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G.H. Yusuf Sait Vs. S. Ramamurthy - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberCivil Revn. Petn. No. 88 of 1962
Judge
Reported inAIR1963Mad367; (1963)1MLJ333
ActsCode of Civil Procedure (CPC) , 1908 - Sections 151
AppellantG.H. Yusuf Sait
RespondentS. Ramamurthy
Appellant AdvocateA.K. Sriraman, Adv.
Respondent AdvocateK. Hariharan, Adv.
DispositionPetition dismissed
Cases Referred and Jivraj v. Gagammal
Excerpt:
.....creditors, especially when it was brought to the notice of the court in the petition filed by the petitioning creditor that there were other creditors besides to whom payment bad been suspended by the debtors. ' in an earlier context the learned judge stresses :if such be the policy underlying the provincial insolvency act, it is all the more necessary and reasonable that when there is a compromise or settlement entered into between the petitioning-creditor and the debtors, as a result of which the petition is likely to be dismissed once for all, there should be an opportunity given to other creditors who would like to safeguard their interests from being jeopardised by the action of the sole petitioning creditor'.9. i am, therefore, of the view that even if the court had become aware..........for the petitioner. hence i shall first particularise the essential facts which have led up to the revision proceeding.2. a certain petitioning creditor, one fred, j. dyas, filed i. p. no. 5 of 1960 before the learned subordinate judge of nilgiris at ootacamund, to have the adjudication in insolvency of the present revision petitioner (insolvent). the act of insolvency alleged was that on 7th october 1959, the insolvent had executed an alleged deed of settlement, by virtue of which he had fraudulenly gifted away or transferred all his properties, worth over rs. 1 1/2 lakhs in favour of his wife. the petition, which was filed on 23rd december 1959 further alleged that the insolvent was indebted to various persons including the petitioning creditor himself, and the present respondent in.....
Judgment:
ORDER

Anantanarayanan, J.

1. This revision proceeding involves a question of some interest and importance with regard to the degree to which a Court exercising powers in insolvency could review or set aside its own order, either under powers vested in the Court by virtue of Section 5 of (he Provincial Insolvency Act (V of 1920), read with Section 114, C. P. Code and Order 47, Rule I, C. P. Code, or by virtue of its inherent powers under Section 151, C. P. Code. As I shall show presently, there is the authority of the judgment of a learned Judge of this Court in Chandramouleswaran v. Krishnaswami Naidu, : AIR1953Mad993 in an instance that was very similar upon the facts, for the affirmative reply to the question with regard to the power of the Court. But the matter is not free from difficulty, particularly in view of certain authorities that have been placed before me by learned counsel for the petitioner. Hence I shall first particularise the essential facts which have led up to the revision proceeding.

2. A certain petitioning creditor, one Fred, J. Dyas, filed I. P. No. 5 of 1960 before the learned Subordinate Judge of Nilgiris at Ootacamund, to have the adjudication in insolvency of the present revision petitioner (insolvent). The act of insolvency alleged was that on 7th October 1959, the insolvent had executed an alleged deed of settlement, by virtue of which he had fraudulenly gifted away or transferred all his properties, worth over Rs. 1 1/2 lakhs in favour of his wife. The petition, which was filed on 23rd December 1959 further alleged that the insolvent was indebted to various persons including the petitioning creditor himself, and the present respondent in the revision proceeding. The petition was numbered as I. P. No. 5 of 1960 on 11th August 1960. The insolvency was notified in the Gazette as per orders of Court, and the insolvency petition was posted on 5th October 1960 for return of publication in the Fort St. George Gazette and notices duly served.

3. On 3rd October 1960, a joint memorandum was filed by the petitioning creditor and the insolvent or debtor, to the effect that the matter between them had been settled outside Court, and hence that the Court might be pleased to record the settlement and to dismiss the proceeding in insolvency. Thereupon, the hearing of the petition was advanced to that date and it was dismissed, recording the compromise, by the learned Subordinate Judge.

4. Coming to know of these proceedings, the present respondent, a creditor who was admittedly indicated as such by the petitioning-creditor him-self, filed an application under Sections 5 and 16 of the Provincial Insolvency Act read with Order 47, Rule 1 and Section 151 of the C. P. Code, to the Sub Court, praying for a review of the order of dismissal, passed on 3rd October 1960, the setting aside of that order and the restoration of the application to file. He also desired to be substituted as the petitioning-creditor under Section 16 of the Provincial insolvency Act. The Sub-Court heard and allowed this petition. The learned Subordinate Judge has pointed out that his earlier order, recording the compromise and dismissing the insolvency petition in terms of that record, was defective and amounted to an apparent error of law. That is because a petitioning creditor is not merely acting for himself, but for the benefit of the general body ofcreditors, whose interest also he is bound to subserve by his action to have the debtor adjudicatedan insolvent. The result of such an order of Court, as the dismissal of the petition, would mean that the other creditors would not be in a position to rely on the alleged act of insolvency, namely, the gratuitous transfer of a very substantial property, in the context of a general indebtedness to thewife of the debtor himself, shortly prior to the peit-tion.

5. In prosecuting this revision proceeding, the debtor has relied on the following main grounds in support of his contention that the Court had no jurisdiction to pass the order which is now sought to be impugned. The respondent creditor could not really invoke the powers of review vested in the Court under Section 5 of the Provincial Insolvency Act, read with Section 114 and Order 47, Rule 1, C. P.Code. That is because, it is not enough that the respondent creditor is a person aggrieved by theorder of Court dated 3rd October 1960. It is conceded that he is a person aggrieved. But he must further show that the order in question was onemade 'against him' within the scope of Section 114, read with Order 47, Rule 1 of the C. P. Code. Since, admittedly, the order was not made with the respondent-creditor as a party eo nomine, he could not validly invoke the powers of the Court in review. Thesecond ground is that the respondent-creditor being a stranger to the proceedings, could not invoke the inherent powers of the Court, under Section 151,C.P.C. to set aside the earlier order. Reliance is placed upon certain observations in Perumal Moopan v. M. K. Venkatachariar, 42 Mad LJ 563 : AIR 1922 Mad 193.

The third ground, which is equally important, is that the respondent-creditor has misconceived his proper remedy in instituting the application before the learned Subordinate Judge for review of the earlier order, and the substitution of the respondentcreditor on record under Section 16. The earlier order was appealable under Section 75 of the Provincial Insolvency Act, and it is not in dispute that far wider reliefs are afforded under that section thaneven under Section 8(1) of the Presidency Towns Insolvency Act, as far as the party affected is concerned. Further the Provincial Insolvency Act does not invest the Court with any such wide powers as are invested in the Insolvency Court under Section 8(1) of the Presidency Towns Insolvency Act. Hence, the true remedy of the respondent-creditor ought to have been only the institution of an appeal under Section 75 . He could not have validlymaintained the application for review.

6. In further support of these arguments, certain authorities are relied upon, in clarification of the matters that incidentally arise for consideration, upon the general situation of the facts earlier setforth by me. For instance, the following passage has been cited which occurs in Mullah's Principles of Insolvency, at page 777:

'An application for re-hearing under Section 8(1) can only be made by a person who was a party to the proceedings in which the order was made. In this respect the right of a rehearing is much more limited than the right of appeal in insolvency, for the right of appeal is given not merely to persons who are parties to the original order but to any person aggrieved thereby.'

This passage is relied upon in support of the argument that the respondent-creditor wholly misconceived his remedy. When he came to know of the order recording the compromise and dismissing the petition in insolvency as a person aggrieved by this order, he should have properly instituted an appeal under Section 75 of the Act He had no locus standi to institute any proceeding in the insolvency petition, for review of that order and for substitution of the respondent creditor under Section 16, either under that section, or under Section 114, C. P. Code read with Order 47, Rule 1, C. P. Code or under Section 151, C. P. Code, Further, the doctrine of inherent power cannot apply, where there is some express statutory provision which would meet a particular contingency or situation. In the decision of the Privy Council in Bisheshwar Pratap Sahi v. Parath Nath it has been laid down that the powers of Court under Section 114, C. P. C. must be read as qualified by the powers in Order 47 Rule 1, C. P. C. for the reason that the Code itself provides that rules in the first Schedule will have effect as if enacted in the body of the Code. Again, the right of appeal of the respondent might now be barred, and the observations of the Privy Council in are relevant.

7. On the contrary, learned counsel for the respondent-creditor not merely relies on : AIR1953Mad993 , wherein the facts were very similar, but also upon several authorities of this court and other High Courts, for the view that the court has inherent power under Section 151 C. P. Code under such circumstances, to review and set aside its own order in the interests of justice. The decisions relied upon are Lal Singh v. Dhaumal Jailal, AIR 1937 Lah 631, Keshav Appa; v. Sitaram Hanumandas, AIR 1946 Bom 20, Thangavelu v. Chockalinga, AIR 1944 Mad 129 : ILR 1944 Mad 649, and Jivraj v. Gagammal, : AIR1953Bom430 . the last two decisions being under the Presidency Towns Insolvency Act. It is not necessary for me, for the purpose of disposal of this revision petition, to analyse the facts of these decisions, and the degree to which they may govern the present situation of fact. It is sufficient for me to observe that, in my view, the real reasons why the order of the Court, reviewing its prior order under Section 151 C. P. Code should be sustained as within the powers of the court and a valid order, lies in the nature of the proceeding, in relation to the basic concepts of insolvency law, rather than in the question of the propriety of the form. For instance, the question does not merely depend, as it might in other conceivable cases, on the status of the petitioning creditor to invoke the powers of court under Section 151 C. P. Code. It is for this reason that the observations in : AIR1953Bom430 are particularly relevant. There it is pointed out that a petitioning creditor did not occupy the same status as a plaintiff who was a dominus lite as far as his suit was concerned. The plaintiff could withdraw that suit, settle his claim or otherwise abandon it. But a petitioning-credi-tor is, if I may so express it, a kind of trustee for the general body of creditors, bound to serve their interests also by the bona fide prosecution of this petition to adjudicate the debtor as insolvent. Any other view, would mean that the interests of the general body of creditors might be irreparably jeopardised by collusion between the petitioning creditor and the debtor.

8. Baheer Ahmed Sayeed, J. in : AIR1953Mad993 , has expressed his view of the matter in words of almost identical import. The learned Judge said :

'Such an order is certainly manifestly unjust to the rest of the creditors, especially when it was brought to the notice of the court in the petition filed by the petitioning creditor that there were other creditors besides to whom payment bad been suspended by the debtors. The proper thing for the court would have been to withhold the payment of the amount for a period in order to allow other creditors to come up and then adjudge their rights against the debtors.....Even if Section 16 and 19 of the Provincial Insolvency Act would not be of any avail to the petitioner, still the courts below had ample power and jurisdiction to rectify situations such as this, where if such rectification does not take place, injustice will ensue.'

In an earlier context the learned Judge stresses :

If such be the policy underlying the Provincial Insolvency Act, it is all the more necessary and reasonable that when there is a compromise or settlement entered into between the petitioning-creditor and the debtors, as a result of which the petition is likely to be dismissed once for all, there should be an opportunity given to other creditors who would like to safeguard their interests from being jeopardised by the action of the sole petitioning creditor'.

9. I am, therefore, of the view that even if the court had become aware of the error, defect or, of the possible injustice resulting from its order by any other mode than the formal act of an aggrieved party, still it would have inherent power under Section 151 C. P. C. to rectify the situation, as the earlier settlement between the petitioning creditor and the debtor was substantially 'an abuse of the process of the court.'

10. Consequently, the revision proceeding has to be dismissed. But learned counsel for the revision petitioner (debtor) represents that ample provision has been made already for the satisfaction of the claim of the non-petitioning creditor who has not been substituted under Section 16, and that the alleged act of insolvency was a perfectly bona fide act which might be fully justified when the facts of the context of the transaction are taken into account. I need not express any opinion upon these arguments. They will no doubt be carefully considered on the merits, when further proceedings are taken by the Court below in the insolvency, resulting from the lifting of the interim stay directed by this court.

11. The revision proceeding is accordingly dismissed, but I make no order as to costs.


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