ltd.

14. The result is that in my opinion the application to set aside the insolvency notice fails and must be dismissed with costs.


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