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T.R. Rajakumari Vs. the Motion Picture Producers Combine Ltd. (by the Official Liquidator) - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai
Decided On
Reported inAIR1942Mad349; (1942)1MLJ182
AppellantT.R. Rajakumari
RespondentThe Motion Picture Producers Combine Ltd. (by the Official Liquidator)
Cases ReferredJesudasan v. Ramasamy
Excerpt:
.....156,..........are sections 191 and 229 of the indian companies act. section 191 provides thatthe court may fix a time or times within which creditors are to prove their debts or claims or to be excluded from the benefit of any distribution made before those debts are proved.the section does not say that if the proof of debt was not filed in time, the court could not excuse the delay or excuse the delay only under certain circumstances as rule 91 which is framed in pursuance of section 246 seems to provide. under section 229in the winding up of an insolvent company the same rules shall prevail . . . . as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent and all persons who in any such case would be entitled to prove for and receive.....
Judgment:

1. This is an application by one Rajakumari, a creditor, for excusing the delay in filing her affidavit of proof of her claim and for directing the Official Liquidator to receive the same. The Official Liquidator in pursuance of Rule 83 of the Indian Company Rules gave notice to all the creditors in accordance with Form No. 30 of the Appendix I to the Rules requiring them to prove their claim before the 30th April, 1941. The Official Liquidator contends that under Rule 91 of the Rules the applicant is not entitled to have her claim admitted and unless the provisions of the said rule are satisfied, there is no provision by which her claim can be admitted. The said rule runs thus:

If any creditor fails., either owing to ignorance or want of notice, to file proof of his debt with the liquidator within the time specified in the advertisement referred to in Rule 83, such creditor may apply to the Judge or Registrar for relief and the Judge or Registrar, may, upon such terms as he thinks just, adjudicate upon such debt himself or direct the liquidator to do so and make such other orders as he shall think fit.

On a literal reading of the rule it would seem that unless a creditor satisfies that owing, to ignorance or want of notice he did not file proof of his debt, his claim cannot be admitted. Mb' Thiruvenkatachari on behalf of the applicant concedes that it appears to be so but contends that in this particular case it is due to ignorance that his client could not file proof of her claim in time. He further contends that the rule goes far beyond the provisions of the statute. The relevant provisions are Sections 191 and 229 of the Indian Companies Act. Section 191 provides that

the Court may fix a time or times within which creditors are to prove their debts or claims or to be excluded from the benefit of any distribution made before those debts are proved.

The section does not say that if the proof of debt was not filed in time, the Court could not excuse the delay or excuse the delay only under certain circumstances as Rule 91 which is framed in pursuance of Section 246 seems to provide. Under Section 229

in the winding up of an insolvent company the same rules shall prevail . . . . as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent and all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company and make such claims against the company as they respectively are entitled to by virtue of this section.

The rule followed under the English Bankruptcy Act is that enacted in Section 65 which runs thus:

Any creditor who has not proved his debt before the declaration of any dividend or dividends shall be entitled to be paid out of any money for the time being in the hands of the trustee any dividend or dividends he may have failed to receive, before that money is applied to the payment of any future dividend or dividends, but he shall not be entitled to disturb the distribution of any dividend declared before his debt was proved by reason that he has not participated therein. (Vide p. 377 of Williams' Bankruptcy Practice, 14th Edition).

It is the same principle that is now being followed in the administration of insolvents' estates under the Presidency Towns Insolvency Act (vide Section 72 of the Presidency Towns Insolvency Act). So far as the English practice under the Company law is concerned, the principle observed is thus stated in Palmer's Winding up, Part II at p. 483:

As by the Act the assets are impressed with a trust in favour of all the creditors, the Court will make no difficulty in admitting proofs after the expiration of the time fixed. No mischief can be done to other creditors by reason of the delay or laches of any creditor, since, if he delays beyond the proper time, he must take his chance of what assets he can find for payment of his debt, not disturbing any former dividend.

Of course the difficulty will not occur under the English practice because the lists are settled from time to time. Under the Indian Companies Act of 1882, the principle enunciated in In re General Rolling Stock Co., Joint Stock Discount Co.'s claim (1872) 7 Ch. A. 646 was applied in our High Court in the case reported in Jesudasan v. Ramasamy (1903) 14 M.L.J. 345 : I.L.R. Mad. 496 (F.B.). That decision was based on an interpretation of Section 156 of the Companies Act of 1862 the language of which is almost similar to Section 191 of the present Act. The learned Judges observed thus:

The only penalty for failure to come in within the time stated in the notice is the penalty prescribed in the latter part of Section 156, viz., that the claimant is 'excluded from the benefit of any distribution made before such debts are proved', that is,, he can only claim a proportionate share in such assets as may remain undistributed at the time when he proves his claim and without disturbing any distribution made before such proof.

In In re General Rolling Stock Company (1872) 7 Ch. A. 646 Mellish, L.J., explains thus the principle that should be observed in these cases:

The Legislature intended us to follow the analogy of other cases where the assets of a debtor are to be divided .amongst his creditors, whether in bankruptcy or insolvency, or under a trust for creditors, or under a decree of the Court of Chancery, in an administration suit. In these eases the rule is that everybody who had a subsisting claim at the time of the adjudication, the insolvency, the creation of the trust for creditors, or the administration decree, as the case may be, is entitled to participate in the assets, and that the Statute of Limitations does not run against this claim, but, as long as assets resmain unadministered he is at liberty to come in and prove his claim, not disturbing any former dividend.

Therefore so long as justice can be done to a creditor without disturbing the dividend already declared or paid, there is no reason why he should be prevented from getting his dividend. In the present case it would seem to me that the applicant would come within the meaning of Rule 91 and I am therefore prepared to excuse the delay. I therefore direct the Official Liquidator to admit the applicant's claim without further proof and pay her the dividend due to her if he can do so without disturbing the previous dividend and if he has funds enough in his hands. It seems to me desirable that Rule 91 as framed should be amended on the lines of Section 65 of the English Bankruptcy Act or Section 72 of the Presidency Towns Insolvency Act, as it would be in consonance with the provisions of the Indian Companies Act and the principle laid down in the cases which I have referred to above.


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