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In Re: A.K. Fazlal Huq. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Reported inAIR1937Cal532
AppellantIn Re: A.K. Fazlal Huq.
Cases ReferredGovind Das v. Jardine Skinner and Co.
Excerpt:
- .....the points in connexion with these documents-whether the debt was a joint debt and whether it is a debt admitted by the official assignee. on the proof of debt, the official assignee has not signed his name in the space left for his signature if he admits the claim. the act does not require that the admission of a claim by the official assignee must be evidenced by his signature on the proof of debt. but it does provide for the procedure if he does not admit the claim, or rejects it, and it does provide that a claim to be a creditor must be made on a stamped document under sch. 2.8. it appears that the only proof of debt filed before the official assignee was the proof by the son of nilmony on behalf of his father and his uncle keshab lal addy claiming a joint interest in the debt. there.....
Judgment:
ORDER

Remfry, J.

1. This is an application made under Sections 30 and 31, Presidency Towns Insolvency Act, but primarily under Section 31, to re-adjudicate the debtor. According to the affidavit made by Syed Ahmed Ally an order for adjudication was made on 8th June 1926, and a scheme of composition was sanctioned on 26th August 1926. Two trustees were appointed who furnished security for Rs. 97,000. Under the deed, creditors in group A were to receive rateably the money in the hands of the Registrar of this Court and the trustees were to make certain other payments and to pay Rs. 6,000 a year to them and the creditors in group B rateably, until they had received 8 annaa in the rupee.

2. It is alleged that the trustees made no payment to one Keshab Lal Addy or his heirs. This gentleman died on 15th February 1931 intestate. It is stated that his son was his sole heir and left a will making his only son, one Gopinath Addy, his sole legatee and that he was also his sole heir. It is alleged that this Gopinath Addy assigned his right to a debt of Rs. 4,000 to the plaintiff, both as the sole legatee under his father's will and as his heir, on 17th March 1937. The present applicant made an affidavit on 20th March 1937 and then commenced these proceedings. Although Keshab Lal Addy's name appears as creditor 32 in group A, nothing is stated as to whether he received any payment from the Registrar. The applicant does not suggest that he approached the trustees before starting these proceedings. According to the affidavit filed in opposition, Rs. 6,000 was owing to Keshab Lal Addy and his brother Nilmony Addy jointly, and that inadvertently the Rupees 4,000 was entered in his schedule by the debtor as due to Keshab Lal Addy only. The debtor admits that no payments were made to Keshab Lal or his heirs, but states that this was due to disputes between Keshab Lal's son and Nilmony Addy, and that after the death of Nilmony his son gave notice to the trustees to make no payment to the heirs of Keshab Lal before these disputes were settled.

3. It is also alleged that the security given for the Rs. 6,000 was two life-policies and that Rs. 3,076 is payable under these policies. The debtor offers to deposit in Court the balance of Rs. 1,963. It is also stated that out of 55 creditors the claims of all but five have been satisfied and that pending adjustment of accounts, four of them have received payments. It is also stated in the additional affidavit that the claim of Keshab Lal Addy has not been proved and admitted. The debtor produced the original proof of debt filed by the son of Nilmony Addy. From this it appears that the Rs. 6,000 was due to Keshab Lal and Nilmony Addy jointly and that it was in respect of two promissory notes given for money advanced on the security of two life policies. The claim is for Rs. 10,678. This proof was not signed by the Official Assignee as admitted for any purpose. Further in the debtor's schedule this Rs. 4,000 is described under the heading 'Partially secured debts' as jointly due to Keshab Lal Addy and his brother.

4. The main grounds argued on behalf of the debtor were that the assignor, Gopinath Addy, purported to assign as sole legatee under the will of his father or as his sole heir, and his title was not admitted, that in fact the debt of Rs. 4,000 was due jointly to Keshab Lal Addy and his brother Nilmony and therefore the assignor could not assign the whole debt or any part of it, and lastly that the debt had not been proved or admitted within Rule 128. The remedies open to a creditor claiming under a composition are to apply under Section 30, Presidency Towns Insolvency Act, to enforce the provisions of the deed, or under Section 31 to re-adjudicata the debtor and set aside the composition. But under Rule 127 if a claim to be a creditor is disputed, the Court may order the debtor to give security for the amount of the claim and detain the same until the creditor has established his claim in a regular manner. This rule is designed to meet the obvious difficulties which would arise if a dispute had to be decided on affidavits.

5. It was argued that there was no bona fide dispute and that the debtor admits that Rs. 1,963 is due jointly to the estates of Keshab Lal and Nilmony and therefore the Court should pass an order under Section 31 with a preliminary order under Section 30, as was done by Greaves, J. in Govind Das v. Jardine Skinner & Co. : AIR1924Cal176 , where that learned Judge passed an order for re-adjudication, but stayed that order for some time to enable the trustees to pay off the admitted claim of the creditor. An order in some such form appears to be highly desirable if the circumstances permit, but obviously there must be, before such an order is possible, an ascertained sum due to the person claiming such an order.

6. In the present case, the first objection to the applicant's title is that his assignor is not admitted to be entitled to his father's estate. The assignor claims as sole legatee under a will, and litigation is pending as to that will. It is not suggested that this Court should decide that matter, but it is argued that because the applicant in his affidavit asserts that even if probate is not obtained, the assignor is entitled to the estate as sole heir, the Court should accept that statement. In my opinion this is not a proceeding in which the title to an estate should be decided, and in this particular case there is no proper evidence or materials for any such decision. The next objection is that the debt was a joint debt due to Keshab Lal and Nilmony Addy. If in fact it is a joint debt, an assignment by one of the joint creditors would not enable the assignee to enforce the payment of the whole debt: see Ghishulal Ganeshilal v. Gumbhirmal Pandya (1934) 62 Cal 510. It was argued that this is an admitted debt because the debtor in his schedule entered the name of Keshab Lal Addy as entitled to Rs. 4,000 being creditor 32, and because the Official Assignee in his report made under the rules in the proceedings which resulted in the composition being sanctioned, reported that the claims of the creditor were admitted.

7. In the affidavit filed on behalf of the debtor, it is stated that this entry in the schedule was made by inadvertence, and in support of this statement he produced the original proof of debt filed on behalf of Keshab Lal and Nilmony in which they claim Rs. 6,000 and more as due to them jointly, in respect of an advance against the security of two life-policies. No other proof of this debt of Rs. 4,000 is produced, and counsel for the applicant admitted that this was the proof of debt in respect of the applicant's claim. It is convenient to consider both the points in connexion with these documents-whether the debt was a joint debt and whether it is a debt admitted by the Official Assignee. On the proof of debt, the Official Assignee has not signed his name in the space left for his signature if he admits the claim. The Act does not require that the admission of a claim by the Official Assignee must be evidenced by his signature on the proof of debt. But it does provide for the procedure if he does not admit the claim, or rejects it, and it does provide that a claim to be a creditor must be made on a stamped document under Sch. 2.

8. It appears that the only proof of debt filed before the Official Assignee was the proof by the son of Nilmony on behalf of his father and his uncle Keshab Lal Addy claiming a joint interest in the debt. There were apparently no materials before the Official Assignee on which he could alter the claim or admit that Rs. 4,000 was due to Keshab Lal only, which, of course, would amount to rejecting the proof filed on behalf of Nilmony Addy. If therefore the words in his Report refer to the admission of claims by the Official Assignee, it seems obvious that he admitted a joint claim to this Rs. 4,000, and a secured or partially secured debt. In my opinion it is clear that the debt set out in the schedule to the deed of composition is not a debt admitted by the Official Assignee, for there is nothing to show that he admitted any debt of Rs. 4,000 due to Keshab Lal Addy only. Further nothing appears to have been done as regards the security.

9. In my opinion also, it is by no means clear that the words used in the report of the Official Assignee refer to any admission made by him. They seem to mean that the debts were admitted by the debtor. But in any case the debt in the schedule is not a debt or the debt admitted by the Official Assignee. Under Rule 128 proof is necessary and admission is necessary just as it is under the Act itself and the proof is of a joint debt and the admission claimed to be of a separate debt of which there is no proof. The applicant is in the difficulty that if he alleges that a separate debt of Rs. 4,000 was admitted, he cannot show that it was proved, even if 'proved' in this rule merely means that a claim in writing has been made to the Official Assignee or to the trustees. In my opinion there is a bona fide dispute as to this debt and it is not a dispute which should be decided in these proceedings. The applicant asks the Court to decide that Gopilal Addy was entitled to his father's estate and that this debt was due to that estate, without any proper materials. It was argued that all the applicant had to do was to show that he was a person interested and was then entitled to an order under Section 31. It was argued that Rule 128 did not apply. Under the rule no creditor can claim under a composition deed unless his debt has been proved and admitted by the Official Assignee or the trustee or trustees appointed under the deed of composition. Unless his debt has been duly admitted, he cannot claim to be paid under the deed of composition and therefore cannot complain that there has been any default on the part of the trustees because he has not been paid.

10. It was argued that as a person interested, the applicant had only to show that there had been some default in carrying out the terms of the deed of composition in order to induce the Court to set it aside. It was argued that the debtor admits that four other creditors have not been paid in full and that is an admission that there has been a default in carrying out the terms of the composition. But the admission must, if the other side seeks to rely on it, be taken as a whole, and the debtor alleges that accounts have not been adjusted but part payments made. In the circumstances it does not appear to me that there are sufficient materials before the Court to decide whether there has been any default or such a default as would justify an order under Section 31. For, it must be remembered that it has been held that an order under Section 31 releases the trustees from their bond: see Govind Das v. Jardine Skinner and Co. : AIR1924Cal176 , and that would or might affect other creditors. Then it was argued that two creditors support this application. One approved it. One of the creditors supporting the application filed no affidavit and I declined to allow his counsel to make a statement on instructions. The other filed an affidavit the day before this application was heard, and although he alleged that he had not been paid, in my opinion it was impossible to act on that statement when the debtor had no opportunity to meet it. It was argued that the applicant was entitled to an order under Section 31 because the debtor had not sworn in affidavit, because the schedule had not been rectified, and because the trustees had not opposed this application. I cannot see on what ground the applicant can assert that an affidavit by the debtor himself is essential. The affidavits are made by his manager who states-and I see no reason to doubt him-that hie has been in charge of the matter from the beginning.

11. I cannot myself follow why the debtor should have applied to rectify the register-this particular creditor had not had his claim admitted or proved-and under Rule 128 it would be unnecessary to take action until he put in a proof of a debt for Rs. 4,000 due to him alone and it was admitted. As regards the position of the trustees, the application, as far as an order under Section 31 is concerned, if successful, would release them. As regards any application under Section 30, they may have been content to leave the debtor to place their case before the Court. And, however that may be, the attitude taken by the trustees is not the deciding factor in an application under Section 30 or Section 31. Finally the applicant asked for an order, under Section 30, on the trustees to pay him. In my opinion his claim is disputed and it is not merely a bona fide dispute but substantial points have been raised which should be decided in proper and appropriate proceedings. I considered an order under Rule 127 and the debtor has offered to deposit in Court the amount admitted to be due to the heir of both the brothers. But security has already been given by the trustees for payment of the sums payable under the composition deed. Counsel argued that swas not the effect of the bond, but the bond is abundantly plain. It does not seem to me that the rule was intended to give a mere claimant both the security under the deed of composition and a further security under a special order. In this particular case there is security for the Rs. 4,000. Two other points were argued: one was that the debtor admitted preferential treatment of some of his creditors. I find no such admission in his affidavits.

12. It was argued that it was too late to dispute the correctness of the schedule. No question of estoppel was raised nor could there be any estoppel, for Keshab Lal knew the facts. As this is the first demand for payment, as far as appears, I cannot see why it is too late to raise this point, particularly as it appears from the affidavit filed on behalf of the debtor that the heirs of Nilmony have made a claim in respect of this debt to the trustees. Further, as pointed above, this Rs. 4,000 is also described as a joint debt on the schedule itself. In my opinion therefore this application fails under Section 81, for, it is not established that there has been any default by the trustees as far as the applicant is concerned, and these are not sufficient materials to establish any other default; it fails under Section 30 because he has not established his right to any ascertained sum; and as there is sufficient security already for his claim, no order should be passed under or on the lines of Rule 127. This application is therefore dismissed, but the applicant is at liberty to establish his claim if any in appropriate proceedings. The applicant will pay the costs.


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