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Chandan Lal Vs. Khemraj and ors. - Court Judgment

LegalCrystal Citation
CourtAllahabad
Decided On
Judge
Reported inAIR1917All239(2); 40Ind.Cas.156
AppellantChandan Lal
RespondentKhemraj and ors.
Excerpt:
provincial insolvency act (iii of 1907), section 27 - composition--debt, proof of schedule of creditors, settling of--creditors, right of vote of. - - we think, however, that all that has happened up to the present should not prevent the debtor from submitting a further proposal for composition, and we think that those creditors whom the court finds to have been really creditors should be admitted on to the schedule upon proof of their debts (with a note, of course, to the effect that they bad received part payment if such be the fact) and we think that these creditors might reasonably be included in the majority required by the section......is to say, they must have proved their debts and their names admitted on to the schedule by the judge. we think that in all these insolvency matters the schedule of creditors should be settled at as early a date as possible and before a proposal for composition is finally accepted. it is only by this means that the interests of all parties can be properly considered. we are asked to put some stay on the sale of the debtor's property or the distribution of the money that may have been realised by such sale. we do not think that we ought to do this. such an application ought to be made to the judge before whom the insolvency matter is pending. no doubt if an application is made to him and he comes to the conclusion that a bona fide proposal for composition is about to be made by the.....
Judgment:

1. This application arises out of an insolvency matter. Chandan Lai is the debtor. A petition for a declaration of insolvency was presented by one of his creditors. The debtor appears to have submitted a proposal for composition under Section 27 of the Provincial Insolvency Act. This proposal was in the first instance accepted by the Judge of the Small Cause Court before whom the insolvency matter was pending. On an appeal, however, the matter was remanded with certain directions. As the result the Small Cause Court Judge refused to accept the composition. On appeal to the District Judge the order of the Small Cause Court was affirmed. The insolvent comes to this Court in an application by way of revision with various grounds of objection. The first ground was that the District Judge had erred in holding that certain debts, which were paid up subsequent to the application, should not be taken into account when considering the proposal for composition. Secondly because the debts had been legally proved and the petitioner was not bound to prove them in any particular way; thirdly, be cause under the circumstances the composition proposed by the applicant should have been accepted, and lastly, because the order of the District Judge was not in accordance with law.

2. We may point out that Section 27, Clause (2), expressly provides that the proposal for composition to be accepted must be accepted by a majority in number and three-fourths in value of all the creditors whose debts are proved and who are present in person or by a Pleader. We think that the proof of debts means that the creditor shall have proved his debt in some of the ways prescribed by the Act and that his name shall have been put by the Court on the schedule of creditors. In the present case some of the creditors had given no proof whatever of their debts--others had filed affidavits of their debts, but we do not know whether the Court even considered whether or not they were creditors and certainly they were not put on the schedule of creditors. Under these circumstances we do not see our way to interfere with the order of the Court below. We think, however, that all that has happened up to the present should not prevent the debtor from submitting a further proposal for composition, and we think that those creditors whom the Court finds to have been really creditors should be admitted on to the schedule upon proof of their debts (with a note, of course, to the effect that they bad received part payment if such be the fact) and we think that these creditors might reasonably be included in the majority required by the section. But we think that no creditor should be entitled to vote whose debts have not been 'proved as stated' above, that is to say, they must have proved their debts and their names admitted on to the schedule by the Judge. We think that in all these insolvency matters the schedule of creditors should be settled at as early a date as possible and before a proposal for composition is finally accepted. It is only by this means that the interests of all parties can be properly considered. We are asked to put some stay on the sale of the debtor's property or the distribution of the money that may have been realised by such sale. We do not think that we ought to do this. Such an application ought to be made to the Judge before whom the insolvency matter is pending. No doubt if an application is made to him and he comes to the conclusion that a bona fide proposal for composition is about to be made by the judgment-debtor which is likely to be accepted by a majority of the creditors, such consideration will influence him in granting the application. We dismiss the application with costs, including in this Court fees on the higher scale.


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