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Jarwa Bai Vs. Pitambar Nilambar Shah and ors. - Court Judgment

LegalCrystal Citation
CourtKolkata
Decided On
Judge
Reported in36Ind.Cas.689
AppellantJarwa Bai
RespondentPitambar Nilambar Shah and ors.
Cases ReferredReg. v. Erdhetm
Excerpt:
presidency towns insolvency act (iii of 1909), section 27(6), schedule ii, clause 18 - proper or necessary party--creditor--evidence act (i of 1872), section 137--cross, examination--adverse party. - .....case seems to have been mainly undertaken by the opposing creditors, and a considerable amount of cross-examination was undertaken by the opposing creditors, the learned counsel appearing for them cross-examining first, and the gentleman who appeared for the official assignee coming next. now, it may been decided that those people who appeared as opposing creditors were not creditors at all, i need not go into the details of the procedure by which that decision has been arrived at. it is sufficient for me to pay that under the direction of the court of appeal an issue wan tried by mr. justice greaves: the issue was as to whether pitambar nilambar shah and others were in fact creditors of the insolvent or not, and the learned judge has decided that they were not creditors, and the result.....
Judgment:

Lancelot Sanderson, C.J.

1. This is an appeal from a decision of Mr. Justice Chitty who heard the application which was made under the 18th Clause of the Second Schedule to the Presidency Towns Insolvency Act of 1909. The application was made by the appellant Jarwa Bai, and the learned Judge has disallowed the claim on the ground that he thought that the alleged transaction between Jarwa Bai on the one hand and the in. solvent on the other was not a bona fids transaction. At the hearing certain opposing creditors appeared, the opposing creditors being named Pitambar Nilambar Shah and others, and in addition the Official Assignee appeared. The conduct of the case seems to have been mainly undertaken by the opposing creditors, and a considerable amount of cross-examination was undertaken by the opposing creditors, the learned Counsel appearing for them cross-examining first, and the gentleman who appeared for the Official Assignee coming next. Now, it may been decided that those people who appeared as opposing creditors were not creditors at all, I need not go into the details of the procedure by which that decision has been arrived at. It is sufficient for me to pay that under the direction of the Court of Appeal an issue wan tried by Mr. Justice Greaves: the issue was as to whether Pitambar Nilambar Shah and others were in fact creditors of the insolvent or not, and the learned Judge has decided that they were not creditors, and the result is that Pitambar Nilambar Shah and others ought never to have been allowed to appear at the enquiry which was held by the learned Judge, it is further to be pointed out that they were allowed to appear in spite of the opposition of the applicant Jarwa Bai. The result of that has been that during-the hearing of the appeal we decided that the evidence which was adduced by Pitambar Nilambar Shah and others who then appeared as opposing creditors ought not to be looked at: and not only that, but that the evidence which was elicited by cross-examination from the claimant and the insolvent by Counsel appearing for those parties ought not to be looked at, and, therefore, for the purpose of deciding whether this appeal should be allowed or not on its merits, we have to consider only the evidence which appears in the paper-book, other than that referred to above. Now, on that evidence it appears that the claimant claims to be a creditor to the extent of Rs. 12,000, that she holds a promissory note for that amount given to her by the insolvent, which she alleges to be a promissory note given to her in the ordinary course of money-lending business, and she also claims to be the holder of certain title-deeds which were deposited by the insolvent at or about the time the money was lent, and she, therefore, claims as equitable mortgagee of the property mentioned in these deeds, prima facie, therefore, she comes forward as a creditor producing a certain document which on the face of it purports to be a promissory note, and in addition to that she holds some title-deeds of the insolvent relating to some part of the insolvent's property. It, therefore, lies upon the Official Assignee and those who are assisting him to show to the satisfaction of the Court that the transaction, as alleged by the claimant who produced these documents, was not a bona fide transaction, but in fact, as they alleged, was a fraudulent transaction.

2. Now, I think some of the comments which have been made by the learned Counsel for the Official Assignee and by the learned Counsel appearing for the opposing creditor in this Court, in so far as they suggest that there were, suspicious circumstances connected with the case, are to a certain extent justified, I have fully considered the points which they put forward, and I think there is weight in some of them, as for instance the fact that there apparently was no entry in the attorney's books of the visit which the agent of the claimant is alleged to have paid to the attorney; that there is no entry of any charge made for the advice which is supposed: to have been given on that date, and that nobody was produced from that office to prove that the promissory note was typed in that office. Hut giving all due weight to the comments and criticisms of those two learned Counsel upon the case, in my judgment the; Official Assignee and the opposing; creditor have not discharged the onus and, upon the evidence which is now before us, they have not satisfied me that this was a fraudulent transaction. The quite recognise, as Mr. Begram argued; before us that it may be that the deposit, of title-deeds without at the same time giving a memorandum of the deposit may be contrary to the general practice in Calcutta, On the other hand, it is alleged that such transactions as these are sometimes loosely done, and title-deeds are taken without the memorandum of deposit being given--it very largely depending upon what the relations are between the parties at the time the transaction is effected. I need not, however, say anything except that the Official Assignee and the opposing creditor who is now before us have not satisfied me that the transaction was a fraudulent one. For this reason I think the appeal ought to be allowed.

4. Then comes the further question as to whether we ought to remit this matter for farther investigation by the learned Judge to inquire again whether this transaction was a fraudulent one or not. I have come to the conclusion that we ought not to do so, and for this reason. In my opinion, the proper person to investigate a matter of this kind was the Official Assignee. It was pointed out at the outset by the learned Counsel appearing for the claimant that the parties who claimed to be creditors ought not to be allowed to appear, and, as I understand, even at that early stage there was a dispute as to whether they were creditors or not, and further that even if they were creditors they ought not to be allowed to appear. In these circumstances, the proper thing for the Official Assignee to do was to take charge of the proceedings, ask such questions as he might think right, and, it be wanted any information which he himself did not possess but which was in the hands of the creditors, to get such information and to conduct the investigation not only on behalf of the opposing creditors but on behalf of all the creditors of the estate whom he represented in his position as Official Assignee. As regards Mr. Sircar's client, to my mind, it would be a very dangerous precedent for us to allow an opposing creditor to come in on an appeal, not merely for the purpose of assisting the Official Assignee to argue the appeal which apparently was the ground upon which Mr. Sircar's client was allowed to appear in this Court, but for the purpose of getting this Court to order the enquiry to be started all over again in order that his client, who did not appear at the original application, might have the application re-heard from start to finish and that his client, might have the conduct of the proceedings. I do not think that this is an application to which this Court ought to accede. Therefore, I think this appeal ought to be allowed with costs.

5. With regard to the costs in the Court below, the learned Judge ordered the claimant to pay two sets of costs, one to the Official Assignee. With regard to these costs, any costs which have been paid to the Official Assignee must be repaid by him to the claimant out of the general assets of the estate. The learned Judge also ordered another set of costs to be paid by the claimant to the people who were then called the opposing creditors, namely Pitambar Nilambar Shah and others. Now, inasmuch as they are not here to-day, it would not be right for this Court to make any order as to costs in their absence. I am of opinion that they were largely responsible for the costs which were incurred in the Court below. I think they ought to be given notice by the claimant to come here and show cause in this Court why they should not be directed to repay the costs which they received in the Court below and why such other order should not be made as to this Court may seem proper.

6. As regards the costs of this appeal, the costs will be paid in the ordinary way, that is, by the Official Assignee out of the general assets of the estate. The costs of the Official. Assignee will be paid out of the assets of the estate, as between attorney and client.

7. It is impossible for this Court to say how much of the Rs. 33,000 the claimant is entitled to in respect of her mortgage. The Official Assignee will have to deal with that. If he has any doubt, it will be open to him to apply to the Judge in insolvency.

Woodroffe, J.

8. I agree,

Mookerjee, J.

9. This appeal is directed against a determination by Mr. Justice Chitty, under Clause 18 of the Second Schedule to the Presidency Towns Insolvency Act, that the appellant bad failed to establish her claim against the estate of the insolvent on the basis of an equitable mortgage. The case for the appellant is that on the 10th January 1911, she advanced, on a deposit of title-deeds by the borrower, a sum of Rs. 12,000 through her son. Lachmi Chand Karnawat to one Kissori Mohan Roy, who has been subsequently adjudged an insolvent. When the appellant discovered that her name had not been included in the schedule, on the 5th February 1914 she made an application for an investigation of her mortgage under Clause 18 of the Second Schedule to the Insolvency Act, In the course of these proceedings, her claim appears to have been resisted by a firm Earned Pitambar Nilambar Shah, who had been described as creditors of the insolvent although they asserted that they were not mortgagees bat purchaser of a part of the estate of the bankrupt. If the position they took up was correct, they would not be necessary or proper parties to the proceedings and their right to intervene therein was, as might be expected, challenged at an early stage. They were permitted, however, to take an active part in the enquiry held under Clause 18, without any determination of their precise position. Indeed, the record shows that the cross-examination of the witnesses was conducted principally by Counsel on their behalf; the Official Assignee was no doubt represented; but he appears to have taken only a subordinate part in the enquiry. The result was that, after a full investigation, Mr. Justice Chitty came to the conclusion that the mortgage-debt of the appellant was not established. When the present appeal, to which Pitambar Nilambar Shah were joined as opposing creditors, was taken up for disposal sometime ago, the Court of Appeal directed that their status should, in the first instance, be determined and an issue to that effect was sent down for investigation. It has now transpired, on an enquiry made by Mr. Justice Greaves pursuant to the order of the Court of Appeal, that Pitambar Nilambar Shah were purchasers and not mortgagees of the estate of the insolvent. The consequence follows that they are not creditors of the insolvent; they were thus not proper parties to the proceedings in the Court below, nor are they proper parties to this appeal and, as a matter of fact, they have not been represented at this the final hearing of the appeal before this Court.

10. On behalf of the appellant, two points have been urged, namely, first, that all the cross-examination held at the instance of Pitambar Nilambar Shah should be eliminated from the record, and secondly, that the public examination of the insolvent under Section 27 cannot be used as evidence against her. In my opinion, both the objections are well founded and must prevail.

11. As regards the first point, it has been argued on behalf of the Official Assignee as also of a creditor who did not appear in the Court below but who upon his own application has been made a patty respondent to this appeal, that the course proposed should not be adopted, and that, if the argument of the appellant prevails, the case should be remanded for a fresh investigation. Mr. Sircar, who appeared on behalf of the added respondent, has further argued that the statements made by the son of the appellant in cross-examination may, in any event, be treated as admissions within the meaning of the Indian Evidence Act, and may accordingly be considered by the Court in the determination of this appeal. In my opinion, it is obvious that the cross-examination at the instance of Pitambar Nilambar Shah must be entirely eliminated from the record. The right to cross-examine belongs, as is clear from Section 137 of the Indian Evidence Act, to an adverse party. The firm of Pitambar Nilambar Shah did not in reality occupy the position of an adverse party, as has now been finally decided. Consequently, no right to cross-examine was vested in them. It follows conclusively that they should not have been allowed to intervene in the proceedings and to take part in the cross-examination of the witnesses and the record must be restored to the condition it would have attained had there been no cross-examination at their instance. It is also clear that the ingenious argument that the statements made by the son of the appellant may be treated as admissions, is entirely untenable. Section 18 of the Indian Evidence Act, upon which reliance has been placed, provides that 'Statements made by a party to the proceeding, or by an agent to any such party, whom the Court regards, under the circumstances of the case, as expressly or impliedly authorised by him to make them, are admissions.' In the first place, it is clear that Section IS can be of no avail if the cross-examination is, as I hold it must be, eliminated; in the second place, it is clear that the statements mentioned were not made by a party to the proceedings, nor were they made by an agent to any party whom the Court may properly regard, under the circumstances, as expressly or impliedly authorised by him to make them. We cannot reasonably bold that the son of the appellant was even impliedly authorised to make those statements under the circumstances in which they were made, namely, in answer to the questions improperly put in cross-examination by a party not entitled to participate in the proceedings. I hold accordingly that the statements in cross-examination concluded at the instance of Pitambar Nilambar Shah must be ignored.

12. As regards the second point, it is incontestable that the notes of the public examination of the insolvent, though admissible against him under Section 27(6) Reg. v. Erdhetm (1896) 2 Q.B. 260 : 65 L.J.M.C. 74 L.T. 734 : 44 W.R. 607 : 3 Manson 142, cannot be used against a creditor who had no opportunity to cross-examine him, and it is noteworthy that though the insolvent was examined afresh in the present proceeding, no attempt was made to contradict him by reference to the notes of his public examination.

13. We must accordingly consider the case on the remainder of the evidence, and, when we do so, it becomes plain that the decision of Mr. Justice Chitty cannot be supported. There is a prima facie case established on the evidence that the transaction, which forms the basis of the claim of the appellant, was real and that a sum of Rs. 12,000 was actually advanced by the appellant to the debtor, as alleged by her son. This case has not been successfully met by the Official Assignee or by any of the creditors; her claim to rank as a secured creditor of the insolvent must consequently succeed.

14. But it has been argued that the Official Assignee as also the added respondent should be allowed an opportunity to have the matter re-investigated in their presence. I think we should not accede to this application. The added respondent did not appear in the Court below. I need not decide whether he was entitled as a matter of right to intervene in the proceedings; if he was so entitled, he should have availed himself of the opportunity and cannot now claim an indulgence; if lie was not entitled to appear, he cannot now ask for a re-trial, The Official Assignee is in no better position; he did appear in the Court below, and no good reason has been assigned why he took a subordinate part in the proceedings and why he permitted the cross-examination of the witnesses to be conducted in the main by a party who was not only not admitted to he a creditor, but whose right to intervene in the proceedings at all was challenged.

15. On these grounds, I hold that this appeal must be allowed and the order of Mr. Justice Chitty discharged.


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