1. The appellants in this case, who are father and son, were adjudged insolvent on their own petition in 1919. Eventually, when their estate was realized, it was found to leave a large surplus after all the creditors who had proved their debts had been paid off under Section 61 (5), Provincial Insolvency Act. The respondent here, who was one of the creditors, applied to the District Judge for a further amount out of the surplus representing the balance due to him if interest on his claims, which were two, was calculated at the contract rate from the date of adjudication. The District Judge did not allow this subsequent claim in full. There were two debts due to the respondent, on one of which the contract rate was 48 per cent and on the other 19 per cent. The learned District Judge allowed 18 per cent on each debt from the date of the contract to the date of payment. The insolvents appeal against that order.
2. The answer to the question to what amount is the creditor entitled in these circumstances depends upon the interpretation of several sections of the Provincial Insolvency Act, which at first sight may not be easy to reconcile; but I think when they are examined, their effect becomes clear. Under Section 33 of the Act, when an adjudication is made, a. schedule has to be framed showing the creditors and the amounts of the debts duo to them as proved by them. Section 34 of the Act provides that provable debts-include all debts and liabilities to which the debtor is liable when he is adjudged insolvent. That would include the principal and interest at the contract rate-on each debt, where the debtor is really liable to that rate in the absence of reduction by way of relief against penalty or by restriction of interest under the Usurious Loans Act and so on. That a provable debt includes not only the principal of the debt but interest up to the date of adjudication is shown both by Section 34 of the Act and by Section 48, in neither of which is there any limit to the rate of interest which can be proved. An extreme case of a high rate of interest being provable under the contract will be found in Kanto Mohun Mullick v. John Carapiet Galstaun : AIR1930Cal547 , where Rankin, C. J., points out that the creditor, having lent one lakh but by his contract being entitled to get two lakhs in six months and interest at 12 per cent on the two lakhs, could prove in accordance with that very harsh-looking contract. So we find that the creditor's proved claim, whether it is described as 'entered in the schedule' or is a 'debt proved'-those terms as used in the Act being synonymous-will include both the principal and interest at the contract rate, if any, unless that rate is specially reduced under provisions of law such as I have mentioned. But that interest, which is included in the proved debt, the debt entered in the schedule, runs only up to the date of adjudication.
3. That is in accordance with the long established rule in, England, as shown by Bromley v. Goodere 26 E.R. 49 and In Re: Savin 7 Ch. A760, and will he clear when Sections 34 and 48 of our Act are examined. But although interest at the contract rate, unless specially reduced under the provisions of law, will be included in the debt as entered in the schedule, there is a provision in our Act, as in the English Bankruptcy Act, that for purposes of dividend interest will not be calculated necessarily at the contract rate. In Section 48(2) of our Act for the purpose of dividend interest is limited to 6 per cent. The result of that is that, when a dividend is to be distributed to different creditors, the claim of each on which he is entitled to got rateable distribution is not necessarily the principal plus the contract interest up to the date of adjudication but the principal plus interest at 6 per cent up to the date of adjudication where that is less than the contract rate. Section 61 (5) of our Act directs distribution of the assets. After payment of certain specified preferential debts, all other debts entered in the schedule are to be paid off rateably; but that is to be done subject to the provisions of the Act. That will mean, as I have explained, that, if a dividend is being paid, it will not necessarily be the full debt entered in the schedule which is taken for the purpose of calculation but the principal with interest on it not exceeding 6 per cent. But that restriction, it must be noticed, only applies when there is a dividend to be distributed. If the assets are large enough for the whole of the proved debts entered in the schedule to be paid, then there is nothing in Section 61 (5) which places any restriction on paying off the whole of those debts. In fact Section 61 (5) requires them to be paid in full if the assets are sufficient. Any question of dividend of course only arises when there is not enough to pay the proved debts in full.
4. But, when the proved debts-the debts entered in the schedule-have been paid in full in any case and there is any surplus, Section 61 (6) prescribes what is to be done in those circumstances. It provides that
where there is any surplus after payment of the foregoing debts it shall be applied in payment of interest from the date on which the debtor is adjudged an insolvent at the rate of 6 per centum per annum on all debts entered in the schedule.
5. When that has been done as it has been done in this case there may still be a surplus left over, as there is in this case, Section 67 of the Act provides that, if in those circumstances there is a surplus:
the insolvent shall be entitled to any surplus remaining after payment in full of his creditors with interest as provided by this Act and of the expenses of the proceedings taken thereunder.
6. It will be seen that before the insolvent can get any part of the surplus under that provision there must have been payment of the creditors in full. It will be noticed that up to the stage we have now reached the debts entered in the schedule will have been paid in full and under Section 61 (6) 6 per cent interest on those debts will have been paid but that may not be payment of the creditors in full. It will not be payment in full of any creditor whose contract rate of interest not specially disallowed or reduced by the Court exceeds 6 per cent. It is here that the last part of Section 48 (2) must be taken into consideration. Section 48 (2), as I have mentioned, reduces for the purpose of calculating dividend interest at the contract rate if it is above 6 per cant. But it does so subject to a proviso and the proviso is that it shall be done:
without prejudice to the right of a creditor to receive out of the debtor's estate any higher rate of interest to which he may be entitled after all the debts proved have been paid in full.
7. Now, if we take the words of Section 67 'after payment in full of his creditors' with this proviso in Section 48 (2), it preserves the creditor's right to get the higher rate of interest to which he may be entitled after all the proved debts have been paid in full. On the face of those words there is no difficulty of interpretation but it has been suggested for the appellants by Mr. Chandra-sekara Sastri that we should not take the words I have quoted from Section 48 (2) in their literal sense, that we should read the words as if they were:
without prejudice to the right of a creditor to receive out of the debtor's estate any higher rate of interest to which he may be entitled up to the date of adjudication,
8. I do not think we are entitled to read the words in that way or that there is any justification for inserting the words ' up to the date of adjudication' in our (interpretation of the section. It will be observed that the creditor is entitled to got that higher rate of interest after the proved debts have been paid in full and as I have already mentioned a proved debt or debt entered in the 'schedule includes interest at the contract rate unless it has been disallowed by the Court or reduced by the Court up to the date of adjudication. What the creditor is entitled to under the last words of Section 48 (2) is the higher rate of interest after the proved debts have been paid in full. That must be the higher rate of interest for the period subsequent to the date of adjudication on proved debts which will ex hypothesi have been paid in full for the period up to the date of adjudication. But there are some other words in Section 67 which might perhaps be thought to raise a little difficulty in this interpretation which I have indicated. As I have mentioned the provision of Section 67 is that:
the insolvent shall be entitled to any surplus remaining after payment in full of his creditors with interest as provided by this Act.
9. What do those words 'with interest as provided by this Act' mean? Mr. Viyanna for the respondent has suggested that those words refer to the higher rate of interest mentioned at the end of Section 48 (2). I do not think that is at all an impossible interpretation, though perhaps it is not very happy to refer to the higher rate of interest which is preserved for the creditor by Section 48 (2) as being 'provided by' this Act. Without definitely rejecting that interpretation I may indicate that there is another possible interpretation, namely, that 'interest as provided by this Act' in Section 6 7 may well refer to the interest which a creditor can prove and get under Section 48 (1)'of the Act, where no interest is reserved or agreed upon in his contract subject to provisions very much like those of the Interest Act. And it may also refer to the interest which is to be given in the first instance out of the surplus at 6 per cent on all proved debts under Section 61 (6).
10. Under Section 61 (6) it will be seen that interest on interest in many cases can be given and given only by virtue of' the provisions of the Act. The words 'with interest as provided by this Act' may have been inserted in Section 67 to prevent the insolvent from claiming when he asks for the surplus that his creditors have been paid in full even without the interest specially allowed by the Act in Section 61 (6). What Mr. Chandrasekara Sastri asks us to say is that 'interest as provided by this Act' in Section 67 refers to the 6 per cent interest in Section 61 (6) and restricts full payment of creditors for the purpose of this Act to that interest and that although in Section 67 the insolvent is said to be entitled to the surplus remaining after payment in full of his creditors with interest as provided by this Act, it does not mean after payment in full really but after payment in full as qualified by Section 61 (6). That interpretation can only be reached by ignoring the proviso in Section 48 (2) 'without prejudice to any higher rate of interest' etc. We must take all the provisions of the Act together and in my opinion we have no right to adopt an interpretation of Section 67 which ignores the words in Section 48.
11. A suggestion has been made that Section 48 (2) preserves the creditor's right to get the higher rate of interest but not in the insolvency proceedings that he may sue for it after the insolvency proceedings are closed, but that he cannot get out of the assets of the debtor in insolvency the higher rate mentioned in the section. That contention is I think answered by the wording of Section 48 (2). It will be observed that the creditor's right to got the higher rate is preserved not as a right of suit but as a right to get that higher rate out of the debtor's estate. And what can a reference to the debtor's estate in the Insolvency Act mean except to the debtor's estate as administered in insolvency?
12. As might be expected there have been very few decisions on this question of the disposal of the ultimate surplus in insolvency cases because it is not in many cases that there is a large surplus. But our attention has been drawn to a decision of the Allahabad High Court, which is directly in favour of the appellants, viz. Ganga Sahai v. Mukarram Ali Khan : AIR1926All361 . A Bench of that Court decided that after the 6 per cent on the proved debts had been distributed out of the surplus under Section 61 (6) of the Act, the creditors could get no more, whatever their contract rate of interest was. From what I have said it will be soon that with great respect I find it not possible to agree with that view, and I may point out that the learned Judges do not appear to have given sufficient weight to the words of Section 48 (2). It is true that they refer to the creditor's right to the higher rate of interest being reserved by that section; but they say it is not an enabling section ' and obviously regard the creditor's right so reserved as one which he must pursue, if at all, in proceedings outside the insolvency. As I have said, the fact that the section preserves his right to get the higher rate out of the debtor's estate in my opinion shows that that interpretation is not correct. And I may mention that there is another decision of the same High Court, to which one of the learned Judges who took part in Ganga Sahai v. Mukarram Alt Khan : AIR1926All361 was a party, namely Muhammad Ibrahim v. Ram Chandra A.I.R. l926 All. 289 where it is implied in the judgment that a debtor who wishes to get his adjudication annulled on the ground of payment of his debts in full under Section 35 of the Act must pay the creditors at the higher rate of interest mentioned in Section 48 (2), if they are entitled to it. With respect, if payment of the debts in full within the meaning of Section 35 of the Act means payment of the higher rate of interest, should the creditors be entitled to it, then it does not appear to be correct that we should interpret ' payment of creditors in full ' in Section 67 of the Act in a different way.
13. Mr. Viyanna has drawn our attention to several English cases, which show-how this matter has been treated in bankruptcy in England. He has cited four cases which extend from the middle of the eighteenth century to the middle of the nineteenth century, namely, Bromley v. Goodere, Ex parte Morris 30 E.R. 266, Ex parte Mills 30 E.R. 640 and Bower v. Morris 41 E.R. 525, all to the effect that a creditor is entitled, if there is eventually a surplus in the debtor's estate, to get interest at the contract rate from the date of the commission, which corresponded to our date of adjudication hero, up to the date of payment. Those cases were quoted and followed by Bittleston, J., in In Re: Alexander Maclean 1 M.H.C.R.220 which was approved by Scotland, C. J., in In Re: Thomas Pareira  1 M.H.C.R. 217. Lord Hardwicke in the first of those cases allowed from the surplus of the debtor's estate interest at the contract rate from the date of the commission and found that that was in accordance with the Bankruptcy Law of England from the time of the Statute of 13 Elizabeth. In Act 6 of Geo 4 in 1825 statutory recognition was given to that practice. That we find repeated in Section 197 of Acts 12 and 13 Vic. in 1849. After the Act of 1849 there were the Bankruptcy and Insolvency Act of 1861 and the Bankruptcy Act of 1869. They do not touch the provision in this respect in Section 197 of the Act of 1849. But, when we come to the Bankruptcy Act of 1883, we do find a distinct change. In the Act; of 1883 there is a provision in Section 40 (5) exactly corresponding to Section 61 (6) of our Act, except that the rate to be paid out of the surplus on all proved debts is 4 per cent instead of 6 per cent and there is also in Section 65 of the Act of 1883 a provision exactly similar to that of our Section 67 entitling the insolvent to get back the surplus after payment of the creditors in full with interest as provided in the Act. If those two provisions were read together, they might be interpreted as purposely departing from the regular course of the English law as shown in the decisions and statutes I have mentioned up to that time and so taking away from the creditor the right to get cut of the surplus interest at the contract rate and reducing all the creditors to the same level so that they could only get after the date of adjudication interest at 4 per cent. however large the surplus might be, corresponding to our 6 per cent. But it is to be noticed that soon after the Bankruptcy Act of 1883 came into force it was found necessary to amend it in a number of ways, and so an amending Act was passed in 1890.
14. That amending Act by its Section 23 introduced into the Act of 1883 exactly the provision which we now find in Section 48 (2) of our Act. What can that mean but that the creditor's right to get out of the surplus the higher contract rate of interest, if he was entitled to it, as he had been able to up to the Act of 1883, was restored to him, if it were thought that it had been taken away by the Act of 1883? If the history of the matter is looked at in that way, it is impossible, I think, to avoid the conclusion that by the Act of 1890 it was ultimately intended to affirm the creditor's right to get out of the surplus, if sufficient, what he had been able to get up to the Act of 1883, namely, interest up to the data of payment at the contract rate unless it ware disallowed by the Court for some special reason. In the subsequent Bankrutcy Act of 1914 in England we find all those three provisions, corresponding with our Sections 61 (6), 67 and 48 (2) repeated; and again they appear in our own Act. Although of course we cannot go to the other Acts for the direct interpretation of the Act which governs us here, the history of this matter in England both in statutes and decisions is, I think, enlightening and confirms what appear to me to be the proper grammatical interpretation of the provisions in our own Act. In my opinion the creditor in this case is en titled to get his contract rates of interest on his proved debts from the date of the adjudication to the date of payment unless there is some special reason for reducing those rates.
15. I may add that the interpretation of the Act which I have adopted appears to me to be in accordance not only with the wording of the Act and the history of the matter but with practical convenience. If the interpretation contended for by the appellants were accepted, then it would be possible for a dishonest person, who happened to be liable to pay very high interest on certain debts but had ample property for doing so to present an insolvency petition praying that he should be adjudged an insolvent and by getting himself adjudged at one stroke to reduce the rate of interest on his debts to 6 per cent from that date. I should be sorry if I were obliged to adopt an interpretation of the Act which gave room for such maneuvers. In this case what has been found eventually is that the insolvents had a large amount of property, much more than what was necessary to pay all their debts, when they put in their insolvency petition they tried to reduce 'their ostensible property by a number of transfers which had to be set aside under the provisions of the Act. Their case appears to be one in point.
16. In my opinion this appeal should be dismissed with costs.
17. A memorandum of cross-objections has been put in by the respondent. The learned District Judge as I have mentioned, ordered that the respondent should get interest at 18 per cent on his principal out of the surplus. The respondent claims that ha should get 48 per cent on one debt and 19 per cent on the other which are the contract rates. Now I have no doubt that when those claims were first put forward for proof, they could have been kept down under the Provincial Insolvency Act in insolvency proceedings to reduced rates of interest which appeared proper in the circumstances. It happens that that was not done. That was in my opinion the proper time for making the reduction. The learned District Judge has exercised the same jurisdiction at this late stage when the respondent has made a claim to a part of the surplus. Although I think that the respondent's claim should have been dealt with at an earlier stage as the learned District Judge has allowed him 18 per cent interest I see no sufficient reason for interfering with the order which was eventually made in regard to the surplus. In my opinion the memorandum of cross-objections also should be dismissed with costs.
Anantakrishna Ayyar, J.
18. The question raised in this case is whether a creditor of the insolvent to whom money is due under a promissory note which provides for a higher rate of interest than 6 per cent per annum, is entitled to get interest, on the principal amount due to him on the date of the adjudication at the contract rate mentioned in the promissory note for the period between the date of adjudication and the date of payment of the principal amount by the Official Receiver, or whether he is entitled to interest during that period only at 6 per cent per annum, when there is a sufficient surplus of as-sets in the hands of the Official Receiver after paying the amount of debts included in the schedule.
19. To answer this question it is necessary to consider Sections 33, 34, 48, 61 and 67, Provincial Insolvency Act 5 of 1920. Under Sections 33 and 34 the creditors are entitled to tender proof of their debts including interest at the rates provided for in the promissory notes, etc. Under Section 48 (2), where a debt which has been proved under the Act includes interest... the interest shall, for the purpose of dividend, be calculated at a rate not exceeding 6 per centum without prejudice to the right of a creditor to receive out of the debtor's estate any higher rate of interest to which he may be entitled after all the debts proved have been paid in full. Under Section 61, Sub-section (5), subject to the provisions of the Act, all debts entered in the schedule shall be paid rateably according to the amounts of such debts respectively and without any preference. Under Sub-section (6):
where there is any surplus after payment of the foregoing debts it shall be applied in payment of interest from the date on which the debtor is adjudged insolvant at the rate of 6 per centum per annum on all debts entered in the schedule.
20. Under Section 67:
The insolvent shall be entitled to any surplus remaining after the payment in full of his creditors, with interest as provided by this Act, and of the expenses of the proceedings taken thereunder.
21. The insolvent relies on Sections 61 and 67; whereas the creditor relies on Section 48 (2). The question is what, on a proper construction of the provisions of the Act are the exact rights of the creditor in respect of the claim for interest in question, the surplus in the hands of the Official Receiver being more than sufficient to pay the creditor the interest claimed, if he be entitled to the same.
22. The question was elaborately argued before us, and our attention was drawn to the following decisions of the Indian Courts : In Re: Alexander Maclean, Subbarayalu v. Rowlandson 14 Mad.133 at pp. 136 and 139, Ganga Sahai v. Mukarram Ali Khan, Mohammad Ibrahim v. Ramachandra, In Re: Mahomed Shah 13 Cal.66 and Kanto Mohan Mullick v. John Carapiet Galstaun and the Official Assignee of Bengal (1).
23. When a debtor is adjudged insolvent, the Official Receiver has to frame a schedule of creditors and debts proved under the Act. Creditors, in respect of debts provable under the Act, shall tender proof of their debts, and such proof is to include proof of the interest on such debts claimed by them under the terms of their contract with the insolvent. Neither the Court nor the Official Receiver could disallow proof in respect of such interest. The schedule of debts thus prepared should therefore mention the amount due to the creditor both in respect of the principal and interest under the terms of the document proved by the creditor, up to the date of adjudication. I am not here concerned with the question whether if the contract rate of interest be extortionate or unconscionable, the same could not be reduced and a reasonable rate of interest substituted by the Court. When I speak hereafter, of the contract rate of interest, I mean, for the purpose of this judgment, the higher rate of interest mentioned in the contract between the parties, or the reduced rate of interest substituted by the Court, having regard to the Usurious Loans Act, or otherwise, both rates being higher than the rate of 6 per cent mentioned in Section 48 of the Act. Under Section 48 (2), when declaring dividend, the principal amount of such debt and only interest at a rate not exceeding 6 per cent, could be taken into account, and on the amounts so arrived at, dividend should be declared. But if there be a surplus after all the debts proved have been paid in full, then the creditor has got right:
to receive out of the debtor's estate any higher rate of interest to which he may be entitled.
24. The fixing of the lower rate of interest (which I call 6 per cent.) on the principal amount of debt up to the date of adjudication is only for the purpose of declaring a dividend when the assets are not enough to pay the creditors full 16 annas in the rupee. When it is found that there is a surplus, then the creditors are entitled to be paid not only the lower rate of interest mentioned in Section 48 (2), but the higher rate of interest mentioned in their contracts, and of which interest, proof has been given under Sections 33 and 34. When there is still a surplus left after paying the debts mentioned in the schedule (made up of the principal plus interest at the contract up to the date of adjudication), the creditors would be entitled to interest from the date of adjudication to the date of actual payment by the Official Receiver. It is argued for the insolvent that such rate of interest should only be 6 per cent under Section 61 (6), whereas the creditor claims interest at the contract rate on the principal amount of the debt from the data of adjudication to the date of payment, relying on Section 48 (2), as there is a large surplus in this case in the hands of the Official Receiver.
25. It is clear that a creditor is entitled to tender proof of the contract rate of interest and that proof claiming such contract rate of interest higher than 6 per cent could not be rejected : Re-Herbert, Ex parte Jones 9 Morrel. 253. No debt (whether principal or interest) which has not been proved could be considered nor paid in the coarse of proceeding under the Insolvency Act. Therefore a creditor is entitled to prove for principal plus contract rate of interest in respect of his debt; but for the purposes of dividend (when assets are not sufficient to pay the debts in full), interest must in the first instance be calculated at a rate not exceeding 6 per cent under Section 48 (2); by reason of interest being calculated at that rate of 6 per cent only, the creditor is however not to be prejudiced' or debarred from claiming any higher rate of interest to which he may be entitled; but that higher rate of interest could be claimed only in a case of surplus : see lie-Herbert, Ex parte Jones (13) and Kanto Mohan Mullick v. John Carapiet Galstaun and the Official Assignee of Bengal (1).
26. Section 48 (2) enacts that if there be a surplus after all the debts proved have been paid in full, the creditor is not to be prejudiced in his right to receive out of the debtor's estate any higher rate of interest to which he may be entitled. The expression 'the debts proved' connotes the principal plus interest up to the data of adjudication at the contract rate proved under Section 33. Therefore after the principal plus interest at the contract rate proved have been paid, it would seam that such a creditor would be entitled not simply to interest at 6 per cent mentioned in Section 61 (6) from date of adjudication to date of payment, but to interest at the higher rate under his contract, if there be sufficient surplus assets left in the hands of the Official Receiver to satisfy the same. Otherwise, it is difficult to give effect to the last ten words in Section 48 (2). Under Section 61 (5):
all debts entered in the schedule shall be paid rateably according to the amount of such debts respectively and without any preference.
27. The expression ' all debts entered in the schedule' are wide enough not only to cover the principal plus interest at 6 per cent fixed by the Court under Section 48 (2), but also the principal plus the contract rate of interest proved, if there be assets enough for the purpose. If there be still a further surplus, then, as I understand Section 61 (6) read with Section 48 (2), the same is to be utilized for paying interest on the principal debt at the contract rate proved, from the date of adjudication to the date of payment, when there is a rate of interest fixed in the contract, and at 6 per cent in other cases, as when the contract fixes no rate of interest or fixes only a lesser rate. Section 61 (6) does not, in my view, conclusively operate to cut down the contract rate of interest on the principal amount to 6 per cent for the period between the date of adjudication and the date of payment, when the surplus in the hands of the Official Receiver is more than enough to satisfy the same. The rate of interest, 6 per cent, mentioned in Section 61 (6) is primarily to provide for those cases whore the surplus does not admit payment of more than 6 per cent to any class of creditors. The object is not, as I said, to reduce the rate of interest fixed by the contract between the parties, when the assets are enough and there is a surplus. Sections 48, 61 and 67 should be read together, and if possible such a construction should be placed on them as would make the said provisions not inconsistent with each other.
28. The learned advocate for the insolvent argued that whoa creditors prove their debts and proof is accepted, they are in the position of decree holders, and ha urged that after the date of decree, the decree-holder is not entitled to the contract rate of interest, but only to interest at 6 per cent. according to the provisions of the Civil Procedure Code, and also according to the practice of the Courts and he submitted that that is the policy underlying Section 61 (6), Provincial Insolvency Act. Though at first sight that argument looks plausible, yet having regard to the principles laid down in the early English cases, and to the history of legislation in England relating to this matter, (the Indian Acts closely follow the provisions of the English Act in this matter), and also having regard to the express provisions of Section 48 (2), I am of opinion that that argument should not be accepted, when there is a sufficient surplus. The analogy to the case of a decree passed by a civil Court is not complete, and should not be pressed too far. Under the Act the adjudication may be annulled, in which case the creditors are restored to their former position. Again a creditor, if loft to himself, is entitled to choose his own time for filing a suit to recover his money; and till the date of plaint, if not till date of decree, Courts ordinarily award the contract rate of interest. In the case of proceedings in insolvency, the creditor has no option as to the time when he will put his claim into Court, but is compelled to prove his claim before a particular period, so that ha may share in the very first dividend that may be declared. It is a principle underlying administration in insolvency that no debt which is not proved could be paid or satisfied in insolvency proceedings by the Official Receiver and also that all claims of the creditors who have proved their debts should be dealt with in the insolvency proceedings. Section 61 (6) will have full scope in cases where no interest is fixed in the original contract, or where the contract rate does not exceed 6 per cent thus leaving Section 48 (2) to have full operation in cases where the contract rate is higher than 6 per cent. The two provisions could stand together in cases where there is surplus, and it is a principle of law that the substantial rights of parties should not be interfered with except to the extent to which they have been interfered with either expressly or by necessary inference by any enactment.
29. When we come to Section 67 we find that the insolvent shall be entitled to any surplus remaining after payment in full of his creditors. The expression 'debts proved' or 'debts entered in the schedule' do not occur in Section 67. The insolvent's right to any surplus comes in only 'after payment in full of his creditors.' The addition of the words 'with interest as provided by this Act,' occurring in Section 67, seems to indicate that payment to a creditor would be full only when he has been paid also interest as provided by the Act. The Act provides for interest at 6 percent by Section 61 (6) from the date of adjudication on all debts, even though they did not carry interest under the contract, it having already provided for a similar rate till date of adjudication under Section 48 (1). Thus in respect of debts which do not carry interest under the terms of the contract, practically 6 per cent is allowed; but in respect of debts which carry a higher rate of interest under the contract, the right of the creditor to receive out of the debtor's estate the higher rate of interest to which he may be entitled under his contract, is preserved by Section 48 (2), if there be surplus assets available. The words in Section 67 are 'with interest as provided by this Act, not as provided by Section 61.' Therefore questions as to rate of interest would be governed by Sections 48 and 61, among others, according to there being surplus or not. This view does not work injustice either to the creditors or to the insolvent. No question of dividend arises, because ex hypothesi assets exceed the debts in whatever way interest is calculated, there being still a surplus. If there be no insolvency proceedings, the creditor would be entitled to the contract rate of interest (the Court's power to reduce unconscionable rates of interest, apart).
30. The insolvent could not take advantage of his insolvency to cut down the rate of interest agreed to by him when there is such surplus and when no question of the rate being unconscionable arises. Otherwise the debtor could cut down the rate of interest agreed upon, to 6 per cent by getting himself adjudicated insolvent, and benefit himself by prolonging the proceedings. The object and policy of the Insolveney Act do not seem to me to bring about 'such a result. The object is to distribute the assets rateably (among the creditors. If however there be assets enough, then, unless there be any specific provisions in the. Act to the contrary, every creditor is entitled to be paid the full amount of his debt principal plus interest agreed upon. Besides the sections already noticed, our attention has not been drawn to any specific provision in the Act which expressly deprives the creditor of such a right; nor oven of any provision in the Act which by necessary inference leads to such a result.
31. The wordings of the above sections of the Provincial Insolvency Act have been borrowed from the English Bankruptcy Act of 1883 as amended by Section 23 of the Act of 1890, and the Act of 1914. Our attention has been drawn by the learned advocate for the creditor to certain very early decisions of the English Courts which lay down the principle that in case of surplus, the creditor is entitled to the principal plus interest at the contract rate till the date of payment. In Bromley v. Goodere, the Lord Chancellor made the following observations at p. 50:
All bankrupts are considered in some degree as offenders. They are called so in the old Acts, and all the Acts are made to prevent their defeating and delaying their creditors, and it would be an extraordinary thing that the delay of payment should prevent the creditors from having interest out of an estate able to pay it, when interest in all cases is given for delay of payment.
32. At p. 51, the learned Lord Chancellor further remarked:
The surplus to be paid over to the bankrupt is only the surplus after payment of the whole debts; for it would be vain to pay any other surplus, when it might have been recovered from him again by the creditors.
33. The Court gave directions that upon contracts or notes carrying interest, the interest at the rates therein specified, and where no rate of interest is specified at the rate of 6 per cent until reduced by Act of Parliament to 5 per cent, be calculated and the creditors paid, and the balance only handed over to the insolvent.
34. In Ex parte Morris (6) Lord Chancellor Thurlow decided that:
upon a bankruptcy, there being a surplus, subsequent interest was to be given to the creditors, and that nothing but want of assets need stop the rate of interest claimed by the creditors,
while holding that compound interest should not be allowed, in the absence of specified agreement to that effect. The Court hold that 'the whole must be computed as running interest.'
35. In Ex parte Mills (7), the Lord Chancellor decided that:
in case of a surplus coming to a bankrupt creditors have a right to interest wherever there is a contract for it appearing either on the face of the security or by evidence.
36. At p. 643, it was observed:
It was with surprise, that I heard that case of Bromley v. Child 1 Atk. 259, questioned. It has now been fifty years confirmed by every Judge who has sat in this Court....Nothing but an express specific provision to declare that all debts should be taken with a stop as at the time of the bankruptcy would have induced me to make a conclusion against the principle upon which the Act was made for the benefit of the creditors not of the bankrupt. The fund belongs to the creditors. It goes on and produces considerable profits. The surplus after full satisfaction belongs to the bankrupt. Till that in natural justice the creditors have a right to retain it against any claim the bankrupt can set up.
37. The Court directed the order to be drafted as follows:
To compute interest upon such debts, as either upon the face of the security or by force of the contract between the parties carry interest: p. 644.
38. As observed by the Lord Chancellor at p. 613 of 30 E.R. [Ex parte Mills]: in cases of Bankruptcy a surplus is unfortunately a very rare case; and as further observed in Bower v. Morris, at p. 528:
Indeed, the instances of there being a surplus are so few that there have not been materials for establishing a practice.
39. At p. 527, it is stated that
the interest stops at the date of commission, and though subsequent interest becomes due, it is not provable under the commission. The bankrupt's estate is taken from him by the commission; and the law in order to make an equal division amongst the creditors, pays to each a dividend upon the debt proved. But this is merely an arrangement for the convenience of the debtor's creditors. The bankrupt continues indebted for the principal and the interest accrued since the commission, although his certificate, if he obtains one, protects him against the liability to the debt, and being so indebted payments are made out of his estate to the obligee...Suppose the bankrupt does not obtain his certificate, but afterwards acquires and is sued by the obligee, ought not the obligee to be entitled to compel payment of all he could have demanded if there had not been any bankruptcy? Supposing the assignees realize a surplus of the estate, ought the obligee, in the case supposed, to suffer, and the bankrupt's estate to benefit by the bankruptcy?
interest is stopped at the date of the commission, because it is supposed that the estate will be deficient; it proves to be more than sufficient, why is the creditor to suffer and the bankrupt to benefit....
41. These are cases decided in England about a 100 years ago. Our attention was drawn generally to the English statutes relating to bankruptcy, and particularly to the Bankruptcy Act of 1883 as amended in 1890, and to the Bankruptcy Act of 1914. What we have been able to gather therefrom with reference to the question now before the Court, viz., the creditor's right in respect of the contract rate of interest proved, between the date of commission (adjudication) and the date of payment, if there is a surplus, is this: Prior to 1883, the English Bankruptcy Courts gave the creditor interest at the contract rate in such cases, provided there was sufficient surplus. The English Bankruptcy Acts till 1883 either contained provisions which were taken as justifying such a course or did not contain any specific provisions on the point. The statute of 1883 however contained two provisions: Section 40, Clause 5, and Section 65, which substantially correspond to Sections 61 (6) and 67 of our Provincial Insolvency Act of 1920. As there was not in the English Act of 1883 any provision corresponding to Section 48 (2) of our Act, evidently difficulty was felt, with the result that in 1890, an amending Bankruptcy Act was passed, Section 23 of which corresponded to Sub-section 2 of Section 48 of our Act.
42. In Robson on Bankruptcy, it is stated, and no doubt quite correctly, that Section 23 of the Act of 1890 was enacted to give greater benefit to creditors. The provisions of Section 23 of the Act of 1890, found a place in the Provincial Insolvency Act of 1907, (S. 32), and, as already stated, Sub-section 2, Section 48 of the present Insolvency Act of 1920 is a reproduction of Section 23 of the Act of 1890. In the Bankruptcy Act of 1914, Section 66 re-enacted Section 23 of the Act of 1890, and that Act of 1914 further contains Sections 33 (8) and 69 which correspond to Sections 61 and 67 respectively of our Provincial Insolvency Act of 1920. It cannot be questioned that the Indian legislature has been borrowing from the English Bankruptcy Act when enacting the Insolvency Acts in this country. No doubt Courts in India are bound, in the first instance, to construe the. words of the Indian Act, whenever any question arises, and in case of difference between the wordings of the Indian Act and the English Statute, Courts in India are bound to give effect to the words of the Indian Act, and confine themselves to the law as enacted by the words occurring in the Indian Act. Where however the language of the Indian Act and the English statutes is identical, I think Indian Courts are entitled to seek guidance and help from the decisions of English Courts in such matters.
43. Cases of surplus in the administration of an insolvent's estate are not matters of frequent occurrence. When such cases occurred in England, learned Judges there have held that the creditor is entitled to interest at the contract rate till date of actual payment, if there were sufficient assets in the bands of the Official Receiver. Section 61 standing by itself is capable of the construction contended for by the learned advocate, Mr. Chandrasekhara Sastri, who appeared for the insolvent; but we have the words of Sub-section 2, Section 48, also. Sections 48, 61 and 67 have to be read together and, if possible, consistently. The history of Section 48 (2) helps the Court to understand the scope and implication of the words used in that subsection. With that history before us, and in the light of the English decisions, if we consider the meaning of the words:
without prejudice to the rights of a creditor to receive out of the debtor's estate any higher rate of interest to which he may be entitled after all the debts proved have been paid in full,
I think it is reasonably clear that the contention urged by Mr. Viyyanna, the learned advocate who appeared for the creditor, should be upheld.
44. I am glad to have been able to arrive at this result; for otherwise it will be a further inducement to dishonest debtors to apply for their adjudication, so that they could derive undue and unjust benefit by having the rate of interest agreed to be paid to their creditors reduced to six per cent for the period during which the adjudication subsists, though there is surplus in the hands of the official receiver.
45. The judgment in In Re: Alexander Maclean, is a very learned and instructive one. The remarks at p. 843, Edn. 8, of Lindley on Partnership, so far as they go, support the above view. The remarks of Venkatasubba Rao, J., in Sabapathi Rao v. Sabapathi Press Co., Ltd. A.I.R. 1930 Mad. 1012 at p. 328 (of 54 Mad.), also support the general principle that in cases where there are enough assets, the rights of creditors should be worked out 'in the ordinary way.' In cases of winding up of companies by order of Court, though interest ceases to run from the date of the winding up order, yet interest at contract rate is payable if there are sufficient surplus assets.
46. The passages referred to at p. 136 of Subbarayudu v. Rowlandson apply only to cases where there are not assets enough to pay in full the creditors, and a dividend only has to be distributed among the creditors. Having regard to the considerations mentioned above, I feel myself unable to agree with the observations in Ganga Sahai v. Mukarram Ali Khan at p. 446, that interest at a rate higher than six per cent could not be allowed, after the date of adjudication, though it be the contract rate even in cases where there is surplus.
47. The learned Judge at p. 446 observes with reference to Section 48 (2) of the Act as follows:
But this subsection merely reserves the right of a creditor and is not an enabling section.
48. If the suggestion is that the creditor in such a case would be entitled to obtain relief with reference to the higher contract rate of interest, by filing a suit for the same, then with all respect, I find myself unable to agree to the same. There are two fundamental principles underlying proceedings under the bankruptcy law : one is, that only such debts as are proved could be taken into account and paid and discharged in bankruptcy proceedings; and the second is, that in respect of debts so proved, the creditor could not so long as the bankruptcy proceedings continue seek relief elsewhere than in the bankruptcy Court. I need not consider the case of a ' secured' debt in respect of which there is a specific exception in the Act. Again, that suggestion does not (in my view) give full effect to the words 'right of creditor to receive out of the debtor's estate' which occur in Sub-section 2, Section 48, since the reference to ' the debtor's estate' prima facie means the estate which is being administered in bankruptcy. Lastly, the English cases and the history that lies behind this provision of law Section 48 (2) as a reference to the old English oases and the several Bankruptcy Acts in England would show, have not been referred to in that case.
49. For the above reasons, I am of opinion that on a proper reading of Sections 48, 61 and 67 of the Act, the creditor's right to the contract rate of interest in such a case is not only not taken away, but is preserved by Section 48 (2), and that Section 61 only provides for cases where the contract rate is either less than six per cent or where no rate is fixed in the contract. In any event, unless the creditor's rights to such contract rate of interest is taken away either expressly or by necessary inference by any provision of law, he is entitled to be paid interest at such rate till the date of payment when the surplus in the hands of the official receiver is more than enough to cover such claim.
50. I accordingly uphold the contention of the learned advocate for the creditor in this respect.
51. The appeal accordingly fails and is dismissed with costs.
52. In the memorandum of objections, the creditor claims the contract rate of interest (48 per cent), which has been reduced by the learned District Judge to 18 per cent per annum. It is clear that the insolvency Court has jurisdiction, if a proper case be made out, to reduce the rate of interest 48 per cent mentioned in the promissory note. Baijnath Pandan v. The Estate of E.C. Dennet : AIR1925All400 and A Debtor In Re: the debtor Ex parte  1 K.B. 705 are authorities in favour of the view that the insolvency Court has got such power. If a suit had been filed by the creditor claiming 48 per cant per annum, it would be open to the Court in a proper case to reduce the rate of interest. If that be so, there is no reason why the insolvency Court should not have at least that jurisdiction, seeing that the creditor has to tender proof not only of the principal amount but also of the rate of interest claimed by him. Holding that the lower Court had jurisdiction to deal with the matter on the merits, I am not satisfied that any case has been made out for our interference in appeal.
53. The memorandum of objections is accordingly dismissed with costs.
54. Before parting with this case, I should like to draw attention to one point. A schedule of creditors and of debts proved has to be framed under Section 33, Insolvency Act. According to the form now in use the columns provide only for names of creditors and the amount of debts proved (principal debt plus interest fixed in the agreement, found by the Court to be proved, and calculated till date of adjudication). While information on these two points is of great use for various purposes under the Act, including the decision of compositions and schemes of arrangement proposed under Section 38, we have to remember that in the practical administration of the insolvent's estates (which in most cases are unable to pay the debts in full), dividends have to be declared in respect of only the principal amount of the debts and interest at rates not exceeding six per cent till date of adjudication, fixed by the Court under Section 48 of the Act.
55. As things now stand the schedule gives no information as to the amounts so due to the creditors; the official receiver has to make calculations and keep a separata record of such amounts for the purpose of declaring dividends. As those latter are the real figures that have to be often referred to in insolvency proceedings in connexion with the dividends in most cases of insolvency, it is a question for consideration whether the schedule to be framed under Section 33 should not have also another column which would give information as to the amounts due to the creditors for the purpose of declaring dividend. Further, the Court has to fix a rate of interest for debts proved, for the purpose of declaring a dividend under Section 48. The rate is not to exceed six per cent. In practice I understand that no such rate is fixed. To regularize proceedings, it is necessary that when it is seen that the debts proved exceed the amount of assets, which are expected to be realized, then the Court should in the first instance, fix the rate of interest as contemplated in Section 48 for the purpose of calculating dividend, and thus comply with the instructions contained in Section 48.