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Haji Dada Nurmahomed and Bros. Vs. Ismail Karim - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtMumbai
Decided On
Case NumberInsolvency No. 690 of 1927
Judge
Reported in(1929)31BOMLR420; 118Ind.Cas.794
AppellantHaji Dada Nurmahomed and Bros.
Respondentismail Karim
Excerpt:
.....are intended, first, for the benefit of the general body of creditors, and secondly, to enable the official assignee to establish his rights against the creditors or the creditors in the insolvency who are brought upon the scene by means of fraudulent preferences or fraudulent tactics resorted to, and who usually are the relatives and friends of the insolvent, prior to the insolvency.;the provisions of article 36 are not meant to be used for the purposes of a fishy cross-examination in order to prepare for future litigation. - [couto; m.l. pendse, jj.] in the first instance the order passed under s. 132(5) is an order of a summary nature and does not conclude the rights of the petitioners, because while passing the assessment order, it is always open to the petitioners to point out that..........october 31, 1928, made under section 36 of the presidency-towns insolvency act obtained by the official assignee from the commissioner in insolvency at the instance of the opposing creditors in so far as it directs the applicant to appear before the learned chief clerk on december 6, 1928, for being examined and to produce at that time all his books of account, papers, vouchers, etc., in any way relating to the insolvent's dealings and transactions and property in his possession or subject to his control, should not be vacated, and for costs.2. in this instance the official assignee applied tome in chambers for an order under article 36, clause (1), for the examination of the applicant. following general directions given to the official assignee, the official assignee is careful,.....
Judgment:

Davar, J.

1. This is a notice of motion dated November 28, 1928, taken out by the applicant, calling upon the opposing creditors Haji Dada Nur Mahomed & Bros, to show cause why the order dated October 31, 1928, made under Section 36 of the Presidency-towns Insolvency Act obtained by the Official Assignee from the Commissioner in Insolvency at the instance of the opposing creditors in so far as it directs the applicant to appear before the learned Chief Clerk on December 6, 1928, for being examined and to produce at that time all his books of account, papers, vouchers, etc., in any way relating to the insolvent's dealings and transactions and property in his possession or subject to his control, should not be vacated, and for costs.

2. In this instance the Official Assignee applied tome in chambers for an order under Article 36, Clause (1), for the examination of the applicant. Following general directions given to the Official Assignee, the Official Assignee is careful, when presenting these applications to me, to satisfy himself that the order asked for is not intended for the purposes of annoyance to the insolvent or to the deponents under Section 36, or with a view to extract information in a pending suit or in a suit intended to be filed. In every one of these applications, I have it on oath from the deponent, as it also appears in the present affidavit, that the application is not made with the object of harassing the insolvent or unnecessarily delaying the insolvency proceedings, or annoying any other party. The Official Assignee in this case wishes that this order should not be vacated as the present application requires it to be done.

3. I have, on more occasions than one, pointed out, in a large number of cases in which I have made or refused these orders, the principles upon which these orders have to be made. The first of these judgments was delivered by me on March 20, 1928, in the insolvency of Husseinbhai Ahmedbhai, No. 136 of 1927. Before that judgment was delivered, I had occasion to deliver a judgment in chambers in the matter of Suit No. 2730 of 1919 and in the matter of References Nos. 52 and 53 of 1922 (Damodar Raghoba v. Mantri & Co.m), In delivering that judgment I reviewed the authorities as they existed in India and England for the last sixty years, and I do not wish to go over the same ground. In another judgment, delivered by me on November 6, 1928, in the matter of Ebrahim Khanbhai and another, insolvents, I have again alluded to the principles to be followed by the Insolvency Judge in granting orders under Section 36. I have in that judgment, page 240 of the file of judgments, pointed out what or what should not be a proper order under Section 36 of the Presidency-towns Insolvency Act, and the construction of the section, to my mind, presents no difficulty. Orders made under Section 36, in my opinion, are purely discretionary. In the first instance they are intended to be made for the benefit of the general body of creditors, and secondly, to enable the Official Assignee to establish his rights against the creditors, or the creditors in the insolvency who are brought upon the scene by means of fraudulent preferences or fraudulent tactics resorted to, who usually are the relatives and friends of the insolvent, prior to the insolvency. At the same time it is clear that the law never contemplated that the provisions of Section 36 should be used for the purposes of a fishy cross-examination in order to prepare for future litigation. The dicta of the learned Judges in England are, by the provisions of Section 36 of the Presidency-towns Insolvency Act of 1909 aa amended by the Act of 1927, now brought in a line with the English authorities, but before the amendment the English cases had no application to Section 36. The cases cited and collected in the decision in Be Haripada Rahshit: Ex parts Binodini Dassee I.L.R.(1916) cal. 374 and Jeffris v. Tomlinson (1886) 3 T.L.R. 193; Irwell v. Eden (1887) 18 Q.B.D. 588 ; Hood Barrs v. Heriot: Ex parte Blyth [1896] 2 Q.B. 338 and the authorities collected in Bald wia on Bankruptcy illustrate the principle, and all point to one conclusion, viz., that the provisions of this section are not to be used as an instrument of torture and annoyance in preparing for litigation, or for extracting information from a genuine claimant, who in law is not bound to give that information. The scope and utility of Section 36 by the amendment has been considerably restricted. Prior to the amendment in 1927, by Clause (4) of Section 33, if on the examination of any person the Court was satisfied that the person examined was indebted to the insolvent, the Court could, on the application of the Official Assignee, or on its own motion, order the person examined to pay to the Official Assignee, at such time and in such manner as the Court may direct, any amount by which he was found indebted. Similarly under Clause (5) if, on the examination under Section 36, the Court was of opinion that the property belonging to the insolvent was in the possession of the person examined, an order could be made by the Court, vesting that property in the Official Assignee, without further litigation. Those provisions were found to be arbitrary and led to a great deal of hardship, till the amendment was agitated in 1927, and was eventually granted. Under the present amended section, under Section 36, one could get a deponent to admit possession of property, or one could find that the deponent was indebted to the insolvent, but no summary methods exist now of getting hold of the property by the Official Assignee unless and until the deponent admits that the property belongs to the insolvent. Therefore, in every case, if the claim is contested, the Official Assignee is driven to a suit. But following the principles of cases decided in the past, creditors should not be put to that annoyance, if the object of the examination is to extract information in anticipation of preparation for filing a suit, and in granting these applications made by the Official Assignee, I exercise a great deal of caution in order to ascertain whether the applications are genuine or otherwise. The matter may be a subject of comment, if behind the back of the Official Assignee or without his knowledge and consent, any creditor applies to examine another person under Section 36, Such orders I refuse to grant unless I am satisfied with the bona fides of the application. But when the matter rests on different contentions, then the Official Assignee applies.

4. In the present case the Official Assignee has applied for this order after the public examination of the insolvent was concluded. The insolvent in his public examination states facts which show that he wishes to keep the Official Assignee at arm's length. He is a man, who has done large business in different places, and owned immovable properties. He declines to give any information about the mortgages of these properties. One method, in which the Official Assignee could have ascertained whether there was consideration for these mortgages or not, was the production of the insolvent's books, where entries would be found showing what the insolvent received. In this case the insolvent, although he carried on extensive business and mortgaged his properties, both in Bombay and outside, refuses to disclose a single book on the plea that his partner took the books to be completed, and there is no explanation where the partner is, or what has happened to the books. I can well understand an insolvent doing this, because if he has not received consideration and his books are produced, that might give the show away in the absence of entries of actual payments. There should be no difficulty so far as the applicant in thin case is concerned, if his mortgage is genuine, to place his books before the Official Assignee to show what consideration passed; but as there is nothing said in the insolvent's examination before the Official Assignee or in his public examination later, as to the disposal of his property and his books. I am inclined to think that in this instance the deponent, who is a cousin of the insolvent, is very probably the custodian of his property until the clouds disperse.

5. Under these circumstances the notice of motion will be dismissed, and the order made by me, as asked for by the Official Assignee, under Section 36, Clause (1), on October 31, 1928, will stand.


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