Skip to content


Kazi Abdul Sattar Vs. Dinajpur Trading and Banking Co. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Reported inAIR1939Cal490
AppellantKazi Abdul Sattar
RespondentDinajpur Trading and Banking Co. Ltd. and ors.
Cases ReferredG.C. Moses v. A.C. Oaskeshott
Excerpt:
- .....have not been substituted, the appeal to this court must be regarded as incompetent. when the insolvent's application for discharge was being considered by the lower court it appears from the record that the requisite notices as required by rule 9 of the rules framed under section 79, provincial insolvenoy act, were duly served upon creditors 9 and 11. as regards creditor 13 there is a note in the order sheet dated 18th march 1936 that creditor 13 was reported to be dead. her heirs were however substituted on 28th march 1936 and there is also a return of service on the record which shows that her heirs were duly served with the requisite notices. apparently, the original creditors 9 and 11 died during the pendency of this appeal in this court and as regards the original creditor 13.....
Judgment:

Edgley, J.

1. This appeal is directed against an order of the learned District Judge of Dinajpur, dated 25th September 1936 under which he directed that the application for discharge of the appellant should be disallowed. In the case with reference to which this appeal arises, the appellant filed his application for insolvency on 10th April 1935. An adjudication order was passed on 29th August 1935, and the appellant applied for his discharge on 8th February 1936. This application was con. tested and was disallowed by the learned District Judge in his order, dated 25th April 1936, against which this appeal is directed. The first point that arises for consideration in connexion with this appeal is whether or not this Bench has jurisdiction to hear it. With regard to this question, it appears that the appellant, at the time when he filed the appeal, valued it at Rs. 5400. It is however provided in Item 4 (iii), Section 1, Ch. 2 of the Appellate Side Rules that a Judge sitting singly may hear all appeals against orders made in insolvency proceedings in cases where the property of the insolvent does not exceed Rs. 1000 in value. In the case out of which this appeal arises it appears from the record that the total value of the insolvent's property as realized by the Receiver amounts to Rs. 279-8-0. It is therefore clear that this Bench is competent to hear the appeal. A preliminary objection has been urged to the effect that no appeal lies in this case, as there is a note at p. 25 of the paper-book to the effect that the appeal has abated as against the heirs of the deceased respondents 9, 11 and 13. The deceased respondents were creditors upon whom notices of the date of the hearing of the application for discharge were served in accordance with the provisions of Rule 9 framed under Section 79 of Act 5 of 1920. This procedure has been prescribed primarily in order to afford the creditors a reasonable opportunity to appear at the time of the hearing of the application for discharge. It is argued however on behalf of the respondents that the procedure prescribed by the provisions of the Code of Civil Procedure in the matter of substitution of parties should be followed in insolvency proceedings and as the heirs of the three respondents mentioned above have not been substituted, the appeal to this Court must be regarded as incompetent. When the insolvent's application for discharge was being considered by the lower Court it appears from the record that the requisite notices as required by Rule 9 of the rules framed under Section 79, Provincial Insolvenoy Act, were duly served upon creditors 9 and 11. As regards creditor 13 there is a note in the order sheet dated 18th March 1936 that creditor 13 was reported to be dead. Her heirs were however substituted on 28th March 1936 and there is also a return of service on the record which shows that her heirs were duly served with the requisite notices. Apparently, the original creditors 9 and 11 died during the pendency of this appeal in this Court and as regards the original creditor 13 owing to some mistake, which has not been explained, her name was shown in the memorandum of appeal instead of her heirs. The question therefore which has to be considered is whether or not the failure to make the heirs of the original creditors 9, 11 and 13 parties to this appeal renders the appeal incompetent. With regard to this matter, it is significant that the only creditors who took part in the proceedings in the lower Court with reference to the insolvent's application for discharge were creditors 1 and 2. It is true that certain other creditors proved their debts. Those who did so prove were creditors 1 to 12, 19 and 22 to 25; and it is admitted that it is only these creditors who would be entitled to partake in the ultimate distribution of the assets of the insolvent. As regards creditors 9 and 11, beyond proving their debts in the lower Court, they appear to have taken no interest in the proceedings there and although the notices required under Rule 9 of the rules framed under Section 79, Provincial Insolvency Act, were duly served upon them, they did not put in an appearance during the course of the proceedings in connexion with the application of the insolvent's discharge. Similarly, as regards creditor 13 her heirs were duly served with the requisite notice but they did not think it fit to appear in those proceedings in the lower Court. There is a provision in the Provincial Insolvency Act (Section 17) which provides for the procedure to be followed in the case of the death of the insolvent himself. There is also a specific provision to the effect that in certain circumstances the procedure in the Civil Procedure Code shall specifically apply to the insolvency proceedings: see Section 18, Provincial Insolvency Act. The Act is however silent with reference to the procedure which should be adopted in the matter of substitution of the heirs of deceased creditors.

2. This being the case, in my opinion, the criterion which should be adopted for the purpose of deciding whether such heirs should be substituted is to ascertain whether or not the interests of such persons are likely to be adversely affected by their; non-substitution. In this connexion it was pointed out by the Lahore High Court in Thakur Singh v. Ganga Singh (1927) 14 A.I.R. Lah. 424 that the death of a creditor not really interested in the proceedings does not necessarily cause an appeal to abate. In the case now before us it cannot be said that the heirs of the deceased respondents mentioned above are likely to be adversely affected owing to their non-substitution. As stated above, the original I creditors 9 and 11 took no interest in the matter in the lower Court beyond proving their debts. Their names have been entered in the schedule of creditors and their heirs have admittedly received such shares of the assets of the appellant as would be finally payable at the time of the distribution of the assets. As regards the heirs of creditor 13 this creditor and her heirs even failed to prove their debts and it is therefore difficult to say how her heirs could possibly be affected by the fact of their non-substitution in these proceedings. As stated above, the procedure as regards the issue of notices! on creditors appears to have been prescribed primarily in order to afford them I a reasonable opportunity to appear at the time of the hearing of the application for discharge. In my opinion, this procedure cannot be said to constitute such persons parties to the proceedings in the same sense that plaintiffs and defendants are parties in a civil suit. I do not think that the heirs, of the deceased respondents can be affected j in any way by their non-substitution; and in my view, the fact that the heirs of the; deceased respondents 9, 11 and 13 have not been impleaded in the case, cannot in any way affect the competency of the appeal. The learned District Judge refused the application for discharge, because he was inclined to think that the insolvent shortly before applying for his discharge fraudulently transferred certain properties to his wife and son for the purpose of cheating his creditors. The transfers in question were effected by three kobalas; the first was dated 19th February 1933 and was in favour of his wife and the remaining two kobalas were dated 21st October 1933 and they were in favour of his wife and his son respectively.

3. The first point urged on behalf of the appellant is that the Court below should have only considered the conduct of the insolvent subsequent to the date of his insolvency. The language of Section 42, Provincial Insolvency Act, is clearly against this contention and gives the Court wide authority to examine the insolvent's conduct whether before or after the insolvency. The order of the learned Judge appears to have been passed mainly with reference to the provisions of Section 42(1)(i) of the Act, which empowers the Court to refuse to grant an absolute order of discharge on proof of the fact that the insolvent has concealed or removed his property or any part thereof or has been guilty of any other fraud or fraudulent breach of trust. In this connexion, it may be observed that the pro-vision of Section 39(2)(j), Presidency Towns Insolvency Act, is somewhat similar in its terms to Section 42(1)(i), Provincial Insolvency Act. With reference to the provisions of the former Act, it was held in G.C. Moses v. A.C. Oaskeshott (1926) 13 A.I.R. Cal. 794 that a fraudulent transfer by the insolvent prior to the insolvency came within the purview of Section 39(2)(j) of the Act and rendered the insolvent guilty of a breach within the meaning of the sub-section. The same principle must be held to be applicable in the case before us; and this contention which has been raised on behalf of the appellant cannot therefore be accepted. It was next urged that some limit should be imposed with regard to the time of the alleged fraudulent transactions upon which an order for discharge can be refused, and that it is not open to the Court to base an order of refusal upon transactions which took place long before the application for insolvency. In support of the contention, reliance is placed upon the observations of Lord Bsher in Ex Parte Constable; In re Barker (1890) 25 Q.B.D. 285. His Lordship stated with regard to similar transactions in England that

it seems to me that there must be some limit and I think the Judge ought not to take into his consideration conduct which could not have had any thing to do with the bankruptcy either in producing it or in affecting it in any way after its commencement. Only such conduct or affairs as may or can have had some effect upon the bankruptcy ought to be taken into consideration.

4. In my view, this is the principle which should certainly be adopted in cases which fall under Section 42(1)(i), Provincial Insolvency Act. But, in the case now before us if these particular allegations of fraud against the insolvent can be maintained, there is no doubt that the transfers upon which the order of the learned District Judge was based must have' had some considerable effect upon the insolvency. This contention must therefore fail. The next argument put forward on behalf of the appellant is that the application for discharge should not have been refused unless the transactions mentioned in the order of the learned District Judge could be brought within the provisions of Sections 53 and 54, Provincial Insolvency Act. These Sections mention certain specific transactions which may be treated as voidable or void provided they took place within a certain definite period before the presentation of the petition for insolvency. But it is quite clear that, in view of the wide powers conferred upon the Court by Section 42 of the Act the Court has power generally to review any questionable transactions covered by that Section which are in any way relevant to the insolvency even if such transactions could not be expressly avoided under Sections 53 and 54 of the Act. I therefore do not consider there is any substance in this argument put forward on behalf of the appellant. It is next argued that in any event, having regard to the nature of the transactions represented by the three kobalas mentioned above it cannot be said that these transactions were fraudulent in such a way as to make him guilty of fraud or of fraudulent breach of trust under Section 42 of the Act.

5. With regard to the first kobala dated 19th February 1933, it purports to convey to the appellant's wife certain immovable properties belonging to him in satisfaction of a debt due to her in respect of her dower, which amounts to Rs. 2200. No evidence was given in the Court below to the effect that no such debt was due from the appellant to his wife on account of dower; and this being the case, the transaction would appear to be prima facie genuine. The learned District Judge appears to have proceeded upon the view that the value of the property conveyed by the kobala, dated 19th February 1933, was very much greater than the value as stated in the kobala, but the evidence with regard to the actual value of this property does not appear to be sufficient to indicate that it was undervalued at the time when the transaction took place. The kobala in question purports to convey to the appellant's wife property of about 21 bighas and 17 cottas in area besides a one-third share of a jama of Rs. 51-9-1. The average price of this land according to the kobala would be about Rs. 33 a bigha. The appellant admits that part of the land covered by the transfer appertained to some property held by him at Fatepur which would sell at Rs. 50 or so per bigha, but in view of the fact that the transfer was made by the appellant to his wife in lieu of her dower, it is not unreasonable to suppose that he made the transfer at a price somewhat lower than the ordinary value of the land. In any case, having regard to the provisions of Section 42, Provincial Insolvency Act, it is clear that the onus would lie upon the respondent to prove fraud, if any, in respect of the trans action. In my opinion, this onus has not been discharged and it has not been proved that this transaction was fraudulent.

6. Similarly, as regards the second kobala, dated 21st October 1933, it cannot be said to have been proved that this transaction was in any way fraudulent. The transfer was made for the purpose of reducing further the debt due by the appellant to his wife on account of dower and he transferred to her certain property the value of which was said to be Rs. 1000. The first item consisted of the equity of redemption in respect of an area comprising 2 bighas 2 kottas and 6 dhurs. This was valued at Rs. 200. The second item comprises the equity of redemption in respect of the appellant's house and garden. According to his evidence, the total value of this property was Rs. 2000 and, as it has been mortgaged the equity of redemption was stated to be Rs. 700. It is significant that as regards this item of property, the Receiver subsequently sold one-third of the house and the garden transferred for a sum of Rs. 200. This is therefore an indication to the effect that the property was actually overvalued at the time of the execution of the kobala. As regards the last item covered by this document, it comprises certain household articles and domestic articles, the total value of which was estimated at Rs. 100. It is true that with regard to this item, the estimate given in the schedule seems to be very low; but there is no satisfactory evidence on the side of the respondents to the effect that the proper valuation of these articles should have been greater and, in view of the fact that the articles in question were probably in daily use by the insolvent himself and his wife, it cannot be said that it has been established! that this part of the transaction was fraudulent. The third kobala mentioned in the-order of the learned District Judge is dated 21st October 1983. The transfer of the properties mentioned in this document was effected for the purpose of repaying a debt due by the appellant to his son, which appears to have amounted to Rupees 900. There is no evidence to the effect that such a debt did not exist; and, having regard to the nature of the immovable properties mentioned in the kobala some of which were mortgaged, it does not appear to have been established that the properties were-sold by the appellant to his son at an in-adequate price.

7. In my opinion, therefore, it has not been proved that the appellant committed any fraud in connexion with the transfers mentioned above. Although admittedly the insolvent's assets were not of a value equal to 8 annas in the rupee of his unsecured liabilities, he gave evidence which, in my opinion, was sufficient to show that the fact that the assets were not of such value had arisen from circumstances for which he could not justly be held to be responsible. In view of the circumstances stated above, I am of opinion that the order of the learned District Judge cannot be maintained. The appeal is accordingly allowed with costs throughout. The order of the lower Court set aside and the appellant is discharged. The hearing fee in this Court is assessed at three gold mohurs. With regard to the circumstances of the case, it is not necessary, in my opinion, to attach any conditions to the insolvent's discharge under Section 42(3), Provincial Insolvency Act. The prayer for leave to appeal under Section 15 of the Letters Patent is rejected.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //