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Yerramilli Radraraju Vs. Yavanamanda Suryanarayana Raju and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 418 of 1956
Judge
Reported inAIR1960AP257
ActsProvincial Insolvency Act, 1920 - Sections 28(2), 33, 34, 49, 62, 78(2), 79 and 79(1)
AppellantYerramilli Radraraju
RespondentYavanamanda Suryanarayana Raju and ors.
Appellant AdvocateN. Bapiraju, Adv.
Respondent AdvocateG. Chandrasekhara Sastry and ;M. Suryanarayana Murthi, Advs.
DispositionAppeal dismissed
Excerpt:
.....of the official receiver or it would mean the proof that bad been lodged within the provisions of section 49 of the insolvency..........prasad v. pawankumar, 1943-2 mad lj 121: (air 1943 pc 98) the privy council has held that a 'debt proved' means a debt in respect of which a proof has been lodged and requirements of section 49 of the provincial insolvency act fulfilled. it is clear that in the case the decree-holdur was entered as a creditor in the list of debts of the insolvent, whose insolvency was later sot aside and therefore the decision is no authority for deciding that an affidavit of debts would prove it where the creditor be not asking for a dividend or for being included in the schedule. in other words -the ease does not decide that whenever proof of debt has been furnished to an insolvency court but not adjudicated upon as proving the debt, it constitutes sufficient proof of the debt.in 1947-1 mad lj.....
Judgment:

Ahmed Ansari, J.

1. The appellant is the plaintiff and has filed a suit against four persons to recover Rs. 1,619-1-0. The first defendant is the father and the others are his sons. The amount sued for is the total of three claims, the first being the money value of 54 bags of paddy on account of an oral lease. The next is the principal and interest of a promissory note for Rs. 476 by the father which was executed on 19-4-1949. The last item is the debt of Rs. 54/- on account of Katha dealings. The plaint is dated 24-4-1953, and the defences raised are that no relation of landlord and tenant existed between the parties, the debt on the promissory note had been discharged and the Katha debt remitted.

The trial court found all the aforesaid pleas to be incorrect; but it had dismissed the suit on the ground of limitation. In appeal the Subordinate Judge has sustained the defence of the suit not beings within limitation. In second appeal the argument urged before the learned Judge who originally heard the appeal was that the appellant was entitled to the benefit of Section 78(2) of the Provincial Insolvency Act, and the learned Judge having regard to the importance of the question so raised has referred the case to a Division Bench.

2. There is no dispute concerning the facts that are necessary for the argument. The father had applied to the Sub Court, Amalapuram by I. P. No. 1/50 for being adjudged insolvent and an order of adjudication was made on 31-3-1950. Thr appellant presented I. A. 41/51 for permission to file a suit against the father and the Oifficial Receiver for the three claims now sued upon. The question was under Section 28(2). The petition was also accompanied with an affidavit, whose 2nd paragraph mentioned the three debts and the third paragraph after stating that the Official Receiver had been appointed to administer the estate, asked for permission to file the suit. The petition is dated 7-11-1951 and it was rejected on 4-4-1952. The order of adjudication concerning the father's insolvency was annulled by the Court on 10-1-1953 and the suit giving rise to this appeal was filed on 24-4-1953. The appellant claims deduction of the period between 31-3-1950 to 10-1-1953, which, if allowed, would make his claims within limitation. Section 78(2), whose benefit the appellant claims reads thus:

'Where an order of adjudication has been annulled under this Act, in computing the period of limitation prescribed for any suit or application for the execution of a decree (other than a suit or application in respect of which the leave of the Court was obtained under Sub-section (2) of Section 28) which might have been brought or made but for the making of an order of adjudication under this Act, the period from the date of the order of adjudication to the date of the order of annulment shall he excluded.

Provided that nothing in this Section shall apply to a suit or application in respect of a debt provable but not proved under this Act.'

The learned Counsel for the appellant relying on the affidavit to support I. A. 41/51 has urged that it would be sufficient to constitute proof of the debt within the proviso and a finding by the Court about the existence of the debts was unnecessary. In other words he has argued that the debt must he deemed to have been proved, because of the filing of the affidavit, and no other proof was necessary under the Act. In support he has placed reliance on the observation of Bcaslcy, C. J., in Lakshmi Bai v. Rukmaji Rao, ILR 57 Mad 767: (AIR 1934 Mad 465) and also on Manicka Nainar v. Murugesa Goundan, 1947-1 Mad LJ 50: (AIR 1947 Mad 331). The position taken by the learned counsel for the respondent is that the proof of debt in the proviso to Section 78(2)is used in a technical sense and would mean proof for the purpose of receiving the final dividends in the insolvent's assets under Section 64 of the Act. In other words he has argued that any affidavit in support of the petition for seeking permission to enforce the petitioner's right under the general law would not be proof of it for purposes of the proviso to Section 78(2), The Counsel in this connection relied on Rule 3 that, has been framed by the Madras High Court in exercise of powers under Section 79(1) of the Act. The rule defines 'proved debt' as the claim of a creditor so far as it is admitted by the Court.

3. We think the argument by the respondent's Counsel has considerable force; for it is well settled that an expression in a statute is controlled by its context, by the scheme of the statute and the object which the enactment seeks to achieve. Now the words 'debts provable' occur in Ss. 33, 34 and 62(1)(a) and appear to have been used in a special sense. Section 33 calls upon all persons claiming to be creditors in respect of debts provable under the Act to tender proof of their respective debts by producing evidence of the amount and the Court is directed to determine the persons who have proved themselves to be creditors and their debts, so that it may frame the schedule which is to be the basis of the distribution of the realised assets.

Section 34 defines what debts are not provable under the Act. Section 49 provides for the proot where objection is taken by the Official Receiver and Section 62 provides that the Receiver in calcinating the dividends shall, retain sufficient assets to meet the debts provable under the Act. In this connection reference should also be mode to Section 61(5) that provides for the rateable distribution of the debts mentioned in the schedule and to Section 64, which provides for the final dividend for paying them. It is therefore clear that the expression 'debts provable' in the Act means the debts whose proof are offered with a view to entitle the creditors to be included in the Schedule with a view of their participating in the assets of the insolvent and not the proof for any other purpose.

The same expression is used in Section 28(2) and here also it means debts provable for purposes of inclusion in the schedule and payable out of the assets; otherwise the necessity for permission for instituting a suit would be meaningless. It follows that the use of the same expression in the proviso to Section 78(2) should not carry a different meaning, It further follows that the definition, of 'proved debts' under the rules is not ultra vires of the Act. That is the legal position apart from the authorities, and as we shall show, they do not establish a different proposition. In fact some of them establish that proof for other purpose should not be treated as if were proof by the creditor for purposes of participating in the bankrupt's assets. In Lakshmi Bai's case, ILR 57 Mad 767; (AIR 1934-Mad 465), the petitioner was the payee of a promissory note that was alleged to have been executed by the insolvent.

The adjudication was subsequently annulled and the Official Receiver had not passed any orders with regard to proof lodged by the petitioner. In the suit on the promissory note filed after the annulment order the question arose whether proof meant debt established to the satisfaction of the Official Receiver or it would mean the proof that bad been lodged within the provisions of Section 49 of the Insolvency Act. The learned Chief Justice in that context held that the proviso to Section 78(2) means a debt in respect of which proof has been lodged and all the requirements of Section 49 fulfilled. He further held that satisfaction of the Official Receiver was not necessary.

We find nothing in the case as laying down the proposition that an affidavit for purposes other than being treated as a creditor of an insolvent in order to claim dividends in his assets would also amount to proof under the proviso. In Ramalinga Ayvar v. Subba Ayyar, AIR 1933 Mad 168 a decree had been passed, after which the judgment-debtor became insolvent, and the decrqe contained a direction that the plaintiff should prove the debt in insolvency. The assignee of the decree applied-to the insolvency court for being recognised as the insolvent's creditor and the learned Judges held that the debt was proved though no formal mode prescribed by Section 49 was followed. As the creditor had applied for recognition for purpose of sharing in the assets of the insolvent, the decision is no authority for what constitutes proof of debt where a creditor applies to the Court for purposes of permission to sue.

In Govind Prasad v. Pawankumar, 1943-2 Mad LJ 121: (AIR 1943 PC 98) the Privy Council has held that a 'debt proved' means a debt in respect of which a proof has been lodged and requirements of Section 49 of the Provincial Insolvency Act fulfilled. It is clear that in the case the decree-holdur was entered as a creditor in the list of debts of the insolvent, whose insolvency was later sot aside and therefore the decision is no authority for deciding that an affidavit of debts would prove it where the creditor be not asking for a dividend or for being included in the schedule. In other words -the ease does not decide that whenever proof of debt has been furnished to an insolvency Court but not adjudicated upon as proving the debt, it constitutes sufficient proof of the debt.

In 1947-1 Mad LJ 50: (AIR 1947 Mad 331! there was a money decree of September 1027 and the judgment-debtor was adjudged insolvent in September, 1936 which was cancelled in September, 1940. The decree-holder, who had not tendered proof: of his debt to the Official Receiver applied in December, 1942 for the execution of the decree claiming to be entitled in the benefit of Section 78(2), but it was held that as there was no proof of the insolvency debt by the decree-holder in the insolvency proceedings, the latter was not entitled to the benefit of Section 78(2).

It was further held that even if the insolvent had, in his statement filed under Section 13 of the Act, given the particulars of the decree that would not in itself amount to proof of the amount actually owing under the decree. It was also held that if the Official Receiver had included the name in the list, that would justify the Court in holding the debt to have bean proved. This decision therefore supports the proposition that the proviso to Section 78(2) contemplates proof of debts for purposes of claiming distribution in the assets of the insolvent, and tender of proof of debt for another purpose would not attract the provisions of Section 78(2).

In this connection reference may also be made to Sait Sogmull Lachiram Firm v. Parandhsmayya, 1940-2 Mad LJ 17: (AIR 1940 Mad 716) where it was held that proof of debt in insolvency means that kind of proof, which entitles the creditor to have his name entered in the schedule, and unless the creditor tenders proof of his debt in the manner indicated by Section 49, his name cannot be entered however proved his debt may be. Before summarising the several propositions established from these authorities, it is necessary to mention the case of Ramaliga Ayyar v. Rayalu Ayyar, Nagaswami Ayyar, ILR 53 Mad 243: (AIR 1930 Mad 356(1)). It was held in that case that where a person obtained a decree against an insolvent the Official Receiver being the party the debt must he held to have been proved within the terms of Section 73 of the Act. It is difficult to treat this case as laying down any general proposition For the learned Judges have themselves observed as follows:

'We do not in this case wish to lay down any general rule as regards the meaning of the word 'proved' occurring in the other Sections of the Act.' .

4. To summarise the legal position therefore the word 'proved' in the proviso, is used in the technical sense of proof of debt for the purposes of claiming distribution in the assets of the insolvent before the Insolvency Court, (2) 'proved' would include admission in the Court and also affidavit of debt under Section 49(3) Section 78(2) cannot be taken advantage of where the creditor's purpose for furnishing proof of his debts is other than that of claiming a share in the dividend.

5. It would follow from the last proposition that unless the affidavit concerning the debt is for the purpose stated in it, mere tender of proof would not suffice. Therefore an affidavit for purposes of permission under Section 28(2) would not amount to a debt being proved within the meaning of Section 78(2). It is common ground that the petition in the case was not for the purposes of being entered as a creditor of the insolvent, and therefore the duration of the insolvency proceeding cannot be taken advantage of by the appellant. We therefore feel that the suit has rightly been dismissed by the trial court and by the lower appellate court. We would therefore dismiss the appeal with costs.


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