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Gustasp Behram Irani Vs. Bhagvandas Sobharam - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtMumbai
Decided On
Reported inAIR1931Bom554
AppellantGustasp Behram Irani
RespondentBhagvandas Sobharam
Excerpt:
- indian penal code, 1860 [c.a. no. 45/1860].sections 124-a, 153-a, 153-b, 292, 293 & 295a; [f.i. rebello, smt v.k. tahilramani & a.s. oka, jj] declaration as to forfeiture of book held, the power can be exercised only if the government forms opinion that said publication contains matter which is an offence under either of sections 124-a, 153-a, 153-b, 292, 293, 295a of i.p.c., - 11): if the action against a person who becomes bankrupt is unsuccessful, no costs become payable by him or out of his estate, and no question as to them can arise. but if an unsuccessful action is brought by a man who becomes bankrupt, then, if ha is ordered to pay the costs, or if a verdict is given against him before he becomes bankrupt, they are provable:.....and under section 45, clause (2), the order of discharge shall release the insolvent from all debts provable in insolvency. 3. the question therefore arises whether the decretal debt with regard to the costs in the application for leave to sue is a provable debt within the meaning of sub-section (3), section 46. apart from authority, in order that a debt should be provable, it must appear that the insolvent was subject to such debt or liability at any time before his discharge by reason of any obligation incurred before the date of the adjudication. the debt or the liability would not be provable if the debtor becomes subject to it after his discharge, or if he becomes subject to it by reason of any obligation incurred after the date of the order of adjudication. in the present case.....
Judgment:

Patkar, J.

1. (After recounting the facts stated above, his Lordship proceeded:) We are concerned in this appeal with regard to the item of Rs. 513-5-9, costs awarded by the High Court in the application for leave to sue. The learned Subordinate Judge disallowed the contention of the appellant who was a discharged insolvent and allowed execution to proceed. It is contended in this appeal that the decree is a nullity as the High Court in allowing the leave ordered the costs of the application to be tacked on to the mortgage debt due to the respondent by the estate of the said insolvent, and that a personal decree with respect to the costs of the application ought not to have been passed. This objection ought to have been raised by the appellant defendant in the suit. He did not raise that contention and the decree was passed against him and must be executed as it stands. Further, the order passed in the application for leave to sue does not necessarily preclude the Court from passing a personal decree with regard to the amount of costs in the application for leave to sue.

2. It is next contended that even if the decree is not a nullity the mode of execution is erroneous, and that the decree holder ought not to be allowed to execute the decree against the property of the insolvent after his discharge. It is urged that under Schedule 2, Presidency Towns Insolvency Act, Rule 9, a mortgagee, after he finds that the realization of the mortgaged property is not sufficient for the payment of the mortgage amount, can prove for the balance of the mortgage money as a debt in insolvency.It is further contended that Under Section 46, Clause (3), Presidency Towns Insolvency Act, the decretal debt would be provable in insolvency, and Under Section 45, Clause (2), the order of discharge shall release the insolvent from all debts provable in insolvency.

3. The question therefore arises whether the decretal debt with regard to the costs in the application for leave to sue is a provable debt within the meaning of Sub-section (3), Section 46. Apart from authority, in order that a debt should be provable, it must appear that the insolvent was subject to such debt or liability at any time before his discharge by reason of any obligation incurred before the date of the adjudication. The debt or the liability would not be provable if the debtor becomes subject to it after his discharge, or if he becomes subject to it by reason of any obligation incurred after the date of the order of Adjudication. In the present case the order for costs was passed after the date of the adjudication, and the obligation to pay the debt was incurred at the time when the order for costs was passed. The liability therefore to pay the costs accrued on 9th August 1926, after the appellant was adjudged an insolvent on 15th July 1924. Though the word 'debt' includes a judgment debt according to Section 2(b) of the Act, the obligation to pay the costs is one which accrued after the date of the adjudication and in respect of which there could be no proof in insolvency, and which remained a debt enforceable against the insolvent after and notwithstanding his discharge.

4. According to the decision of Re Bluck; Ex parte Bluck [1887] 57 L.T. 419 if a man brings an action he does not place on himself the obligation to pay the costs. The obligation arises when the judgment is given against him.

5. In British Gold Fields of West Africa, In re [1899] 2 Ch. 7 it was observed as follows (P. 11):

If the action against a person who becomes bankrupt is unsuccessful, no costs become payable by him or out of his estate, and no question as to them can arise. But if an unsuccessful action is brought by a man who becomes bankrupt, then, if ha is ordered to pay the costs, or if a verdict is given against him before he becomes bankrupt, they are provable:.. On the other hand, if no verdict is given against him, and no order is made for payment of coats until after he becomes bankrupt, they are not provable. In such a case there is no provable debt to which the costs are incident, and there is no liability to pay them by reason of any obligation incurred by the bankrupt before bankruptcy; nor are they a contingent liability to which he can be said to be subject at the date of his bankruptcy.

6. The same view is taken in A Debtor, In re [1911] 2 K.B. 652 and also in Pilling, In re [1909] 2 K.B. 788 and Vint v. Hudspith [1885] 30 Ch. D. 24.

7. The case cited on behalf of the appellant in Buckwell v. Norman [1898] 1 Q.B. 622 is distinguishable on the ground that the order for costs was passed before the receiving order was made and the debt was therefore provable in insolvency notwithstanding the personal disqualification for proving it. Under Sub-section (2), Section 46 the respondent having notice of the presentation of the insolvency petition would not be in a position to prove the debt or liability contracted by the debtor subsequent to the date of his so having notice.

8. In the present case the debt is not provable as the liability was incurred after the date of adjudication, and there is also the personal disqualification under Sub-section (2), Section 46 for proving it.

9. We think therefore that the liability incurred by the order for costs in the application for leave to sue is not a provable debt within the meaning of Sub-section (3), Section 46, Presidency Towns Insolvency Act, and therefore the order of discharge would not release the insolvent from that debt.

10. The order therefore of the lower Court seems to be right and this appeal must be dismissed with costs.

Broomfield, J.

11. The relevant facts and the dates have been stated by my learned brother. The appellant has raised two contentions. In the first place he contended that the trial Court had no power to pass a personal decree against the appellant in view of the order of the High Court of 9th August 1926, directing that the amount of costs incurred in connexion with the application to the High Court for leave to sue should be tacked on to the mortgage debt. It appears to me to be very doubtful whether this order of the High Court necessarily meant that a personal decree for the amount of costs could not be passed in addition. But in any case it is clear that appellant defendant 2 in the suit ought to have raised that contention at the hearing of the suit and ought also to have appealed against the decree. It is to be noted that a specific prayer was made in the suit for this particular amount of costs. Defendant 3 who was a puisne mortgagee, contended that the plaintiff could not get priority over him in respect of this claim and a special issue wag raised on that point which was decided in favor of defendant 3. But defendant 2, the present appellant neither appeared nor gave any instructions to his pleader and after the decree had been made he did not file any appeal. The decree in respect of these costs cannot be described as a nullity and its validity cannot be questioned in execution.

12. Then, secondly, it was contended that instead of executing the decree the plaintiff was bound to prove the debt in the insolvency. This argument was based on Schedule 2, Rule 9, Presidency Towns Insolvency Act and Section 45, Clause (2), of the Act. Rule 9 of the schedule provides as follows:

If a secured creditor realizes his security, he may prove for the balance due to him after deducting the net amount realized.

13. Section 45, Clause (2), provides:

Save as otherwise provided by Sub-section (1), an order of discharge shall release the insolvent from all debts provable in insolvency.

14. Counsel argued that by reason of the High Court's order of 9th August 1926 the debt in respect of the costs became part of the secured debt and the plaintiff therefore could have proved for the balance after realization of the security. But it is clear I think that this Rule 9 in the schedule must be read subject to Section 46 of the Act which defines what are provable debts. The rule can only mean that the creditor can prove for the balance if the balance consists of a provable debt.

15. The question therefore is whether this particular debt was provable in the insolvency. Clause (2), Section 46 is as follows:

A person having notice of the presentation 01 any insolvency petition by or against the debtor shall not prove for any debt or liability contracted by the debtor subsequent to the date of his so having notice.

16. This clause would appear to stand in the way of any attempt by the plaintiff to prove this particular debt in the insolvency. The case of Buckwell v. Norman [1898] 1 Q.B. 622 shows that the fact that a party cannot prove a debt by reason of the provisions of this Clause (2) does not necessarily mean that the debt is not a provable debt within the meaning of Clause (3), Section 46. But this particular debt with which we are concerned does not come within the terms of Clause (3). In spite of the very wide definition of the word 'liability' in the explanation to Section 46 it seems to me to be impossible to hold that the liability to pay these costs is one to which defendant 2 became subject by reason of any obligation incurred before the date of his adjudication. The only 'obligation incurred before the order of adjudication which was made on 15th July 1924, was the obligation to pay the mortgage debt. The plaintiffs' application in which the costs were incurred and the Court's order on it were both more then two years after the date of the adjudication order. That this debt is not a provable debt seems to me to be sufficiently clear from the language of Section 46 and if any authority is needed it will be found in the cases cited in the arguments to which my learned brother has referred. If the debt is not a provable debt then Clause (2), Section 45 has no application and the appellant's objection to the execution of the decree is untenable.

17. I agree with the order proposed by my learned brother.


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