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Chowdappa Gounder, a Creditor of the Insolvent Kathaperumal Pillai for Himself and on Behalf of All the Creditors Vs. Kathaperumal Pillai and ors. - Court Judgment

LegalCrystal Citation
CourtChennai
Decided On
Judge
Reported in96Ind.Cas.944
AppellantChowdappa Gounder, a Creditor of the Insolvent Kathaperumal Pillai for Himself and on Behalf of All
RespondentKathaperumal Pillai and ors.
Cases ReferredAct. In Niadar v. Ramji Lal
Excerpt:
provincial insolvency act (v of 1920), sections 75, 53 - application by official receiver under section 53 to set aside alienation by insolvent dismissed--creditor, right of, to file appeal without moving official receive--creditor not party in lower court, effect of--'person aggrieved,' who is. - .....interest, as distinguished from the interest he possesses homogeneous with those of the general body of creditors. the general principle thus would seem to be that where the insolvency proceeding under consideration concerns only an individual creditor and his interacts, he alone can agitate the matter both in the original court and in the appeal court. reference may be made in this connection to the reported ruling in khushhaliram v. bholar mal 23 ind. cas. 573 : 37 a. 252 : 13 a.l.j. 270. in such cases, however, there would ordinarily be an order by the receiver as representing the general body of creditors, and a fortiori the homogeneous interests of all individual creditors, including the creditor opposed to him in the matter of that creditor's individual claims, un-favourable to.....
Judgment:

Wallace, J.

1. The first, question in this appeal is whether an appeal lies. The Official Receiver of Coimbatore in proceedings in Insolvency applied to the lower Court under Section 53 of the Provincial Insolvency Act to declare void against him an assignment or sub-lease in favour of the second respondent before it. The lower Court dismissed the petition. The appellant before us is not the Official Receiver but one of the creditors; and a preliminary objection is taken that such an appeal by a single creditor is not competent. It does not appear that the appellant before appealing moved the Official Receiver to appeal. For the purposes of this argument I assume that the Official Receiver was not moved to appeal.

2. The appellant relies very strongly on the general wording of Section 75, Sub-clauses 1 and 2, which undoubtedly lays down that any creditor aggrieved by the decision of the District Court may appeal to the High Court in a matter of this kind. The short question then is, is the appellant a creditor aggrieved by this order and does the fact that he did not first move the Official Receiver to appeal, make him any the less an aggrieved creditor?

3. Now, the general scheme of the Act is that in insolvency proceedings creditors cannot act individually and independently but are represented by the Official Receiver who alone may ordinarily take action. Clearly, however, the Official Receiver can act for the whole body of the creditors only when the interests of the whole body are homogeneous; if the interests of individual creditors conflict, then the Official Receiver cannot represent the interests of the creditor who is standing on his individual right as opposed to those of the general body, so far as that right is concerned. Such a case would occur, for example, when the Official Receiver or some creditor wishes to have the debt of another creditor struck out as fictitious, or when one creditor wishes to be ranked as a secured creditor, or when an alienation in favour of one creditor is sought to be declared void under Section 53 or 54 of the Act. In such cases it seems to mo clear that no one but the individual creditor can represent his individual interest, as distinguished from the interest he possesses homogeneous with those of the general body of creditors. The general principle thus would seem to be that where the insolvency proceeding under consideration concerns only an individual creditor and his interacts, he alone can agitate the matter both in the Original Court and in the Appeal Court. Reference may be made in this connection to the reported ruling in Khushhaliram v. Bholar Mal 23 Ind. Cas. 573 : 37 A. 252 : 13 A.L.J. 270. In such cases, however, there Would ordinarily be an order by the Receiver as representing the general body of creditors, and a fortiori the homogeneous interests of all individual creditors, including the creditor opposed to him in the matter of that creditor's individual claims, un-favourable to the individual creditor's individual claims and the latter would apply first of all to the Oourt under Section 68 for redress. See Thiruvenkatachariar v. Thangayi Ammal 29 Ind. Cas. 294 : 39 M. 479 : 17 M.L.T. 432 : 29 M.L.J. 755. But where the proceeding, concerns the general interests of the general body of creditors, then individual creditors are not in the first instance permitted ordinarily to act individually, but must be represented by and must act through the Official Receiver. What then is the principle to be invoked if the Official Receiver being moved on behalf of the general body of creditors refuses to act. The proper principle, as I conceive, has been laid down by Gave, J., in Ex parte Kearsley; In re Genese (1886) 17 Q.B.D. 1 : 55 L.J.Q.B. 325 : 31 W.R. 474 : 3 Morrell 57. It is quoted in extenso in Ananthanarayana Aiyar v. Ramasubba Aiyar 79 Ind. Cas. 395 : 47 M. 673 : 18 L.W. 857 : 33 M.L.T. 198 : A.I.R. 1924 Mad. 345.

4. That principle would, prima facie, apply equally to proceedings in the Original Insolvency Court and to proceedings in appeal from it. But, having regard to the generally adopted interpretation of the phrase 'any person aggrieved' set out in, the well-known case of In re Sidebotham (1880) 14 Ch. D. 458 : 49 L.J. Bk. 41 : 42 L.T. 783 : 28 W.R. 715 and adopted therefrom in various decisions in this country--see Ananthanarayana Aiyar v. Ramasubba Aiyar 79 Ind. Cas. 395 : 47 M. 673 at p. 682 : 18 L.W. 857 : 33 M.L.T. 198 : A.I.R. 1924 Mad. 345 and Kumarappa Chettiar v. Murugappa Chettiar 36 Ind. Cas. 771 it must be admitted that Section 75 does give an individual creditor a wider right, viz., aright to appeal in any case in which his interests are adversely affected, whether it is his individual interests or his interests as one of the general body of creditors which are so affected, so that it is open to the individual creditor to appeal in a case where his interests are homogeneous with and not opposed to those of the whole body of creditors, even though he has not first moved the Official Receiver to appeal and had a refusal.

5. At the same time it is essential that the general principle that the individual creditor cannot without leave or order of the Court represent the whole body of the creditors, must not be lost sight of, and in cases where he does so, it must be made clear that the appeal is on behalf of the general body of creditors. Following, therefore, the analogy of a suit by an individual creditor under Section 53 of the Transfer of Property Act cf Kottarathil Puthiyapurayil Pokker v. Batalhii Parkum Chandrankandi Kunhamad 51 Ind. Cas. 714 : 42 M. 143 : 25 M.L.T. 47 : (1919) M.W.N. 39 : 9 L.W. 138 : 36 M.L.J. 231 and Ishwar Timappa v. Devar Venkappa 27 B. 116 : 5 Bom. L.R. 19 I would direct that before this petition of appeal be entertained and heard, the petition be amended so as to make it clear that the appellant is appealing on behalf of the general body of creditors, so that any order he may obtain will enure on their behalf and be worked out if necessary by the Official Receiver.

6. The general principles on which such insolvency proceedings ought to be conducted would then be these: In original proceedings in the Insolvency Court in which an individual creditor's individual interests are concerned, and are opposed to the interests of other creditors so that the Official Receiver cannot represent the individual creditor's individual claims a motion may be made by the individual creditor and an appeal may be made by him also; but when in the original proceedings the individual creditor's interests are homogeneous with those of the rest so that the Official Receiver can represent all, the proper person to move is the Official Receiver and the individual creditor cannot move unless there is a decision of the Official Receiver against him under which he can come up under Section 68. But, in the matter of appeals an individual creditor can always appeal whether or not the Official Receiver does; but if in the matter of appeal his interests are homogeneous with those of the rest of the creditors, then in such a case he must make his petition a representative petition on behalf of all the creditors.

7. I do not think that the fact that the appellant was not in his individual capacity a party to the original petition precludes him from appealing. This individual creditor was in matters in which his interests are homogeneous with those of the general body of creditors sufficiently represented in the Original Court by the Official Receiver who was a party to the original proceedings.

8. Various decisions have been quoted at the Bar. I shall refer only to a few of them. Iyappa Nainar v. Manikka Asari 27 Ind. Cas. 241 : 40 M. 630 is no authority against a right of appeal in this case. There the creditor's interests were not affected in any way and it was held, therefore, that he had no right of appeal at all. The case Gontu Appireddi v. Gontu Chinna Appireddi : AIR1922Mad246 is not a case of an appeal, and Section 75 did not come under consideration. Ordinarily, as I have said where the interests of all creditors are involved, the individual creditor cannot move in the original Court unless and until the Official Receiver has refused to move. The same rule is laid down in Ananthanarayana Aiyar v. Ramasubba Aiyar 79 Ind. Cas. 395 : 47 M. 673 : 18 L.W. 857 : 33 M.L.T. 198 : A.I.R. 1924 Mad. 345 and Hemraj Champa Lall v. Ram Kishen Ram 38 Ind. Cas. 369 : 2 P.L.J. 101 : 1 P.L.W. 752 : (1917) Pat. 303. The respondent strongly relied on Ananthanarayana Aiyar v. Ramasubba Aiyar 79 Ind. Cas. 395 : 47 M. 673 : 18 L.W. 857 : 33 M.L.T. 198 : A.I.R. 1924 Mad. 345. That, however, was a case in which the Court did not deny the right of a creditor to come up on appeal, but only held that he had been premature and should have applied himself to the original Court in place of the Official Receiver who refused to act under Sections 53 and 54 of the Act to have the alienation set aside, and it was laid down generally that the principle must be safeguarded, that a creditor should ordinarily act on behalf of the whole body of creditors, and if necessary for that purpose, should apply for and obtain permission to use the Official Receiver's name. The same principle was safeguarded in another way in. Jagannatha Ayyangar v. Narayana Ayyangar 52 Ind. Cas. 761, by the Court directing that the proceedings after remand ordered on appeal by an individual creditor should be conducted by the Official Receiver. The respondent relies on the wording in Ananthanarayana Aiyar v. Ramasubba Aiyar 79 Ind. Cas. 395 : 47 M. 673 : 18 L.W. 857 : 33 M.L.T. 198 : A.I.R. 1924 Mad. 345 with reference to the right of appeal under Section 75: We see no reason why we should not hold that a creditor can appeal when he is a party to the decision appealed against and it is sought to deduce the inference that he cannot appeal when he is not a party to the decision appealed from. As to this, I think, as I have said that, as his interests in that case are homogeneous with those of the general body of creditors, he need not have been represented in the original proceedings in his individual capacity; it is sufficient that he was represented by the Official Receiver. In East India Cigarette . v. Ananda Mohan Basak 58 Ind. Cas. 10 : 24 C.W.N. 401 an individual creditor whose individual interests were at stake was allowed to appeal and make the Official Receiver a party in order to have on record the general body of creditors. The previous view in the Allahabad High Court set out in Jhabba Lal v. Shib Charan 37 Ind. Cas. 76 : 39 A. 152 : 15 A.L.J. 1 that the provisions of Act III of 1907 did not allow an individual creditor to appeal, has been altered in deference to the wording of the present Section 75--see Shikri Prasad v. Aziz Ali : AIR1922All196 and Niadar v. Ramji Lal : AIR1925All549 .

9. I would, therefore, allow the appeal to be argued provided the appellant amends his appeal petition to make it clear that his appeal is presented by him as representative of the general body of creditors, and then he may be heard on the merits.

Madhavan Nair, J.

10. The facts of this case are very simple. One Kathaperu-mal Pillai was adjudicated as an insolvent. He had assigned a lease in his favour to the 2nd respondent. The Official Receiver at the instance of the present appellant, one of the creditors, filed an application before the District Judge to set aside this alienation under Sections 53 and 54 of the Provincial Insolvency Act V of 1920. The appellant himself was not an actual party to the proceedings. The District Judge declined to set aside the alienation. The present appeal is against this order of the District Judge. The appellant, before filing the appeal, did not move the Official Receiver to file an appeal, but he has made him the 3rd respondent before us.

11. Mr. Ramachandra Iyer, on behalf of the 2nd respondent; the alienee, takes the preliminary objection that the appellant, inasmuch as he did not request the Official Receiver to file an appeal beforehand, is not himself entitled to file it. The appeal has been preferred under Section 75, Sub-section 2 of the Provincial Insolvency Act. Section 46 of Act III of 1907 gave a right of appeal to any person aggrieved by an order made in the exercise of insolvency jurisdiction. The Madras High Court in Thiruvankatachariar v. Thangayi Ammil 29 Ind. Cas. 294 : 39 M. 479 : 17 M.L.T. 432 : 29 M.L.J. 755 held that an individual creditor was a person aggrieved and was entitled to appeal. In this view, as pointed out in Niadar v. Ramji Lal : AIR1925All549 the terms of Section 46 have been altered, in the new Act in Section 75, Sub-section 1 to the debtor, any creditor, the receiver or any other person aggrieved by a decision come to or an order made in the exercise of insolvency jurisdiction...'Sub-section (2) of Section 75 provides that, 'any such person aggrieved by any such decision or order of a District Court as is specified in Schedule I, coma to or made otherwise than in appeal from an order made by a subordinate Court, may appeal to the High Court.' There can be no doubt that the decision of the District Judge is clearly adverse to the interests of the appellant; for it reduces the amount of property out of which he will be entitled to claim a dividend. It is conceded by Mr. Ramchandra Iyer that the language of the section is certainly wide enough to include within its terms 'any such person aggrieved by any such decision or order of a District Court' a creditor like the present appellant who was not an actual party to the original proceedings or who has not asked the Official Receiver to file an appeal. But he argues that, according to the decisions of this Court, an appeal by a creditor under this section is to be deemed incompetent if he is not ah actual party to the proceedings, or if he has not moved the Official Receiver to file the appeal beforehand.

12. In my opinion, the position contended for is not warranted by the decisions of this Court. In Kurharappa, Chettiar v. Murugappa Chettiar 36 Ind. Cas. 771 when an objection was raised as regards the maintainability of an appeal filed by a contesting creditor in insolvency proceedings under Section 36 of the old Act (III of 1907) Krishna, J., after a consideration of the English authorities as to who is a person aggrieved, stated as one of his conclusions that a person is aggrieved by an order where he is a party to an order, or, even if he is not, he is bound by the order and the order affects his interests, i.e., 'his person or his property injuriously.' If so, the appellant though not a party, as 'an aggrieved person' is certainly entitled to prefer the appeal. Oldlield, J., while, agreeing, with the conclusion of Krishnan, J., made the following observations: 'The Official Receiver, from the moment at which the insolvent's estate vests in him, represents the body of creditors and ought to protect their interests. If in the exercise of his discretion he thinks it unnecessary to appear to do so, but finds that a particular creditor thinks an appearance necessary, the proper practice is for him to obtain an indemnity from such creditor and to carry on the contest, recovering his costs from him in case of failure.' These remarks, in my opinion, do not lay down that an aggrieved creditor can prefer an appeal only in cases where the Official Receiver has refused to do so; they only indicate the usual practice and are meant to point out that the order passed in insolvency cases after the vesting of the estate in the Official Receiver will enure only to the advantage of the whole body of creditors. This decision was followed by Oldfield and Seshagiri Iyer, JJ., in Jagannatha Ayyangar v. Narayana Ayyangar 52 Ind. Cas. 10 : 24 C.W.N. 401 with this remark: 'This, however, we may observe will not entitle the appellant (a creditor) to the conduct of the petition in the lower Court, when it is dealt with there in pursuance of this order.' In Ananthanarayana Aiyar v. Ramasubba Aiyar 79 Ind. Cas. 395 : 47 M. 673 : 18 L.W. 857 : 33 M.L.T. 198 : A.I.R. 1924 Mad. 345 the case most relied on by Mr. Ramachandra Iyer, it was held that a creditor could move the Court to set aside a voluntary transfer or to avoid a fraudulent preference and that he could file an appeal against the order of the lower Court. In the course of their judgment the learned Judges observed: 'If the Official Receiver refuses to move the Court under Sections 53 or 54, even though a creditor offers to indemnify him against costs in the event of an adverse order against him, such creditor can apply to the Court to permit him to use the Official Receiver's name, or make him a party to the proceeding and may move for an order under Section 53 or 54, and if the order is against him, if the Official Receiver refuses to appeal notwithstanding the offer of indemnity against costs, the creditor can appeal against the order and may make the Official Receiver a party to the appeal.' These remarks, while laying down a very salutary rule of practice, do not, in my opinion, support the contention that an aggrieved creditor cannot prefer an appeal under Section 75(2) without first obtaining a refusal from the Official Receiver. The observation in the judgment 'We see no reason why we should not hold that a creditor can appeal when he is a party to the decision appealed against does not necessarily lead to the conclusion that an aggrieved creditor can prefer an appeal only if he actually figures in his own person as a party to the original proceeding. In the present case, the appellant was sufficiently represented by the Official Receiver in the lower Court as his interests did not conflict with those of the other creditors and, in this sense, he may be deemed to have been a party to the original proceeding, It is true that in all the rulings of the Madras High Court that we have examined the creditor was an actual party to the proceedings and that in some of them there are remarks that a creditor, before he moves the Court, should apply to the Official Receiver to take the necessary proceeding but it seems to me that none of the decisions goes the length of holding' that a creditor can prefer an appeal against an adverse order passed by the District Judge only if he is an actual party to the proceeding, or only if the Official Receiver on being moved refuses to appeal. To import this limitation would be to cut crown the general right conferred on an aggrieved creditor by Section 75(2).

13. The contention that has been advanced on behalf of the appellant is supported by the decision in Shikri Prasad v. Aziz Ali : AIR1922All196 . In that case the original application was by the insolvent complaining under the old Act against an act of the Official Receiver and from the order passed by the District Judge a creditor preferred an appeal. In reply to the objection that no appeal lay, the learned Judges observed that Section 75(2) of Act V of 1920 gives a right of appeal to any creditor against the decision of a District Court of the nature specified in Schedule I of the Act. In Niadar v. Ramji Lal : AIR1925All549 the crops in suit were attached by a Receiver in insolvency at the instance of the appellant who was a creditor of the estate. The District Judge held that the crops were sold by the respondent and belonged to him and directed their release from attachment. The creditor preferred an appeal to the High Court under Section 75(2). As regards the preliminary objection taken that no appeal lay, the learned Judges pointed out that the decision being adverse to the interests of the creditor, he was a person aggrieved and had, therefore, a right of appeal under Section 75 of the Act. It is not clear from the report whether the creditor was actually a party to the original proceedings.

14. In my opinion, the preliminary objection in this case should be overruled. The right conferred by Section 75(2) is not to be fettered by considerations such as whether he was an actual party to the proceedings, or whether before he filed his appeal he moved the Official Receiver to appeal. It is the policy of the Insolvency Law to administer an insolvent's estate in the interests of all the creditors. Any order that may be passed in favour of the appellant-creditor will enure only to the benefit of the entire body of creditors represented by the Official Receiver and not merely for his own benefit Since the Official Receiver is a party to this appeal, there can be no difficulty, in the event of the creditor's success, in passing an order in favour of the Official Receiver, so that the advantage resulting from it may enure for the benefit of all the creditors. The same result may be achieved, as suggested by my learned brother, by directing that, before this petition of appeal be entertained and heard, the petition be amended so as to make it clear that the appellant is appealing on, behalf of the general body of creditors, so that any order he may obtain will enure on their behalf and be, worked out, by the Official Receiver.

15. For these reasons, I would overrule the preliminary objection and proceed with the case. I agree with the order proposed by my learned brother.

16. This appeal and the memorandum of objections put in by the 2nd respondent coming on for further hearing this day after the amendment of the appeal petition in compliance with the order of Court contained in the above judgment dated 7th January, 1926, the Court deliver ed the following.


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