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Haji Sajan Lalji Vs. N.C. Macleod - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberAppeal No. 1501
Judge
Reported in(1908)10BOMLR178
AppellantHaji Sajan Lalji
RespondentN.C. Macleod
DispositionAppeal dismissed
Excerpt:
.....the commissioner, whose intention appears clearly from his judgment to have been that the orders should not become operative until they were drawn up: it is, however, not necessary to consider this point further at present, since the respondent replies to it, and the learned judge below has found, that the effect of the consent decree of the 21st november 1904 was to empower the official assignee to maintain the suit on behalf of fazulbhai as well as on behalf of his late partners. it is true that he treated it as paid to him as official assignee, but there appears to have been no reason why he could not have endorsed it over to himself as trustee on the same day......in the suit being the three insolvents and the trustees under the impugned settlements. in this suit a consent decree, ex. d, was taken on 21st november 1904. speaking broadly, the terms of the decree are-that the trustees under the settlement should forthwith pay to the official assignee a sum of money which, with the money already in his hands belonging to the estate, would enable him to pay himself as trustee for paymentto the creditors of messrs. visram ebrahim and co. (in addition to all costs, charges and expenses already incurred or which might be incurred by the official assignee) a composition of six annas in the rupee 'in accordance with the terms of the orders dated respectively 21st september last made by the court for the relief of insolvent debtors, bombay, in the matter.....
Judgment:

Batchelor, J.

1. The suit in which this appeal is brought was instituted by Mr. N. C. Macleod as Official Assignee of Hasambhai Visram, Hajibhai Visram, and Fazulbhai Visratn, who had traded under the name and firm of Messrs. Visram Ebrahim & Company. The object of the suit was to recover a considerable sum of money alleged to be due by the defendant to the insolvents' firm in respect of certain business dealings. In the Court below preliminary issues were raised as to whether the plaintiff was entitled (a) to file, and (b) to maintain the suit. These issues the learned Judge decided in the plaintiff's favour, and from that decision the defendant now appeals. The broad ground upon which the appeal is brought is that the plaintiff as Official Assignee became funetus officio and that the property of the insolvents revested in them either before the institution, or during the pendency, of the suit; and for the better understanding of the points in controversy it is necessary to set out certain dates and facts which are not disputed.

2. On 14th October 1903 Hasam and Haji filed their petitions, and a vesting order was made by the Insolvency Court. On the following day the third partner, Fazalbhai, was adjudicated an insolvent, and a vesting order was made (Exts. G and H).

3. On 15th June 1904 Hasam and Haji took out a Rule Nisi (Ex. E) for leave to withdraw their petition ' on payment to Mr. Macleod as trustee of a sum sufficient to pay a composition of six annas in the rupee to the unsecured creditors of the said insolvents' ; and on the same day Fazalbhai took out a Rule for the. re vocation, of his adjudication upon the same terms (Ex. F).

4. On 21st September 1904 these Rules were made absolute (Exs. B and C). But the Rules were not drawn up till 27th February 1906 and this suit was filed on 2nd March 1905.

5. It will be observed that the Rules of 21st September 1904 do not specify any period of time within which the payment sufficient for the six anna composition should be made. Accordingly on 28th September 1904 orders were obtained directing that 'the amount of composition mentioned in and payable under the order made herein on the 21st September instant be paid as directed in the said order within two months from the 21st September instant' (Exts. 3 and 4).

6. In another suit filed in 1904, Suit No. 76 of 1904, the Official Assignee had impeached certain settlements made by the insolvents before their insolvency as being voluntary transfers made to defeat or delay creditors, the defendants in the suit being the three insolvents and the trustees under the impugned settlements. In this suit a consent decree, Ex. D, was taken on 21st November 1904. Speaking broadly, the terms of the decree are-that the trustees under the settlement should forthwith pay to the Official Assignee a sum of money which, with the money already in his hands belonging to the estate, would enable him to pay himself as trustee for paymentto the creditors of Messrs. Visram Ebrahim and Co. (in addition to all costs, charges and expenses already incurred or which might be incurred by the Official Assignee) a composition of six annas in the rupee 'in accordance with the terms of the orders dated respectively 21st September last made by the Court for the relief of insolvent debtors, Bombay, in the matter of Hasambhai Visram and Hajibhai Visram and of Fazulbhai Visram.'

7. On 21st November 1904 a payment of Rs. l 1/4 lakhs was made by endorsement of a cheque by the trustees to Mr. Macleod, who apparently treated this as a payment to himself as Official Assignee ; and on the following day he paid this sum over to himself as trustee for the creditors of the insolvents. On 1st January 1905 Mr. Macleod closed his account with the insolvents, and as trustee opened an account with the trustees under the settlements.

8. The first point urged by Mr. Kanga, who has argued the appellant's case with skill and resource, is that, under Sections 7 and 11 of the Insolvent Debtors Act, the Official Assignee was divested of the assets of the insolvents on the 21st September 1904 when the rules were made absolute. In the case of Fazulbhai the argument is made to depend upon the revocation of the adjudication, which would, it is said, revest the property in the late insolvent ; and no doubt that is the effect which such an order would ordinarily have. The case of Hasambhai and Hajibhai cannot, it is conceded, be brought upon the same footing unless it be held that the withdrawal of their petition was in law the same thing as its dismissal by consent. But this is a proposition for which no authority has been shown to us, and which we are not prepared to accept in this appeal. Interesting questions have been raised as to the competence of the Court to permit a withdrawal and as to the validity of Rule No. 22 of the Rules framed under the Act; but these are subjects which we are not now concerned to pursue. It is enough to say that we cannot regard a withdrawal-for which no provision is made in the Act-as the legal equivalent of a dismissal by consent and we are fortified in our opinion in this case by the proceedings before the Commissioner, which indicate that in fact one of the creditors, Raoji Sankalchand and Co., did not consent to the withdrawal upon the terms upon which it was allowed. We must hold that the withdrawal would not operate to discharge the vesting order.

9. Here it is important to recall attention to the dates which I have mentioned. The suit was instituted on 2nd March 1905, and the rules absolute for withdrawal and revocation, though made on 21st September 1904, were not drawn up till 27th February 190G. This delay in drawing up the orders was in accordance with the directions given by the Commissioner, whose intention appears clearly from his judgment to have been that the orders should not become operative until they were drawn up: compare Tolson v. Jervis (1845) 8 Beav. 364. It follows that at the date of the institution of the suit the insolvency proceedings were still in force, and the assets of all three insolvents still remained vested in the Official Assignee. The subsequent coming into force of these orders could not vitiate the institution of the suit, and it is clear that the Official Assignee was competent to bring the suit. He was also competent to continue it, at least so far as Hasambhai and Hajibhai are concerned, for the order of withdrawal, even after it became operative, was not effective to divest the Official Assignee and revest the property in these insolvents. This reasoning does not of course apply to the case of Fazulbhai, for when on the 27th February 1906 the order for the revocation of his adjudication was drawn up, it would, if there were nothing more in the matter, have operated to revest his assets in him on that date, and in that event the provisions of Section 372, Civil Procedure Code, would be called into play. It is, however, not necessary to consider this point further at present, since the respondent replies to it, and the learned Judge below has found, that the effect of the consent decree of the 21st November 1904 was to empower the Official Assignee to maintain the suit on behalf of Fazulbhai as well as on behalf of his late partners.

10. I pass therefore to Mr. Inverarity's next argument that there never was an absolute revocation or an absolute withdrawal, but only an order contemplating revocation and withdrawal upon the fulfilment of certain conditions, which in fact have never been fulfilled. As we hold that a withdrawal, even if absolute and complete, would not have divested the Official Assignee of his interest in the properties of Hasambhai and Hajibhai, it will not be necessary to consider the special bearing of this argument upon their case. As regards the case of Fazalbhai, whose adjudication was revoked, we have come to the conclusion that, though the revocation was conditional, the conditions have been fulfilled. This finding is based mainly upon the terms of the orders which have already been referred to, and need not therefore be elaborated at any great length. It mustbe remembered that when these orders were drawn up, the present disputes were not foreseen, and in our opinion it will be safest to construe them as a whole upon a general consideration of their provisions. So reading them, we have no doubt that they were originally, and always remained, conditional, and that the condition precedent to their operation was the payment of a sum sufficient for the six anna composition. The question, is, was that condition fulfilled? Mr. Inverarity in contending for the negative has urged that the consent decree substituted for the orders of the Insolvency Court a totally different arrangement, which the Court has never approved; and he has pointed to the distinction that, whereas under the Rules absolute the insolvents were to pay to the trustee 'a sum sufficient to pay a composition of six annas in the rupee', the consent decree directed the trustees to pay to the Official Assignee a sum which, with the moneys already available in his hands minus costs and charges incurred or to be incurred, would suffice for the composition in question. The distinction is, no doubt, there, but upon a consideration of all the materials we do not think that it is entitled to the significance which the respondent desires to assign to it. The decree, which purports on its face to give effect to the orders of 21st September, was taken on 21st November,i.e. the last day on which the amount required for the composition was payable, and on the same day the cheque for Rs. 11/4 lakhs was paid to Mr.Macleod. It is true that he treated it as paid to him as Official Assignee, but there appears to have been no reason why he could not have endorsed it over to himself as trustee on the same day. It is objected, moreover, that the sum was not sufficient to pay the composition within the meaning of the orders of the Insolvency Court, but would only become sufficient on being added to the moneys already in the Official Assignee's hands. As to this, if it were necessary to confine ourselves to the actual wording of the Insolvency Court's orders, we should be prepared to hold that those orders did not exclude the reckoning in of the moneys already with the Official Assignee; but, however that may be, it seems to us clear that Mr. Macleod accepted the payment as sufficient to pay to the creditors the six anna composition ' in accordance,' as the consent decree runs, 'with the terms of the orders dated respectively the 21st day of September last.' This being so, the plaintiff seeks to fall back upon the consent decree, and we must now, therefore, consider the question whether this decree had the effect of empowering the Official Assignee to maintain the suit on behalf of Fazulbhai even after the orders had been drawn up in February 1906. Mr. Justice Davar has held that the decree has this effect, and we are not disposed to differ from him. We think that as between the insolvents, the trustees and the Official Assignee, the decree embodies a contract under which the assets of the insolvents are not to vest in them, but are to be made over to thetrustees by Mr. Macleod, as Official Assignee, in whom they arc to remain vested for that purpose not only until a sum sufficient for the composition has been paid, but also until he is requested by the trustees to assign the assets to them. No such request has yet been made, and under the decree the trustees are entitled to ask the Official Assignee to continue to make recoveries on their behalf. It follows that the objection thatFazulbhai should have been a plaintiff fails by virtue of the decree; the Official Assignee is entitled to maintain this suit on his behalf; and, as I have already said, even apart from the decree the Official Assignee is entitled to sue on behalf of Hasambhai and Hajibhai.

11. For the foregoing reasons our findings on the issues are :-

(1) The plaintiff is entitled to maintain this suit, and

(2) The plaintiff was entitled to file the suit.

12. The result is that the appeal must be dismissed with costs, It remains to add that the appellant has stated that his reason for taking objection to the form of the suit is that if Hasambhai, Hajibhai and Fazulbhai are not parties to the suit, they might harass him with another action. The respondent is willing that they should be joined, and we therefore order that they be added as. parties-as plaintiffs if they consent, and as defendants if they do not consent.


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