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Gokaldoss Govardhandoss Vs. Parry and Co. and the Official Assignee of Madras - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Judge
Reported in(1925)ILR68Mad795
AppellantGokaldoss Govardhandoss
RespondentParry and Co. and the Official Assignee of Madras
Cases ReferredDawe v. Vergara
Excerpt:
presidency towns insolvency act (iii of 1909), sections 11(d), and 99 - petition for adjudication of a firm as insolvent--'carrying on business,' under section 11(d), meaning of--so long as its business debts are undischarged, firm carries on business--receiver appointed in a suit between members of a firm, whether a bar to court ordering adjudication--adjudication of a firm as insolvents, whether prohibited by rule 47 of insolvency rules--rule 47, whether ultra vires. - .....in in re wenham, ex parte, baltams [1900] 2 q.b., 698, lord alverstone observed that the rule of the supreme court in england under which a creditor was enabled to get a separate receiver order against each individual partner could not be held to cut down the rights and liabilities created by sections of the bankruptcy act. in the present case there is no question that at the date of the petition, the insolvent firm had business debts undischarged.8. the objections taken to the order of mr. justice waller thus fail, and the appeals of the two members of the firm must be dismissed with costs.9. the respondents will get their costs out of the estate.10. this order will have the effect of dissolving our order, dated 18th december 1924, as to payment of rs. 500 per mensem for the maintenance.....
Judgment:

Spencer, J.

1. These are appeals against the order of Mr. Justice Waller adjudicating the firm of Murlidoss Bamdoss & Co., insolvent, and finding that the two brothers Gokuldoss and Dwarkadoss were partners in it. The counter-petitioners 3 and 4, namely, Govindoss Krishnadoss alias Babu, who is the son of Krishnadoss Murlidoss, and Ramdoss, son of Dwarkadoss Govardhandoss, being minors, were excluded. O.S. Appeal No. 86 is by the first counter-petitioner Gokuldoss and O.S. Appeal No. 87 is by the second counter-petitioner Dwarkadoss Govardhandoss. As he died after filing the appeal, his son Ramdoss is allowed to continue it. The facts which appear from the affidavits on either side are that the first counter-petitioner Gokuldoss's deceased father Govardhandoss and his deceased uncle Murlidoss Ramdoss were carrying on business in buying, and selling houses and lands in Madras under the trade name of Ramdosss Murlidoss & Co., and after their deaths the first counter-petitioner and Krishnadoss Murlidoss, now deceased, carried it on. Messrs. Parry & Co. obtained, a decree in O.S. No. 1007 of 1922 on the Original Side of this Court for Rs. 49,117 against this firm. Other creditors of the firm obtained a decree for Rs. 75,206 and attached the properties belonging to the firm on the 9th September 1924. The property remained attached for a period of 21 days and notice was given to Gokuldoss of the intention of Messrs. Parry & Co. to file a petition to declare the firm insolvent. Meanwhile Govindoss Krishnadoss alias Babu, instituted a suit, O.S. No. 622 of 1923, first for partition and later, upon amendment, for a declaration that the family had been divided from 1890 and that the debts incurred by the firm were not binding upon him after his father's death. In this suit a Receiver was appointed in August 1923.

2. It was contended before Mr. Justice Waller and again in appeal that, as the business of the firm ceased in April 1923, the Court had no jurisdiction to make an order of adjudication in November 1924. It is also contended that after the appointment of a Receiver any business carried on by the Receiver will not amount to a carrying on of the business by the firm, as the receiver is not an agent of the parties but an officer of Court, and that until he is discharged, no adjudication order can validly be made.

3. Section 11(d) of the Presidency Towns Insolvency Act declares:

The Court shall not have jurisdiction to make an order of adjudication in the case of a petition against a firm of debtors unless the firm has carried on business within a year before the date of the presentation of the insolvency petition within those limits.

4. Whether a firm has carried on business or not within a year before the date of the filing of the insolvency petition is a question of fact in each case. But it is necessary first to determine what is meant by 'carrying on business.' Is it the same as 'being a trader,' which is the expression used in Section 87 of the English Bankruptcy Act of 1869 Mr. Ramachandra Ayyar quoted the case of Dawe v. Vergara (1883) 11 Q.B.D., 241. That was a case where two persons, Ellery and Festirig, traded together as wine merchants. Pesting brought a suit for dissolution and himself took service in another company as a book-keeper. A receiver was appointed to carry on the business. It was held that, after the appointment of the receiver who took possession and carried on the business, Festing was no longer a trader at the time when his goods were taken in execution. Mr. Ramachandra Ayyar also relied on the case of Ex parts Blain, In re Sawers (1879) 12 Ch. D., 522 where it was held that an act of bankruptcy could not be committed by an agent and therefore that two partners of an English firm who were residing permanently in Chili could not be adjudicated bankrupts in an English Court of Bankruptcy. The explanation to Section 9 of the Presidency Towns Insolvency Act declares that the act of an agent may be an act of the principal for the purpose of committing acts of insolvency, even though the agent may have no specific authority to commit it. It was pointed out by me in Kalianji Singji Bhai v. The Bank of Madras (1915) 29 M.L.J., 788 that the law in England was not the same as that in India in this respect.

5. In Goswami Shri Girdhariji v. Shri Govardhanlalji I.L.R.,(1894) 18 Bom., 294 (P.C.) the Privy Council had to consider the meaning of the phrase 'carry on business' and they observed that the phrase was an elastic one and almost incapable of definition, It was intended in the Letters Patent, where the phrase was used, to refer to business in which a man might contract debts and become liable to be sued by persons who had business relations with him. I am of opinion that the expression 'carry on business' in the Presidency Towns Insolvency Act cannot be interpreted in the light of the Letters Patent or of the wording of the old English Bankruptcy law with reference to traders; so that cases like Dawe v. Vergara (1883) 11 Q.B.D., 241 and Ex parte Schomberg, In re Schomberg (1874) 10 Ch. App., 172 and Ex parte Sail-man, In re Taylor (1882) 21 Ch. D., 394 do not help us to decide the meaning of the phrase 'carry on business' in cases of insolvency. Under the old Bankruptcy Act of 1869, a firm could not be adjudicated insolvent in England, but this was made possible by the Bankruptcy Act of 1893 in which the expression 'being a trader ' was dropped and the expression 'carrying on business' was substituted. As a married woman could not be made bankrupt unless she was carrying on a trade or business after her marriage the question has come up in connexion with the Married Women's Property Act, as to what is the meaning of ' carrying on business' under the Bankruptcy Act. In In re Dagnall, Ex parte Soan and Morley [1896] 2 Q.R, 407, Vaughan Williams, J., observed that trading was not completed until all the obligations that the fact of trading imposed upon the trader were performed. The learned Judges declined to be bound by the earlier decisions such as Ex parte Schomberg (1874) 10 Ch. App., 172 as to the meaning of the words in the Bankruptcy Act of 1869 'being a trader.' Then in In re Worsley [1901] 1 Q.B., 309, Lord Alverstone, C.J., held that a woman who was carrying on business separately from her husband and sold that business must be deemed to be still carrying on the business so long as the debts she had incurred in the business remained unpaid. Reference is made by the learned Chief Justice to the case of Ex parte Bamford (1809) 15 Ves., 449, where the Lord Chancellor laid down that so long as a trader did. not pay the debts he had contracted while engaged in the trade he was to be regarded as still engaged in the trade. In In re Clark, Ex parte Pope and Owles [1914] 3 K.B., 1095 a similar meaning was given by three learned Judges of the Court of Appeal to the words 'carrying on business'; and in this Court in petition No. 150 of 1916 our learned Chief Justice took the view that the meaning of 'carrying on business' as understood by the Court of Appeal in England was the same in this country and that the language used by the English Court of Appeal was expressed in terms so general as to mean that, so long as there are debts of the business being discharged and assets being got in, a business must be regarded as still being carried on.

6. As regards the argument that the appointment of a receiver prevented the order of adjudication being made, Mr. Justice Pollock in Dawe v. Vergara (1883) 11 Q.B.D., 241 implied, that if testing intended to reconstitute the business or carried it on after the receiver was discharged, he would be a trader. It seems to me that the legislature could not have intended that an insolvent firm should be allowed to evade its responsibilities and obligations by the device of one member of the firm bringing a suit against another member and applying to the Court to appoint a receiver.

7. It was also argued that Mr. Justice Waller's order declaring the firm insolvent was contrary to Rule 47 of the Insolvency Rules which says that an order of adjudication shall be made against partners individually. I do not understand this rule as meaning that an order of adjudication shall not also be made against the firm. But if it has that meaning, it is at variance with the provisions of Section 99 of the Act which speaks of adjudication orders being made against firms, and it may be ultra vims, as suggested by Mr. Grant. In In re Wenham, Ex parte, Baltams [1900] 2 Q.B., 698, Lord Alverstone observed that the rule of the Supreme Court in England under which a creditor was enabled to get a separate receiver order against each individual partner could not be held to cut down the rights and liabilities created by sections of the Bankruptcy Act. In the present case there is no question that at the date of the petition, the insolvent firm had business debts undischarged.

8. The objections taken to the order of Mr. Justice Waller thus fail, and the appeals of the two members of the firm must be dismissed with costs.

9. The respondents will get their costs out of the estate.

10. This order will have the effect of dissolving our order, dated 18th December 1924, as to payment of Rs. 500 per mensem for the maintenance of the insolvents, and they may apply for what is necessary to the Official. Assignee or to the Judge sitting in Insolvency.

Ramesam, J.

11. I agree.


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