Skip to content


Motilal Radhakissen Vs. Ganpatram and ors. - Court Judgment

LegalCrystal Citation
CourtKolkata
Decided On
Judge
Reported in34Ind.Cas.792
AppellantMotilal Radhakissen
RespondentGanpatram and ors.
Excerpt:
provincial insolvency act (iii of 1907), sections 27, 42 - adjudication, annulment of--circumstances justifying. - .....the present time justifies the order of the court below. the obvious answer is that an order for annulment of adjudication can be made only upon proof of the existence of one or more of the circumstances specified in sub-section (1) of section 42. that section is moulded on section 35 of statute 45 and 46 vict., chap. 52; with reference to the latter provision, it has been ruled that the court has no power to annul otherwise than in exercise of the authority vested in it by statute: inre gyll, ex parte board of trade (1888) 5 mcr. 272 : 58 l.j.q.b. 8 : 59 l.t. 778 : 37 w.r. 164 : in re: hester, ex parte hester (1889) 22 q.b.d. 632 : 60 l.t. 943 : 6 mcr. 85 and in re: painter, ex parte painter (1895) 1 q.b.d. 85 : 64 l.j.q.b. 22 : 71 l.t. 581 : 1 manson 499 : 15 r. 16 : 43 w.r. 144. it.....
Judgment:

Asutosh Mookerjee, J.

1. This appeal is directed against what purports to be an order under Sub-section (1) of Section 42 of the Provincial Insolvency Act, whereby an order of adjudication has been annulled. The respondents applied on the 24th July 1912 to be adjudicated insolvents under the provisions of the Provincial Insolvency Act. The order of adjudication was made in due course under Section 16 on the 12th August 1912. Since then, a Receiver has been appointed and has taken charge of the assets. Proceedings were thereafter instituted under Section 43 on the allegation that the insolvents had misconducted themselves in the manner contemplated in that section. Pressed by these proceedings, the insolvents repeatedly applied under Section 42 to have the adjudication annulled. The application was refused on more than one occasion, but was ultimately granted on the 1st May 1915. The present appeal by one of the creditors is directed against that order and is supported on the ground that none of the circumstances, enumerated in Section 42 as essential for an order of annulment, has been established. In our opinion, there is no answer to this objection.

2. Sub-section (1) of Section 42 authorises the Court to annul an adjudication of insolvency when the Court is satisfied that the debtor should not have been adjudged an insolvent or where it is proved to the satisfaction of the Court that the debts of the insolvent have been paid in full or where a composition or a scheme has been approved by the Court under Section 27. There is no foundation for any possible suggestion here that the respondents should not have been adjudged insolvents. They were adjudged insolvents on their own application, and they cannot, with any show of reason, now turn round and contend that the order was improperly obtained. It is also clear that the debts of the insolvents have not been paid in full; in fact, in their petition for annulment, the respondents state that they will endeavour here. after to satisfy the claims of their creditors. The only question then is, whether a composition or scheme has been approved by the Court under Section 27. There is no trace on the record of an order of the Court which can, by any stretch of language, be deemed to express its approval of a composition or a scheme. Indeed, an examination of the proceedings shows conclusively that the preliminary steps requisite for an order under Section 27 have not yet been initiated. The position, consequently, is that not one of the three circumstances mentioned in Section 42, which would justify an exercise of the power vested in the Court to annul an adjudication of insolvency, exists in the present case. An earnest appeal has, however, been made by the respondents to induce us to hold that the failure of the Receiver to satisfy the debts up to the present time justifies the order of the Court below. The obvious answer is that an order for annulment of adjudication can be made only upon proof of the existence of one or more of the circumstances specified in Sub-section (1) of Section 42. That section is moulded on Section 35 of Statute 45 and 46 Vict., Chap. 52; with reference to the latter provision, it has been ruled that the Court has no power to annul otherwise than in exercise of the authority vested in it by Statute: Inre Gyll, Ex parte Board of Trade (1888) 5 Mcr. 272 : 58 L.J.Q.B. 8 : 59 L.T. 778 : 37 W.R. 164 : In Re: Hester, Ex parte Hester (1889) 22 Q.B.D. 632 : 60 L.T. 943 : 6 Mcr. 85 and In Re: Painter, Ex parte Painter (1895) 1 Q.B.D. 85 : 64 L.J.Q.B. 22 : 71 L.T. 581 : 1 Manson 499 : 15 R. 16 : 43 W.R. 144. It may be incidentally noted that a contrary view had been taken and wider powers claimed for the Court under the Statute of 1869 by Bacon, C.J. in the case of Ex parte Ashworth, In Re: Hoare (1874) 18 Eq. 703 : 43 L.J. Bk. 142 : 30 L.T. 906 : 22 W.R. 925. We have then the fundamental position that it is obligatory upon an applicant under Section 42 to establish the existence of one or more of the circumstances mentioned therein; this has not been done here. It may be a matter for consideration whether, if one or more of these circumstances were proved to exist, the Court could, under the Indian Law, as under the English Law, refuse to make an order of annulment; there is apparently an important variation here from English Law, for whereas Section 42 of the Provincial Insolvency Act uses the word 'shall' Section 35 of the Bankruptcy Act, 1883, uses the word 'may', and it was with reference to the latter phraseology that Stirling, L.J., said In Re: Keet, Ex parte Official Receiver (1906) 2 K.B. 666 : 74 L.J.K.B. 694 : 54 W.R. 20 : 93 L.T. 259 : 21 T.L.R. 615 : 12 Manson 235, that the jurisdiction is discretionary, and that it would not, in the absence of special circumstances, be a good exercise of discretion to make an order of annulment, where, if the bankrupt were applying for his order of discharge, an order of discharge would not be granted: In Re: Taylor, Ex parte Taylor (1901) 1 K.B. 744 : 70 L.J.K.B. 531 : 49 W.R. 510 : 84 L.T. 426 : 8 Manson 230 : In Re: Beer, Ex parte Beer (1903) 1 K.B. 628 : 72 L.J.K.B. 366 : 51 W.R. 422 : 88 L.T. 334 : 19 T.L.R. 319 : 10 Manson 136. But it is perfectly plain that, even under Section 27 of the Provincial Insolvency Act, the consent of all the creditors is not by itself necessarily sufficient to justify an order of annulment In the case of In Re: Hester, Ex parte Hester (1889) 22 Q.B.D. 632 : 60 L.T. 943 : 6 Mcr. 85, Lord Esher, M.R. said: 'The cases are clear that the Court is not bound by the consent of all the creditors. Although the consent of all the creditors has been obtained, the Court will still consider whether what they have agreed to is for the benefit of the creditors as a whole. The Court has gone still further, and I think rightly so, and has said that under the present Bankruptcy Act it will consider not only whether what is proposed is for the benefit of the creditors, but also whether it is conducive or detrimental to commercial morality and to the interests of the public at large; and it will take into consideration the position of the bankrupt with regard to- his creditors, and see whether what is proposed will not place his future creditors, who must come into existence immediately, in a position of imminent danger.' Bowen, L. J., was equally emphatic and observed: When the creditors have not been paid in full, and there are no objections to the original validity of the receiving order, it is not enough for the debtor to collect the assents of his creditors, and come to the Court and say, rescind the receiving order. He ought, if he wishes to move the Court to interfere in a matter which, to a certain extent, is one of discretion, to bring before it some clear grounds for thinking that what is proposed is a bona fide proposal, which it will be in the interest of the creditors to uphold. I wish emphatically to add my entire concurrence in what the Master of the Rolls has said, that the proposal ought to be also one which is not detrimental to the interests of the public. Those interests are part of what the Court has to consider upon such applications under the present Bankruptcy Act.' Fry, L. J., added: 'It is an idle notion that the Court is bound by the [consents of the creditors. The Court has far larger and more important duties to perform than merely to consider whether the creditors have consented to the rescinding of the order. We are bound in the exercise of our jurisdiction in such a matter, and I think I might almost say in all matters under this Act, to take a wider view. We are not only bound to regard the interests of the creditors themselves, who are sometimes careless of their best interests, but we have a duty with regard to the commercial morality of the country.' To the same effect are the decisions in In Re: Gyll, Ex parte Board of Trade (1888) 5 Mcr. 272 : 58 L.J.Q.B. 8 : 59 L.T. 778 : 37 W.R. 164 and In Re: Flatau, Ex parte Official Receiver (1893) 2 Q.B. 219 : 62 L.J.Q.B. 569 : 4 R. 414 : 68 L.T. 740 : 41 W.R. 529 : 10 Mor. 151. It is consequently fruitless for the respondents to rely, as they have done, upon the fact that the appellant, at one stage, was willing to accept a composition, and to have the matter settled out of Court,

3. The result is that this appeal is allowed, and the order of the Court below set aside. The appellants are entitled to their costs in both the Courts out of the estate of the insolvents. We assess the hearing fee in this Court at five gold mohurs.


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