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Ramakrishnan Vs. Samiyar Marappa Gounder and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1986)1MLJ53
AppellantRamakrishnan
RespondentSamiyar Marappa Gounder and ors.
Cases Referred and Narayanan v. Kannabiran Mudaliar
Excerpt:
.....failed to furnish his address to the official receiver. the affidavit must be made by the creditor or by some person authorised by him, and in cases where the affidavit is not by the creditor, it should also state the authority of the deponent as well as the means of his knowledge. under section 33(1) of the act, after the order of adjudication is made, persons alleging themselves to be creditors of the insolvent in respect of debts provable under the act, shall tender proof of debts by producing evidence of the amount and particulars thereof and thereafter, by an order, the court shall determine the persons who have proved themselves to be creditors of the insolvent in respect of such debts as well as the amount of debts and shall frame a schedule of such persons and debts. in such..........as a creditor in toto. in such an event, it would not be open to that person to say that he had filed proof of his claim to the debts due to him from the insolvent and, therefore, he should be considered a creditor for purposes of the act. sections 33 and 49 and rule 8 referred to above clearly lay down the procedure in proving a debt in the course of the insolvency proceedings. it contemplates the filing of proof of the debt by the creditor in the shape of an affidavit and it is always open to the court to call for further proof. it is for the court to decide on the basis of the proof filed whether a person who claims to be a creditor is really one or not and that has to be done by an order in writing and the amount has also to be determined and the name of the creditor should also.....
Judgment:
ORDER

V. Ratnam, J.

1. The Civil Revision Petition arises out of proceedings initiated by the petitioner in I.A. No. 128 of 1980 in I.P. No. 29 of 1971, Sub Court, Coimbatore, under Section 68 of the Provincial Insolvency Act (V of 1920) (hereinafter referred to as 'the Act'), praying that the sale of an one-fourth share in an extent of 12-99 acres in G.S. No. 271, Pongalur Village, Avanashi Taluk, belonging to the insolvent/second respondent by the third respondent herein in favour of the first respondent herein on 18.7.1980 should be set aside. Claiming that the petitioner is a creditor furnished by the insolvent and that the insolvent is indebted to him in a sum of Rs. 5,000/- on a promissory note executed on 10.2.1969, the petitioner complained that he had no notice of the sale held by the Official Receiver on 18.7.1980 and that the property which was worth more than Rs. 20,000/-had been sold for a very low price as the first respondent had successfully kept away the real bidders. Stating that by a properly conducted sale, the estate of the insolvent will stand to benefit and the creditors also will be benefitted, the petitioner prayed for the setting aside of the sale held by the Official Receiver on 18.7.1980 in favour of the first respondent herein.

2. In the counter statement filed by the first respondent, the locus standi of the petitioner to file the application under Section 68 of the Act was questioned on the ground that the petitioner was not a creditor who had proved his debt. The application, according to the first respondent, had been filed at the instigation of the insolvent with a view to protract the proceedings. The first respondent questioned the claim of the petitioner that he is entitled to notice and stated that he had notice of the sale. The sale had been proclaimed more than once and at the prior sales, there were no bidders, according to the first respondent. The value of the property sold as given by the petitioner was disputed by the first respondent. The loan claimed to have been advanced by the petitioner to the second respondent had been brought into existence and the promissory note in support thereof had also been created, according to the first respondent. It was the further case of the first respondent that the petitioner was not possessed of sufficient means to advance any loan to the insolvent. With reference to the one-fourth share of the insolvent sold in favour of the first respondent, he stated that it had been sold to him for a proper price and if the petitioner claimed that it was worth Rs. 24,000/-, than, he should be directed to deposit that amount into Court so that in the event of the Court holding that a fresh sale has to be ordered, the bid can start from that account upwards. The application to set aside the sale was characterised as one devoid of merits and the first respondent prayed for its dismissal. The respondents 2 and 3, though served with notice of the application, remained ex parte.

3. Before the Sub Court, Coimbatore, on behalf of the petitioner, Exhibits A-l to A-3 were marked and the petitioner was examined as P.W. 1, while, on behalf of the first respondent, Exhibits B-l and B-2 were filed and he was examined as R.W.1 Exhibits C-l and C-2 were marked in evidence by the Court. On a consideration of the oral and the documentary evidence, the learned Subordinate Judge found that the sale of the insolvent's property by the Official Receiver had taken place after proper publication of the notice and also for a proper price and that there were no irregularities in the conduct of the sale. The petitioner was held to be an employee of the insolvent, who had been instigated by him to file the application to set aside the sale. It was also found that the petitioner had not established that he is a creditor entitled to maintain an application under Section 68 of the Act. On these conclusions, the application filed by the petitioner herein for setting aside the sale was dismissed. Aggrieved by this, the petitioner preferred an appeal to the I Additional District Court, Coimbatore, in C.M.A. No. 30 of 1983. During the pendency of the appeal, the petitioner filed I.A.No. 1 of 1984 for the reception of certain documents as additional evidence. Though the first respondent opposed the reception of these documents as additional evidence in the appeal, the learned District Judge was of the view that those documents are essential and material for a decision in the appeal and marked them as Exhibits A-4 to A-6. Relying upon the inclusion of the name of the petitioner in the list of creditors filed by the insolvent and the affidavit filed by the petitioner in proof of his claim before the Official Receiver, Coimbatore, the learned District Judge concluded that the petitioner is a creditor who has proved his claim and had, therefore, the locus standi to maintain the application under Section 68 of the Act. Adverting to the grounds upon which the petitioner challenged the sale held by the Official Receiver on 18.7.1980, the learned District Judge, after perusing the records of the Official Receiver, found that the sale had been duly proclaimed and that there was no justification in the complaint of the petitioner that he was not served with the sale proclamation, as he had failed to furnish his address to the Official Receiver. Considering the objection raised by the petitioner that the property had been sold for a very low price in 1980 when compared to its value when it was acquired in 1968, the learned District Judge concluded that though in 1980 the value of the property must have gone above Rs. 42,000/-, there was no material to infer that its value was Rs. 80,000/- in 1980 and that even if Rs. 8,010/- cannot be said to be a proper price for the sale of one-fourth share of the insolvent, the sale cannot be set aside on the ground of inadequacy of price alone. A dispute was raised before the learned District Judge regarding the share of the insolvent and it was found that the insolvent was entitled to only 3/16 share in the total extent of 12.99 acres and in view of the expression of willingness by the first respondent to confine his rights to that share of the second respondent, the Official Receiver, Coimbatore, was directed to execute a sale deed in favour of the first respondent in respect of 3/16 share. In the result, the appeal was dismissed. It is the correctness of this order that is challenged in this Civil Revision Petition.

4. The learned Counsel for the petitioner strenuously contended that the sale held by the Official Receiver on 18.7.1980 in respect of 3/16 share of the insolvent in an extent of 12.99 acres in G.S. No. 271 of Pongalur Village was for a price much lower than that for which the property was purchased in 1968 and that by itself would justify the Court holding that the property should not have been sold at that price and setting aside the sale in favour of the first respondent. Reliance in this connection was placed upon the decision in Srinivasa Naicker v. Engammal : AIR1962SC1141 and Narayanan v. Kannabiran Mudaliar : (1974)2MLJ303 . On the other hand, the learned Counsel for the first respondent submitted that the petitioner had not placed any evidence before the Court to show the market value of the property in 1980, when the property was brought to sale and sold and in the absence of the materials in that regard, the Court cannot proceed to accept the case of the petitioner that the value of the property in 1980 was high and the sale of the property for Rs. 8,010/- in favour of the first respondent was for a low or inadequate price. The learned Counsel also challenged the finding recorded by the lower Appellate Court to the effect that the petitioner is a creditor and contended that the petitioner has not proved his debt in insolvency and cannot, therefore, maintain the application under Section 68 of the Act as a creditor.

5. Before considering the question whether the sale held by the Official Receiver is liable to be set aside on all or any of the grounds urged by the petitioner, it is necessary to consider whether such an application would at all lie at the instance of the petitioner. In the affidavit filed in support of I.A. No. 128 of 1980, the petitioner claimed that the insolvent was indebted to him in a sum of Rs. 5,000/-on a promissory note executed by him in his favour on 10.2.1969 and that his name had been included in the list ofcreditors furnished by the insolvent and further that he shall be proving his claim before the Official Receiver. This claim of the petitioner was refuted by the first respondent in his counter and, therefore, it became necessary for the petitioner to establish that he is a creditor entitled to maintain an application under Section 68 of the Act. In order to maintain an application under Section 68 of the Act, the person applying must be either the insolvent or any of the creditors or any person aggrieved by any Act or decision of the Receiver. The petitioner, if at all he can maintain the application under Section 68 of the Act, can do so on the footing that he is a creditor. The question is, whether the petitioner has proved that he is a creditor of the insolvent entitled to maintain the application. The evidence in support of the claim of the petitioner that he is a creditor consists of Exhibit A-6 and his oral evidence as P.W. 1. In the course of his chief-examination as P.W. 1, the petitioner stated that he had advanced Rs. 5,000/-to the second respondent on the basis of a promissory note. When cross-examined, P.W. 1 claimed that the sum of Rs. 5,000/-was earned by him and his brothers jointly. He frankly admitted that he had not taken any step or filed a petition before the Official Receiver to prove the promissory note debt stated to be due to him from the insolvent. On further cross-examination, P.W. 1 was obliged to admit that the amount of Rs. 5,000/- advanced to the second respondent was kept in his house for 7 or 8 years, though he did not retain that amount for purposes of advancing the same to the second respondent. The petitioner was also forced to admit that he was employed as a clerk under the insolvent for writing accounts and that he was paid a salary of Rs. 250/- per mensem by him. This evidence of the petitioner with reference to the advance of Rs. 5,000/- stated to have been made by him to the insolvent on a promissory note dated 10.2.1969 does not appear to be true. It is impossible to believe that the petitioner, who has been working as a clerk under the insolvent on a monthly salary of Rs. 250/-, was able to muster Rs. 5,000/- for advancing a loan to the insolvent. In order to give the so-called lending a colour of reality, the petitioner came forward with the theory of joint earning with his brothers. No material has been placed to show who the brothers were and how much was earned by them and how much was saved in order to accumulate such savings to Rs. 5,000/-. Besides, it is impossible to accept the evidence of the petitioner to the effect that he had been retaining in his house the sum of Rs. 5,000/- advanced to the insolvent for 7 or 8 years. His evidence that he did not keep the amount of Rs. 5,000/- for advancing it to the insolvent does not in any manner improve his case. Thus the evidence of the petitioner with reference to the advance of Rs. 5,000/- by him to the insolvent is not satisfactory at all. It has to be remembered that the petitioner gave evidence in Court on 12.4.1982 and 13.4.1982 and he was obliged to admit that no steps had been taken by him to prove the debt before the Official Receiver. The insolvency petition was filed some time in 1971 and till April, 1982, the petitioner had not moved his little finger to establish his claim under the promissory note, even according to his own evidence. This would not have been the conduct of a person who had a genuine claim against the insolvent. There is, therefore, considerable substance in the contention of the learned Counsel for the first respondent that the insolvent had been able to get hold of an ex-employee, the petitioner herein, and instigate him to file an application in order to enable the insolvent to continue to remain in possession of his properties as before, despite his adjudication as an insolvent.

6. The only other document in support of the claim of the petitioner that he is a creditor of the insolvent is Exhibit A-6 dated 30.6.1982. That is an affidavit filed by the petitioner in the course of the insolvency proceedings. Therein, though in paragraph 1, the petitioner claims that he is a creditor, yet, in paragraph 2, he would state that the insolvent owes his employer amounts on promissory notes and that the documents had been filed therewith. In paragraph 4, the petitioner had stated that apart from what has been mentioned in the affidavit, no amounts had been received either by him or by his employer or by others. Finally, in paragraph 5, the petitioner states that the amount due to him as per the rate of interest awarded by Court is shown in the B Schedule as Rs. 7,675/-and the details of the promissory note had been given in D Schedule. Exhibit A-6 purports to be a certified copy of the affidavit filed by the petitioner. But that does not contain the copy of the promissory note stated to have been filed by the petitioner along with Exhibit A-6. The filing of the affidavit Exhibit A-6 by the petitioner would not, in my opinion, enable the petitioner to claim that he has proved that he is a creditor of the insolvent. Under the provisions of the Act, there is no definition of a creditor and, therefore, it is for the petitioner to make out that he is one with respect to the insolvent. Section 49 of the Act sets out the mode of proving a debt. Thereunder, a debt may be proved under the Act by delivering, or sending by post in a registered letter to the Court an affidavit verifying the debt and containing or referring to a Statement of Account showing the particulars of the debt and specifying the vouchers, if any, by which the same can be substantiated: It is no doubt open to the Court at any time to call for the production of the vouchers, Rule 8 of the rules framed by this Court under the Act provides for proving debts. Thereunder, unless otherwise ordered, all claims shall be proved by affidavit in Form No. 3 in the manner provided in Section 49 of the Act, provided that before admitting any claim, the Court may call for further evidence. The affidavit must be made by the creditor or by some person authorised by him, and in cases where the affidavit is not by the creditor, it should also state the authority of the deponent as well as the means of his knowledge. On tendering proof of any debt, as soon as may be, the Court shall, by an order in writing, admit the creditors' claim in whole or in part or reject it and when there is a rejection in whole or in part, the reasons for the rejection should also be set out. Every order, either rejecting a claim or admitting it in part only, shall be sent by the Court by registered post to the person making the claim within seven days from the date of the order. Under Section 33(1) of the Act, after the order of adjudication is made, persons alleging themselves to be creditors of the insolvent in respect of debts provable under the Act, shall tender proof of debts by producing evidence of the amount and particulars thereof and thereafter, by an order, the Court shall determine the persons who have proved themselves to be creditors of the insolvent in respect of such debts as well as the amount of debts and shall frame a schedule of such persons and debts. If the value of any debt is capable of fair estimation, then the Court may make an order to that effect and thereupon the debt shall be included in the Schedule. Section 33(2) of the Act enjoins that a copy of schedule of creditors shall be posted in the Court house. Section 330) of the Act provides for the inclusion of claims by creditors at any time before the discharge of the insolvent on tendering proof of the debt and making an application to the Court for the inclusion of the name of the creditor in the Schedule in respect of a debt provable under the Act and not already entered in the Schedule. In such cases, the Court, after giving notice to the Receiver as well as the other creditors who had proved their debts and hearing their objections, if any, shall comply with or reject the application. It is thus seen from the aforesaid provisions of the Act that merely filing an affidavit in proof of the debt would not be sufficient to clothe a person with the status of a creditor entitling him to take proceedings under the Act in that capacity. For all that, the Court may reject the claim of a person as a creditor in toto. In such an event, it would not be open to that person to say that he had filed proof of his claim to the debts due to him from the insolvent and, therefore, he should be considered a creditor for purposes of the Act. Sections 33 and 49 and Rule 8 referred to above clearly lay down the procedure in proving a debt in the course of the insolvency proceedings. It contemplates the filing of proof of the debt by the creditor in the shape of an affidavit and it is always open to the Court to call for further proof. It is for the Court to decide on the basis of the proof filed whether a person who claims to be a creditor is really one or not and that has to be done by an order in writing and the amount has also to be determined and the name of the creditor should also be shown in the schedule of creditors by Court. Proof of debts means that a creditor should have proved his debt in the method and manner prescribed by the Act and the rules and that his name should also be put in by the Court in the Schedule of the creditors. In view of these provisions in the Act and the rules, the mere filing of an affidavit in proof of the debt without the further procedure having been followed and completed culminating in the passing of an order by the Court and the inclusion of the name of the creditor in the Schedule cannot be taken to be tantamount to proof of the debt and the person proving itj being a creditor for purposes of the Act.

7. However, the learned Counsel for the petitioner would urge that he had on his part done all that can be done to establish his claim as a creditor and that he cannot be penalised for the inaction of either the Official Receiver or the Court, as the case may be. It is difficult to accept this argument advanced by the learned Counsel for the petitioner. As noticed earlier, the petitioner claims to have advanced a sum of Rs. 5,000/-to the insolvent as far back as 10.2.1969. The proceedings in insolvency were initiated in the year 1971. At the time of the examination of the petitioner on 12.4.1982 and 13.4.1982, he had frankly confessed that he had not taken any steps whatever to prove his debts in insolvency. Only subsequently, on 30.6.1982, the petitioner appears to have merely filed an affidavit in proof of his claim as a creditor of the insolvent. Even the affidavit filed 6y the petitioner is equivocal in that it is not clear therefrom whether the petitioner claims the amount as due from the insolvent or he claims it on behalf of his employer. Even assuming that the contents of Exhibit A-6 can be so construed as to make it an affidavit in proof of the claim of the petitioner against the insolvent, that by itself cannot be accepted as establishing the rights of the petitioners as a creditor of the insolvent who hasproved his debt, in the absence of non-compliance with the procedure enacted in Section 33 of the Act and the passing of an order by the Court. The petitioner had not been diligent at all in proving and establishing his claim that he is a creditor of the insolvent in accordance with the provisions of the Act. As matters stand now, the petitioner has not been recognised as a creditor by an order of Court and his name has not been shown to be included in the schedule of creditors as contemplated under Section 33(1) of the Act. In its absence, the petitioner cannot claim that he is a creditor entitled to maintain the application under Section 68 of the Act.

8. The Lower Appellate Court was of the view that Exhibit A-6 filed by the petitioner would be sufficient to clothe the petitioner with rights as a creditor for purposes of the Act. That, as pointed out earlier, is not correct as the mere filing of a claim would not enable the petitioner to say that he had proved his debt in insolvency and, therefore, he is a creditor of the insolvent. The inclusion of the name of the petitioner in the list of creditors filed by the insolvent is also not decisive of the matter because it would always be open to the Court to consider the claim of even those creditors on its merits on their tendering the proof and then rejecting it wholesale. In such an event, the inclusion of the name of a particular person as a creditor in the list of creditors filed by the insolvent will be absolutely of no avail. The Lower Appellate Court was, therefore, in error in holding that the petitioner is a creditor merely on the basis of the claim proof filed by the petitioner under Exhibit A-6 and the inclusion of the name of the petitioner in the list of creditors filed by the insolvent. On a careful consideration of the facts and circumstances and the evidence, the conclusion is irresistible that the petitioner has not established that he is a creditor who has proved his debt, in the insolvency of the second respondent and that, therefore, he is not entitled to maintain anapplication under Section 68 of the Act. Consequently the order of the Lower Appellate Court confirming the dismissal of theapplication filed by the petitioner has to be maintained, though for different reasons. The Civil Revision Petition, therefore, fails and is dismissed with costs of the first respondent.


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