Posted On by &filed under Calcutta High Court, High Court.

Calcutta High Court
Rustomjee Dorabjee vs K.D. Brothers And Anr. on 30 April, 1926
Equivalent citations: AIR 1927 Cal 163
Author: Sanderson


Sanderson, C.J.

1. This is an appeal by Rustomjae Dorabjee against an order of the learned Judge sitting in insolvency on the Original Side, dated the 13th January 1925. The order is headed as follows:

Numbers 10 and 27 of 1924, re Krishna Das and Brij Mohan Das both residing and carrying of business in co-partnership in bioscope films with Jug Mohan Das at No. 150, Lower Chitpur Road, in the town of Calcutta, under the name and style of K.D. Brothers find re Messrs. K.D. Brothers a firm carrying on business in cinema trims and as exhibitors of cinema shows at 150, Lower Chitpur Road, in the town of Calcutta and at the Goverdhone Buildings, Charni Road, in the Sown of Bombay and at Sule Pagoda Road in the town of Rangoon.

2. The order recited that Mr. Landlord James appeared for the insolvent firm; Mr. A. Sen, advocate for Rustomjee Dorabjee, one of the creditors of the insolvent firm; and another learned advocate for another creditor of the said firm.

3. It was further recited that the insolvent’s assets were not of a value equal to four annas in the rupee on the amount of their unsecured liabilities, and it was ordered that
the discharge of the said insolvents Krishna Das, Jugo Mohan Das and. Brij Mohan Das be and the same is hereby suspended for three months. And it is further ordered, that the said insolvents do before the signing of this order consent to a decree being passed against them in this Court in its ordinary original civil jurisdiction in favour of the said Official Assignee for the sum of Rs. 10,000 being part of the balance of the debts provable in insolvency which are not satisfied at the date of this order.

4. The report of the Official Assignee of Calcutta was dated the 2nd September 1924. Prom that it appears that Jugo Mohan Das, one of the partners of the firm, was adjudicated insolvent by the Bombay High Court on the 19th December 1923. It appears further that an order of adjudication in insolvency was made by this Court against Krishna Das and Brij Mohan Das, two of the partners of the firm on their own application on the 12th January 1924. It was stated by the learned advocate, who appeared for the appellant, that the members of the firm were adjudicated insolvents by the Bombay High Court on the 24th January 1924. The learned advocate who apeared for the respondents did not admit that date. It is clear from the Official Assignee’s report that there was an adjudication made against the members of the firm by the Bombay High Court but the Official Assignee did not state in his report what was the date of that order, and therefore this Court at present is not aware of the actual date of the adjudication order which was made by the Bombay High Court against the members of the firm.

5. On the 28th of January 1924 there was an order of adjudication made by the Calcutta High Court against the members of the firm of K.D. Brothers. That adjudication order was made at the instance of a creditor. The two adjudications in the Calcutta High Court which were numbered 10 and 27, were consolidated and were dealt with by one order, as I have already mentioned, on the 13th January 1925.

6. It seems to me that the order for the conditional discharge dated the 13th January 1925 must have been made upon, the assumption that the two orders of adjudication made by the Calcutta High Court had vested the assets of the members of the firm in the Official Assignee of Calcutta; otherwise I do not understand how the order of conditional discharge could have been made. The question arises whether the order of conditional discharge of the 13th January 1925 should have been made. I am clearly of opinion that that order should not have been made. It is material to consider what would be the effect of the order of the 13th January 1925. Section 45 of the Presidency Towns Insolvency Act is the section which deals with the effect of an order of discharge. But before I deal with that section I think it advisable to refer to Section 17 of the Act. That section provides:

On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the Official Assignee and Khali become divisible among his creditors.

7. It is not necessary, for mo to read the remainder of the section.

8. Sub-section (1) of Section 45 deals with certain debts, from which au order of discharge shall not release the insolvent. The first sub-section is not applicable to the case which is now under consideration. Sub-section (2) provides as follows:

Save as otherwise provided by Sub-section (1) an order of discharge shall release the insolvent from all debts provable in insolvency.

9. The result of the order of the 13th January 1925, therefore, would be that when the insolvents had consented to the decree for Rs. 10,000, in accordance with the order, the discharge would operate at the end of the three months specified in the order and the members of the insolvent firm would be released from all debts provable in insolvency. The insolvents did consent to the abovementioned decree being entered against them on the 18th of February 1925.

10. I draw attention to the words “all debts provable in insolvency” for I think the order, which is now under consideration, can only have been made upon the assumption that it would not affect the proceedings in insolvency in Bombay. One of my reasons for saying so is this. There is passage at the bottom of page 5 of the paper-book in the Official Assignee’s report which runs as follows:

The insolvent Judge Mohan Das, who stays at Bombay, was examined before the Ragistrar in Insolvency under Section 36. He has joined in the schedules filed by his brothers of the Calcutta and Rangoon branches. The schedules of the Bombay business not having been tiled, it is impossible to say how the position of. the Bombay business stands.

11. I fail to understand how the conditional order of discharge dated the 13th January 1925, could be made in view of that report, which means that the Official Assignee was not able to give the Court any information as to the position of the insolvents’ business in Bombay. Bombay was the head office of the firm and the business there was evidently an important part – it may be the most important part of the firm’s business.

12. If it had been appreciated that the effect of the learned Judge’s order would lie to discharge the insolvents from all debts provable in insolvency, I feel sure that the order would not have been made without sorrow investigation as to the assets and as to the liabilities of the insolvents in Bombay. There are several other matters which go to show that the order should not have been made.

13. Section 38 provides as follows:

An insolvent may at any time, after the order of adjudication, apply to the Court foe an order of discharge, and the Court shall appoint a day for hearing the application, but save where the public examination of the insolvent has been dispensed with under the provisions of this Act, the application shall not be hoard until after examination has been concluded.

14. I have already referred to the statement in the Official Assignee’s report that the schedules of the Bombay business had not been filed at the time the Official Assignee made his report on the 2nd September 1924. It appears further that the public examination of the insolvents had not been concluded at the time the application for the discharge was made. From the report of the Official Assignee it appears that only one of the insolvents, viz., Krishna Das, had been subjected to a public examination. It seems to me that if this fact had been brought to the attention of the learned Judge, the order of the 10th January 1925 would not have been made.

15. Section 27, Sub-section (2) contain plates schedules being filed by the insolvents before the public examination of the insolvents. It appears, however, that the public examination of Krishna Das, the only insolvent who was publicly examined, was concluded before the schedules relating to the Bombay business were filed.

16. There are other matters to which learned advocate for the appellant referred; but which, in my opinion, I need not mention in detail, because the matters which I have already mentioned are, in my opinion, sufficient to show that the order complained of cannot be allowed to stand. The Official Assignee in his report stated as follows:

It appears that the firm was also adjudicated by an order of the Bombay Court. There are therefore orders against the firm pending both here and in Bombay but no creditor so far as I Mil aware has taken any steps under Section 22 of the Presidency Towns Insolvency Act either here or at Bombay to have the proceedings taken in one Court only.

17. From this I assume that the Official Assignee, having stated what I have just read, felt that there was no duty upon him to take any further step’s in that respect.

18. I am not able to agree with that proposition. In my opinion, it was the duty of the Official Assignee to take stops in the first place to ascertain whether the property of the insolvents had vested in 1dm or in the Official Assignee of the Bombay Court. I cannot find any trace of his having made any effort to get information upon that important matter. If he had ascertained that fact, it would have been open to him to take such steps as he would, have been advised. I am not in a position to say what steps he could or should have taken for the simple reason that I do not know the facts which, in my opinion, the Official Assignee ought to have ascertained and laid before the Court.

19. On this question I will refer to a judgment of Sir John Wallis, when he was the Chief Justice of Madras, in the case of The Official Assignee of Madras v. the Official Assignee of Rangoon [1918] 42 Mad. 121 which clearly states the position when adjudication orders were made by two Courts, namely, the High Court of Madras and the Chief Commissioner’s Court of Lower Burma. In that caw the insolvent firm carried on business in Madras and Rangoon, and on the 23rd April 1917 an order of adjudication of the members of the firm was made by the High Court of Madras on a petition of creditors.

20. On the 10th May 1917, the same firm was again adjudicated insolvent by the Chief Court of Lower Burma in respect of acts of insolvency found to have been committed in or about the month of February of the same year. the Official Assignee of Rangoon moved on the 10th April 1918, before the High Court of Madras, for annulment of, and stay of further proceedings under, the adjudication of the Madras High Court. I draw attention to the fact that it was the Official Assignee who moved in that case. The learned Judge who’ heard the application made an order for stay of proceedings in the Madras High Court. On appeal the learned Chief Justice and Mr. Justice Seshagiri Ayyar dismissed the appeal. There are two passages in the learned Chief Justice’s judgment to which I wish to refer. At page 125 the learned Chief Justice is reported to have said:

The provisions in Section 17 that on the making of an order of adjudication the property shall vest in the Official Assignee is express, and there is no provision in the Act divesting the property so vested in that Official Assignee and transferring it to another Official Assignee under a later adjudication.

21. At page 126 the learned Chief Justice referred to a case which was decided by the House of Lords and to a passage in Mr. Dicey’s Conflict of Laws and stated as follows:

As observed by Mr. Dicey citing this case, priority depends on the date of adjudication and not on the date of commission of the act of bankruptcy.

22. Then the learned Chief Justice made the following observations with which I entirely agree:

In British India who have not only four insolvency jurisdictions under the Presidency Towns Insolvency Act, but also the very numerous jurisdictions under the Provincial Insolvency Act, so that cases like the present may not in-frequently arise. In all such cases it should, we think, be rocognised that the vesting depends on priority of adjudication, and that steps should at once be taken to annul the prior adjudication where it is convenient that the estate should be administered by another jurisdiction. Great confusion might ensue if competing assignees or receivers were to have concurrent authority to realize the insolvent’s estate independently of one another, instead of the insolvency being in one jurisdiction only at a time and the other jurisdictions being required to act in aid of it, if necessary.

23. In my judgment in this case, the. Official Assignee, as I have already stated, should have ascertained the material fasts relating to the adjudication in Bombay and should have taken such steps as he was advised and obtained the directions or orders of the Court with a view to prevent the confusion and difficulties referred to by the learned Chief Justice of Madras, which would be caused by the estate being administered by competing Official Assignees. I am of opinion, therefore, subject to the preliminary point taken by the learned advocate who appeared for the respondents, to which I will presently refer, that the learned Judge’s order of the 13th January 1925 must be set aside.

24. The learned advocate for the respondents argued that the appellant had no right of appeal. Section 8 of the Presidency Towns Insolvency Act is the section which deals with this matter, and it is provided in Sub-section (2) of that section that
orders in insolvency matters shall, at the instance of any person aggrieved, be subject to appeal, as follows.

25. The question is whether the appellant is a “person aggrieved” by the order which was made by my learned brother on the 13th of January 1925. In the first place, it should be noted that the appellant was allowed to appear before the learned Judge and he is referred to in the order as appearing in the capacity of a creditor. There was no objection to his so appearing.

26. It was urged in this Court that ha had no right to appear and therefore no right to appeal on the ground that he had not filed a proof. There is no finding on this point, and the objection was not taken at a time when evidence could have been given, if necessary, as to the question of the appellant’s right to appear.

27. Section 40 is the section which deals with the right of a creditor to be heard by the Court upon an application by the insolvent for discharge. I am not prepared at present to hold that the appellant had no right to appear before the learned Judge, but I do not think it necessary in this case to give any definite decision upon the question for the following reasons.

28. There is no doubt that the appellant is a creditor of the firm. It was stated that some time or other (the date is not certain) the appellant had filed a proof in respect of his debt in the insolvency.

29. If the order of the 13th January 1925 is allowed to stand, in my opinion, it is obvious that the right of the appellant to recover his debt or part of his debt from the insolvents may be seriously affected, as I have already pointed out, by reason of Section 45 of the Presidency Towns Insolvency Act.

30. I am therefore of opinion that the appellant is a “person aggrieved” within the meaning of Section 8 of the Act whether he had a right to appear before the learned Judge or not and consequently he has a right to appeal to this Court.

31. The appeal will be allowed and the learned Judge’s order of the 13th January 1925 will be set aside. We give the appellant liberty to add the amount of his taxed costs in this appeal to his secured debt.

Rankin, J.

32. I entirely agree. It is well settled, as regards the practice under the English Acts, which are for this purpose repeated in the Presidency Towns Insolvency Act of 1909, that there, is no rule that a person to be entitled to appeal must have been a respondent, below. The test whether the appellant is “a person aggrieved” for the purpose-of Section 8 is entirely independent of the question whether under the particular arrangement (which in England is represented by Section 26, Sub-section (7), and the English Bankruptcy Rule 227) which in our Act is represented by Section 40, which is enlarged by our Insolvency Rule 152, he was or was not entitled to take part in the proceedings before the learned Judge.

33. In this case what has happened is that two insolvencies have been going on in respect of the same firm in Calcutta and in Bombay just as though one set of proceedings had been in Calcutta and the other set of proceedings had been in Berlin. Each Court appears to have carried on the proceedings to some extent. This Court at the time when the Official Assignee presented his report upon the insolvent’s application for discharge had apparently done a certain amount of administration. It got in & list of creditors and it got in apparently certain statements as to the assets in, Calcutta and in Rangoon, but as regards the position of the Bombay business there was no information as to its assets; and it does not appear that any real attempt was made to administer anything except; such assets as were not being administered in Bombay. The appellant was a creditor in Bombay. He was a secured creditor and in the list of creditors which was supplied to the Calcutta Assignee his name appeared.

34. It is true that the insolvent represented that ha was over-secured and that there was, therefore, an asset in the equity of redemption. However, the appellant appears to have taken no part in the proceedings in Calcutta, but at some stage to have taken some part tendering a proof in the proceedings in Bombay. While that was the position he was given notice of the public examination and of the application for discharge in the Calcutta proceedings. Apparently all the Bombay creditors were given these notices. The appellant apparently thinking that the proceedings with which he was concerned wore those in Bombay took no steps in the matter until a late stage when he came to the conclusion that under the Presidency Towns Insolvency Act a discharge in Calcutta would be a discharge from all liability provable in insolvency and therefore would put an end to his own claim except in so far it was against the security. Thereupon he appeared before the learned Judge and asked for a stay and attempted to raise the question whether double bankruptcy under the same Act in India should be allowed to be pushed to this extreme.

35. The learned Judge, being doubtless very familiar with the habit of creditors who have taken no interest in the insolvency and given no assistance in the administration to come in at the last moment upon the insolvent’s application for discharge in a state of high excitement wanting to begin all over again, very properly looked upon the belated application with some suspicion. Had he, however, appreciated that the case before him was a case of a kind that has never been intended by the Act at all, namely, the case of two Courts each claiming to be administering the whole assets of the same firm, each claiming that all the creditors should apply to it for a dividend and each claiming to have a right to release the members of the firm from all liability in respect of the debts provable in insolvency, – had he relised that, the learned Judge would, I think, have seen that whatever the merits of the particular application, it was necessary in the interest of the Court and in the interest of public order, to have this matter dealt with and to refuse to go on with the discharge.

36. The question now is whether the appellant in these circumstances is a “person aggrieved” by an order which purports to release the insolvents from all liability from any debt provable in bankruptcy, and it is said that unless he had tendered a proof in this insolvency the case law is against him. That is quite true. Where the appeal is against, an order which merely affects the fund applicable for dividend in this Court it is doubtless quite right to insist that the appellant should at least have tendered a proof before going to appeal about the distribution or the quantum of then fund.

37. This case is not to my mind on all : fours with the case Ex parte Ditton, re Woods [1879] 11 Ch. D. 56, cited to us, because here the matter may be tested in this way : suppose the Official Assignee in Bombay had applied to this Court as a “person aggrieved” by this order on the ground, that its operation was to sweep away the Bombay insolvency altogether. It must be that he could have done so in the interest of the Bombay creditors. To my mind, not in his capacity as a creditor who has proved in this insolvency, but in his capacity as a creditor taking part in the other insolvency the appellant has right to come to this Court and to say that the order made by this Court is one which should no have been made. The insolvents actually applied to the Bombay Court to terminate its proceedings on the ground of the order of the learned Judge.

38. With regard to the merits of that order I would add that it appears to have been an oversight, if not on the part of the officers of the Court at least on the part of the Official Assignee, that this, application was allowed to be presented at all at the time at which it was presented. Apart altogether from the fact that the assets of the Bombay business had not been disclosed under a proper schedule of affairs no proper public examination had really taken place. Two of the insolvents have not yet undergone public examination. In those circumstances, this application ought never to have reached the learned Judge. If it could not be stopped in the office, the first thing which should have appeared in the report of the Official Assignee was a strong objection against its being heard at all.

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