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In Re: Anshu Prokash Ghose - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata
Decided On
Judge
AppellantIn Re: Anshu Prokash Ghose
Excerpt:
presidency towns insolvency act (iii of 1909), section 36 - examination of insolvent, how to he conducted--creditor, whether can take part in examination--examination of mortgagee from insolvent--mortgagee, whether entitled to costs--practice.;costs - witness--examination under presidency towns insolvency act (iii of 1909), section 36--practice. - .....by the taking of an ordinary partnership account, but on the amount put into the business by the present applicant with certain interest.2. on the 21st january 1918, the applicant, as mortgagee and with the consent of the official assignee, obtained an order from this court under rule 18 of schedule ii of the presidency towns insolvency act, 1909, for sale of the property and for the taking of the mortgage accounts by the registrar.3. two creditors, messrs. osier & co., and the present respondents, messrs. k.c. ghattack & sons, appeared by their attorneys before the registrar minded to investigate the claim. at the second hearing on the 6th march, messrs. osier & co.'s attorney examined the insolvent and after so doing, asked for the taking of the accounts to stand over pending.....
Judgment:

Rankin, J.

1. This is a motion in the insolvency of one Anshu Prokash Ghose who was adjudicated, in this Court by order of the 3rd August 1917. The present applicant is Akhoy Chunder Ghose, who at one time was a partner with the insolvent, in a firm of building contractors called A.P. Ghose and Company, under Articles of Partnership, dated the 13th December 1915. By a mortgage deed, dated 27th March 1917 wherein the partnership was recited, and the fact that it had been dissolved, the insolvent mortgaged to the applicant the premises No. 1-1, Issur Mill Lane (subject to a prior mortgage) to secure the sum of Rs. 24,500 as being the amount for which the applicant was to release all claim against, and interest in, the partnership. This sum appears to have been calculated, not on the amount ascertained by the taking of an ordinary partnership account, but on the amount put into the business by the present applicant with certain interest.

2. On the 21st January 1918, the applicant, as mortgagee and with the consent of the Official Assignee, obtained an order from this Court under Rule 18 of Schedule II of the Presidency Towns Insolvency Act, 1909, for sale of the property and for the taking of the mortgage accounts by the Registrar.

3. Two creditors, Messrs. Osier & Co., and the present respondents, Messrs. K.C. Ghattack & Sons, appeared by their attorneys before the Registrar minded to investigate the claim. At the second hearing on the 6th March, Messrs. Osier & Co.'s attorney examined the insolvent and after so doing, asked for the taking of the accounts to stand over pending enquiry. The respondents' solicitor joining in this request intimated a desire to examine the mortgagee under Section 36. I am quite satisfied of the reasonableness and propriety of this desire having regard to the surrounding circumstances, the insolvents' evidence, the apparent conflict, between the insolvent and mortgagee, and the lack of material and opportunity for getting to the bottom of the relationship and transactions between the two; and I notice that the mortgagee's solicitor immediately took the very proper course of offering to facilitate the examination of his client under Section 36, and to give inspection of documents. The respondents then applied for an order for the examination of the mortgagee by a petition which undoubtedly puts in. the forefront the question of the validity of the mortgage-deed. The order of the 9th March, which was thus asked for and obtained, summoned the mortgagee to be examined respecting the alleged mortgage, and respecting the insolvent, his dealings or property. From the minutes of the proceedings before the Registrar I find that on the 13th, 19th, 20th and 21st March the present applicant was examined before the Court; his attorney on the first occasion and his counsel on the last three occasions being, present and taking part on his behalf. In the end the respondents were not advised to attempt to have the mortgage declared invalid, and in these circumstances the present application is brought.

4. Now, the present application is an application which asks two things, first of all it asks that there may be an order against the creditor to pay the, applicant's costs of attending by solicitor and counsel upon his own examination; it also includes a claim, of which I think nothing was said in argument before me, that a similar order should be made against the present respondents in respect of the applicant's costs of attending and taking part in the examination of the insolvent. So far as regards the latter part of the claim, there can be no doubt that that must be dismissed. I do not collect from the papers before me that there was any examination of the insolvent except his examination on the taking of the mortgage accounts, and his public examination; but if there was, if the insolvent was examined under Section 36 at all, there can be no doubt that the mortgagee had no right to take part in that examination, and both he, his attorney and his counsel ought to have been excluded from the room.

5. I come to the main part of this claim--the claim, that is to say, as regards the costs incurred by the mortgagee in attending by solicitor and counsel for purposes of his own examination under Section 36.

6. Now, it seems to me that I must dispose of that application, not (as I was asked to do) upon the footing that the applicant is a lucky man, or on the footing that the mortgage is one which now has got a doubt or taint about it still; I must dispose of it on the footing that the mortgage is valid, and that any appearance of suspicion was due either to the attitude of the bankrupt, or incompleteness of the available information or other circumstances over which the present applicant had no control; still less have I any right to assume that the petition was kept back in the applicant's interest. I have no evidence of the sort, and it looks to me rather as if the insolvent and the present applicant, at a time not very long afterwards, were at loggerheads. On the other hand, I must deal with it on the basis that in view of the circumstances, in view of the insolvent's story, it was a proper case for enquiry; and I must deal with it on that basis both by reason of the order obtained from the Court and because I think such are the facts.

7. What happens when a debtor is adjudicated? What happens is, that all his assets are vested in the Official Assignee who may never have heard of him or of his circumstances before. The creditors all rank upon an insufficient fund, and when the adjudication order is made, creditors, who up till then had no right to take any part in questions as between the insolvent and other creditors, become entitled to see that no mortgage is admitted unless it is genuine, that no debt is allowed to rank unless it is really due. Moreover, bankruptcy always commences with the act of bankruptcy, which may be at any time within three months of the petition, and subject to certain exceptions bankruptcy rips up the insolvent's transactions in the meantime on the footing that during that period he has regally been a person in possession of assets, the beneficial right to which was in his creditors. Now, it has long been a settled practice in bankruptcy that the ordinary right of discovery which a litigant has, is insufficient and inadequate to meet the case; ordinarily a litigation must be started, issues must be defined, and only then is it possible to have discovery at all, and the discovery mast be confined to the issues; but a trustee in bankruptcy, or a creditor, has got to learn everything from the start, and for that purpose he is given what are intentionally inquisitorial powers, not confined to the determination of issues that have been raised; he is given those powers subject only to the control of the Court. There need not be an existing litigagation; on the contrary if a creditor or a trustee has started litigation with the person whom he desires to examine, he has prima facie given up his right so to do, and ought, except in special circumstances, then to be confined to the ordinary rights of discovery of a litigant. The purpose of Section 36 is to inform the mind of the Court, of the trustee, of the creditor, to inform their mind for the purpose of enabling them to decide whether to embark upon litigation or not; but for such a power as this, the Bankruptcy Court would he helpless, and it would be impossible to make any pretence of administration of the debtor's estate as the law requires.

8. In England for the last 15 years or so, and for a considerable time, I think, before that, there has been a well-settled practice under the section which corresponds to our Section 36, and that practice is this: the trustee never pays the costs of the witness attending by solicitor and counsel; he pays only the witness' travelling expenses and the witness' allowance; if there are no proceedings afterwards, or if proceedings are taken, and are unsuccessful, these costs are not allowed to be recovered by the person who has been examined under Section 36. On the other hand, if proceedings are subsequently taken, and the trustee or creditor succeeds, the trustee or creditor is never allowed to include his costs of the examination in the costs of the motion which the other party is ordered to pay. The witness, in short, is treated as a witness, and is not treated for this purpose as a party at the examination. That being so, whenever a trustee or creditor brings a motion in bankruptcy he is expected and required by the Court to have used those powers before he commenced his motion, and this is necessary because otherwise it will be impossible for the Court to exact the same standard of proof from trustees in bankruptcy as it would exact from any other litigant. If these powers are not to be used, and if the standard of proof is not to be lowered, it would result simply in this; that bankruptcy, instead of being a terror for fraudulent debtors, will become a mere convenience in their interests. Mr. Langford James cited to me two English cases. The first is the case of Ex parte Waddell (1877) 6 Ch. D. 328. I have read that case and it seems to me that the utmost which it decides is, that the Court in such a case as the present would not be without power to make the order asked for. Moreover, the remarks made in the course of that case are obiter. Lord Justice James said, This is not the case of a man who is charged with having property in his possession belonging to a bankrupt and is summoned to give evidence respecting it. In such a case it might possibly be said that there was a litigation between him and the trustee and that he was entitled to be protected by counsel.' Long since this case was decided in 1877, the English practice has been settled and established in the sense I have mentioned. When 1 come to consider the present case upon its merits, I do not find anything that makes me exercise my discretion in the light of Ex parte Waddell (1877) 6 Ch. D. 328. The next case that was mentioned was a case under the Companies Act before Mr. Justice Warrington: In re Appleton, French and Scrafton, Ld. [1905] 1 Ch. 749. In that case it would appear that the original application which had been taken out asked for a summons for the examination of witnesses and also for leave to issue a misfeasance summons against them. The main argument, so far as I am able to collect from the judgment, went upon the question of jurisdiction to make the order asked, for; but when that was decided in the affirmative, Mr. Justice Warrington goes on to say [1905] 1 Ch. 755, 'I desire to say in the strongest terms that my exercise of discretion in this case is not to be used as a precedent in any other case. I intend to lay down no such general rule, and I only make the order asked for under the particular circumstances of this case. The summons asked for leave to examine witnesses and leave to issue misfeasance summons, and the examination was asked for, for the express purpose of establishing a case in support of the misfeasance summons. I agree that ordinarily persons examined under Section 115 of the Act of 1862, as in bankruptcy, merely as witnesses, would hot be entitled to be paid out of the assets or otherwise their costs of employing solicitors or counsel', and then his Lordship cited Ex parte Waddell (1877) 6 Ch. D. 328. I am not very clear what the special circumstances in the case before Mr. Justice Warrington were that made him make an order that should not be regarded as a precedent. I think they were these, that the applicant in that case in asking for a misfeasance summons also asked for a summons under Section 115 because he thought in that way he could not only institute a litigation at once, but could get a part of the evidence which he required for that litigation taken in. the other way so as not to make himself liable to pay costs. Some such notion as that, or perhaps some other exceptional circumstances may be the explanation; but as far as the precedent is concerned, I shall follow Mr. Warrington's request and I shall not accept it as a precedent in an ordinary case.

9. On the facts of the case before me I think there are no special circumstances except possibly one. It would appear that this mortgagee has been examined at different times, on, at any rate, four days before the Registrar. Prima facie, that is a much longer time than, an examination under this section ought to be allowed to take. I am not going to assume that there was anything irregular or wrong, so far, at all events, as the respondents here are concerned. There is no evidence whatever of that. I do notice that the attorney for the insolvent was present at the examination, and, if he took any part in the examination, that action was quite wrong. That is the only fact that I can see that I ought to regard as at all a special fact in this case. Whether, if a part, a large part, of the four days can be shown to have been occupied by the examination on behalf of the insolvent, I should be disposed to make an order in another application, is a question. There can be no order against the present respondent. In the presence of the Official Assignee, possibly in the presence of any subsequent encumbrancer on the mortgaged property, there might be a question of asking me to make the costs of defending his right part of the mortgagee's costs. There might also in another application be a question of making a case for asking me to give some portion of his costs out of the estate. I do not invite either application on the part of the present applicant but I keep my mind open. All I say at present is that there is to my mind no case here why, in my discretion, I ought to make the order asked for against the respondent. In India far more than in England it is necessary to encourage creditors to look after themselves in connection with bankruptcy. I cannot get creditors to take nearly enough interest in the administration of the estates before me and I am certainly not going to lay it down, that the costs of an honest and necessary enquiry are to be thrown upon the creditors who take part in the administration within their rights, in any greater decree or upon any stricter footing than is the practice at home. For these reasons the present motion is dismissed with costs. I certify for counsel.


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