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Rustomji Ardeshir Cooper Vs. Madhavji Damodar Thackersey - Court Judgment

LegalCrystal Citation
SubjectCivil;Property
CourtMumbai
Decided On
Case Number O.C.J. Appeal No. 42 of 1928 and Insolvency No. 757 of 1928
Judge
Reported in(1932)34BOMLR1436
AppellantRustomji Ardeshir Cooper
RespondentMadhavji Damodar Thackersey
DispositionAppeal allowed
Excerpt:
.....292, 293, 295a of i.p.c., - i think in the present case, it would have been better if the learned judge had given a short notice of a day or two to the insolvent to appear on this petition. 283 it is stated in the head-note that if the registrar is satisfied that a bona fide appeal is pending from the judgment of the court of first instance, he ought to adjourn the further hearing of the petition until after the appeal is disposed of. 10. now it has been pointed out to us by counsel for the present respondents that the english bankruptcy act is not precisely similar to the indian act, because the former gives an express power to stay the bankruptcy proceedings on an appeal by the judgment debtor, where the alleged act of bankruptcy is non-compliance with a bankruptcy notice..........in section 21(1) that where, in the opinion of the court, a debtor ought not to have been adjudged insolvent, or where it is proved to the satisfaction of the court that the debts of the insolvent are paid in full, the court may, on the application of any person interested, by order annul the adjudication. there is alsosub-section (2) which provides that any debt disputed by a debtor shall be considered as paid in full, if the debtor enters into a bond with sureties then there is another section giving a general power of stay, namely, section 94, which says that the court may, at any time, for sufficient reason, make an order staying the proceedings under an insolvency petition, either altogether or for a limited time, on such terms and subject to such conditions as the court.....
Judgment:

Amberson Marten, Kt., C.J.

1. This is an appeal against the judgment of Mr. Justice Davar of July 24, 1928, refusing to set aside an adjudication order against the appellant which had been made ex parte on July 19, 1928, There is also a companion notice of motion by the appellant of August 25, 1928, asking for all the proceedings to be stayed with liberty to the appellant to manage his property, to recover outstandings and rents, to incur necessary expenses in respect of his immoveable properties, and to file, prosecute and defend suite in his name as if he had not been adjudged an insolvent, and for such other order as to this Court may seem fit.

2. Shortly stated, the position is this : The appellant Mr. Cooper, a Parsi, and the respondents Messrs. Madhavji Damodar Thackersey andothers Hindus, are carrying on a bitter litigation connected with certain landed property in Bombay, where they are adjoining owners. In the Court of first instance the appellant succeeded. In the Court of AppealMessrs. Madhavji and others succeeded. There is now an appeal to the Privy Council by Mr. Cooper to restore the judgment of the Court of first instance in his favour and toset aside the judgment of the Appeal Court, The paper-book has been prepared and the case and the record is ready to be sent to their Lordships. The case involves large figures and substantial sums may also be required to be paid as costs by one side or the other according to the final decision of the Privy Council.

3. Now, this being the state of affairs and Messrs. Madhavji and others who are the successful parties in the appellate Court having been awarded their costs and having had them taxed at something over Rs. 40,000, proceeded to attach certain property of their opponent, and satisfaction not having been made within the usual period, they then filed an insolvency petition against their opponent and proceeded to apply ex parte for an order of adjudication under Sections 7(e) and 10 of the Act. We are told by counsel who appeared last week for the respondents that they informed the learned Judge that an appeal to the Privy Council was pending. Be that as it may, the learned Judge made the order ex parte.

4. When that came to the knowledge of Mr. Cooper, he applied for a discharge of the adjudication order and incidentally he claimed that he was able to pay all his debts and that it was unfair that pending his appeal to the Privy Council an adjudication order should have thus been made. After hearing arguments, the learned Judge, though aware of the possible hardship on Mr. Cooper, refused to discharge the adjudication order, but gave Mr. Cooper this breathing space, namely, that certain property of his should be put up to sale within some four weeks, and that if it proved sufficient to pay the petitioning creditors' debt, then the matter should be ended in that way. In fact, the property was not put up for sale. This was not the fault of the petitioningcreditors, but of Mr. Cooper who made another application to the learned Judge to annul the adjudication order. He also filed an appeal, as I have already stated, against the order of July 24, 1928.

5. Now that being the general position, what is the proper course for this appellate Court to take It seems to me that we have first to consider the position in which the learned Judge was when this original petition was presented to him ex parte. I have frequently in other cases objected to the frequency with which ex parte orders of a very serious character, such as an injunction or a receiver, are sought to be obtained on the Original Side behind the back of the opponents, when a brief notice, even of twenty-fourhours, would enable the other side, at any rate, to appear before the Court and to give some indication of its defence, if any. I think in the present case, it would have been better if the learned Judge had given a short notice of a day or two to the insolvent to appear on this petition. There is no suggestion here, so far as I can see, that a delay of a day or two would have resulted in the assets being misapplied or leopardised as might possibly be the case in other insolvencies.

6. But putting that point aside, let us treat the application for annulment as if it was a defence to the original application for adjudication which had been served on the alleged insolvent, and was opposed. That being so, a question of principle seems to arise, and it is this: Are the hands of the insolvency Court tied by the mere fact that under Section 7(e) of the Act there has been an attachment for twenty-one days in execution of the Court's decree for the payment of money, on the ground that the moment the judgment of the Court is delivered there is a valid and undisputed judgment debt Or can the Court consider the question whether in effect the debt in question represents a disputed debt, and that until a final decision has been obtained on it on a bona fide appeal to a superior tribunal it would be unfair to make an adjudication order ?

7. Now, if one turns to the English authorities on the point, it would seem that under the English law, at any rate, the practice is not to make an adjudication order under such circumstances provided, at any rate, proper security be given for the payment of thedebt. That is shown in Ex parte Heyworth. In re Rhodes (1884) 14 Q.B.D. 49 a decision of the English Court of Appeal where the Court declined to interfere with the exercise of the Registrar's discretion in adjourning the hearing of a bankruptcy petition founded on non-compliance with a bankruptcy notice in respect of a judgment-debt, when an appeal waspending from the judgment, unless it was clear that the registrar could not have been right, It . was there held in effect that if the appeal appears to be a bona fide one, the hearing of a bankruptcy petition can be adjourned. If, however, the appeal is evidently frivolous, a receiving order ought to be made notwithstanding its pendency. Thus Baggallay L.J. says (p. 51):-

In the present case its appears to me that there is a substantial question raised by the appeal, and it is possible that on the hearing of the appeal the alleged debt may be gob rid of altogether. I think the registrar has exercised a very wise discretion. He has not adjourned the petition until after the appeal has been heard; ho has only adjourned it generally, with liberty to apply, so that, if the appeal is not duly prosecuted, the petitioner can apply to the Court to allow him to proceed with the petition.

8. Then Bowen L.J. saya (p. 52):-

It cannot, of course, be said that the mere fact that an appeal is pending from the judgment, gives the debtor an absoluteright to a stay of proceedings, or to have the petition, dismissed.... If it could beshown that the appeal from the judgment must be a frivolous one, we might reverse his (registrar's) decision. But, so long as he might reasonably have come to the conclusion that there was a reasonable ground of appeal, it would be a monstrous thing that a receiving order should be made while the appeal is pending.

9. So, too, in Ex parte Yeatman. In re Yeatman (1880) 16 Ch. D. 283 it is stated in the head-note that if the registrar is satisfied that a bona fide appeal is pending from the judgment of the Court of first instance, he ought to adjourn the further hearing of the petition until after the appeal is disposed of. That also appears from the concluding words of the judgment of Cotton L.J.

10. Now it has been pointed out to us by counsel for the present respondents that the English Bankruptcy Act is not precisely similar to the Indian Act, because the former gives an express power to stay the bankruptcy proceedings on an appeal by the judgment debtor, where the alleged act of bankruptcy is non-compliance with a bankruptcy notice founded on a judgment-debt. But in India we have no procedure as regards bankruptcy notices. I mean that we have no procedure constituting non-compliance with bankruptcy notices as being an act of bankruptcy. Therefore, one can understand why expressly, at any rate, the particular power in the English Act in connection with non-compliance with bankruptcy notices is not to be found in the Indian Act. On the other hand, as far as the justice of the case is concerned, it would seem that there is no difference, and that it would be as unfair in India as it would be in England to adjudge a man insolvent on ajudgment-debt for which he can give proper security although an appeal is pending from the judgment.

11. There are, however, certain express clauses in our own Act. One is to be found in Section 13(6) which provides that where the debtor appears on the petition and denies that ha is indebted to the petitioner, the Court on such security (if any) being given as the Court may require, may, instead of dismissing the petition, stay all proceedings on the petition for such time as may be required for trial of the question relating to the debt. Then it is provided in Section 21(1) that where, in the opinion of the Court, a debtor ought not to have been adjudged insolvent, or where it is proved to the satisfaction of the Court that the debts of the insolvent are paid in full, the Court may, on the application of any person interested, by order annul the adjudication. There is alsoSub-section (2) which provides that any debt disputed by a debtor shall be considered as paid in full, if the debtor enters into a bond with sureties Then there is another section giving a general power of stay, namely, Section 94, which says that the Court may, at any time, for sufficient reason, make an order staying the proceedings under an insolvency petition, either altogether or for a limited time, on such terms and subject to such conditions as the Court thinks just.

12. Now here a stay is sought in appeal from the learned Judge's order. In my judgment the debtor did in effect deny that he was indebted to the petitioners within the meaning of Section 13(6) Accordingly it was open to the trial Court to stay all proceedings provided it took such security, if any, as it thought fit. As, however, the adjudication order has actually been made, I think the case now comes within Section 21(1) which provides that where, in the opinion of the Court, a debtor ought not to have been adjudged insolvent, the Court may by order annul the adjudication. Similarly, if there was any doubt at all about the application of this section, then, at any rate, with regard to the initial proceedings before the learned Judge, he had, so I would hold, the power generally to stay the insolvency proceedings under Section 94 of the Act.

13. Now, the learned Judge in his judgment does recognise that hardship might be imposed on the insolvent, for he says:-

However that may be on the facts of this case, I am satisfied that it would be a matter of very great hardship on the insolvent, if time is not given to him to make at least one last effort to pay off the opposing creditors' claim.

14. It does not, however, appear that the learned Judge's attention was drawn to the English authorities which have been cited to us. Looking at the merits of the case, there is little doubt that the main object of the petitioning creditors is to get their costs, if they can, before the decision of their opponent's appeal to the Privy Council. That no doubt they are entitled to do and also to insist on their strict legal rights in all respects. It is equally, I think, the duty of the Court to see that the rights of all parties are fairly preserved; and it is difficult here to see how the petitioning creditors can bedemnified by the adjudication order not being made, provided there is security for their debt. The only suggestion made to us is that if the insolvent failed in the Privy Council appeal, it would not be possible for him to pay the costs and that the ordinary security for costs would prove insufficient in a heavy case of this description. On the other hand, if security is now given, they will get substantially payment of their existing costs which they would not necessarily be able to obtain even if the adjudication order was made.

15. It has also been pointed out to us that the proper course which the alleged insolvent should have taken would have been to apply to this appellate Court for a stay of this Court's proceedings on account of the litigation now going to the Privy Council That, I think, is a correct contention. The alleged insolvent has only himself to blame for not taking the proper course in the first instance; but that can be borne in mind when one comes to the question of costs. It has also to be borne in mind in favour of the respondents that the precise offer which the insolvent now makes to this Court, namely, that he is prepared to find security to the satisfaction of the Prothonotary for the petitioning creditors' debt was never placed, as far as we can see, before the learned Judge when he made his original order, though apparently some offer to that effect was made much later on about the time of the filing of this appeal, That again is a matter to be borne in mind. But we think it would be too hard on Mr. Cooper to treat the case strictly as it was before Mr. Justice Davar irrespective of the offer for security that is now made. That is a matter, we think, in which justice can be done by a proper order as to costs.

16. On the whole, then, I would hold that in this case the proper order that the learned Judge should have made would have been to stay the insolvency petition generally with liberty to apply and that he should not have made an adjudication order, provided, of course, proper security was given by the alleged insolvent, There is no question here that the appeal to the Privy Council is a bona fide appeal, because, as I have pointed out, the alleged insolvent has the judgment of the Court of first instance in his favour. We need not, therefore, consider the contingency which counsel for the respondents put before us to the effect that any order of the sort I am now indicating would cause practical abuse by promoting frivolous appeals. Nothing of the sort, in our opinion, need follow or will follow from our judgment.

17. I would, therefore, allow the appeal and discharge the order which the learned Judge made and direct the insolvency petition to stand over generally with liberty to apply.

18. Then as regards costs, the alleged insolvent substantially was wrong in the attitude he took up before Mr. Justice Davar inasmuch as he did not tender a proper security for the debt. That being so, we think, with regard to the costs of the proceedings in the Court below, that the insolvent must pay the costs of the petitioning creditors of the petition and the subsequent proceedings in the lower Court. As regards the costs of this appeal and the notice of motion, each party has been partly right and partly wrong. We, therefore, think the fair order would be that each party do bear his own costs of the appeal and of the notice of motion.

19. The above is, of course, subject to the condition of adequate security. Mr. Cooper must furnish security to the satisfaction of the Prothonotary for the petitioning creditors' debts within fourteen days from today, and the Prothonotary is to give notice to the respondents of any appointment for fixing that security and they will be at liberty to raise objections as to the sufficiency of it. If, however, that security is not furnished within fourteen days or such extended time, if any, which this Court may grant, then this appeal and the notice of motion is to be dismissed with costs.

20. There will be liberty for Mr. Cooper to withdraw his Rs. 500 deposited as security for the costs of the appeal in the event of the above general security being given as already directed.

Murphy, J.

21. I agree in the judgment just delivered by the learned Chief Justice.


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