Whether the court can restore insolvency petition dismissed in default on the application of one of the creditors?

 The learned Assistant Judge considered that the petitioning creditor sues on behalf of the general body of creditors and, therefore, in a sense every creditor is a party to the proceedings and that under Order IX, Rule 9, any party to the proceeding can ask for a petition dismissed for default being restored to file. But Order IX, Rule 9, refers specifically to the plaintiff who has to satisfy the Court that he has sufficient cause for non-appearance, and it is doubtful whether it was competent to the shop of Laxminarayan Sitaram to apply under Order IX, Rule 9, for a revival of the petition.

7. But the question still remains whether the Court did not have inherent jurisdiction to restore the application to file at the instance of one of the creditors. Under Section 151 of the Civil Procedure Code the Court has inherent powers to make such orders as may be necessary for the ends of justice and to prevent abuse of the process of the Court. In my opinion the ends of justice do require in the peculiar circumstances of this case that the application should be restored to file, and that, therefore, the two lower Courts were right in passing the order that they did.

IN THE HIGH COURT OF BOMBAY

Civil Revision Application No. 87 of 1944

Decided On: 17.11.1944

 Keshav Appa Bhagat  Vs.  Sitaram Hanumandas

Hon'ble Judges/Coram:

G.S. Rajadhyaksha, J.

Citation:1944 SCCONLINE 79: AIR 1946 Bom 20:MANU/MH/0133/1944

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Whether insolvency petition is maintainable if debt is denied by debtor?

This contention of Mr. Bhandari that if the debt is denied by the debtor then no petition would be maintainable under Section 9 of the Act, cannot be accepted, because if the expression "debt is a liquidated sum" is interpreted in the manner in which Mr. Bhandari wants this Court to interpret it, then it would provide an easy handle to every debtor to escape the consequences under the provisions of the Act by simply raising a plea of dental about the existence of the debt. In order to debar a creditor from presenting an insolvency petition against a debtor under Section 9 it is necessary for the debtor to show that the debt is of such a nature which is not capable of being easily ascertained within the mischief of Section 9 of the Act. In P.N.V. Ratnasami Naidu v. K.S.P.A. Subba Reddiar, MANU/TN/0146/1943 : AIR 1943 Mad 766 the learned Judge while defining the expression "debt is a liquidated sum" observed as follows:--

"It is not always easy in a claim on an account to say definitely whether it is for a liquidated sum or for an unliquidated sum. It does not cease to be a, liquidated sum, because it can be arrived at only after making some simple calculation; but if it is not readily ascertainable without enquiry, then it is an unliquidated claim."

13. In Madhya Bharat case Ramchandra Narayanji v. Rameshwar Bhagwandas AIR 1951 MP 115 there was a claim for damages for breach of contract of sale and it was in that context that the learned Judge observed that,--

"An essential condition for the foundation of a creditor's petition is that the debt must 'be a liquidated sum. There must, therefore, be a certain sum admittedly due and payable to the person who presents the petition. A claim for damages for non-performance of a contract of a sale cannot ordinarily be within the meaning of a liquidated sum, especially where the alleged contract and its validity or the need of its performance are in question."

This authority, in my opinion, cannot be of any avail to the appellant, because the facts of that case showed that the claim for damages for the non-performance of the contract of a sale could not be accepted as a "debt" of the creditor, unless such a claim was determined by a competent authority. In my opinion this ruling cannot help the court to find out the correct interpretation of the expression "the debt is a liquidated sum", as used by the Legislature in Clause (b) of Sub-section (1) of Section 9 of the Act.

14. In Allahabad case Balak Ram v. Kaley 1966 All LJ 476, the learned Judge held that a claim for damages before passing of the decree could not be termed as a liquidated sum. but in his opinion once a decree is passed, it becomes a liquidated sum payable immediately. This authority is distinguishable on : the point that in that suit the debt claimed depended upon " the adjudication about the quantum of damages and unless it was done that debt could not be said to be of a liquidated sum. In my opinion this authority of Allahabad High Court hardly throws any light on the question that has been posed for this court to answer.

15. In Subramonia Iyer Saradam-bal v. K. R. Ramchandra Iyer AIR 1956 TC 88, the learned Judges, while examining the scope of Section 9 of the Act, observed that.-

"A debt on which the insolvency petition can be based must be one provable in insolvency or in other words it must be a subsisting debt due from the debtor on the date of the presentation of the petition. It must also be a liquidated sum payable either immediately or at some future time."

According to these observations of the learned Judges, if the debt, even though denied by the party, can be proved easily in the insolvency court, then it can act as a base or foundation for submitting a petition under the provisions of the Act.

 Citation : AIR 1976 Raj 4

IN THE HIGH COURT OF RAJASTHAN

Civil Misc. First Appeal No. 60 of 1973

Decided On: 09.10.1975

Mohanlal
Vs.
Rameshwar Dayal and Ors.

Hon'ble Judges/Coram:
V.P. Tyagi, J.

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Whether joint hindu family firm can be adjudicated as insolvent?

As the above rulings throw little light on the question whether a Hindu joint family firm can be adjudged insolvent under Section 99, Presidency Towns Insolvency Act, it is necessary to look to the words of the section itself. It is no doubt true that a Hindu joint family firm is somewhat different from an ordinary partnership business; as pointed out in Mulla's Hindu Law, p. 250, a joint Hindu family firm is not dissolved by the death of a coparcener whereas an ordinary partnership is dissolved when a partner dies. Ordinarily however there is not much difference between the members of a Hindu joint family who carry on business together and the partners of an ordinary partnership firm. In common parlance members of the family who transact the business are partners and in this case they have so described themselves in the application to the Imperial Bank of India Ex. 14. In that they refer to the firm of Kala Gella as a firm and inform the bank that they are partners of the said firm. This being so, it would seem to be that the wording of Section 99, Presidency Towns Insolvency Act is wide enough to include a Hindu joint family business and that under that section it was open to the learned Additional Judicial Commissioner to adjudicate the firm insolvent.

 Citation : AIR 1931 Sindh 179

IN THE HIGH COURT OF SIND

Decided On: 07.11.1930

 Chaturbhuj and Ors.

Vs.

 F.O. Kewalram and Ors.

Milne, A.J.C.

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Whether insolvency petition can be filed if decree is not for payment of money?

 Civil - Validity of sale - Whether sale of property in execution of decree would fall within meaning of Section 6(e) of Provincial Insolvency Act (the Act) - Held, in present case, decree for sale was not decree for payment of money within meaning of Section 6(e) of the Act and that sale in execution would not be an act of insolvency on which an application for adjudication could be founded - Civil Revision Petition allowed.

Citation : AIR 1937 Mad 433

IN THE HIGH COURT OF MADRAS

Decided On: 14.12.1936

 Vakkalagadda Venkata Rama Lakshmayya
Vs.
 Parepalli Subba Rao and Ors.

Hon'ble Judges/Coram:
Venkataramana Rao, J.

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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 court can apply provisions of civil procedure if specific provisions are available in insolvency Act?

 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.

 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 petition abate on death of debtor?

The scheme of the Act shows that the proceedings in the insolvency are really in rem and ensure for the benefit of all the creditors of the insolvent. The petition cannot be withdrawn without the leave of the court, nor does it abate on the death of the debtor and provision has been made for consolidation of two or more petitions of various creditors and also for substitution of the petitioner .

Delhi High Court

Shadi Ram Ram Sarap Dass And Ors. vs Ravi Chander Xazigla And Ors. on 26 November, 1976

Equivalent citations: AIR 1977 Delhi 187

Bench: B Misba

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Whether member of family who was not personally liable under decree can be adjudicated insolvent?

On the fourth point the learned District Judge is clearly right. Molar Singh, respondent 4, was not personally liable under the decree. The debt in question was due by his father Chattar Singh along with his uncles, respondents 1 to 3. So far as Molar Singh is concerned the decree against him was passed in his representative capacity and was obviously realisable from the estate of Chattar Singh which had come into his possession. On these facts, it was eventually conceded by Mr. Shamair Chand for appellant that, Molar Singh could not be adjudicated insolvent.

 Citation : AIR 1930 Lah 592

IN THE HIGH COURT OF LAHORE

Decided On: 07.03.1930

 Kalu Ram
Vs.
Gitwar Singh and Ors.

Coram:

Tek Chand, J.

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Whether creditor can make single insolvency petition for adjudicating two or more person as insolvents?

After giving the matter my careful consideration I am of opinion that there is no legal bar to a single application being made by a creditor for adjudicating two or more persons as insolvents if they are jointly liable on a debt or have committed a joint act of insolvency.

 Citation : AIR 1930 Lah 592

IN THE HIGH COURT OF LAHORE

Decided On: 07.03.1930

 Kalu Ram
Vs.
Gitwar Singh and Ors.

Coram:

Tek Chand, J.

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Whether legal heirs of deceased creditor can start execution proceeding without obtaining succession certificate?

Hence, the heirs of the deceased creditor cannot start execution proceedings in respect of a decree obtained by the deceased creditor without obtaining representation to his estate. The petitioning creditors are not, therefore, in a position to execute the decree immediately in view of the provisions of Section 214 of the Indian Succession Act. Mr. Daruwala who appears for the petitioning creditors has urged that an order has been obtained under Order 21, Rule 22, of the Civil P. C. Hence the decree was executable on the date when the insolvency notice was issued. He, therefore, submits that the insolvency notice is valid in law and an act of insolvency can be based on the insolvency notice. This argument proceeds on the assumption that if an order has been obtained under Order 21, Rule 22, then the decree is executable. When, however, execution is sought not by the original decree-holder but by his heirs, they are required to comply with the provisions of Section 214 of the Indian Succession Act also before they can proceed to execute the decree. The heirs of the judgment-creditor cannot, therefore, be heard to say that they were entitled to execute the decree at the time when the insolvency notice was issued. Without obtaining representation to the estate of the deceased decree-holder, they were not in a position to execute the decree at the date of the insolvency notice. Non-compliance with an insolvency notice constitutes an act of insolvency only in cases where the notice is issued in respect of a debt under a decree which can be executed in praesenti. The present insolvency notice does not satisfy this legal requirement. Hence no act of insolvency can be based on such an insolvency notice.

Citation : AIR 1980 Bom 76

IN THE HIGH COURT OF BOMBAY

Petition No. 29 of 1978

Decided On: 17.07.1979

Vijay Jethalal Shah
Vs.
Laja Nandlal Raheja and Anr.

Hon'ble Judges/Coram:
S.V. Manohar, J.

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