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Chirunji Lal and ors. Vs. Ajodhia Prasad and ors. - Court Judgment

LegalCrystal Citation
CourtAllahabad
Decided On
Judge
Reported inAIR1917All243(2); 37Ind.Cas.391
AppellantChirunji Lal and ors.
RespondentAjodhia Prasad and ors.
Cases ReferredTirloki Nath v. Badri Das
Excerpt:
.....dismissed--parties, proper-practice--insolvency court, power of, to refuse application for adjudication--adjudication, order for. - - sundar lal that that order, although a very natural and convenient one to make, was a nullity if anybody had chosen to call it in question and, therefore, the present appellant was well advised under the circumstances in not making the interim receiver a party to the appeal. the persons really interested in the discussion before us were the general body of creditors and without attempting to lay down a rule of universal application, we think that the better practice in such cases is to do what has been done in this case or even less than what has been done in this case, to give notice to a substantial number of creditors of the proposed appeal,..........the act dealing specifically with the matter. if there was a receiver, then in the rare event of a debtor appealing from an order of an insolvency court, the proper person to make respondent would be the receiver, but ex hypothesi there can be no receiver, inasmuch as the appointment of a receiver depends upon the adjudication. in this particular case there was an interim receiver who had been appointed before the hearing of the petition and whose appointment was continued for the purposes of convenience, when it was known that the order of dismissal would be taken to the court of appeal. we are disposed to agree with dr. sundar lal that that order, although a very natural and convenient one to make, was a nullity if anybody had chosen to call it in question and, therefore, the present.....
Judgment:

Walsh, J.

1. This case is by no means easy to deal with and raises several questions of some importance. Not for the first time in this Court within my short experience questions are raised which show what, I think, has been recognised for sometime by the legal profession, that there is a real necessity for a rigorous amendment of the existing insolvency law in these Provinces. It is a question of some public importance which calls for the attention of the Government. Now there was one preliminary question, which it is desirable to dispose of which was mentioned by Dr. Sundar Lal on behalf of the appellant at the opening of the appeal, namely, where the debtor has petitioned on bis own behalf for an order of adjudication and his petition has been dismissed and he desires to appeal, whom he ought to make parties as respondents to his appeal. There is no provision in the Act dealing specifically with the matter. If there was a Receiver, then in the rare event of a debtor appealing from an order of an Insolvency Court, the proper person to make respondent would be the Receiver, but ex hypothesi there can be no Receiver, inasmuch as the appointment of a Receiver depends upon the adjudication. In this particular case there was an interim Receiver who had been appointed before the hearing of the petition and whose appointment was continued for the purposes of convenience, when it was known that the order of dismissal would be taken to the Court of Appeal. We are disposed to agree with Dr. Sundar Lal that that order, although a very natural and convenient one to make, was a nullity if anybody had chosen to call it in question and, therefore, the present appellant was well advised under the circumstances in not making the interim Receiver a party to the appeal. The persons really interested in the discussion before us were the general body of creditors and without attempting to lay down a Rule of universal application, we think that the better practice in such cases is to do what has been done in this case or even less than what has been done in this case, to give notice to a substantial number of creditors of the proposed appeal, so as to enable them to represent their interests as respondents. Now the grounds upon which the learned Judge has dismissed the application may be summarised as follows: -

2. (1) It is alleged, and the Judge appears to have held, that one, if not more, of the applicants (there are in fact three applicants for insolvency) had supplied his mother with funds. What precise branch of the criminal law that act is supposed to constitute a breach of, we do not for the moment appreciate, but if it be the fact, then the money which could not otherwise be recovered from the mother, might be recovered by the Receiver under the Insolvency Act. That ground appears to us, so far from being a ground for refusing an adjudication in bankruptcy, to be rather a reason in favour of making the order.

3. The second ground is that the insolvent has deliberately incurred liabilities and committed various frauds in the course of doing so. The fact that a debtor, who is otherwise within the provisions of the Insolvency Act which renders an adjudication against him possible, is also a dishonest man, does not seem to us to be a reason for refusing an order of adjudication. Conduct of that kind can be dealt with either independently of, or through the machinery of, the Insolvency Act, and if he has committed any offence, he can be dealt with for it, whether he is made an insolvent or not.

4.The third ground is that he appears to have collected funds while proceedings in insolvency were contemplated, and not to have accounted for them. The observations we have made about the second ground apply equally to the third ground. It, therefore, appears to us that the three grounds upon which the learned Judge proceeded are not grounds recognised by law for refusing an adjudication. The respondents, however, have, in addition to the specific matters relied upon by the learned Judge in the Court below, put forward other arguments of a somewhat similar character. It is safe to say that none of them amount to an allegation of what is known as an abuse of the process of the Court or really do any more than aggravate the allegation made against the debtor at the hearing. It is perfectly true that it is open to an Insolvency Court, (we think it is generally recognised that the principles which regulate the administration of the Bankruptcy Act of 1883 in England are applicable to the Provincial Insolvency Act), and according to the English authorities it is quite clear that there is an inherent power in the Insolvency Court, to refuse an application by a debtor when it is satisfied that it will result in no benefit to anybody and is an abuse of the process of the Court. Before pointing out shortly the illustrations of that principle, because as Dr. Sundar Lal has rightly pointed out, it is very easy to use vague language and take it out of one context and apply it to another, and it is, of course, a dangerous method of interpretation it is important in this case to point out two things. First, owing to the nature of the resistance offered to the debtor's application and to the way in which the Judge has treated the case, there are certain findings of fact in the judgment before us of an undoubtedly embarrassing character to the appellant. We have not dealt with these findings of fact in any way and they must be regarded as immaterial, or if I may use the term ultra vires, in the judgment of the Court below inasmuch as they do not constitute, in our opinion, legal grounds for the order that was made and, therefore, any future proceedings which may be taken upon the facts and admissions of the debtor in the evidence of the Court below must be taken wholly and entirely without regard to any findings arrived at in the judgment now under review. Secondly, if it be true that the debtor, or the three debtors, are really fraudulent persons, who have been carrying on a dishonest business and hope to obtain some material benefit for themselves through the machinery of the Insolvency Court: such as for example payment of a dividend of their debts instead of payment in full, and obtaining a speedy discharge and starting a fresh career at an early date, it must be clearly understood that all these matters of the conduct of the debtors in the insolvency proceedings are matters which ought seriously to be taken into account when the time arrives for the appellants to apply for their discharge. It only remains to point out that we see nothing in what we are deciding which is inconsistent with the principle which has already been recognised by a Full Bench decision of this Court and which is reported as Tirloki Nath v. Badri Das 23 Ind. Cas. 4 : 30 A. 250 : 12 A. L.J. 355, and which is consistent with the practice in England. But it should be recognised that the grounds upon which the Court has refused to interfere either at the instance of a creditor or at the instance of a debtor are limited. It is impossible to state them in the form of a general proposition, but two or three cases may at any rate be mentioned by way of illustration. In the case of Ex parte Painter, In re Painter (1895) 1 Q.B. D. 85 : 64, L.J. Q.B. 22 : 71 L.T. 481 : 1 Manson 499., where a debtor who was possessed of a pension which he could not alienate and whose assets were only 12, filed his petition in order to evade a judgment summons; he was practically the only creditor, it was held that this was not an abuse of the process of the Court. Now the only conceivable object of the debtor in that case was to evade arrest, because he had a pension which bankruptcy could not effect and which enabled him to pay his creditors if he pleased, and although he had only 12 assets in addition to the pension, which would have enabled him to pay his debts in order to evade arrest, he petitioned the Bankruptcy Court, and there is a later case, In re Hancock, Hillearys, Ex parte (1904) 1 K. B. 585 : 73 L.J. K. B. 245 : 90 L.T. 389 : 52 W. R. 547 : 11 Manson 1., the facts of which (it is not necessary to refer to them in detail) were that the debtor had a very small income and there was practically no hope of anything for the creditors beyond his personal earnings and he wanted to evade committal which is, of course, the same thing as arrest : the Court of Appeal held that that also was not an abuse of the process of the Court. In this case there are very considerable debts and apparently, though that is not certain, considerable assets. At any rate there are a number of creditors, and it, seems to us, at any rate so long as the existing Act is in force, administering that Act according to the recognised principles of law, that it would be contrary to the policy of that Act to refuse the adjudication in this case which will enable the assets to be administered and a dividend to be paid to all the creditors.

5. Under these circumstances the appeal must be allowed and we make the order which ought to have been made by the learned Judge, that is to say, we adjudicate the three appellants insolvent under the petition presented by them on the 9th of August 1913, that is to say, the order of adjudication in this case will date from the 9th of August 1913 under the provisions of Section It, Sub-section 6, of Act III of 1907.

6. We certainly think there are many grave circumstances appearing in the findings in this case which demand immediate action on the part of the Receiver. The Court should immediately appoint, if it can, a competent and responsible Receiver to enquire into the circumstances and to take steps under Section 36 or any other Section applicable to the facts, assuming there is a prima facie case. If no Receiver is appointed, then we think this is a case in which the District Judge, who will have to act as Receiver, should lose no time, although we recognise that he has very little time for such work, investigating the circumstances and instituting proceedings. It must be taken that we form no opinion whatever upon the merits or otherwise of such proceedings.


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