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Haridas Mundhra Vs. Mahabir Prasad Juthalal and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 76 of 1973
Judge
Reported inAIR1975Cal357
ActsPresidency Towns Insolvency Act, 1909 - Sections 9 and 13(4); ;Code of Civil Procedure (CPC) , 1908 - Section 47 - Order 21, Rule 2 - Order 40, Rule 1; ;Arbitration Act, 1940 - Section 21
AppellantHaridas Mundhra
RespondentMahabir Prasad Juthalal and ors.
DispositionAppeal dismissed
Cases ReferredThe Official Receiver Kanpur v. Abdul Shakoor
Excerpt:
- hazra, j. 1. this appeal has been preferred by haridas g. mundhra (shortly called 'haridas mundhra') against the order of adjudication made by ajoy k. basu, j. on 6-3-1973 in an insolvency petition presented by his creditors.2. on june 19, 1959, a decree was passed by the bombay high court in suit no. 1182 of 1954 in favour of bai kamla bai, mahabir prasad juthalal, shyara sundar juthalal and kailash pat alias arun kumar juthalal against haridas mundhra for the sura of rs. 5,09715,98 p. and interest on the principal sum of rs. 3,50,000/- at the rate of 4 per cent. per annum and costs. the decree-holders and/or the heirs of the decree-holders transmitted the said decree to this court for execution.3. by an order dated march 17, 1960 passed in suit no. 610 of 1958 in brahmaputra tea co. v......
Judgment:

Hazra, J.

1. This appeal has been preferred by Haridas G. Mundhra (shortly called 'Haridas Mundhra') against the order of adjudication made by Ajoy K. Basu, J. on 6-3-1973 in an insolvency petition presented by his creditors.

2. On June 19, 1959, a decree was passed by the Bombay High Court in Suit No. 1182 of 1954 in favour of Bai Kamla Bai, Mahabir Prasad Juthalal, Shyara Sundar Juthalal and Kailash Pat alias Arun Kumar Juthalal against Haridas Mundhra for the sura of Rs. 5,09715,98 P. and interest on the principal sum of Rs. 3,50,000/- at the rate of 4 per cent. per annum and costs. The decree-holders and/or the heirs of the decree-holders transmitted the said decree to this Court for execution.

3. By an order dated March 17, 1960 passed in Suit No. 610 of 1958 In Brahmaputra Tea Co. v. S. B. Industries Development Co. Ltd. and Haridas Mundhra, this Court appointed Mr. S.K. Acharyya, Bar-rister-at-Law as Receiver over 2005 ordinary shares of Haridas Mundhra with directions to collect the said dividend in respect of such shares. The said Receiver took possession of the said 2005 shares and collected diverse sums of money declared as dividend on the said shares and also the bonus shares issued in respect of the said shares.

4. On an application of the decree-holders, R.M. Datta, J. by an order dated January 27, 1971 granted leave to the decree-holders to attach and otherwise proceed against all moneys lying in the hands of S.K. Acharyya, as Receiver to the extent of the decretal amount mentiond in the decree passed by the Bombay High Court.

5. On or about June 3, 1971, the decree-holders applied for execution of the said decree by attachment of the moneys and shares belonging to the judgment-debtor Haridas Mundhra lying with Mr. S.K. Acharyya, Receiver to the extent of Rupees 6,71,715.80 P. and further prayed that the said order for execution to be made for the benefit of all the decree-holders including the heirs of the decree-holders who had since died. On June 4, 1971, a notice under Order 21, Rule 22 of the Code of Civil Procedure was issued upon the judgment-debtor Haridas Mundhra. The said notice was duly served upon him, but he did not appear. On February 9, 1972, an order for attachment was passed as prayed for in column 10 of the Tabular Statement. On January 29, 1972 Bai Kamala Bai one of the decree-holders died and the heirs and legal representatives were brought on record.

6. On June 8, 1972, a notice of attachment was issued by this Court under Order 21, Rule 52 of the Code of Civil Procedure for attachment of moneys belonging to the judgment-debtor Haridas Mundhra lying in the hands of Mr. S.K. Acharyya, Receiver. The notice of attachment was served upon the receiver Mr. S.K. Acharyya by the Sheriff of Calcutta and the attachment was levied on June 19, 1972. On September 15, 1972 an insolvency petition was filed in this Court by the said judgment-creditors and/or heirs of judgment-creditors (hereinafter called creditors) for adjudging Haridas Mundhra an insolvent. The act of insolvency mentioned in the petition for order of adjudication is that the said Haridas Mundhra has allowed his properties, namely, the amount of money belonging to him and lying in the hands of the receiver Mr. S.K. Acharyya to be attached or to remain attached for a period of more than 21 days in execution of the said decree passed by the Bombay High Court. It is stated that the attachment is still subsisting.

7-8. On February 23, 1973, Haridas Mundhra, residing at 18-A Loudon Street, Calcutta, affirmed and filed his affidavit-in-opposition to the said petition. The case of Haridas Mundhra in his affidavit, is inter alia, as follows:--

The petition is mala fide and not maintainable. The petition has been made on deliberate suppression of facts. The shares and moneys alleged to have been attached do not belong to him at all. The said shares were the subject-matter of Suit No. 610 of 1958 instituted in this Court by Brahmaputra Tea Co. Ltd. against S. B. Industrial Development Co. Pvt. Ltd. and himself (Haridas Mundhra) and a decree was passed in that suit inter alia, declaring that the said shares along with other shares which had been pledged by him stood charged for the payment of the dues of the said Brahmaputra Tea Co. Ltd. By an order dated March 17, 1960 passed by this Court in execution of the decree in Suit No. 610 of 1958, Mr. S.K. Acharyya, Barrister-at-Law was appointed receiver to collect the said dividends on the said shares. He sold his right, title and interest in all the shares of Turner Morrison and Co. Ltd. belonging to him to his wife Sm. Yashoda Devi Mundhra, for valuable consideration. Since then he has no personal interest in the said shares.

9. The applicants have deliberately suppressed from this Court that pursuant to the passing of the decree dated June 19, 1959 in Suit No. 1182 of 1954, the decree-holders and Haridas Mundhra had agreed to refer the matter to the arbitration of Mr. Sailendra C. Sen, Attorney-at-Law, since deceased. Not only the matter in connection with the decree dated June 19, 1959 passed in Suit No. 1182 of 1954 in the Bombay High Court was referred to but also the matter concerning another decree dated April 25, 1961 passed in Suit No. 218 of 1955 in the Bombay High Court was aJso referred to the said Sri Sailendra C. Sen for arbitration and for finally giving an award on the matters. By his letter dated December 19, 1969, the said Sri Sailendra C. Sen for arbitration and for finally giving an award on the matters. By his letter dated December 19, 1969, the said Sri Sailendra C. Sen forwarded to Haridas Mundhra as also to the applicants copies of the two awards made by him in respect of the above two matters.

10. His further case is that pursuant to theisaid two awards, he approached Shri Vishnu Dayal Jhunjhunwala representative of the decree-holders in or about end of 1969 and explained to him his difficult financial position and other involvements and also pointed out that the decree-holders' previous application for adjudicating him as an insolvent in respect of the decree passed on April 26, 1961 had failed as his appeal thereto had been allowed and the proceedings had abated against him. It is stated by him that it was thereafter agreed that the said award in respect of the decree dated April 28, 1961 was not to be given effect to. It was also agreed that in respect of the second decree dated June 19, 1959 passed in Suit No. 1182 of 1954, the instalments due to the said award will commence from November 30, 1972, the other terms remaining the same, i.e., that the previous time gaps for the subsequent instalments would be the same.

11. His further case is that on or about lanuary 13, 1973 he met Shri Jhunjhunwala, the representative of the decree-holders and explained his financial difficulties which were still continuing and requested him to grant further time and to reduce the total amount payable by him under the said award. His further case is that although under the said award a total sum of Rs. 1,75,000/- was payable by him, the said Shri Jhunjhunwala, who was authorised to agree on behalf of judgment creditors agreed to reduce the same to Rs. 1,00,000/-, out of which Rs. 20,000/- was to be paid on June 30. 1973 and Rs. 5,000/- on every alternative month thereafter. According to Haridas Mundhra, it was further agreed that in order to show his bona fide he would also deposit 5000 snares of British India Corporation Ltd. belonging to him, which was agreed to be returned after payment of the first instalment of Rs. 20,000/- payable by the end of June, 1973.

12. He says that in view of the said arrangements and/or agreements and specifically in view of having accepted the said 5000 shares of British India Corporation Ltd., the decree-holders are estopped from proceeding in the above matter in the manner sought to be done. So, according to him the application is misconceived.

13. The learned trial Judge considering the points urged by the learned counsel on behalf of Haridas Mundhra held, inter alia, that in fact there was no real sale of shares by Haridas Mundhra, and the property and title of the shares remained with the judgment-debtor Haridas Mundhra. The learned Judge further held that in the petition for adjudication the award of Sailendra C. Sen, since deceased has not been suppressed as the entire facts about arbitration has been mentioned in column 5 of the tabular statement filed by the petitioners. The learn-ed Judge observed that the award itself says that in default of two instalments, the entire decretal sum will be payable viz., if there is a default in payment of instalments as mentioned in the award the decree will ba revived and in this case, Haridas Mundhra has failed to pay any sum in respect of the instalments and, therefore, in the view of the learned Judge, the decree has been revived. The Learned Judge was satisfied that there was a debt in respect of the decree and the judgment-debtor has committed an act of insolvency by allowing the attachment to continue beyond 21 days and the property in respect of these shares were the judgment-debtor's property.

14. The learned Judge was of opinion that act of insolvency set out in the petition has been committed by Haridas Mundhra and passed the order of adjudication.

15. In the appeal before us against the order of the learned judge it is not disputed that Haridas Mundhra is a debtor. Money decree has been duly passed by the Bombay High Court in favour of the respondents or their predecessors-in-interest. There are other money decrees also. The debts of Haridas Mundhra are real debts and his liability to pay the debts is admitted.

16. The question in this appeal is whether the debtor Haridas Mundhra has committed an act of insolvency within the meaning of Section 9 of the Presidency Towns Insolvency Act, 1909 (Act III of 1909) (hereinafter called the Act) and whether the learned Judge was right in passing the order of adjudication adjudging him an insolvent.

17. The petition by the creditors has been made under Section 9, Sub-section (e) of the Act. Section 9, Sub-section (e) reads :

'Section 9. Act of Insolvency, A debtor commits an act of insolvency in each of the following cases namely:

****

(e) if any of his property has been sold or attached for a period of not less than twenty-one days in execution of the decree of any Court for the payment of money.

* * * *'

18. The first point which arises in the appeal is whether the money in the hands of the receiver S.K. Acbaryya which has been attached by the creditors is the money or property of the debtor Haridas Mundhra.

19. Mr. Somnath Chatterjee with Mrs. Munjula Bose appearing for the debtor Haridas. Mundhra contended that it is not his property. Mr. Chatterjee referred to Kerr on Receivers, 13th Edition at page 134 and submitted that in appointing a receiver the Court appoints an officer of its own to take possession of the property over which he is appointed. He also referred to page 145 of the same book and relied on the English decision of Taylor v. Eckersley, (1877) 5 Ch D 740 and submitted that possession of the receiver has taken the money out of the order and disposition of Haridas Mundhra. Mr. Chatterjee referred to the definition of the word 'property' in Section 2, Sub-section (e) of the Act. He stressed on the words 'over which or the profits of which any person has a disposing power' and submitted that as Mr. Acharyya, the receiver took possession of the shares and realised the dividend or money, Haridas Mundhra had no disposing power over the same and so it was not his property. He also cited 1971 Lab IC 521 = (1971) 2 Lab LJ 162 (Cal) and submitted that a bonus payable to an employee is not property which vests in the Official Assignee. He mentioned the case of In re: Ignatius Rodi-rick, reported in (1939) 43 Cal WN 1194, where before Pankridge, J. it was conceded that a pension payable by the Government is not property of the insolvent within the meaning of Section 7 of the Presidency Towns Insolvency Act, which vests in the Official Assignee on the making of an order of adjudication and the learned Judge held: 'This is in accordance with Section 2(e) of the Act, by which 'property' includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit.'

20. On this point the argument of Mr. S.K. Gupta, the learned counsel for the respondents is as follows:

Mr. Gupta referred to Section 2 of the Act and stressed on the words 'unless there is anything repugnant in the- subject or context' mentioned in the beginning of the section. He also referred to the definition of the word 'property' in Section 2(e) and submitted that the definition of 'property' as defined in that section is an 'inclusive definition.' It says:

' 'property' includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit.' Mr. Gupta contended that the words 'which he may exercise for his own benefit' in the section signify that the cases of trustees, agents executors and administrators, who have no beneficial interest and may not use property for their own benefit are not included. But otherwise, if any property may be used for the benefit of any person, he has disposing power over it and the same is included within the meaning of the word. Mr. Gupta submitted that the money in the hands of the receiver Mr. S.K. Acharyya is the property of the judgment-debtor Haridas Mundhra. Mr. Gupta contended that the definition of property in Section 2(e) should not be imported in Part III of the Act relating to administration of property. He submitted that Section 46 relates to debts provable in insolvency. He relied on the decision of Sat Narain v. Behari Lal, reported in 52 Ind App 22 = (AIR 1925 PC 18). He referred to Section 60 of the Code of Civil Procedure as the property liable to attachment and stresses on the words 'belonging to the judgment-debtor or over which, or the profits of which, he has a disposing power which he may exercise for his own benefit whether the same be held in the name of the judgment-debtor or by another person in trust for him or on his behalf.' He also referred to Order 21, Rule 52 of the Code of Civil Procedure relating to attachment of property in custody of Court or public officer and submits that if mere appointment of receiver would make the property not attachable, then Order 21, Rule 52 of the Code would be nugatory. He submitted that the receiver is not the owner of the property. He relied on the case of Province of West Bengal v. Bholanath Sen reported in : AIR1950Cal174 and submitted that the security deposit can be attached in execution of the decree and that the effect of security deposit does not take away entirely the disposing power of the depositor. He also referred to AIR 1949 Pat 126 (P. C. Lal Choudhury v. Commr. of Income-tax) and submitted that a mortgagee is not the owner because even in regard to a mortgage in English form, the- legal estate still vests in the mortgagor and the income of the property belongs to the mortgagor. He also referred to : [1957]1SCR801 (Amar Singh v. Custodian, Evacuee Property, Punjab) at page 605 and submitted that vesting of the property in the Custodian of evacuee property does not mean that ownership of the property is lost. He referred to : [1970]76ITR471(SC) (Ahmed G. H. Ariff Etc. v. Commr. of Wealth Tax Calcutta), as to the definition of the word 'property' under the Wealth Tax Act.

21. Mr. Gupta submitted that it is dangerous to bring the conception of 'property' divisible among creditors in Sec. 52 of the Act while interpreting the meaning of the word 'property' in other sections of the Act. He also pointed out that under Section 27 of the Security Control Act (Act 42 of 1956) Haridas Mundhra has title to the shares and the dividend. The receiver collected the dividend on the shares which belong to Haridas Mundhra. Any suspension of the power of disposal by the appellant Haridas Mundhra by reason of the appointment of the receiver will not make it any less the property of Haridas Mundhra.

22. On the point whether the money in the hands of the receiver which was attached by the creditors is the property of the judgment-debtor, I am inclined to accept the argument of Mr. Gupta that it is the property of Haridas Mundhra within the meaning of the words 'his property' in Section 9(e) of the Act. I am giving my reasons as hereunder:

23. The meaning of the word 'property' in Section 2(e) of the Act is that it includes any property over which or the profits of which he has disposing power which he may exercise for his own benefit. The word 'includes' in Section 2(e), gives the word 'property' wider denotation. The words used in an inclusive definition denote extension and cannot be restricted in any sense. It is appropriate to quote here the dictum of the Supreme Court in the case of State of Bom-bay v. Hospital Mazdoor Sabha reported in : (1960)ILLJ251SC . At p. 614, paragraph 10, of the report Gajendragadkar J. observed as follows:

'It is obvious that the words used in an inclusive definition denote extension and cannot be treated as restricted in any sense. (Vide: Slroud's 'Judicial Dictionary' Vol. 2, p. 1415). Where we are dealing with an inclusive definition it would be inappropriate to put a restrictive interpretation upon terms of wider denotation.'

24. Mr. S.K. Acharyya as receiver in execution of the decree in Suit No. 610 of 1958 is holding certain money or property. The receiver is an officer of the Court. He is not the owner of the property which he takes into his possession. Then who is the owner of the same at the date of attachment? The dividend or the money has been realised by the receiver on shares owned by, Haridas Mundhra. The receiver is holding the same for payment of judgment debts of Haridas Mundhra in the suit in which he was appointed but till payment out has been made by him the dividend realised by him does not cease to be the property of the judg-ment-debtor, Haridas Mundhra. The money jis held by the receiver for payment of the judgment debts of Haridas Mundhra, so the money is held for the benefit of Haridas Mundhra. The English case of Taylor v. Eckersley (reported in (1877) 5 Ch D 740), relied on by the learned counsel for the appellant deals with the question as to the effect of appointment of receiver and possession of the receiver in a chancery action. The headnote of the decision runs thus:

'In an action to enforce an agreement by B, an innkeeper, to give a bill of sale of his furniture and effects, A. obtained the appointment of a receiver, who entered into possession on the 16th of March 1876, and served the customers. During the night B. absconded and next day (the 17th of March) filed a liquidation petition, under which a receiver was appointed in bankruptcy. The two receivers remained in joint possession:--Held, that the case did not fall within the provisions of the Bills of Sale Act 1854, and that the possession of A's receiver had taken the goods out of the order and disposition of B. at the time of his bankruptcy; and accordingly that the title of A prevailed over that of B's trustee in bankruptcy.'

25. In that case it was held that title of A. prevailed over B the trustee in bankruptcy. Question of priority of title between A and trustee in bankruptcy was determined in that case. That is a different aspect of the matter. In the instant case all that is necessary to see is whether any property of tho debtor Haridas Mundhra has been attached in execution of the decree of the Bombay High Court and for this purpose I must consider the definition of the word 'property' given in the Act. I am quoting here the observation of the Privy Council in Sat Narain's case reported in 52 Ind App 22 at p. 30 = (AIR 1925 PC 18 at p. 22). It runs thus:

'Their Lordships are of opinion that the question to be decided in this appeal must be decided on the wording of the Presidency Towns Insolvency Act, 1909, and on that Act alone. Cases which have arisen undes Section 266 of the Code of Civil Procedure, 1882, or under Section 60 of the Civil P. C, 908, depended on different considerations, and decisions in cases under those sections are likely to mislead a Court which has to construe the Presidency Towns Insolvency Act, 1909.'

26. In my view, the definition of the word 'property' under Section 2(e) of the Act is wide enough to include the money of Haridas Mundhra in the hands of receiver at the date of attachment. The meaning of the word 'property' in part HI of the Act relating to administration of property and proof of debts has to be understood with reference to the definition in Section 2 where the said definition will apply 'unless there is something repugnant to the subject or context.' In this connection it is appropriate to quote the observation of the Privy Council in Sat Narain's case: 52 Ind App 22 at p. 38 = (AIR 1925 PC 18 at p. 26) which is as follows:

'But the definitions in Section 2 are only to apply 'unless there is something repugnant in the subject or context'; and it is necessary therefore to consider the effect of the definition of 'property' contained in that Section in relation to the subject-matter which is being dealt with and the other sections of the Act.'

27. In the instant case the creditors say that only traceable asset of Haridas Mun-dhra which they could attach is the money of the debtor Haridas Mundhra in the hands of the receiver. The power of disposal of the property by Haridas Mundhra may be absent temporarily by reason of the appointment of the receiver, but it is his property which is attachable with leave of the Court.

28. Mr. Chatterjee then submitted that the order dated March 17, 1960 has the effect of payment out of money by the Receiver and so, Haridas Mundhra ceases to be the owner of the money in the bands of the Receiver. On this point Mr. Chatterjee relied on a judgment of a single Judge of the Madras High Court in the case of V. T. Ranga Bashyam Chetty v. Sambandam Chetty reported in AIR 1952 Mad 540. Mr. Gupta on the other hand submitted that the order dated March 17, 1960 is a general order and no payment put of any money has been made by the Receiver. The order dated March 17, 1960 has not been included in the paper book. But Mrs. Manjula Bose, the learned counsel for Haridas Mundhra handed over a copy of the order to us during the argument. The said order dated March 17, 1960 by A. N. Ray, J. (as he then was), was passed in Suit No. 610 of 1958. By the said order, the learned Judge appointed Mr. S.K. Acharyya, Barrister-at-Law as the Receiver to collect the dividend on 2005 shares of Turner Morrison and Co. Private Ltd. standing in the name of Haridas Mundhra and others in execution of the- decree in that suit. It was further ordered that the said Receiver

'do receive the said dividend as aforesaid ..... It was further ordered that the said Receiver do pay the said dividend so collected (less costs of realisation and the commission payable to him as his remuneration) to the plaintiff company in part satisfaction of the decretal dues .....'

29. Now what is the effect of the order dated March 17, 1960? Has it the effect of payment out of the money in the hands of Receiver? The order was that the Receiver should realise the dividend on the shares. After the order, the Receiver realised the dividend. But has he paid out? At no stage in the execution proceeding it is stated that the Receiver has paid out any sum out of the dividend realised by him. The decree-holders in the suit in which Receiver was appointed did not ask for payment out.

30. In Ranga Bashyam Chetty's case reported in AIR 1952 Mad 540 relied on by Mr. Chatterjee, what happened was that by a decree in a suit the applicant became entitled to a certain sum out of the entire sums standing in the credit of that suit. He asked for payment out of a particular amount being the balance of the amount to which he was entitled to. The learned Master passed an order ordering payment out. Thereafter, an order for attachment of the money standing to the credit of the applicant in that suit was issued by the Court of Small Causes in execution of another decree in another suit. The attachment was subsequent to the order of payment out. Though the attachment was subsequent to the order for payment out a cheque was issued in favour of the applicant in pursuance of the order. The contention on behalf of the applicant in that case was that once an order has been made for payment out, there is no fund in Court available for attachment and that the order of attachment must have been returned with the endorsement that there was no fund in Court available for attachment. Krishna-swami Nayudu, J. on the facts of that case, held at page 541 of the report (AIR 1952 Mad 540):

'Further, once, an order for payment out has been made, it must be treated that the property in these moneys has passed to the person in whose favour the order has been made; and from that date of the order, the person, who has got the payment out order in his favour, becomes the owner of the moneys, notwithstanding that he may not have got actual possession of the same.'

31. In my view, the Madras case is distinguishable from the facts of this case. In the Madras case, there was certain fund in Court and payment out was made out of the funds lying in Court. In the order dated March 17, 1960, the receiver was appointed to collect the amount of dividend of certain shares of Haridas Mundhra and then to pay the dividends so collected. The receiver has collected certain amount and is holding the same, but he has not made payment after such collection. Till he makes the payment he is holding the amount which belongs to the judgment-debtor subject to further order of the Court. There is no order for payment out of any particular sum in this case as in the Madras case. The attachment was made on notice to the judgment-debtor and to the receiver. It is not stated by the receiver that he paid out the money or that the money in his possession is not the money of Haridas Mundhra or that there is no money of Hari-das Mundhra in his hands liable to attach-ment. In my view the order dated March 17, 1960 did not have the effect of divesting the rights and interests of Haridas Mundhra in respect of the dividend collected and returned by the Receiver at the date of attachment.

32. The next question raised in the appeal is that the decree of the Bombay High Court was not executable and the order of attachment in execution of such a decree cannot be made. Mr. Chatterjee argued that claim under the decree of the Bombay High Court in Suit No. 1182 of 1954 has merged in the award dated December 9, 1969 made by the arbitrator Mr. S.C. Sen. Mr. Chatterjee referred to the case of Satish Kumar v. Surindra Kumar reported in : [1969]2SCR244 and submitted that the award is not a mere waste paper. He also submitted that the question of validity of attachment can be gone into by the Insolvency Court and referred to the case of R.M. Subramaniam. v. N. Sundaram Iyer reported in : AIR1963Mad217 and the case of In re: a Debtor reported in : AIR1963Cal25 . Mr. Chatterjee argued that the Court has no power to make the order of attachment as the decree has become 'non est' by reason of the award.

33. Mr. S.K. Gupta on the other hand argued that the decree of the Bombay High Court was valid, operative and executable. The decree has not been affected by the award.

34. In view of the argument made by Mr. Chatterjee, the question which has to be considered is whether by reason of the award, the decree of the Bombay High Court has become inexecutable. The point taken by Mr. Chatterjee is not that there is no decree of the Bombay High Court, but that the decree of the Bombay High Court has merged in the award and so there is no executable or operative decree.

35. The decree of the Bombay High Court is dated June 19, 1959. After the said decree, the decree-holder took steps to execute the decree. At that stage the judgment-debtor Haridas Mundhra approached the decree-holder to accept a lesser sum in full and final settlement of the decretal amount. The decree-holder and judgment-debtor could not agree to any figure and both the decree-holders and the judgment-debtor approached Mr. Sailendra C. Sen, who had been the Solicitor for the parties, with a request to him to arbitrate in the dispute. An arbitration agreement was entered into between the decree-holders on the one hand and Haridas Mundhra on the other, wherein all disputes between them regarding the quantum of the amount which will be payable by the judgment-debtor Haridas Mundhra to the decree-holder in full and final settlement of their claim under the decree and the mode of payment thereof were referred to arbitration of Mr. Sailendra C. Sen. This will appear from a copy of the arbitration agreement dated June 1, 1969 which was placed before us by Mr. Gupta in course of his argument, we considered the same as admittedly the arbitration agreement was entered into before the parties and the learned counsel for both parties relied on the same. The award dated December 19, 1969 annexed to the affidavit of Haridas Mundhra also mentions that the arbitration agreement was made on June 1, 1969 between Bai Kamala Bai and others as decree-holders and Haridas Mundhra as judgment-debtor and that the dispute between them was regarding the quantum of the amount which would be payable by the judgment-debtor to the decree-holder in full and final settlement of their claim under the decree dated June 19, 1959 passed in Suit No. 1182 of 1954 in the Bombay High Court and the mode of payment thereof.

36. The scope of the dispute and difference between the decree-holders and the judgment-debtor Haridas Mundhra and the scope of the reference to the arbitrator will appear from the said arbitration agreement and the award. I will quote here the relevant portion of the award of Mr. Sailendra Sen.

'I award that if Sri Haridas Mundhra pays to the decree-holders a sum of Rupees 1,75,000/- (Rupees One Lakh and Seventy-five Thousand) only with interest thereof @ 6 per cent. per annum from the date hereof in the manner following, that is :--

(a) Rs. 35,000/- with interest at the aforesaid rate by 15th February, 1970;

(b) Rs. 50,000/- with interest at the aforesaid rate by 15th April 1970;

(c) Rs. 50,000/- with interest at the aforesaid rate by 15th June, 1970; and

(d) Rs. 55,000/- with interest at the aforesaid rate by 15th August, 1970;

Then and in such case the decree-holders will accept the same in full and final settlement of their decretal dues in the said Suit No. 1182 of 1954 hereinbefore mentioned.

I further award that in default of payment of any two instalments with interest within the stipulated time the judgment-debtor Sri Haridas Mundhra shall pay to the decree-holders the entire decretal amount of Rs. 5,09,715.08 with interest @ 4% per annum on Rs. 3,50,000/- from 19th June, 1959 (being the date of the decree) till repayment thereof as provided in the decree dated 19th June, 1959 in the said Suit No. 1182 of 1954 in the High Court at Bombay mentioned above.

I further direct that each party will bear and pay its costs.

Dated this 19th day of December, 1969.

Sd/- S. Sen, Arbitrator.'

37. It was stated before us that although the award was filed on August 6, 1970, by Mr. S.C. Sen, till the month of July 1973 everybody was under the bona fide belief that the award was not filed. Admittedly, the judgment-debtor Haridas Mundhra has not paid any instalment in terms of the award.

38. Thus, it appears that the decree of the Bombay High Court was sought to be executed by the decree-holders and at the execution stage the judgment-debtor, Haridas Mundhra approached the decree-holders for accepting a lesser amount in full and final settlement of the decree. But as the decree-holders and the judgment-debtor could not agree to the amount, the dispute as to the quantum of the lesser amount that the judgment-debtor will pay in full and final satisfaction of the decree and as to the mode in which the lesser amount would be paid by the judgment-debtor were referred to arbitration. The award was made with regard to the dispute relating to satisfaction or discharge of the decree.

39. It seems to me that with regard to the existence of the decree or the right to execute the decree there was no scope for raising any dispute and no. dispute was raised. The decree-holders who have obtained the decree from the Bombay High Court have right to execute the decree and to adopt whatever mode of execution which law allows them for execution of money decree, whether the judgment-debtor Haridas Mun-dhra likes it or not. With regard to this matter there was no dispute but the dispute was raised with regard to the discharge or satisfaction of the decree. Very often real trouble begins after the decree-holder obtains a money decree. How to realise the decretal amount, the fruits of the judgment? It may be that a decree-holder may decide to accept a lesser sum in discharge or satisfaction of the decree, if the judgment-debtor makes payment or really wants to pay. In the instant case, the judgment-debtor Haridas Mundhra did not say that he will not pay but approached the decree-holders to settle the matter by accepting less than the decretal amount and by instalments. Here the parties could not agree as to what that lesser sum would be and what would be the mode of payment of the instalments. These matters were referred to arbitration by the parties and the arbitrator gave his award relating to discharge or satisfaction of the decree.

40. The arbitrator has awarded that if certain amount, namely, Rs. 1,75,000/-(which is much less than the decretal amount of Rs. 3,50,000/-) is paid within certain time and by certain instalments, the decree-holders will accept the same in full and final settlement of the decretal dues.

41. Now, after the award, the decree-holders who have right to execute the decree have applied for leave to execute the decree of the Bombay High Court by attachment of money in the hands of Receiver. At the execution stage, it is for the judgment-debtor, Haridas Mundhra to take the plea that the decree has become satisfied or settled or adjusted by reason of his payment in terms of the award. But this was not done by the judgment-debtor, obviously because he has not paid any amount in terms of the award. The award further provides that in default of payment of any two instalments within the stipulated time, the judgment-debtor shall pay the entire decretal amount with interest thereon to the decree-holders. 42. This part of the award in my view, means that if the judgment-debtor does not pay two instalments of the awarded amount then the decree will not be taken as satisfied or discharged and in that case his liability to pay the entire decretal amount with interest thereon would remain. The decree of the Bombay High Court cannot be the subject-matter of the dispute. The liability to pay under the decree is already there; But with regard to the amount and the mode of discharge or satisfaction of the decree which is the subject-matter of the dispute, the arbitrator in this part of the award says that if there is a default in payment by the judgment-debtor in certain manner, the decree will not be settled or discharged. In my view the decree of the Bombay High Court and the right to execute the decree are not the subject-matter of the dispute and are not within the scope of reference.

43. Mr. Chatterjee strongly relied on the observation of the Supreme Court in Satis Kumar's case reported in : [1969]2SCR244 , where the Supreme Court observed:

'The award is not a mere waste paper, but has some legal effect. It is final and binding on the parties and cannot be said that it is waste paper unless it is made a rule of the Court.'

In that case question arose whether an award given under the Arbitration Act on a private reference requires registration under Sec. 17(1)(b) of the Registration Act if the award affects immovable property over the value of Rs. 100/-. The Supreme Court in that case followed its previous unreported decision in M/s. Uttam Dugal and Co. v. Union of India decided on 11-10-1962, where the following observations were made by the Supreme Court:

'The true legal position in regard to the effect of an award is not in dispute. It is well settled that as a general rule, all claims which are the subject-matter of a reference to arbitration merge in the award which is pronounced in the proceedings before the arbitrator and that after an award has been pronounced, the rights and liabilities of the parties in respect of the- said claims can be determined only on the basis of the said award. After an award is pronounced no action can be started on the original claim which had been the subject-matter of the reference.'

In this connection I shall quote the observation of Hegde, J. at page 837 of the report : [1969]2SCR244 :--

'The award does create rights in that property but those rights cannot be enforced until the award is made a decree of the Court. It is one thing to say that a right is not created, it is an entirely different thing to say that the right created cannot be enforced without further steps.'

44. All judgments should be confined to the facts of the case which is before the Court. But so far as the dictum of the Supreme Court in that case which is of general nature the question is how far the same is applicable under the facts of this case. In this case, the award is that the judgment-debtor shall pay by certain instalments and if those instalments are paid, the decree will be taken as satisfied. Having regard to the judgment of the Supreme Court, this award is not a mere waste paper, but has some legal effect. It is for the judgment-debtor to take recourse to the legal effect of the award to prove before the executing Court that by reason of the award the decree is satisfied or discharged.

45. Mr. Gupta in this connection referred to a decision of the Supreme Court in the case of Kashi Nathsa Yamosa Kabadi v. Narsingasa Bhaskarasa Kabadi reported in AIR 19?1 SC 1077 at p. 1083 where the Supreme Court observed as follows:

'It may be sufficient to observe that where an award made in arbitration out of Court is accepted by the parties and it is acted upon voluntarily and a suit is thereafter sought to be filed by one of the parties ignoring the acts done in pursuance of the acceptance of the award, the defence that the suit is not maintainable is not founded on the plea that there is an award which bars the suit but that the parties have by mutual agreement settled the dispute, and that the agreement and the subsequent actings of the parties are binding.'

46. Mr. Gupta also invited our attention to a later decision of the Supreme Court in Padmaraja v. Dhanavathi reported in : [1973]1SCR383 , where Hegde, J. observed:--

'After the coming into fore of the Arbitration Act, 1940, all awards had to be com-pulsorily made decrees of the Courts if they were to have any force.'

47. There is another aspect of the matter which has been argued by Mr. Gupta, Under Order 21, Rule 2 of the Code of Civil Procedure, unless a payment or adjustment is certified or recorded, the Court executing the decree shall not recognise the same. The judgment-debtor in the instant case did not inform the Court any such payment or adjustment under the award or that any payment or adjustment should be recorded or certified by the executing Court. Till this is done, the executing-' Court under Order 21, Rule 2 of the Code will execute the money decree. Therefore, the attachment Was validly made by the executing Court.

48. In the case of M. P. Shreevastava v. Mrs. Veena, reported in : [1967]1SCR147 , the Supreme Court held that Order 21, Rule 2 of the Code prescribes a special procedure for recording adjustment of a decree, or for recording payment of money paid out of Court under any decree. The principle of Section 47 of the Code is that all questions relating to execution, discharge or satisfaction of a decree and arising between the parties to the suit in which the decree is passed, shall be determined in the execution proceeding, and not by a separate suit.

49. In my view, the decree of the Bombay High Court has not merged in the award. If payments were made in terms of the award of the private arbitrator, the judgment-debtor could have informed the execut- ing Court of such payment or adjustment of the decree for recording the same as certified. As the judgment-debtor Haridas Mun-dhra did not make any payment in terms of the award and as no payment or adjustment has been recorded or certified the executing court would not recognise the award. So far as the judgment-debtor Haridas Mundhra is concerned the award has lost its force by reason of the non-payment of the awarded amount in terms of the award, so far as the decree-holders are concerned, the decree of the Bombay High Court still holds good as valid, subsisting and executable. In view of the above matter I do not agree with the observation of the learned Judge in the Court below that as Haridas Mundhra has failed to pay any sum in terms of the award the decree has been revived.

50. Mr. S.K. Gupta then argued that the judgment-debtor Haridas Mundhra cannot raise the plea that the decree has become invalid or not executable by reason of the award on the doctrine of res judicata or principles analogous thereto.

51. Application for leave to attachthe property was made on notice to the receiver and to Haridas Mundhra. They didnot choose to appear and order was passedgranting leave to attach and otherwise proceed against the moneys- in the hands of theReceiver. The application for execution ofthe decree on tabular statement was made onnotice to the judgment-debtor and order forattachment was made in terms of col. 10 of thetabular statement. The decree-holders putthe decree on execution on notice to the judgment-debtor. The judgment-debtor HaridasMundhra did not appear. He was given opportunity to raise the points which he wantedto raise now. The court would have decided the said points if Haridas Mundhra raisedthe same but this was not done. If any objection was made to the attachment on the groundthat the property was not liable to attachment, the executing court would have proceeded to investigate the claim or objection. Thiswas not done. No appeal was preferredagainst the order of attachment. Thereforethe judgment-debtor Haridas Mundhra isestopped from raising the plea that the decreewas not executable.

52. Mr. Gupta cited the case of Raja of Ramnad v. Velusami Tevar, reported in 48 Ind App 45=(AIR 1921 PC 23) and argued that no appeal was brought against the order of attachment and, therefore, it stands as binding between the parties. He also relied on the case of Shivaraj Gopalji v. Ayissa Bi, reported in 54 Cal WN 55 = (AIR 1949 PC 302) and submitted that it would be contrary to the principle of res judicata to allow Haridas Mundhra to raise the same plea over again which he could have raised before the executing court. He also relied on the case of Kanak Prova Devi v. Dhirendra Nath Roy, reported in AIR 1928 Cal 861 = (32 Cal WN 1107) and the case of Aswini Kumar v. Karamat Ali, reported in AIR 1948 Cal 165 and submitted that the order passed in execution proceedings implied an adjudication that the decree was executable and as this order had stood unchallenged either by way of review or by way of appeal, the judgment-debtor was precluded from raising the plea of limitation. He also relied on a decision of the Supreme Court in the case of Mohan-lal v. Benoy Krishna, reported in : [1953]4SCR377 and the case of Nirmal Enem Horo v. Jahan Ara Jaipal Singh, reported in : AIR1973SC1406 on the principle of constructive res judicata and also the case of Newton Hickie v. Official Trustee of West Bengal, reported in : AIR1954Cal506 and un-reported decision of this court by G. K. Mitter, J. (as he then was) in the matter of Arbitration between Khardah Co. Ltd. v. Morgan Walker & Co. He also cited the decision of Vithal Yeshwant v. Shikandarkhan, reported in : [1963]2SCR285 .

53. Mr. Chatterjee on this point submitted that the principle of res judicata cannot apply because Insolvency Court can always go behind the decree. Mr. Chatterjee referred to the case of State of Punjab v. Rattan Singh, reported in : [1964]5SCR1098 and the case of The Official Receiver Kanpur v. Abdul Shakoor, reported in : [1965]1SCR254 . Mr. Chatterjee submitted that the question before the Insolvency Court is not merely whether factually there was attachment or not, but the question is whether there was valid attachment of the property of the debtor.

54. Although there may be some force in the argument of Mr. Gupta, in the view of the matter which I have already taken, it seems to me that it is not necessary to go into the question of res judicata raised by Mr. Gupta.

55. The principle of law is well established that an Insolvency Court is not precluded from enquiring into the question whether a debtor is a real debtor who is liable to pay the sums said to be payable by him. It is well established that the Insolvency Court can both at the time of hearing of the petition for adjudication of a person as an insolvent and subsequently at the stage of the proof of debts reopen the transaction on the basis on which the creditor has secured the judgment of a Court against the debtor. The court has that right independently of the conduct of the debtor or of the creditor or anyone else. The Court is not estopped from the conduct of the parties, but has the right to enquire into the debt to see whether there is a real creditor. The Court exercising jurisdiction under the Insolvency Act, can go behind the judgment and enquire whether, notwithstanding the judgment, there was a good debt. In doing so the Insolvency Court does not set aside the judgment, the Court goes round the judgment.

56. The above principle has been affirmed by the Supreme Court in : [1964]5SCR1098 and : [1965]1SCR254 cited by Mr. Chatterjee. But it is not necessary, in the instant case, to go into the question of real nature of the debt. All parties are proceeding on the basis that Haridas Mundhra is a debtor and that there is a real judgment-debt. The only question is whether Haridas Mundhra has committed an act of insolvency. The act of insolvency here is attachment of the property of Haridas Mundhra for not less than 21 days in execution of the money decree of the Bombay High Court. Execution means the process for enforcing the decretal amount or the process to give effect to the judgment-debtor which the judgment-debtor is bound to pay in any of the modes for execution stipulated under the Code of Civil Procedure. The decree-holders have complied with the procedure for -attachment of the money decree. The judgment-debtor had notice at every stage of the execution proceeding, but did not raise any objection that there was no executable decree or that this was no valid attachment. No appeal was preferred against the order of attachment passed by the Court.

57. Even if I accept the argument of Mr. Chatterjee that validity of the attachment can be gone into by the Insolvency Court, in the aforesaid view of the matter which I have taken it seems to me that there was not only 'de facto' attachment in execution of the money decree of the Bombay High Court for much more than the statutory period of 21 days but the attachment was valid in law. So, the requirements of Section 9(e) of the Act have been complied with.

58. Mr. Chatterjee then argued that the application by the decree-holders has not been made bona fide. The object of the petitioning creditors is to obtain money by putting pressure. He submitted that the Insolvency petition was taken out on September 15, 1972. In the affidavit-in-opposition Haridas Mundhra stated that on January 13, 1973, he met Shri Jhunjhunwalla, the representative of the decree-holders and explained to him his financial difficulties and requested him for further time be granted to him under the award.

59. In the affidavit-in-reply affirmed by Biswanath Agarwalla, on March 1, 1973 on behalf of the decree-holders it is stated that during the second week of January 1973 the deponent had a talk with Mr. Jnunjhun-walla in his presence when it was agreed by and between the deponent and Mr. Jhunjhunwalla that the deponent would pay a cash sum of Rs. 50,000/- within the end of that week and if be pays the said sum of Rupees 50,000/- in accordance with the agreement as aforesaid then the petitioning creditors would agree for a long adjournment of the pending petition in order to accommodate the deponent to pay the balance decretal dues inclusive of interest amounting to Rs. 6,77,760.08 p. in terms of the notice dated February 9, 1972. It is also stated that the deponent however failed and neglected to pay the said sum of Rs. 50,000/- or any part thereof by the end of the said week. In view of the said affidavits Mr. Chatterjee argued that this agreement shows that the petitioning creditors wanted to put pressure on the judgment-debtor to realise the money.

60. Under Section 13, Sub-section (4) (b), of the Act the Court shall dismiss the petition if the debtor appears and satisfies the Court that he is able to pay his debts or that he has not committed an act of Insolvency or that for other sufficient cause no order should be made. The Court will not permit the bankruptcy proceeding to be used for an inequitable purpose such as to extort money from the debtor. In the case In re Otway reported (1895) 1 QB 812 relied on by Mr. Chatterjee, the debtor had a life interest which ceased on bankruptcy, in the income of certain property. He had no other property. He proposed to insure his life and to set aside half his income for the purpose of keeping up the insurance, and paying his creditors a composition of 10s. in the pound. The petitioning creditor did not agree to this proposal, and a receiving order was made on his petition. On appeal, it was held by Lord Esher, M. R. that the fact that the effect of a receiving order would be to deprive the debtor of the only asset available for the payment of a composition to his creditors was a sufficient cause why no order should be made. The petitioning creditor endeavoured to obtain 25 from the debtor as a condition for agreeing to an adjournment of the petition. At page 813 of the report, Lord Esher, M. R. observed:

'It seems to me that both points taken and made out are against the propriety of this petition being allowed to stand. One point is that the petitioning creditor holds out his hand, and says, 'if you will give me 25f 1 agree to an adjournment,' is it an honest proceeding on the part of the petitioning creditor in a bankruptcy that he should be putting into his pocket 25 in this manner? The case cited to us, In re: Atkinson, Ex Parte Atkinson (9 Morr 193) decides that such a transaction is a fraud on the other creditors and a fraud on the Bankruptcy Court. Though this petitioning creditor did all he could to commit a fraud he did not do it effectually, because the 25 was not forthcoming; but he did all he could to get the money; and in so doing he was committing a fraud, and on that ground, and that ground alone, he could not be allowed to go on with the petition.'

61. In my view, the said observation of Lord Esher, M. R. should be confined to the facts of that case. The Insolvency Court may dismiss a petition for any sufficient cause. What is sufficient cause will depend upon the circumstances of each case. In the' case of In re: Otway, (1895) 1 QB 812 the Court was satisfied that the debtor's sole asset (which he had proposed to pay a composition to his creditors) would be destroyed by his bankruptcy and further, the petitioning creditor had imporperly .attempted to extort costs from the debtor. So the petition was dismissed by the learned Master of the Rolls. But on the facts of this case, it does not seem to me that the creditors are guilty of extortion or abuse of the process of Court. In the instant case, in course of the proceeding, the parties agreed to adjourn the matter in order to enable the judgment-debtor to make part-payment of the debts due by him. But the judgment-debtor failed and neglected to pay. I do not think that the judgment-credi- > tors in the instant case, are guilty of attempted extortion or that the creditors should be precluded from bringing Insolvency proceeding.

62. In view of the above matter I am unable to accept the argument of Mr. Chatterjee on this point.

63. I agee with the order passed by the learned Judge.

64. This appeal will, therefore, be dismissed with costs. Certified for 2 Counsel.

A.N. Sen, J.

65. I agree.


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