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E.P. Ramakrishnan Vs. V. Bashyam Achari and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberO.S.A. No. 132 of 1977
Judge
Reported inAIR1978Mad387
ActsPresidency Towns Insolvency Act, 1909 - Sections 36(4)
AppellantE.P. Ramakrishnan
RespondentV. Bashyam Achari and anr.
Appellant AdvocateP. Sivaramakrishniah and ;Harikesavan, Advs.
Respondent AdvocateK.N. Balasubramanian and ;P.B. Ramanujam, Advs.
DispositionAppeal allowed
Cases Referred and Karnagam v. Jayaseelam Chettiar
Excerpt:
.....towns insolvency act (iii of 1909), section 36-creditor--no independent existence apart from official assignee ; insolvency court--no power to make independent enquiry by passing official assignee. ; the appellant who was adjudicated as insolvent on his own petition, received substantial amounts by way of provident fund and gratuity when he retired from service. one of the creditors took out an application to the insolvency court for a direction to the insolvent to deposit into court the amount so received from his employer. the court directed the insolvent to deposit the amount into court. the insolvent preferred an appeal against the said order.; on the question whether the insolvency court as such, can act at the instance of a single creditor and give directions to the..........resources and properties of the insolvent could be undertaken by the public officer, namely, the official assignee in the presidency towns and the official receiver in places where the provincial insolvency act is in force. such is the power of the official assignee created under the various provisions of the bankruptcy law that it is not for a single creditor to single out himself and act on his own and apart from the official assignee who represents the body of creditors. it is the official assignee who should act and function for and on behalf of the creditors after an order of adjudication is made. this entitlement which is vested in the official assignee by statute cannot be lightly denied by a creditor, however inquisitive he may be and knowledgeable of the affairs connected with.....
Judgment:
1. The appellant is an insolvent, who was adjudicated as such on his own petition in I. P. No. 31 of 1975 on the file of this Court. The relevant facts which led to this voluntary adjudication may be stated thus : The insolvent, who was an employee as an officer in the Life Insurance Corporation of India, retired on 22-9-1974. Consequent upon his retirement, he received substantial amounts by way of gratuity and provident fund on 3-1-1975 and 9-1-1975, totalling a sum of Rs. 29,749-66. The first respondent, who was admittedly a creditor and who was also his neighbour, apparently being aware of such withdrawals of large funds by the insolvent from his quondam employer, was not satisfied about the voluntary adjudication sought for by the insolvent on 22-4-1975. But as law permits a person to assume on himself the badge of insolvency by filing a petition for voluntary adjudication after satisfying the requirements of a debtor's petition for adjudication, the first respondent cannot successfully challenge such a voluntary act on the part of the insolvent when he came to this court with his petition for adjudication as such. After the appellant-insolvent was so adjudicated, the first respondent took out two applications, Appln. No. 329 of 1975 in Aug., 1975 for a direction to the insolvent to deposit into court the amounts withdrawn by him from his erstwhile employer and concurrently, he also took out an application, Appln. No. 330 of 1975 to annul the order of adjudication and both the applications came up before Suryamurthy J. The learned Judge dismissed Appln. No. 330 of 1975 under which the first respondent sought for annulment of the order of adjudication, but allowed Appln. No. 329 of 1975 and gave direction to the insolvent, who is the appellant herein, to bring into court a sum of Rs. 29,000 received by him as provident fund, gratuity and other retirement benefits from the Life Insurance Corporation of India. The learned Judge examined the insolvent and he was not satisfied that the insolvent was not possessed of the funds, which his creditor wanted him to bring to court for the benefit of the body of creditors, He would disbelieve R.W. 1, who claims that he has spent out all such moneys by betting on horses and ultimately, he expressed the view that RW 1 has suppressed the entire cash of Rs. 29,000, which he received from the Life Insurance Corporation of India. It was in those circumstances, he directed the in- solvent to deposit the sum of Rs. 29,000 received by him as provident fund, gratuity etc. As against this order, the insolvent, who was the first respondent in Appln. No. 329 of 1975, has presented this appeal.

2. It is common ground that the creditor who invoked the jurisdiction of the court in the above proceedings has not challenged the order of the learned Judge in Appln. No. 330 of 1975 under which he dismissed the application to annul the order of adjudication. In these circumstances, it is for consideration whether the insolvency court as such, can act at the instance of a single creditor and give directions to the insolvent in the manner the learned Judge did.

3. It has been repeatedly pointed out by this Court and the Privy Council --vide Chhatrapat Singh Dugan v. Kharag Sing Lachmiram, ILR 44 Cal 535 : (AIR 1916 PC 64) and Karnagam v. Jayaseelam Chettiar, that the expression of inability by the debtor to pay his debts cannot lightly be disregarded by courts on a priori consideration and refuse relief to the debtor who seeks for being adjudicated voluntarily as an insolvent, provided the other conditions for the filing of a debtor's petition under the Presidency Towns Insolvency Act are satisfied. The ratio behind the principle as above appears to be that if a person seeks the assistance of court, but through the channel of law, for being badged as an insolvent on the ground that he is unable to pay his creditors, then, such an exposure Of his status and (in)ability is prima facie proof that he seeks for relief under the Insolvency Law for being adjudicated as bankrupt. At that stage, it would be hazardous to enquire into the correctness or otherwise of such voluntary statements made by a debtor. This is because the Insolvency law creates within its frame-work an apparatus to discover whether there is any mala fides or act of suppression or a design to avoid the creditors by secreting property. Such investigations to net the activities of the insolvent and bring into the common pool all the available resources and properties of the insolvent could be undertaken by the public officer, namely, the Official Assignee in the Presidency Towns and the Official Receiver in places where the Provincial Insolvency Act is in force. Such is the power of the Official Assignee created under the various provisions of the bankruptcy law that it is not for a single creditor to single out himself and act on his own and apart from the Official Assignee who represents the body of creditors. It is the Official Assignee who should act and function for and on behalf of the creditors after an order of adjudication is made. This entitlement which is vested in the Official Assignee by statute cannot be lightly denied by a creditor, however inquisitive he may be and knowledgeable of the affairs connected with the debtor.

The claim of the first respondent in this appeal as one of the creditors of the insolvent, against whom an order of adjudication has become final, is that he has knowledge of the fact that the insolvent has squandered funds which he received from his quondam employer about ninety days prior to the order of voluntary adjudication and that he has suppressed such amounts to the disadvantage of the body of creditors. It might be that this statement may be true. But the question is whether, after an order of voluntary adjudication is made by the insolvency court, that court could take upon itself the investigation into the fact whether the insolvent has suppressed any property of his own or assets of his own without the Official Assignee coming before it with such a complaint, or before a creditor, who has already proved before the Official Assignee being dissatisfied with the conduct of the Official Assignee or the Official Receiver, comes to court for such assistance. It is not as if every creditor who has proved before the Official Assignee can directly have recourse to the insolvency court for directions of this kind and in particular for the resuscitation of the assets and the money said to have been squandered by the insolvent just before he entered the portals of the insolvency court for voluntary adjudication. In our view, for certain purposes a creditor has no independent legal existence after an order of adjudication because his persona is merged with the Official Assignee who represents the body of creditors. He would have only a dialogue with the insolvency court through the Official Assignee. The Official Assignee, of course, has the undoubted right to seek the assistance of any of the creditors who form the body of creditors and investigate into the conduct of the insolvent. If his assistance is sought for and if he is provoked to investigate a cause which is just, by a creditor belonging to that body of creditors, the Official Assignee is bound to investigate it even though it is inquisitorial in nature. But, we are unable to agree with Mr. Balasubramanian, learned counsel for the first respondent, that such an inquisitorial enquiry can be undertaken at the instance of a creditor without reference to the Official Assignee or the Official Receiver and pass orders sought for against the insolvent to bring into court amounts said to have been squandered by him or utilised by him without a just cause prior to the order of adjudication which, as we have already stated, is a result of a voluntary act on the part of a debtor. No doubt, Suryamurthy J. was provoked to make the order in question after the enquiry which he undertook for himself and which, in our view, ought to have been undertaken by the Official Assignee, since he was of the view that the insolvent should be deemed to have suppressed the assets which he received prior to the date when he was adjudicated as an insolvent. This fact may be true, or may not be true. But, we are of the view that the insolvency court cannot at that stage make such an independent and original enquiry, by-passing the statutory officer, namely, the Official Assignee or the Official Receiver who is obligated under the statute to enquire into such matters. It is for the Official Assignee to bring to the notice of the court after such investigation and seek for further directions from it either under Section 36 of the Presidency Towns Insolvency Act, or under any other appropriate provision of the Provincial Insolvency Act. But, as matters stand, we are of the view that the directions given by the learned Judge asking the insolvent to bring into court the sum of Rs. 29,000 said to have been received by him as provident fund, gratuity etc., from the Life Insurance Corporation of India cannot be made under any of the provisions of the Act as they stand and at the time he made it, as, in our view, it is premature to do so. It should not be understood that the insolvency court has no jurisdiction to issue such directions. But, the tune was not ripe for such issuance as any such order could be passed only after, the Official Assignee, as representing the body of creditors, investigates fully into the matter and makes a report and seeks for directions, may be for the same purpose as the present first respondent sought for earlier. As the order is not sustainable in law, we have to set it aside, but make it clear that it is open to the creditor to assist the Official Assignee to investigate into the matter and it is for the Official Assignee to take up such inquisition and ultimately if he finds the necessary data for prosecuting the matter further, he is at liberty to do so. The appeal is accordingly allowed, but there will be no order as to costs.


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