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Mul Chand and anr. Vs. Official Receiver and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1930All471
AppellantMul Chand and anr.
RespondentOfficial Receiver and ors.
Excerpt:
- - the official receiver reported that under circumstances detailed in his report dated 28th march 1928, a clear discharge cannot be recommended. if he fail to make an application within the period limited by the court, the adjudication may be annulled with the result that the insolvent may be again arrested in execution of the decree and be subjected to all the other worries of execution. 10. an order like the one passed by the learned insolvency judge can be interpreted only as an order refusing to grant any sort of discharge to the applicants and this is not what is, ordinarily, contemplated by the legislature......to apply for discharge within one year of their adjudication. they accordingly applied and the learned judge has rejected that application. hence the appeal.3. the judgment of the learned district judge, who is the insolvency judge in this ease, is rather short and runs as follows:this is an application for discharge. not an anna has been paid. the debts are rs. 6,000 or 7,000. the applicants had apparently a large business. they have produced no books. they had some zamindari property and some houses which were sold in execution of decrees but only after the amounts due had been expended by delay and unavailing litigation. the applicants are not entitled to a discharge. the application is rejected.4. it appears to me that the learned judge has not taken into consideration whether.....
Judgment:

Mukerji, J.

1. This is an appeal in an insolvency matter, by the insolvents Mul Chand and Jagannath, who are brothers.

2. It appears that the appellants were declared insolvents and they were directed to apply for discharge within one year of their adjudication. They accordingly applied and the learned Judge has rejected that application. Hence the appeal.

3. The judgment of the learned District Judge, who is the insolvency Judge in this ease, is rather short and runs as follows:

This is an application for discharge. Not an anna has been paid. The debts are Rs. 6,000 or 7,000. The applicants had apparently a large business. They have produced no books. They had some zamindari property and some houses which were sold in execution of decrees but only after the amounts due had been expended by delay and unavailing litigation. The applicants are not entitled to a discharge. The application is rejected.

4. It appears to me that the learned Judge has not taken into consideration whether the appellants were not entitled to a conditional discharge. The Official Receiver reported that under circumstances detailed in his report dated 28th March 1928, 'a clear discharge cannot be recommended.' Evidently, even the Official Receiver was not prepared to say that the appellants were not entitled to even a conditional discharge or a discharge, the operation of which may be suspended for some specified time, or whether an order suspending the operation of the order and also attaching conditions might not serve the interests of justice.

5. A consideration of the principles on which the law has been framed will enable us to arrive at proper conclusions having regard to the facts of a particular case. As pointed out by the Court of appeal in the judgment of Vaughun Williams, L.J., In re, Gaskell [1904] 2 K.B. 478(to which two other learned Lord Justices concurred.)

After all, the overriding intention of the legislature in all Bankruptcy Acts is that the debtor on giving up the whole of his property shall be free man again, able to earn his livelihood and having the ordinary inducements to industry. Sometimes, it is not right that the bankrupt should be free immediately; he must pass through a period of probation; and theoretically there may be cases in which he ought not to be free at all, but prima facie, he is to give up everything he has and on doing that he is to be made a free man.

6. That being the true principle of bankruptcy laws it would be only in extreme cases that an insolvent will be refused a discharge either absolute or conditional or of any kind whatsoever.

7. Section 41 read with Section 27, Provincial Insolvency Act, 1920, in my opinion, contemplates the same rule as has been pointed out by Vaughan Williams, L.J.S. 41 of the Act says:

A debtor may at any time after the order of adjudication and shall within the period specified by the Court apply to the Court for an order of discharge....

8. This, when read with the provisions of Section 27 viz., that when an order of adjudication is made, the Court must specify a period within which the debtor shall apply for his discharge and the further provision that on sufficient cause being shown, the 'period within which the debtor shall apply for a discharge may be extended, lead me to the conclusion that there can ordinarily, at least be only one application for discharge. The interpretation that a debtor may apply for a second or third time, so long as he has complied with the rule of applying once within the period specified by the Court is not a valid one. The old law did not require an insolvent to apply for discharge and therefore so long as he did not apply, the Court had no hold over him. Now, the insolvent is under the obligation of applying for a discharge and then all his previous behaviour will come under the scrutiny of the Court, including a review of what he has done since he was adjudicated insolvent, to assist the receiver or the Court in paying up his debts. If he fail to make an application within the period limited by the Court, the adjudication may be annulled with the result that the insolvent may be again arrested in execution of the decree and be subjected to all the other worries of execution. If more than one application had been in contemplation there would be no object in saying in sub-S. 2, Section 27 that the Court might on sufficient cause being shown, extend the period within which the debtor should apply. Further, the language of the words in para. 2, Section 41 indicates that ordinarily a discharge shall be granted, but what would be the nature of the discharge is left to the discretion of the Judge.

9. I am not deciding-the question does not arise in this case-that where an insolvent's application for discharge has been totally refused, he may not, under any circumstances, come in again and apply for a discharge. He may for example, have been able to pay his creditors in full, long after his first application was totally refused, and he may be allowed to have a full discharge. What I do decide is that, ordinarily, no second application by the insolvent is contemlated by the law, the first application being sufficient.

10. An order like the one passed by the learned insolvency Judge can be interpreted only as an order refusing to grant any sort of discharge to the applicants and this is not what is, ordinarily, contemplated by the legislature. It may be that the appellants' is an extreme case of dishonest behaviour so as to merit that they shall continue to be undischarged insolvents for the rest of their days, I am not sure whether the learned insolvency Judge contemplated making any such order of far reaching consequence. If he had meant to pass such an order, he would surely have written a longer order explaining all that appears against the applicants. On the report of the Official Receiver and on the facts mentioned in the learned Judge's order, no case has been made out for branding the applicants with the ignominy of undischarged insolvents and burdening them with the disabilities of such persons, for their whole life. In my opinion, the order of the learned insolvency Judge should be discharged and the case sent back to him with the direction that he should reconsider the application and having regard to the remarks contained in the judgment, he should approach the case with a fresh mind and pass proper orders. I would make the applicants pay their own costs in this Court and in the Court below.

King, J.

11. I concur in the proposed order, but am not prepared to endorse the view that when an insolvent has applied for discharge within the period specified in the order of adjudication under Section 27(1), and his application has been refused, then it is not open to him to make a further application for discharge and he must remain an undischarged insolvent for life.

12. I interpret the order under appeal as refusing to grant an absolute order of discharge on the ground specified in Section 42(1)(b). The Court had jurisdiction to pass such an order, since under Section 41(2)(a) the Court is expressly empowered to refuse an absolute order of discharge.

13. In my opinion such an order does not prevent the insolvent from making a fresh application for discharge in case such an application were justified by fresh incumbrances. The refusal of an absolute order of discharge is distinct from the absolute refusal of an order of discharge. The language of Section 41(1) seems to me sufficiently wide to cover a fresh application made after the refusal of an application made within the period specified.

14. Moreover, this view appears to have been consistently taken by the High Courts i.e., it has been taken in every reported case which has come to my notice.

15. In M. Gopalan Nair v. K. Gopalan Nair : AIR1925Mad915 a Full Bench of the Madras High Court held that there is nothing in Section 44, Provincial Insolvency Act, 1907, to warrant the suggestion that an application for discharge when refused is refused for ever, and that no later application on renewal of the former application can be made.

16. Section 44 of the Act, 1907, corresponds to Sections 41 and 42 of the Act, 1920, and the slight amendment of the old section does not seem to have the effect of rendering the full Bench ruling absolute, or of less authority.

17. In Velayutha Nadar v. Subramania Pillai A.I.R. 1925 Mad. 609 a single Judge of the Madras High Court held that the dismissal of the application for discharge (under Section 41(2)(a) of the Act, 1920) will not prevent the insolvent from presenting further applications for discharge at any later time.

18. In Tan Seik Ke v. C.A.M.C.T. Firm A.I.R. 1928 Rang. 109 a Division Bench of the Rangoon High Court held that the refusal of an application for discharge does not prevent the insolvent from renewing his application for discharge in case fresh circumstances might justify him in doing so.

19. In view of this consensus of judicial opinion, which seems to me correct, I cannot endorse the contrary opinion expressed by my learned brother.

20. I do, however, agree with him that the Court's order is not altogether satisfactory. The learned District Judge did not expressly state that he was only refusing an absolute order of discharge, and it is not clear whether he considered the advisibility of granting a conditional discharge, or of suspending the operation of the order for a specified time. On these grounds I agree to the order proposed.


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