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In Re: Morarji Jairam Naranji - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberInsolvency No. 389 of 1923
Judge
Reported in(1932)34BOMLR1175
AppellantIn Re: Morarji Jairam Naranji
Excerpt:
presidency-towns insolvency act (iii of 1909), sections 8(1), 90(2)-insolvency court-review-order made without jurisdiction-civil procedure code (act v of 1908), order xlvii, rule 1-costs incurred by a creditor before the official assignee-insolvency court cannot award such costs.;under section 8(1) of the presidency towns insolvency act, 1909, the court has larger powers to review, rescind or vary its orders than in proceedings which fall exclusively under order xlvii, rule 1, of the civil procedure code, 1908, an order passed in insolvency can be reviewed if it was made without jurisdiction.;costs incurred by a creditor in an inquiry before the official assignee are not covered by section 90(2) of the act, and cannot be awarded by the insolvency court. - .....of this insolvency may be awarded to them. the application was made after giving notice to the official assignee. no creditor appeared to oppose the application but the official assignee was represented before me by the deputy official assignee. an affidavit was filed by the creditors in support of the application. no affidavit was filed on behalf of the official assignee or any creditors to oppose the application. when the application came on before me, mr. abuwalla, the deputy official assignee, frankly admitted that the applicants had rendered assistance in the course of the insolvency but that his instructions from the official assignee were to oppose the application as it was not the practice of the official assignee's office to allow costs incurred by creditors in the course of.....
Judgment:

Mirza, J.

1. On November 18,1930, an application was made to me on behalf of the applicants Messrs. Debi Sahi Bhaniram who are the creditors of the insolvent that certain costs incurred by them in the course of this insolvency may be awarded to them. The application was made after giving notice to the Official Assignee. No creditor appeared to oppose the application but the Official Assignee was represented before me by the Deputy Official Assignee. An affidavit was filed by the creditors in support of the application. No affidavit was filed on behalf of the Official Assignee or any creditors to oppose the application. When the application came on before me, Mr. Abuwalla, the Deputy Official Assignee, frankly admitted that the applicants had rendered assistance in the course of the insolvency but that his instructions from the Official Assignee were to oppose the application as it was not the practice of the Official Assignee's Office to allow costs incurred by creditors in the course of proceedings before the Official Assignee, out of the assets of the insolvent.

2. The facts appearing from the affidavit of the creditors in support of the application are that, on the adjudication of the insolvent they gave the Official Assignee the required indemnity and guarantee for his costs and this enabled him by bringing himself on the records in place of the insolvent to continue certain proceedings to which the insolvent was a party before the adjudication. These proceedings resulted in the Official Assignee obtaining for the insolvent's estate a sum of Rs. 79,000. So far as these proceedings are concerned the applicants are not claiming any costs as the Official Assignee's attorneys have received from the insolvent's assets all the costs including costs between attorney and client for which the applicant had stood guarantee to the Official Assignee and the Official Assignee is not made liable to pay the costs of any party to these proceedings. In addition to the services rendered by the applicants in these proceedings they have shown that by rendering proper assistance they have enabled the Official Assignee to reject a claim in toto against the estate of the insolvent preferred by one Bai Gunvanti for Rs. 47,970-4 as also a claim made by one Dharamsi Ratansi for Rs. 5,789, and reduce a claim made by one Pitamber Vithaldas from Rs. 1,30,000, to Rs. 5,500 and considerably reduce a claim made by Messrs. Shroff & Lam, attorneys of this Court, for their costs against the insolvent, The applicants have also shown that they worked under much difficulty as the insolvent had died without filing his schedule. The applicants had to incur costs in getting the insolvent's books of account properly examined. The investigation by the Official Assignee of the various claims which were made against the insolvent's estate lasted from February 1927 till March 1930 and the Official Assignee had given notices from time to time to the applicants to attend at the investigation of these claims. The applicants attended on these occasions with their lawyers who rendered assistance to the Official Assignee in rejecting or modifying the claims under investigation. The applicants have thus made themselves liable for legal costs to the extent of Rs. 1,800. As there was no opposition from any creditor and it appeared to me at the time just and proper that the opposing creditors should receive part of the costs they were put to in rendering service which had resulted in benefit to the general body ofcreditors. I settled the claim of the applicants at the round figure of Rs. 1,000, and ordered the amount to be paid out of the assets in the hands of the Official Assignee, The applicants are the largest creditors of the insolvent being claimants in respect of Rs. 79,000. The total liability of the insolvent as finally settled by the Official Assignee is about Rs. 1,50,000. It appears that no other creditor has rendered assistance to the Official Assignee,

3. The Official Assignee has applied for a review of my order on the ground mainly that it was made without jurisdiction.

4. Mr. Somjee on behalf of the creditors has contended that no new facts are disclosed to entitle the Official Assignee to ask for a review of the order made by me on November 18, 1930, He relies upon Section 90 of the Presidency-towns Insolvency Act as prescribing for this Court the same rules of procedure in insolvency as in the exercise of the ordinary original civil jurisdiction. Applications for review under the ordinary original civil jurisdiction have to conform to the provisions of Order XLVII, Rule 1, of the Civil Procedure Code, under which a review would not lie unless there was discovery of a now and important matter of evidence which after the exercise of due diligence was not within the knowledge of the person applying for review or which could not be produced by him at the time when the decree was passed or order made on account of some mistake or error apparent on the face of the record or some other sufficient reason. The proviso to Section 90 of the Presidency-towns Insolvency Act makes it clear that nothing in Section 90(1) of the Act is in any way to limit the jurisdiction conferred on the Court under the Act. Section 8(2) of the Presidency-towns Insolvency Act provides that the Court may review, rescind or vary any order made by it under its insolvency jurisdiction. The terms of this section are more general than those of O. XLVII, Rule 1, of the Civil Procedure Code. It seems to me that larger powers are conferred on the insolvency Court under Section 8(1) of the Act in reviewing, rescinding or varying its orders than in proceedings which fall exclusively under O. XLVII, Rule 1, of the Civil Procedure Code. There would be sufficient cause, in my opinion, for reviewing an order in insolvency if it could be shown that the order was made without jurisdiction.

5. Under Section 90(2) of the Presidency-towns Insolvency Act the Court has the power to award costs of and incidental to any proceedings in Court. The question which arises for determination here is whether the Official Assignee can be regarded as a Court while enquiring into claims made against the estate of an insolvent pending the insolvency. Rule 25 in the second schedule provides that the Official Assignee shall examine every proof and amounts of the debt and in writing admit or reject in whole or in part or require further evidence in support of it. If he refuses the proof he shall state in writing to the creditor1 the grounds of the rejection. Rule 27 in the same schedule provides that the Court may expunge or revise the proof upon the application of a creditor if the Official Assignee declines to interfere in the matter. It is clear from these two rules read together that the Official Assignee does not act in this matter as a judicial officer to whom the Court has delegated certain judicial functions, but acts entirely in an administrative capacity. If a claim is wrongly admitted by the Official Assignee against the insolvent's estate a remedy open to a creditor who is aggrieved by this is to apply to the Court to have the claim expunged or revised. Under the Bombay Insolvency Rules of 1910, Rule 2(2), it is provided that' a Court' includes an officer of the Court when exercising the powers of the Court pursuant to the Act or under the Rules. It is not shown here that the Official Assignee can be regarded as ' a Court ' within the meaning of this rule. I am of opinion that the order made by me on November 18, 1930, was without jurisdiction and should be set aside.


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