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Ganpat Rai Vs. Firm Kani Ram-munna Lal and Kedar Nath - Court Judgment

LegalCrystal Citation
CourtAllahabad
Decided On
Judge
Reported in92Ind.Cas.535
AppellantGanpat Rai
RespondentFirm Kani Ram-munna Lal and Kedar Nath
Cases ReferredFlint v. Barnard
Excerpt:
presidency towns insolvency act (iii of 1909), sections 30(1), 32 - composition scheme, acceptance of--annulment of adjudication, effect of--debts not proved, whether discharged. - - there are no materials before me to enable me to find out clearly under what circumstances the plaintiffs' claim happens to be left out of the schedule prepared in the insolvency proceedings......was adjudicated an insolvent by the calcutta high court on the 22nd of june 1921. he presented a scheme of composition which was ultimately accepted by the high court and the adjudication was annulled on the 27th of september 1923. the respondents had a money claim as against the petitioner on the allegation that the latter obtained goods from them from time to time between the 15th of july 1916 and the 19th of june 1921, that he paid a portion of the price, and a small balance was still due with interest. on the completion of the insolvency proceedings, by a suit instituted on the 3rd of july 1921, the respondents claimed a sum of rs. 109 and odd alleged to be due to them, in the court of small causes at cawnpore. the defendant denied the claim and pleaded, inter alia, that the.....
Judgment:

Mukerji, J.

1. This petition in revision is on behalf of the defendant and raises a question of law on which so far as this country is concerned, there does not appear to be any authority.

2. It appears that the defendant-applicant was adjudicated an insolvent by the Calcutta High Court on the 22nd of June 1921. He presented a scheme of composition which was ultimately accepted by the High Court and the adjudication was annulled on the 27th of September 1923. The respondents had a money claim as against the petitioner on the allegation that the latter obtained goods from them from time to time between the 15th of July 1916 and the 19th of June 1921, that he paid a portion of the price, and a small balance was still due with interest. On the completion of the insolvency proceedings, by a suit instituted on the 3rd of July 1921, the respondents claimed a sum of Rs. 109 and odd alleged to be due to them, in the Court of Small Causes at Cawnpore. The defendant denied the claim and pleaded, inter alia, that the insolvency proceedings barred the suit. The learned Judge held that the defendant was liable and he further held that the proceedings in insolvency were no bar to the maintenance of the suit.

3. The question that has been argued before me is whether the insolvency proceedings were a bar or not. The learned Judge thought that as the adjudication had been annulled the right of suit revived. This is a view which, however, has not been supported.

4. The answer to the question raised must depend on the interpretation of Sections 30 and 32 of the Presidency Towns Insolvency Act, being Act III of 1909. The earlier section runs as follows:

If the Court approves the proposal, the terms shall be embodied in an order of the Court, and an order shall be made annulling the adjudication, and the provisions of Section 23, Sub-sections (1) and (3) shall thereupon apply, and the composition or scheme shall be binding on all the creditors so far as relates to any debt due to them from the insolvent and provable insolvency.

5. It has not been denied that the respondents' claim was one which was 'provable in insolvency'. Section 32 has to be read along with Section 30 as it makes the meaning of Section 30(1) clear. It runs as follows:

Notwithstanding the acceptance and approval of a composition or scheme, the composition or scheme shall not be binding on any creditor so far as regards a debt or liability from which, under the provisions of this Act, the insolvent would not be discharged by an order of discharge in insolvency, unless the creditor assents to, the composition or scheme.

6. Reading the two sections together it appears to my mind that the acceptance of a scheme of com position operates as a discharge of the insolvent from all debts which were provable in insolvency, but which have not been brought before the Insolvency Court. A comparison of the language used in these two sections with the language of Section 45, will, in my opinion, leave no room for doubt, that this interpretation is the correct interpretation. The sections in the English Law. (Bankruptcy Act, 1914) which correspond with Sections 30(1) and 32 of the Indian Act are Sections 16 and 17. The language employed in ' Section 16(13) is very similar to the language employed in Section 30(1) of the Presidency Towns Insolvency Act and Section 17 of the English Law corresponds with Section 32 of the Indian' Act. Under the English Law it has been held that where a composition scheme is accepted and approved the debtor would get the same relief as is given by a discharge, vide, Flint v. Barnard (1889) 22 Q.B.D. 90 : 58 L.J.Q.B. 53 : 37 W.R. 185 and Seaton, v. Lord Deerhurst (1895) 1 Q.B. 853 : 64 L.J. Q.B. 430 : 14 R. 523 : 72 L.T. 453 : 43 W.R. 436 : 59 J.P. 357 : 2 Manson 355.

7. On the language of the Act and on authority it is clear, therefore, that the suit in the Court below was not maintainable.

8. If we look to the principle of the whole enactment we shall at once see that this would be the only rule consistent with practicability, When a debtor takes shelter in an Insolvency Court, he cannot have complete protection unless a duty be cast on all the unsecured creditors of his to come forward and prove their claim to the Insolvency Court. If it be within the competence of such creditors to keep back their debts, so that, the rule of limitation permitting, they might come forward with their claims after the insolvent has been discharged or has managed to formulate, a scheme for the payment of all scheduled creditors, the very object of the law of insolvency enactment would be frustrated.

9. I hold, therefore, that the suit of the plaintiffs was not maintainable in the Court below.

10. The learned Counsel for the respondents has urged that even though the Court below was in error, this Court should not exercise its discretionary power of revision in this particular case. He urged that his was a just debt and the passing of the decree would not entitle him to enforce the claim as against the insolvent, but would entitle him to go before the trustees under the scheme of composition and to obtain such relief as may be available. I do not quite see the force of this argument. There is nothing on the record to show that the respondents were unaware of the insolvency proceedings. The decree, if left outstanding, would be a source of constant trouble to the petitioner, although he may have done everything that was in his power to pay his creditors. There are no materials before me to enable me to find out clearly under what circumstances the plaintiffs' claim happens to be left out of the schedule prepared in the insolvency proceedings. According to the petitioner only a sum of Rs. 4-8 was due to the respondents, while on the respondents' own showing only a sum of Rs. 33-10-9 was due to them as a principal amount. The major portion of the claim due is said to consist of interest. 1 do think in the circumstances I ought to refrain from exercising my powers in revision.

11. The result is that I set aside the decree of the Court below and dismiss the respondents' suit. The respondents will pay the petitioner's costs throughout.


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