1. This is a rule calling upon the Chief Presidency Magistrate, Calcutta, as also upon the complainant opposite party to show cause why the proceedings under Section 200, Penal Code, against the present petitioner pending in the Court of the Fourth Presidency Magistrate, Calcutta, should not be quashed on the ground that
on the prosecution story itself, the offence alleged having been committed in relation to a proceeding in a Court, a formal complaint in writing of such Court was necessary, as contemplated under Sections 195 and 476, Criminal P.C.
2. The complainant in this case is one 'Amulya Ratan Sanyal' as assistant in the employ of and on behalf of the Co-operative Hindusthan Bank Ltd. (in liquidation). The ease of the complainant is that the petitioner, who is a debtor of the Co-operative Hindusthan Bank Ltd., and who was adjudged insolvent by an order made by this High Court on 13th June 1939, submitted, in or about the month of August a scheme of composition to the Official Assignee for acceptance of his creditors, and a meeting of the creditors was convened by the Official Assignee on 10th September 1940 to consider the said scheme; that the petitioner dishonestly and fraudulently procured from one H.C. Mallik an affidavit on behalf of an alleged creditor of his, his brother Satish Chandra Sen, for the purpose of proving that his said brother was a creditor in the insolvency for a sum of Rs. 4000 and 'caused it to be filed before the Official Assignee who was bound by law to receive the same as evidence in support of the claim of the said creditor to rank as a creditor of the accused in his insolvency'; that the said affidavit in so far as it stated that the claim was still outstanding was false inasmuch as the same had been given up on 23rd February 1940 in Suit No. 1624 of 1938 on the original side of this High Court; that on 10th September 1940, on the date of the aforesaid meeting of the creditors, the petitioner
with full knowledge of the falsity of the statements contained in the said affidavit used and/or attempted to use the said affidavit before the Official Assignee in order to include the said creditor as one of those who were supporting him in the scheme of composition submitted by him.
3. On these allegations the complainant prayed for a process against the petitioner for having committed an offence under Section 200 read with Section 199, Penal Code. On this complaint the learned Magistrate started a proceeding requiring the petitioner's attendance on 10th February 1941 to answer to a charge of 'using as true such declaration knowing it to be false brought against him by Amulya Ratan Sanyal under Section 200, Penal Code, and ultimately on 13th June 1941 framed charges against him in the following terms:
1. That you, Kedar Nath Sen, on or about 10th September 1940 at Calcutta, corruptly used or attempted to use as true, in support of your scheme of composition filed before the Official Assignee, Calcutta, a declaration (Ex. 4) made by one Hiran Chandra Mullick to the effect that you, Kedar Nath Sen were still truly and justly indebted to Satish Chandra Sen in the sum of Rs. 4000 and for which sum or any part thereof the said Satish Chandra Sen have had or received no manner of satisfaction, and you knew the said declaration to be false in a material particular, to wit, on the particular of your alleged indebtedness to Satish Chandra Sen and you further knew that your indebtedness to the said Satish Chandra Sen had ceased to exist as per terms of settlement and decree (Exs. 8 and 9) and which declaration was receivable as evidence as 'proof of debt' under the Presidency Towns Insolvency Act and you thereby committed an offence punishable under Section 200, Penal Code, and within the cognizance of this Court.
4. Thereafter on 30th June 1941 the present rule was issued by this Court on the petition of the accused Kedarnath Sen. The point involved in this rule is whether or not the learned Magistrate was debarred from taking cognizance of the offence by Section 195(1)(b), Criminal P.C. Section 195(1)(b), Criminal P.C., lays down:
No Court shall take cognizance...of any offence punishable under any of the following sections of the same Code (Penal Code), namely Sections 193, 194, 195, 196, 199, 200, 205, 206, 207, 208, 209, 210, 211 and 228, when such offence is alleged to have been committed in, or in relation to, any proceeding in any Court, except on the complaint in writing of such Court....
5. The object of Section 195, Criminal P.C., is to minimize the possibility of needless harassment of litigants by rash, baseless or vexatious prosecutions at the instance of their opponents. Private prosecution in every case is more likely to be inspired by the avenging spirit and indeed in a system of criminal administration where the party wronged rather than a public official is given the conduct of prosecution the vice of over-eagerness to obtain convictions predominates. The evil may not be avoided altogether. But at least in the case of offence where the act to a great extent affects the dignity and prestige of the Courts concerned, it is deemed inexpedient to allow such acts to be the sports of personal passions. The offence in this case is alleged as punishable under Section 200 read with Section 199, Penal Code. The question, therefore, is whether the offence is alleged to have been committed in or in relation to any proceeding in any Court, within the meaning of Section 195(1)(b), Criminal P.C. Prom what has been stated above it is clear that the offence is alleged to have been committed in a proceeding before the Official Assignee for a scheme of composition with the creditors of the petitioner. The exact allegation in this respect in the petition of complaint is
that on the date of the said meeting (the meeting of creditors convened by the Official Assignee to consider the scheme of composition), viz., on 10th September 1940, the said accused with full knowledge of the falsity of the statements contained in the said affidavit used and/or attempted to use the said affidavit before the Official Assignee in order to include the said creditor as one of those who were supporting him in the scheme of composition submitted by him.
6. The question, therefore, ultimately resolves to this: Whether the proceeding before the Official Assignee relating to the scheme of composition is a proceeding (1) in a Court, or (2) in relation to a proceeding in a Court.
7. As regards the first point, viz. whether the proceeding before the Official Assignee can be said to be 'a proceeding in a Court', the answer turns upon whether the Official Assignee while discharging this function can be said to be a Court within the meaning of Section 195(1)(b), Criminal P.C. There can be no doubt that in an insolvency proceeding the function of the Official Assignee is chiefly and primarily administrative. At the same time it cannot be denied that the Official Assignee is given judicial powers also in certain respects along with his administrative powers. He, for example, is given judicial powers in the matter of proof of debts. It is conceded by Mr. Banerjee appearing to show cause in this rule that while exercising such judicial powers the Official Assignee discharges the functions of a Court and becomes a Court within the meaning of the section. His contention, however, is that while convening and conducting the meeting of creditors for the consideration of the proposal for a composition or scheme, the Official Assignee discharges a purely administrative function. While discharging this function, he may have to exercise the powers of examining, admitting or rejecting proofs of debts; but such powers, even though couched in terms of similar powers under Schedule 2, Presidency Towns Insolvency Act, read with Section 48 of that Act, are not inconsistent with the powers purely administrative. In the exercise of administrative powers, it may be his duty to ascertain certain facts; but this would not make him a Court within the meaning of the section. Mr. Banerjee refers us to Section 26(2), Presidency Towns Insolvency Act, and the Rules in Schedule 1 of the Act, particularly Rules 9 and 15 of that schedule, and contends that the power of admitting or rejecting proof of debt as conferred upon the Official Assignee by these rules is purely for the purpose of enabling him to discharge his administrative function in the conduct of the meeting convened by him.
8. It is difficult to say that there is no force in this contention. The creditors who are entitled to vote in the meeting are those whose debts are proved. Under the Presidency Towns Insolvency Act, a creditor may, in order to entitle himself to vote, prove his debt even at the meeting; and the Official Assignee as Chairman of the meeting has power to accept or reject the proof; but his decision is subject to appeal to the Court. If he is in doubt, he should allow the creditor to vote, subject to the vote being declared invalid in the event of the objection being sustained. Acceptance or rejection of proof of debt for such a purpose is perfectly consistent with administrative function only. Any act of judgment that he may have to exercise in this connexion will not convert him for the time being into 'a Court'. No doubt Section 28(2), Presidency Towns Insolvency Act, while speaking of the acceptance of the proposal by the majority of creditors uses the words 'whose debts are proved' and it might be contended that when such acceptance of the proposal by the creditors is calculated to produce a permanent effect on the rights of the creditors so far as the composition or scheme is concerned, it is reasonable to take these words as referring to the proof of debts under the Rules of Schedule 2, read with Section 48 of the Act. But the true character of the acceptance by the creditors under Section 28(2) is that it is merely a resolution to entertain the proposal as one deserving of consideration. The very creditor who might have voted for the acceptance of the proposal may oppose its approval by the Court and this is expressly so provided in Section 29(2) of the Act. In our judgment, therefore, in accepting or rejecting the proof of debt for the purpose of Section 28(2) the Official Assignee does only discharge his function as the Chairman of the meeting. He is therefore not a Court within the meaning of Section 195(1)(b), Criminal P.C. This view finds support in Beardsell & Co. v. Nilgiri Abdul Gunni Saheb ('14) AIR 1914 Mad 474.
9. Whatever difficulty there may be in holding the Official Assignee to be a Court within the meaning of Section 19S, Criminal P.C., while he is functioning in connexion with the proposal for a composition or scheme, it seems to us clear that 'the scheme or composition' itself as well as the entire proceeding concerning the same, is 'in relation to' the insolvency proceeding. A debtor after adjudication cannot settle with his creditors out of Court. Such settlement is possible only by a composition or scheme under the Act: Re Shivalal Rathi ('17) 4 AIR 1917 Bom 239 at p. 241. The provisions of the Presidency Towns Insolvency Act as to composition and scheme of arrangement apply to composition or scheme after adjudication. Under the Provincial Insolvency Act, 1907, Section 27(1), a proposal for a composition or scheme could be submitted by the debtor either before or after an order of adjudication. Under the Act of 1920 as well as under the Presidency Towns Insolvency Act, a proposal can only be submitted after an order of adjudication has been made. Under the Presidency Towns Insolvency Act a proceeding for composition or scheme is initiated by the submission to the Official Assignee of a proposal for the composition in satisfaction of his debts or a proposal for a scheme of arrangement of his affairs by the insolvent after the making of an order of adjudication (Section 28(1), Presidency Towns Insolvency Act). The Official Assignee thereupon convenes a meeting of the creditors and places the proposal before the meeting. The proposal will be taken to be accepted if a majority in number and three-fourths in value of all the creditors whose debts are proved resolve to accept it. The essence of a composition or scheme is a proposal by the debtor and its acceptance by the creditors in the above manner. After the proposal is accepted in the above manner, either the in-solvent or the Official Assignee may apply to the Court to approve it. (Section 29, Presidency Towns Insolvency Act.) A time shall be appointed for hearing the application with notice to the creditors who have proved their debts. At the hearing any creditor may be heard by the Court in opposition to the application notwithstanding that he might have voted for the acceptance of the proposal at the meeting. It is really the approval of the Court which makes the scheme binding. Where the Court is of opinion that the terms of the proposal are not reasonable or are not calculated to benefit the general body of creditors or in any case in which the Court is required to refuse the insolvent's discharge, the Court must refuse to approve the proposal. (Section 29(2) and (4), Presidency Towns Insolvency Act.) If the Court approves the proposal, the terms must be embodied in an order of the Court and the adjudication must be annulled. (Section 30, Presidency Towns Insolvency Act.)
10. The jurisdiction of the insolvency Court does not terminate even on the approval of a composition or scheme. Though the adjudication is annulled, the composition is made with the approval of the insolvency Court and the Court retains jurisdiction to give effect to it: Re Krishna Kishore Adhikary : AIR1928Cal21 . The proceedings in insolvency do not terminate even on the annulment of adjudication on the approval of a composition or scheme : Kamireddi v. Devasi Harpal ('29) 16 AIR 1929 Mad 157. The effect of the approval of a scheme is to substitute the scheme for the bankruptcy. The scheme remains under the control of the insolvency Court. Under the Presidency Towns Insolvency Act the payment of any instalment due under a composition may be enforced by an application to the Court: (Section 30(2)). The above short sketch of the provisions of the Presidency Towns Insolvency Act relating to a composition or scheme makes it amply clear that the proceeding for a composition or scheme is in relation to the insolvency proceeding itself. The fact that the initiation of the proceeding is required to be before the Official Assignee whose primary function is administrative does not in the least affect its relation to the main proceeding. From its initiation before the Official Assignee to its approval by the Court, the whole thing is in relation to the insolvency proceeding and any offence alleged to have been committed in this proceeding is, in our judgment, committed in relation to the insolvency proceeding. This insolvency proceeding admittedly being a proceeding in a Court within the meaning of Section 195(1)(b), Criminal P.C., it follows that the offence alleged in the present case must be taken as 'alleged to have been committed in relation to a proceeding in a Court' within the meaning of Section 195(1)(b), Criminal P.C., and, consequently, in the absence of any complaint in writing of that Court, the Magistrate was debarred from taking cognizance of the same.
11. Mr. Banerjee contended that the words 'in relation to' as used in the section are not wide enough to include 'the relation' between a composition or scheme and the insolvency proceeding itself. His contention is that no doubt a proposal for a composition or scheme can be initiated only in connexion with an insolvency proceeding. But as its being carried to the Court is dependent on certain contingencies, viz., (1) its acceptance by the specified majority at the meeting and (2) thereafter the matter being taken to the Court by the insolvent or the Official Assignee, it may never reach the Court and may thus be never related to the proceeding in Court. In support of his contention Mr. Banerjee relied on Indra Chand v. Emperor ('32) 19 AIR 1932 Bom 185 which was a case of an offence under Section 193, Penal Code, and in which Beaumont C.J. observed:
Then there is a fourth case in which an offence is committed under Section 193, Penal Code, in respect of proceedings in a Court of law which are contemplated but which in fact are never started....In such a case it appears to me clear that Section 195, Criminal P.C., does not apply....
12. In our opinion this case has no application to the case before us. The proceeding for a composition or scheme is, in our opinion, in relation to the original insolvency proceeding and in order to bring it into this relation with the original proceeding it is not necessary that it should be carried up to the Court. Without anything more such a proceeding before the Official Assignee is one in relation to the original insolvency proceeding and consequently an offence under Section 200 read with Section 199, Penal Code, alleged to have been committed in course of this proceeding is hit by the provisions of Section 195 (1)(b), Criminal P.C. The rule is accordingly made absolute and the proceedings under Section 200, Penal Code, pending in the Court of Mr. H.K. De, Fourth Presidency Magistrate, Calcutta, against the petitioner are quashed. Let the petitioner be discharged from the bail bond.
13. I agree.
[The parties then settled by agreement the amount of the decree.]