Decided on April 09,1963

P.L.GANDHI Respondents


N.M.MIABHOY - (1.) This revision petition is directed against an appellate order dated 31st March 1959 passed by the learned Extra Assistant Judge at Surat in Civil Miscellaneous Appeal No. 53 of 1958 which appeal was directed against an order dated 7th October 1958 passed below Ex. 194 which was an application made by second opponent herein raising a dispute regarding the debts claimed by the two petitioners. The question which is raised in the present petition is whether the Insolvency Court was prevented from considering the question about the acceptance of the debts of the petitioners by virtue of certain proceedings which had already taken place during the course of the insolvency proceedings and whether therefore the debts of the two petitioners had already been accepted by that Court which would entitle them to share in the distribution of the assets of the insolvent. The two lower Courts have taken different views. The Insolvency Court took the view that the debts of the petitioners had already been accepted and that therefore the application of the opponent No. 2 calling Upon the Court to determine the debts claimed by the two petitioners was not tenable The appellate Court took the view that the Insolvency Court had not applied its mind on the subject of the determination of the aforesaid debts and that that step still was required to be taken and that therefore it was open to the Insolvency Court to enter into the question about the correctness of the claims made by the two petitioners.
(2.) In Insolvency Petition No 20/32-33 one Parbhubhai Laxmidas was adjudged insolvent by the Civil Court at Kathor which was in the Baroda State territory then. On 23rd of February 1932 the insolvent had transferred some of his assets to Gopal Parbhu for Rs. 8 0 and with the sale proceeds he had satisfied the debts of his three creditors (1) Dahya Vira (2) Amaidas Dhanji and (3) Gopal Parbhu himself. This transaction was impeached by the receiver under secs. 53 and 54 of the Provincial Insolvency Act. Ultimately the transaction was held not to be bad by the Baroda High Court by its order dated 6th December 1946. But the Baroda High Court held that though the transfer was not bad the aforesaid three creditors had been given fraudulent preference. Therefore the Baroda High Court ordered those three creditors to refund the amount of Rs. 8 0 together with interest and called upon those three creditors if they chose to prove their claims in the insolvency proceedings. Accordingly the creditors aforesaid refunded the amount of Rs. 8 0 and the creditors Dahya Vira and Gopal Parbhu further paid a sum of Rs. 1 0 towards interest. Creditor Amaidas Dhanji did not care to prove his claim in the insolvency proceedings. Therefore he went out of the picture. Dahyabhai Vira died and his place was taken by his heir Bhulabhai Dahyabhai petitioner No. 1 herein Similarly Gopal Parbhu also died and he is now represented by his son Rambhai who is petitioner No. 2 herein. Bhulabhai filed an affidavit Ex. 17 to prove his claim of Rs. 5 383 and Rambhai filed his affidavit Ex. 16 in proof of his claim of Rs. 2 275 It appears that whilst the dispute between the three creditors aforesaid and the receiver was pending regarding the transfer dated 23rd February 1932 the Insolvency Court at Kathor had prepared a schedule of creditors at Ex. 123. After Exs. 16 and 17 were filed receiver made a report Ex. 167 seeking directions from the Insolvency Court how payment was to be made to the creditors and whether the present two petitioners were the only legal representatives of Dahya Vira and Gopal Parbhu. On this the Court passed the order Ex. 171 dated 23rd of August 1957 calling upon the receiver to prepare a fresh schedule of creditors. The receiver made his report ex. 179 seeking orders of the Court as to how the assets were to be distributed and attached to the report a schedule of creditors in which he included the names of the present two petitioners as creditors. This report was made on 1st November 1957. This report was posted for hearing to a date after about a fortnight. This report appears to have been shown to several pleaders appearing for different parties in the insolvency proceedings and there are endorsements of some of these pleaders dated 17th of January 1958 in which they have said that they had no objection One of the endorsees was Mr. N. H. Shah who made the endorsement as the transferee of Mr. U. T. Shah who was appearing for the second opponent herein. On 14th of February 1958 the Court passed an order that the schedule should de prepared and asked the receiver to propose a dividend On this the receiver prepared a schedule Ex. 190 dated 22nd of March 1958 which included the names of the two petitioners and showed the sum of Rs. 2 275 against Rambhai Gopal and the sum of Rs. 5 383-1-0 against Bhulabhai Dahyabhai. This schedule was signed by the learned Civil Judge (Senior Division ) Surat. This was so because after the merger the insolvency proceedings had come to be transferred to that Court and numbered as Insolvency Petition NoN 3 of 1958. On 28th of March 1958 the receiver by his report Ex. 1919 proposed a dividend and asked for the fixation of payment of his remuneration. On this the Court passed an order on 22 of March 1958 calling upon the creditors to have their say and on the 1st of April 1958 Shri U. T. Shah the learned Advocate for the opponent No. 2 made an endorsement to the effect that be had no objection if reasonable remuneration was paid to the receiver. There was a similar endorsement dated 10th of April 1958 by another Advocate named K. G. Desai. On 23rd of April 1958 the Court passed an order on the basis that the parties had no objection to the proposal of the receiver and approved the proposal and called upon the receiver to distribute a dividend as proposed by him and to receive the amount of remuneration as suggested by him. It is after this order was passed on 23rd of April 1958 that the second opponent herein made the application Ex. 194 on 6th of August 1958. By this application the second opponent contended that the two petitioners debts in substance had not been accepted by the Insolvency Court and that they were not entitled to a share in the distribution of the assets unless an order was passed accepting their debts. Therefore in substance the second opponent requested the Court to enquire into the correctness or otherwise of the claims made by two petitioners by exs. 16 and 17. The two petitioners gave their reply by Ex. 199 in which they contended that in effect their debts had already been accepted by the Insolvency Court and that nothing further required to be done. In stating the facts I have not used the same nomenclature as the parties have done in the course of their pleadings or the nomenclature which has been used by the Insolvency Court and the Appellate Court. The contention which was in fact urged by opponent No. 2 was that the petitioners had not proved their debts and the reply of the petitioners was that in fact they had so proved their debts. What really the opponent No. 2 contended was as already stated that the claims made by the two petitioners had not been accepted by the Court till then and what the two petitioners contended was that those debts had been in fact so accepted. The Insolvency Court as already stated took the view that that Court had done whatever was necessary for the two petitioners to be entitled to a share in the distribution of the assets and that having regard to the proceedings already undertaken nothing further required to be done by the Court to enable the two petitioners to a share in the proposed dividend. The Appellate Court took a different view. It held that the Insolvency Court had not applied its mind and determined the correctness of the claims made by the two petitioners and that unless that step was taken which the Court should have done the petitioners could not be said to have acquired a right to a share in the distribution of the assets. It is this question which requires to be resolved in the present petition.
(3.) Now as to whether a debtor has or has not acquired a right to a share in the distribution of the assets depends upon a consideration of the provision contained in sec. 33 of the Insolvency Act. Sub-sec. (1) of sec. 33 states that when an order of adjudication has been made all persons alleging themselves to be creditors of the insolvent in respect of debts provable under the Insolvency Act shall tender proof of their respective debts by producing evidence of the amount and particulars thereof and the Court shall by order determine the persons who have proved themselves to be creditors of the insolvent in respect of such debts and the amounts of debts respectively and shall frame a schedule of such persons and debts. The same subject is also dealt with by rule 8 of the Insolvency Rules framed by the High Court of Bombay. Sub-rule (1) states that unless otherwise ordered all claims shall be proved by affidavit in form No. VII in the manner provided in section 49 of the Act provided that before admitting any claim the Court may call for further evidence. Sub-rule (3) states that as soon as may be after proof of any debt is tendered the Court shall by order in writing admit the creditors claim in whole or in part or reject it provided that when a claim is rejected in whole or in part the order shall state briefly the reasons for the rejection. The effect of the aforesaid provisions is as follows. There are three steps to be taken one by the alleged creditor and the other two by the Court for determining as to who are the creditors of the insolvent and what are the debts due to them. The first step is to be taken by the alleged creditor and that step is described as the proof of his debt in sec. 49 and some other sections of the Insolvency Act. Section 49 says that a debt may be proved either by delivering or by sending by registered post to the Court an affidavit verifying the debt. According to rule 8 aforesaid the normal way of proving the claim is by making an affidavit in Form No. VII. The second and the third steps are to be taken by the Court. The second step is the determination of the persons who have proved themselves to be creditors and the amounts of the debts proved by them. This is to be done by passing a written order. Not only the rules enjoin that the Court is to do this by passing an order but sec. 33 in specific terms says that the two questions are to be determined in that manner. After the Court has discharged this duty the third step is that of the framing of a schedule of creditors and the debts due to them and it is to be taken by the Court.;

Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.