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G.P. Gunnis and Co. Vs. T. Mahomad Ayyub Sahib - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Judge
Reported in(1914)ILR37Mad555
AppellantG.P. Gunnis and Co.;t. Mahomad Ayyub Sahib
RespondentT. Mahomad Ayyub Sahib;g.P. Gunnis and Co.
Cases ReferredWeldon v. Neal
Excerpt:
.....were concluded and the judge had taken time to consider, the learned judge took the point that the petitioning creditors had failed to prove that there was any debt due to them upon which they were entitled to present a petition. chamier on behalf of the appellant took a further point on his own behalf that the petition was bad, in that in stating the act of insolvency on which the petitioning creditor relied there was no allegation of an intention to defeat or delay creditors. , uses the expression 'the petitioning creditor failed to prove his debt,'by this i take it the learned judge means he failed to prove the balance of the debt due to him after deducting the value of his security. 979 it was not disapproved of, although apparently collins, j. , did not like it. can we, in view of..........in the petition or in the affidavit.' the chief judge observes 'no amendment of the petition can amend the affidavit upon which the adjudication has been made. that affidavit would still remain imperfect.' that observation would seem to be meaningless unless it implies that the words 'with intent to defeat or delay' did not occur either in the petition or in the affidavit. the present case is, i think, distinguishable at any rate upon the ground (may be on other grounds also) that in the affidavit we have words, though not the words which occur in the section, which may be taken to satisfy the requirements of the section. my view therefore is that the order which the learned judge made giving leave to amend the petition as regards the statement of the act of insolvency was unnecessary.....
Judgment:

Charles Arnold White, C.J.

1. This case comes before us, the appellant being one T. Mahomed Ayyub Sahib, by way of appeal from an order of Bakewell, J., sitting in Insolvency, giving leave to the petitioning creditor to amend his petition. The petition was presented in March 1912 against four persons, of whom the appellant is one, and the petitioner alleges that the appellant and three other persons carried on business as partners under the name of T. Noordeen Sahib & Co. and T. Abdul Kareem Sahib & Co. On March 22nd an order of adjudication was made against these four persons. This order was not served upon the appellant and no order for substituted service was applied for or made. On the 4th May the petitioning creditor applied to the Court by motion for an order under Rule 18 of the second schedule of the Insolvency Act. That rule relates to the taking of accounts of mortgaged property and their sale. The next step in the proceedings was an application on August 22nd made by the appellant to annul the adjudication and. the grounds on which he asked to have the adjudication annulled are stated in the affidavit filed in support of his application, One ground is that no notice of the adjudication had been served upon him. Another ground is that he was never a partner in either the firm of T. Noordeen Sahib & Co. or T. Abdul Kareem Sahib & Co., that he took no part in the management of the business and had no connection with the business. This application came before the learned Judge at the same time as the application made by the petitioning creditor asking for an order under Rule 18 of the second schedule. As we are told, after the arguments were concluded and the Judge had taken time to consider, the learned Judge took the point that the petitioning creditors had failed to prove that there was any debt due to them upon which they were entitled to present a petition. That is how the Judge puts it in his judgment. Mr. Chamier on behalf of the appellant took a further point on his own behalf that the petition was bad, in that in stating the act of insolvency on which the petitioning creditor relied there was no allegation of an intention to defeat or delay creditors. There can be no question that the petition is defective or perhaps 1 should say informal in two respects. It does not state that the petitioning creditor is a secured creditor. Section 12(2) provider 'if the petitioning creditor is a secured creditor, he shall in his petition either state that he is willing to relinquish his security for the benefit of the creditors in the event of the debtor being adjudged insolvent or give an estimate of the value of the securily. In the latter case he may be admitted as a petitioning creditor to the extent of the balance of the debt due to him after deducting the value so estimated in the same way as if ho were an unsecured creditor.' Rule 21 says, 'If the petitioner is a secured creditor he shall give full particulars of his security and value the same.' I do not know whether that carries the matter any further. With regard to the statement of the debt, all that the petition says is 'that at the time aforesaid (i.e., at the time of the alleged act of insolvency on which the petitioning creditor relies) the insolvents were and are now indebted to your petitioners in the sum of seven lakhs and upwards for goods sold, and your petitioners are informed and believe that they are indebted to other creditors to the extent of about two lakhs of rupees or thereabouts/' It is clear therefore that that statement in the petition with reference to the debts is not in accordance with the Act or rules. Bakewell, J., uses the expression 'the petitioning creditor failed to prove his debt,' By this I take it the learned Judge means he failed to prove the balance of the debt due to him after deducting the value of his security. Then the petition is also informal with regard to the statement of the act of insolvency upon which the petitioning creditor relies. Section 9 says:

A debtor commits an act of insolvency in each of the following cases, viz.

(a) * * * *(b) * * * *(c) * * * *(d) if, with intent to defeat or delay his creditors,

(i) he departs or remains out of British India,

(ii) he departs from his dwelling house or usual place of business or otherwise absents himself,

(iii.) he secludes himself so as to deprive his creditors of the means of communicating with him.

2. The petitioning creditor relies on an act of insolvency within Section 9(d) (i), and the petitioner does not expressly allege an intention to defeat or delay creditors. I shall have to refer to the exact words of the petition and of the affidavit filed in support later on. I will content myself with saying now that Laving regard to the express provisions of Section 9 and Rule 20, it is clear that the petition is informal. As regards the omission to state the fact that the petitioning creditor is a secured creditor and the value of the security Mr. Chamier has not seriously contended that it could not be cured by amendment; and, speaking for myself I think that is a defect which could be cured by amendment at the time leave to amend was given. The other matter is whether the learned Judge was right in giving leave to amend as regards the statement of the act of insolvency (the petitioning creditor did. not ask for leave to amend; in fact, his case was that no amendment was necessary) is one of greater difficalty. Mr. Chamier pressed us very strongly with Ex parte Coates, In re Skelton (1877.) 5 Ch. D., 979. That was a case in which it was held by BACON, V.C., sitting as Chief Judge in bankruptcy, that a petition against a, trader which alleges as an act of bankruptcy that he has departed from his dwelling house or otherwise absented himself, must allege that he did so with intent to defeat or delay his creditors, otherwise the petition will be demurrable and must bo dismissed and that such a defect was a matter of substance, not a merely formal defect, and it could not be cured by amendment. This case came before the Registrar in the first instance who, I think, gave leave to amend. Bacon, V.C., took the view that the amendment could not bo made, and his view was confirmed by James, L.J., and Lord Justices Baggallay and Cotton, on append. We have also considered Ex parte Fiddian, Squire & Co. (1892) 9 MBR 95 excepting in one very important particular which I shall have to refer to in a moment, it seems to me that the present case comesmearer to Ex parte Fiddian, Squire & Co.(2) than it does to Ex parte Coates (1877.) 5 Ch. D., 979 and for this reason, in Ex parte Coatea (1877) 5 Ch. D. 979 there was a subsisting order of adjudication and the Chief Judge held that so long as there was a subsisting ordor of adjudication an amendment could not be made by in serting in the petition the words 'with intent to defeat or delay creditors.' With regard to Section 208 of the rules of 1869, which is reproduced in Section 105 of the Act of 1883 the Chief, Judge held that a petition after an order of adjudication had been made was not a proceeding within the meaning of the rule. Now in the case before us the order of adjudication has been sot aside. It was set aside by the learned Judge before he made the order giving leave to amend although it was all done in the same order. There is now therefore no subsisting order of adjudication in this case. That brings the case near to Ex parte Fiddian, Squire & Co. (1892) 9 MBR 95, where leave to amend was given before the receiving order. I desire to express no opinion as to whether 1 should feel bound to follow the decision in Ex parte Coates, In re Skelton (1877) 5 Ch. D. 979, if a case came before us in which the facts were the same as the facts in Ex parte Coates In re Skelton (1877) 5 Ch. D. 979. The case is cited in Williams on Bankruptcy under Section 143 as an authority under the Act of 1883; when it came before a Divisional Court in Ex parte Fiddian, Squire & Co. (1877) 5 Ch. D. 979 it was not disapproved of, although apparently Collins, J., did not like it. But for the reasons I have stated I Think the present case is distinguishable from Ex parte Coates (1877) 5 Ch. D. 979. I said that, in my opinion, the case came near In re Fiddian Squire & Co. (1892) 9 MBR 95 except in one important respect. That is that the order of amendment in that case was made within three months of the act of bankruptcy upon which the petitioner relied. The order of amendment in this ease was made more than three months after the date of the act of insolvency on which the petitioning creditor in this case relies, and that really is the crux of the case. Can we, in view of the well settled principle as to the circumstances in which an amendment ought to be allowed, give the petitioning creditor leave to amend in this case, the effect of which would be to give him rights which he would not have if he sought to file his petition in insolvency in the first instance on the date when the leave to amend, was given? Lord Esher in Weldon v. Neal (1887) 19 Q.B.D. 394 , says that 'we must act on the settled rule of practice, winch is that amendments are not admissible when they prejudice the rights of the opposite party as existing at the date of such amendments. If an amendment were allowed setting up a cause of action, which, if the writ were issued in respect thereof at the date of the amendment, would be barred by the Statute of Limitations, it would be allowing the plaintiff to take advantage of her former writ to defeat the statute and taking away an existing right from the defendant, a proceeding which, as a general rule, would be, in my opinion, improper and unjust.' I may also refer to In re Mound, Er parte Maund (1895) 1 Q.B., 194 which, as a bankruptcy case, is perhaps more in point. There it was hold that the court would not amend a bankruptcy petition by adding as petitioners, after three months had elapsed from the date of the act of bankruptcy upon which the petition was founded, creditors whose debts are other than those in respect of which the petition was presented; if the petition WAS bad in the form in which it originally stood; having regard to the fact that the alleged act of insolvency is now more than three months old, the principle laid down in the decisions to which I have referred, I do not think it could, or ought to be, cured by amendmentt. Then the question is 'was the petition bad in the first instance in that it did not comply with the requirements of Section 9?' I have come to the conclusion that the petition was not bad with regard to this matter in the first instance.

3. Although Mr. Chamier has strongly contended to the contrary T think that, for the purposes of this question, we are entitled to take into consideration the language of the affidavit which is filed in support of the petition. The petition says that on or about the 20th March 1912, the appellant (and three other persons who the petitioner alleges are partners of the two firms), 'being heavily indebted did depart from their place of business and residence and are secreting themselves so as to deprive their creditors of the means of communicating with them whereby your petitioners are advised and believe that the said insolvents are liable to be adjudged to have committed an act of insolvency.' The affidavit in support of the petition alleges in paragraph (1) the indebtedness of the appellant and three others. There is a further statement in paragraph 3 that on or about the 20th March 1912 these partners in the two firms, of whom the appellant is said to bo one, 'left Madras leaving no one in charge of their respective business and are secreting themselves for the purposes of evading their creditors.' I think it is clear that the draftsman of the petition had before him the words of Section 9 although he does not follow the words verbatim and adopts the word 'secreting' instead of 'secluding.' But I do not know whether that is very important for the question we have to consider. The question is, taking the petition and the affidavit together, are we able to say that there is a substantial compliance with the requirements of Section 9. It is true that there is no express allegation that the act done was done 'with intent to defeat or delay creditors.' But we have the words in the petition 'secreting himself so as to deprive his creditors of the means of communicating whereby the petitioners were advised and believe that the insolvent is liable to be adjudged to have committed an act of insolvency' and we have in the affidavit the expression 'for the purpose of evading their creditors.' I think the phrase 'for the purpose of evading their creditors' which occurs in the affidavit may be read as a statement, in the affidavit at any rate, of an intention to defeat or delay creditors. I think In re Shelton, Ex parte Coates (1877) 5 Ch. D., 979 on this point also is distinguishable on the facts. In Ex parte Coates (1877) 5 Ch. D., 979 it seems pretty clear, though I do not find it in the report (because the affidavit is not set out in the report), that there was no statement either express or by implication of an intention to defeat or delay 'either in the petition or in the affidavit.' The Chief Judge observes 'No amendment of the petition can amend the affidavit upon which the adjudication has been made. That affidavit would still remain imperfect.' That observation would seem to be meaningless unless it implies that the words 'with intent to defeat or delay' did not occur either in the petition or in the affidavit. The present case is, I think, distinguishable at any rate upon the ground (may be on other grounds also) that in the affidavit we have words, though not the words which occur in the section, which may be taken to satisfy the requirements of the section. My view therefore is that the order which the learned Judge made giving leave to amend the petition as regards the statement of the act of insolvency was unnecessary and I think the proper course is to set that aside. The order that I would make in this case is that the order of the learned Judge giving leave to amend be modified by setting aside so much of that order as gave leave to amend with reference to this statement of the act of insolvency; subject to this I would dismiss the appeal and make no order as to costs. As regards the question of partnership we do not think it necessary to deal with it in this appeal. The memorandum of objections will be allowed but we make no order as to costs. With regard to the application to stay we make no order and no order as to costs.

Wallis, J.

4. I agree and have very little to add. Section 9 d (ii) makes it an act of bankruptcy if the debtor departs from his dwelling house or usual place of business or otherwise absents himself with intent to defeat or delay his creditors. The petition in this case charges that the partners did depart from their place of business and residence and that is a charge of an act of bankruptcy if it is accompanied by a charge that they did it with the intent already mentioned. But the petition goes on to say that they did 'depart from their place of business and residence and are secreting themselves so as to deprive their creditors of the means of communicating with them whereby your petitioners are advised and believe that the said insolvents are liable to be adjudged to have committed an act of insolvency.' It may be true that these latter words were taken from Section 9d (iii), but reading the passage as a whole it seems to me that it does convey with sufficient certainty that the debtors committed an act of insolvency by leaving their place of business and residence with intent to defeat and delay their creditors. But if that act of insolvency is not expressed with sufficient certainty, I quite agree that we are at liberty to look at the affidavit and after reading the petition with the affidavit to find that the act of insolvency is charged with sufficient certainty. The important thing in this matter seems to me is that there should be proper materials before the Court to justify the exercise of the serious jurisdiction of making an order of adjudication.

5. For the reasons stated I have come to the conclusion that this petition did not require any amendment in this respect. Therefore the question whether it would be open to us to amend the petition does not really arise for decision. We have been referred to Ex parte Coates, In re Skelton (1877) 5 Ch., D., 979 which, as has been pointed out, is distinguishable from this, seeing that there was nothing, apparently, either in the petition or in the affidavit, to show with what intent the debtor left his place of residence. That was the decision in the first place of an eminent Judge whoso experience lay very far in the past, the late Vice-Chancellor Bacon, and it seems to me that, though it was affirmed on appeal, it was treated by James, L.J., rather as a matter of discretion and that the application refused on the ground that to allow the amendment 'would be an encouragement to slovenly procedure' rather than on the ground that the Court was incompetent to allow it on the pleadings : I cannot help feeling some doubt as to whether Sir George Jessel would have taken the same course, having regard to his observations in Ex parte Vander Linden, In re Pogose (1892) 20 Ch. D., 289 where the ground on which the dismissal of the petition was asked for was the second ground of Mr. Chamier which he did not press before us, viz., that the petition did not slate that the petitioner was a secured creditor. Sir George Jessel said 'I am sorry, very sorry, to see this kind of thing. I thought the day had passed for raising such technical objections. But I am satisfied that the Act enables us to do what is right,' Now I may point out that to set aside an order of adjudication is a comparatively small matter, but to set aside a creditor's petition is a very serious thing indeed when there has actually been an act of insolvency. Because the effect of setting aside the petition is to render inapplicable all those safeguards which are enacted by the Insolvency Act against the frauds which so often accompany the commission of an act of insolvency. Although 1 feel the weight of the observations of Lord Esher, M.R., in Weldon v. Neal (1887) 19 Q.B.D., 394 as to the inexpediency of making orders of amendment which would interfere with the rights of parties, yet I cannot help feeling some doubt as to whether a case such as this, would not come within the last sentence in his judgment where he says that 'under very peculiar circumstances the Court might perhaps have power to allow such an amendment, but certainly as a general rule it will not do so.' It is unnecessary to express any final opinion about this part of the case. It is quite sufficient to say that in our opinion the petition sufficiently charged an act of insolvency. I agree with the order proposed by the learned Chief Justice.


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