1. The petitioners and the respondent are cotton merchants; and the petitioners sought to adjudicate the respondent an insolvent on the basis of his account, which showed that the respondent was indebted to the petitioners to the extent of Rs. 5000 and odd. Both the lower Courts have held that the claim of the petitioners against the respondent was one for an unliquidated sum and was therefore not one that could be taken into account in insolvency.
2. It is not always easy in a claim on an account to say definitely whether it is for a liquidated sum or for an unliquidated sum. It does not cease to be a liquidated sum, because it can be arrived at only after making some simple calculation; but if it is not readily ascertainable without enquiry, then it is an unliquidated claim. The learned advocate for the petitioners points to the fact that he is claiming against the respondent for a definite sum and is able to give particulars as to how that sum was arrived at. He argues that in itself indicates that his claim is for a liquidated sum. That, however, does not follow; for there must be very few cases in which a plaintiff is not able to put a figure on his claim.
3. There seems to be very little authority on this question; but the general trend of the decisions shown to me is that it is only when the account is of a simple nature that it can form the basis of insolvency proceedings. If there are entries in the accounts which are open to serious disputes, and the account is subject to counter claims and an enquiry is necessary to ascertain which item and which counter claims are true, then it is not a claim for a liquidated sum and the insolvency Court cannot accept such a claim as the basis for adjudicating a person insolvent. One of the judgments relied upon by the learned advocate for the petitioner himself--Flower v. Herbert (1751) 28 E.R. 548 concludes by saying that a claim on an account is not a claim for a liquidated sum. Robson, in his 'Law of Bankruptcy' page 206--also referred to by Mr. Srinivasa Ayyar for the petitioners says,
So, also, an unascertained balance on a running account will not support a petition for a receiving order, unless, perhaps where clear accounts have been kept, and the creditor can swear to a balance being due to him of the requisite amount.
4. In In re Scott Russell (1862) 31 L.J. Rep Cas B 37 the following passage is relevant:
There is concerning the alleged debt conflicting evidence. If due to any extent, it is due as the balance, or on the balance of cross-demands, complex dealings, and involved accounts unsettled, the clear result of which is said by Mr. Scott Russell to be in his favour, and by Mr. Lester to be in Mr. Lester's favour. Those cross-demands, those dealings, those accounts, were such in condition and in kind, that, however, the truth concerning them may be, it was, I think, a remarkable step on the part of Mr. Lester to become, as he did, a petitioning creditor, against Mr. Scott Russell .... The present case does not seem to me to form an exception from what I conceive to be a general rule; that it is an objectionable, or, at least, an inconvenient, mode of proceeding, and one not deserving of encouragement, to found a petition for adjudication upon a disputed balance of a complicated diversity of cross-demands and unsettled accounts.
5. In re Potts (1862) 31 L.J. Rep.Cas B 34 the learned Judges deprecate the practice of seeking adjudications in insolvency proceedings on doubtful and disputed debts. The petition fails and is dismissed with costs.