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Kakumanu Venkatasubbamma Vs. Kakumanu Venugopala Rao (Died) and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberA.A.A.O. No. 34 of 1949
Judge
Reported inAIR1951Mad814; (1951)IMLJ468
ActsProvincial Insolvency Act, 1920 - Sections 50 and 59; Code of Civil Procedure (CPC) , 1908 - Sections 100 and 101
AppellantKakumanu Venkatasubbamma
RespondentKakumanu Venugopala Rao (Died) and ors.
Appellant AdvocateP.V. Chalapathi Rao, Adv.
Respondent AdvocateB.V. Ramanarasu, Adv.
DispositionAppeal dismissed
Cases ReferredNarahari Ramanamma v. Official Receiver
Excerpt:
.....100 and 101 of code of civil procedure, 1908 - whether insolvency court can order dividend paid on time-barred debts expunged from schedule to be put back into court - contention of appellant that orders of both lower courts illegal because debt was expunged under section 50 on application of creditor and not upon application of official receiver - such point not raised in either courts - same cannot be allowed to be raised for first time by way of second appeal - belated legal contention cannot be entertained - lower appellate court's judgment and decree correct and proper. - - ; (2) whether the official receiver, like a full owner, can acknowledge & pay at his will & pleasure time-barred debts; in a desperate attempt to revive these debts which were given up for good by the applt...........& raises three important questions: (1) whether the insolvency ct. can order dividends paid on time-barred debts, expunged from the schedule, to be put back into ct.; (2) whether the official receiver, like a full owner, can acknowledge & pay at his will & pleasure time-barred debts; & (3) whether a creditor, authorised & directed by the official receiver can file a petn. under section 50, provincial insolvency act, in the insolvency ct., to have debts incorrectly or improperly admitted expunged from the schedule & get a valid order.2. c. m. a. no. 23 of 1948 was an appeal against the order of the subordinate judge, guntur, dated 19-1-1948, in i. a. no. 233 of 1947, in o. p. no. 54 of 1935, an appln. of the resp., venugopala rao, a creditor of the insolvent in i. p. no. 54 of 1935 on.....
Judgment:

Panchapakesa Ayyar, J.

1. This civil misc. second appeal is against the judgment & decree of the Dist. J., Guntur, dated 31-7-1948, in C. M. A. No. 23 of 1948, & raises three important questions: (1) Whether the Insolvency Ct. can order dividends paid on time-barred debts, expunged from the schedule, to be put back into Ct.; (2) Whether the Official Receiver, like a full owner, can acknowledge & pay at his will & pleasure time-barred debts; & (3) whether a creditor, authorised & directed by the Official Receiver can file a petn. under Section 50, Provincial Insolvency Act, in the Insolvency Ct., to have debts incorrectly or improperly admitted expunged from the schedule & get a valid order.

2. C. M. A. No. 23 of 1948 was an appeal against the order of the Subordinate Judge, Guntur, dated 19-1-1948, in I. A. No. 233 of 1947, in O. P. NO. 54 of 1935, an appln. of the resp., Venugopala Rao, a creditor of the insolvent in I. P. No. 54 of 1935 on the file of the Subordinate Judge, Guntur, to expunge two 'whata' debts amounting to Rs. 9135 said to be due to the applt. Subbamma, from one Seetharamamma, from the schedule of proved debts. The learned Subordinate Judge expunged these two debts & directed the applt., Subbamma, to repay the sum of Rs. 2689-4-0, paid by the Official Receiver, Guntur, to her as dividend on these expunged debt, with interest thereon up to the date of realisation. The learned Dist. J. confirmed the order of the Subordinate Judge as he had no hesitation in agreeing that it was correct. He has given two reasons for supporting the expunging of the debts, firstly, that they are 'khata' debts which became barred on 9-4-1932, &, secondly, that there was obviously an interpolation & subsequent insertion in the accounts of the applt. in a desperate attempt to revive these debts which were given up for good by the applt. at the settlement of accounts, with Seetharamamma, on 12-2-1935 When the entire sum due by Seetharamamma to the applt. was fixed at Rs. 4426-6-0 for which a promissory note was executed, which promissory note had already been allowed for in the insolvency petn., & dividend paid therefor. In other words, the learned Dist. J. considered that this alleged debt of Rs. 9135-6-0 was not only time-barred, even if true, but it was also given up at the settlement of accounts on 12-2-1935 & was sought to be fraudulently revived & claimed by interpolations & subsequent insertions in the accounts, a conclusion which the Subordinate Judge too arrived at. I see no reason to differ from these two findings of fact by the learned Dist. J., & the question of law has to be considered with reference to these two facts.

3. I may add that the learned Dist. J's finding regarding the bogus nature of the debt of Rs. 9135-6-0 sought to be dishonestly revived is supported not only by the tell-tale over-writings etc. in the accounts, but also by the curious fact that the debt of Rs. 4426-6-0 due really to the applt., Subbamma, as per the settlement of accounts dated 12-2-1935, was claimed by her 'nearly three years before this alleged additional debt of Rs. 9135-6-0 was claimed by her in the insolvency proceedings'. There can be no explanation at all for this except on the basis that she too was aware that only Rs. 4426-5-0 was the debt really due to her, & that she therefore proved that debt first & drew the dividend in respect of it, & waited for a sufficiently long time before coming forward with the subsequent fraudulent claim regarding the abandoned debt of Rs. 9135-6-0. The Official Receiver could have easily seen this subsequent claim to be fraudulent if he had looked into the accounts carefully & taken note of two significant facts, namely, that the settlement of accounts on 12-2-1935 settled the liability of Seetharamamma only at Rs. 4426-6-0, regarding which a promisory note was executed, & that that amount alone was claimed in the Insolvency Petition at first, the bogus claim regarding Rs. 9135-6-0 being made three years later, namely, on 6-10-1945. But, as usually happens, the Official Receiver was not careful enough, & admitted the subsequent claim in respect of this settled or abandoned debt of Rs. 9135-6-0, & paid the dividend in respect of it too. Later on, the resp. objected to the inclusion of this bogus debt, & the Official Receiver called upon the applt. to produce her accounts or sufficient evidence to show that the debt of Rs. 9135-6 was really due to her. In spite of eight or nine adjournments given to the applt she failed to produce the accounts or other evidence before the Official Receiver & convince him that her claim in respect of this Rs. 9135-6-0 was true. That, even if it was true, it was time-barred ages ago, is obvious.

4. The Official Receiver was now in a quandary. He had admitted this bogus debt as genuine, & had disbursed Rs. 2689-4-0 of the trust monies of the insolvent's estate in his hands in respect of this bogus claim. So, he did not himself file in the Insolvency Ct. an appln. under Section 50, Insolvency Act, for expunging this bogus debt, allowed by him to be entered in the schedule of creditors erroneously, but asked the present resp., by his order dated 23-12-1946, to move the Insolvency Ct. for such expunging. The resp. moved the Subordinate Ct., Guntur, the Insolvency Ct., by I. A. No. 233 of 1947. The Ct. allowed him to put in a petn. without the least objection by the present applt., & ultimately expunged the debt & ordered the applt. to refund the dividend already drawn by her. Even in the appeal before the Dist. J.,. the appellant did not raise any objection to the Official Receiver's not putting in a petn. himself under Section 50, Insolvency Act, and allowing the resp. to put in such a petn. It is only in this civil misc second appeal that this ground has been taken belatedly.

5. On the merits, I have absolutely no doubt that the learned Dist. J. was quite right in holding this claim for Rs. 9135-6-0 to be not only time-barred but also a fraudulent revival of a settled or abandoned debt. But Mr. Chalapathi Rao, for the applt., has raised three legal grounds before me against the lower appellate Ct's order. The first is that the orders of both the Cts. below were illegal because the debt was expugned under Section 50, Provincial Insolvency Act, on the appln. of a 'creditor', & not upon the appln. of the Official Receiver. This contention has considerable force in it, though I cannot agree with it & quash the orders of the lower Cts. in the circumstances of this case. Firstly, it was not raised in either of the Cts. below, & cannot be allowed to be raised for the first time in this civil misc. second appeal after the applt. has tried her luck on merits' in both the Cts. below & failed. Secondly, the resp. must, in the light of the Official Receiver's directions to him to file this petn., be taken to have filed the petn. in the Ct. only as an agent of the Official Receiver & on his specific directions. It was urged by Mr. Chalapathi Rao that the Official Receiver cannot be allowed to delegate his statutory power thus & that his permission or direction is of no avail. There is force in this. But, as the applt. did not raise this objection before the Sub-Judge or Dist. J., & those Cts. also allowed the resp. to proceed with the petn. & appeal, I consider this to be only an irregularity not going to the root of the matter & vitiating the entire proceedings & necessitating the allowance of such a belated legal contention taken for the first time in this civil misc. second, appeal.

6. The second contention was that, once a dividend had been paid, it could not be, directed to be refunded even though it had been paid in respect of a time-barred & expunged debt, though no more dividend need be paid in respect of that expunged debt. Reliance was placed on the ruling of Somayya J, in 'Gangaraju v. Lakshminarayanamurthi', ILR (1942) Mad 879: AIR 1942 Mad 644. This ruling has been considered & rejected by the lower appellate Ct., &, in my view, rightly, because in this case it is not merely the payment of a dividend in respect of an expunged debt, but the payment df a dividend in respect of a 'settled and non-existent & time-barred' debt. Somayya J. simply said that a dividend paid could not be recovered on 'the sole ground' that the debt in respect of which it was paid had been expunged. No doubt, a time-barred debt is not 'extinguished' in law but only the remedy to recover it is extinguished. But a debt which has been settled or given up years ago, like this debt, has 'no existence', & any dividend claimed & taken away in respect of it by a person, like the applt. will be in the nature of taking by cheating or by false pretences, & in the nature of stolen property, & can be ordered to be put back into Ct., even if the law is that the dividend paid in respect of a genuine & subsisting time-barred debt cannot be. Indeed, the applt. ought to thank her stars that she was not ordered to be prosecuted in addition, for dishonestly passing off such a settled & nonexistent time-barred debt as a genuine & subsisting one. I have not the least doubt that the insolvency Ct. has got not only the right, but also the duty, to order dividends paid on time-barred debts expunged by it from the schedule to be put back into Ct. There is clear authority, English & Indian, for that position. The rulings of Venkataramana Rao J. (who has relied on English rulings also) in 'Chandrayya v. Chinnappareddi : AIR1941Mad753 , of Rajamannar J. (as he then was) in 'Narahari Ramanamma v. Official Receiver, Kistna : AIR1946Mad500 ; & of the Bombay High Court in 'In re Ramachandra Ganujee', 104 IC 378: 29 Bom LR 1167 show this beyond the shadow of a doubt. The facts in those cases were a bit different from the facts in one case, but nothing turns on those facts regarding this point.

7. The third contention of Mr. Chalapathi Rao was that the Official Receiver was a full owner of the insolvent's property, which vested in him, &, so, like any other full owner, could, at his will & pleasure, acknowledge & pay time-barred debts, as he did, & the Ct. could not order a refund of the dividend he knowingly & willingly paid in respect of them. I cannot agree at all. The Official Receiver never paid the dividend in this case knowing the debt to be time-barred & settled. Besides, he is a 'trustee' in respect of the entire body of creditors & has no power at all, like 'ordinary full owners', to spend the money on himself, or to make a gift of it to others, however deserving, or to acknowledge or pay time-barred debts, or settled debts, or other debts not binding on the insolvent's estate under the law, including the law of limitation. Otherwise, the Official Receiver can include any number of time-barred debts in the schedule, & the insolvent's genuine creditors, whose debts are not time-barred, will get only a pittance along with persons whose worthless claims have been hopelessly barred years & years ago! Of course, in this case, it is not even a genuine time-barred debt, but a debt given up & 'extinguished long ago' & revived 'dishonestly'.

8. All the contentions of the learned counsel forthe applt. have failed, & I am satisfied that thelower appellate Ct's judgment & decree are correct& proper, & so confirm the same & dismiss thiscivil misc. second appeal, taut without costs, as thelegal point under Section 50, Provincial Insolvency Act,has not been raised in the lower Cts. & has notbeen considered by either of the Cts. below, & thismust have been the main reason inducing the applt.to file the civil Misc. Second Appeal. Leave refused.


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