Whether insolvency court can permit addition of parties as per O 1 R 10 of CPC?

Under Section 5, Provincial Insolvency Act the Court in exercising insolvency jurisdiction can follow the procedure prescribed in the Code only when there is no procedure prescribed in the Act with regard to a particular matter but not when it is provided for in the Act. In other words the provisions of the Civil Procedure Code will apply in the absence of any provisions in the Act. Where the Act prescribed a method by which a party can work out his remedy it is not open to him to call to his aid the provisions of the Civil Procedure Code. It is only on this basis that the rulings in 'Venugopalachariar v. Chinnulal', 49 Mad 935: AIR1928 Mad 942; Ayyasami Chetti v. The Official Receiver, Coimbatore', 61 MLJ 719: MANU/TN/0136/1931 : AIR 1932 Mad 63 & 'Abbi Reddi v. Venkata Reddi MANU/TN/0239/1925 : AIR1927Mad175 can be reconciled. I am of opinion that the decisions in 'Ayyasami Chetti v. The Official Receiver, Coimbatore', 61 MLJ 719: MANU/TN/0136/1931 : AIR 1932 Mad 63, 'Abbi Reddi v. Venkata Reddi MANU/TN/0239/1925 : AIR1927Mad175 are not authorities for the proposition that the procedure prescribed under the Code is to be followed irrespective of whether in the Act a specific provision is made with regard to a particular matter or not. If I may say so with respect, I agree with the reasoning of the learned Judges in 'Venugopalachariar v. Chinnulal', 49 Mad 935 : AIR 1923 Mad 942. Further the provisions of Order 1, Rule 10 cannot be invoked by the respondent herein for being added as an additional party for another reason also. Order 1, Rule 10 lays down

"that a Court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just order that the name of any party improperly joined, whether as plaintiff or defendant be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant or whose presence before the Court may be necessary in order to enable the Court, effectually and completely to adjudicate upon and settle all the questions involved in the suit be added."

This rule indicates that a Court can direct addition of another party under two circumstances; either the name of any person, who ought to have been joined originally, was not added as a party or where the presence of a party is absolutely necessary to enable the Court to come to an effective and complete adjudication upon the question involved in the suit. The position that there is no jurisdiction in a Court to add a party in any other case cannot be seriously disputed. See Mullah, 11th Edn., p. 517 and also the decision in 'Ramakrishnayya v. Satyanarayana MANU/TN/0335/1928 : AIR 1929 Mad 291 : 116 IC 137; 'Vaithilinga Pandara Sannadhi v. Sadasiva Aiyar MANU/TN/0439/1925 : AIR1926Mad836 and 'Devendra Kumar v. Mt. Batasi Bai MANU/NA/0051/1933. Now what I have to consider is whether the petitioner can come within either of the two alternatives mentioned in Order 1, Rule 10 (2). Admittedly the respondent in this case cannot come within the first alternative laid down in that Sub-rule (2). The only question is whether he is a person whose presence is necessary for an effective & complete adjudication of the matters in dispute. I do not think his presence is necessary for any effective and complete adjudication of the matters in dispute. It cannot be said his presence is necessary for any effective and complete adjudication of the matters in dispute in this case. Even in the application for being added as a party he does not mention that there is something in the matter which cannot be decided without his being a party to the application. All that he alleges in the application is that, if for any reason, the petitioning creditor does not choose to proceed with his petition diligently, he would be willing to go on with that application. On these allegations in the affidavit, it cannot be said that' his presence is absolutely necessary for deciding whether the debtor should be adjudicated an insolvent or not.

8. It follows that the petitioner cannot be added as an additional party under Order 1, Rule 10, Civil P. C. This petition is therefore accepted and the order of the Courts below is set aside.

 Citation : AIR 1951 Mad 665

IN THE HIGH COURT OF MADRAS

Civil Revn. Petn. No. 1542 of 1949

Decided On: 05.09.1950

M.A. Jaleel Sahib 
Vs.
 Seeniappa Ramaswami Mudaliar and Co., by its Managing Partner N.S. Srinivasan

Hon'ble Judges/Coram:
P. Chandra Reddy, J.

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Whether Insolvency Court can investigate question of title?

On the question as to whether the Insolvency Court could investigate the question of title, Mr. Doctor has placed reliance on the decision of the learned Single Judge of the Madras High Court in the matter of A Narayan Nair, an Insolvent, The Official Assignee, Madras v. Kochamma Amma & others reported in 1980 Madras Law Journal Reports page 455. Reliance was placed on the observations in paragraph 11 of the judgment which appear on page 462 of the Report, to contend that the Insolvency Court cannot decide the validity of the transfers which had taken place more than two years before the date of adjudication on the ground that it has been made with a view to defeat or delay the creditors having regard to the provisions of section 53 of the Provincial Insolvency Act or section 55 of the Presidency Town Insolvency Act. As we have indicated earlier, the Full Bench of this Court in Padamsi Premchand's case reported in A.I.R. (36) 1949 Bom. 129 (supra) has laid down that nominal and fictitious transfers do not fall undersection 53 of the Provincial Insolvency Act corresponding to section 55 of the Presidency Act. Where, therefore, the Official Assignee alleges that certain transfers were made by the insolvent, though beyond two years prior to the relevant date, but the same were nominal and fictitious transfers, the Insolvency Court would have jurisdiction under section 4 of the Provincial Insolvency Act and section 7 of the Presidency Act to decide the validity of the said transactions as was done by the Full Bench where the adjudication of insolvency was of 24th August, 1940 and the transactions questioned were of 25th January, 1935, 30th January, 1935 and 30th March, 1932. We are bound by the Full Bench decision of this Court. We are also in respectful agreement with the view expressed by Mrs. Justice Sujata Manohor (as the learned Judge then was) in Babubhai's case (supra). The view expressed in Babubhai's case makes it clear that the powers under section 7 of the Presidency Act are wide enough to decide all questions of priorities and all other questions whatsoever whether of law or fact, which may arise in the case of Insolvency coming within the cognizance of the Court or which the Court may think it expedient or necessary to decide for the purpose of doing complete justice or making complete distribution of the property in an Insolvency matter. We have indicated earlier that the claims of the creditors, on the date of the order of adjudication, were over Rs. 3 Crores. The transfers, made by the husband in the name of his wife, in our view, were nominal transfers; were sham and bogus and were made clearly with a view to defeating the claims of the genuine creditors. The said transfers being fraudulent, the validity of the same could be investigated by the Insolvency Court by virtue of the powers under section 7 of the Presidency Act. The bar contained in section 55 of the Presidency Act would, therefore, not come in the way.

Bombay High Court

Smt. Yogini Chandrakant Mehta vs The Official Assignee, High ... on 24 February, 1999

Equivalent citations: 1999 (2) BomCR 719, (1999) 2 BOMLR 428, 1999 (2) MhLj 263

Bench: A Agarwal, A Savant

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