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Judgment
Nainar Sundaram, J.—This Original Side Appeal is directed against the order of the learned single Judge of this Court in insolvency
jurisdiction is Application No. 391 of 1989 in I.P. No. 46 of 1989. I.P. No. 46 of 1989 was taken out by the first-respondent herein as petitioner
therein under S. 9(1)(d)(ii) and (iii) of the Presidency Towns Insolvency Act, 1909, hereinafter referred to as the Act, for adjudication of the
respondent therein�the appellant herein as an insolvent on the ground the respondent departed from his dwelling house or usual place of business
or otherwise absented himself and secluded himself so as to deprive his creditors of the means of communicating with him. It is better we go back
to and refer to the parties as per their array in the main insolvency petition, I.P. No. 46 of 1989. The insolvency petition was admitted by this
Court, and on 10-7-1989 the learned single Judge of this Court in insolvency, ordered notice returnable by two weeks. Thereafter the matter had
gone before the Master of this Court with regard to completion of service on the respondent. A notice issued on 11-7-1989 was taken by the
learned counsel appearing for the petitioner by registered post, acknowledgement due, to the address of the respondent as ""Mr. C.A. Baloo,
proprietor Jayasakthi Chits & Finance No. 225, Lakshmanaswamy Road, 7th Sector, 36th Street, K.K. Nagar, Madras-600 078"". It must be
noted here that in the Insolvency Petition, the petitioner gave the address of the respondent as at No. 34, Venkataraman Street, T. Nagar,
Madras-600 017. The notice taken by registered post by the learned counsel for the petitioner was not to this address but to the address, as noted
above. In the body of the Insolvency Petition, the petitioner has stated as follows:
The petitioner after coming to know about the closure of the business has been making efforts to meet Thiru C.A. Baloo, the debtor herein. He
also came to know that the office At Trichy No. 22, Madurai Road, Tiruchirappalli-620 008 was sealed under order of Court for attachment of
movables. The petitioner made enquiries about the debtor and given to understand that the debtor may be contacted at Madras. The petitioner
came down to Madras on Tuesday the 4th April, 1989. The petitioner went to the debtor''s place at door No. 34, Venkataraman Street, T.
Nagar, Madras, on 5-4-1989. He found that a doctor was residing in the place. The doctor told him that he does not know anything about the
debtor''s whereabouts. The petitioner is reliably given to understand that the house stands in the name of debtor''s wife, Smt. Sundari Bai.
The petitioner then contacted a press in No. 39, Natesan Street, T. Nagar, Madras, where the debtor is running the press benami in his wife''s
name. There also be could not meet the debtor but he managed to get the address of the debtor residing as a tenant viz., No. 225, Lakshmana
Swamy Road. 7th Sector, 36th Street, K.K. Nagar, Madras. The petitioner went to this place on 6-4-1989 along with his friend at Madras viz.
Mr. N.K Damodaran. The petitioner reached the place by 6-00 p.m. Again they could not meet the debtor therein. But then they were confronted
by one Thiru Sekar Shanmugam, a local man who told them that they cannot meet the debtor and he refused to allow them inside the house. On
insistence by the petitioner he ultimately informed him that the debtor is not in the house and that he does not know his whereabouts.
From the above averments, it is clear that to the knowledge of the petitioner, the respondent was no longer at Door No. 34, Venkataraman Street,
T. Nagar, Madras-17.
The notice taken by registered post, acknowledgement due, was not returned, when the Master of this Court took up the matter on 27-7-1989
and it was ordered ''Await acknowledgement, call next week.'' On 3-8-1989, the matter again came up before the Master of this Court and it was
ordered ''Covers were returned as ''no such person''�fresh notice through Court�two weeks''. We find the notice along with the cover sent by
registered post, acknowledgement due, amongst the records of the case and the endorsement on the cover supports the order made by the Master
of this Court. On 17-8-1989, the Master of this Court made further orders as ""Steps taken; await two weeks."" Steps have been taken through
Court for service on the respondent at No. 34, Venkataraman Street, T. Nagar, Madras-600 017. On 31-8-1989, the matter came up again
before the Master of this Court, and he passed orders as ''Await, two weeks''. In the meanwhile, on 28-8-1989, the petitioner took out
Application No. 286 of 1989 for ordering substituted service by publication in one Tamil daily in Madras city; by affixture at the last known place
of address and by affixture on the Court Notice Board. On 6-9-1989, Application No. 286 of 1989 was brought before the learned single Judge
sitting in Insolvency and that application was ordered as prayed for. In the meanwhile, the notice, taken through Court, had been returned by the
Bailiff with his endorsement dated 31-8-1989, and he had noted that the respondent could not be found at No. 34, Venkataraman Street, T.
Nagar, Madras-600 017. It is true that the endorsement of return of the Bailiff dated 31-8-1989 was not there at the time when Application No.
286 of 1989 was filed on 28-8-1989. But, we do not get any indication that the endorsement of return of the Bailiff, dated 31-8-1989, was placed
before the learned single Judge of this Court, sitting in Insolvency, when Application No. 286 of 1989 was ordered on 6-9-1989.
As to what prompted the petitioner to file Application No. 286 of 1989 for substituted service could be gathered from the averments found in
the affidavit sworn to in support of that Application. The affidavit has been sworn to by one Mr. A. Babu, an Advocate, working along with the
learned counsel for the petitioner. The relevant averments run as follows:
The notice in the above petition was taken to the debtor by registered post, acknowledgement due, and the cover was returned with an
endorsement ''left''. The Honourable Court was pleased to order fresh notice through Court. The steps were taken and the bailiff''s report
regarding service has not been filed till this date. Since the Official Assignee is appointed as Interim Receiver in I.P. Nos. 5,6 and 7 of 1989 against
the same debtor and the matter is felt urgent, I submit that expeditious steps far completing the service and prosecution of this petition has become
imminent.
I therefore pray that this Honourable Court may be pleased to order notice of this petition to the debtor/respondent herein by substituted service
by publication in one Tamil daily in Madras city. L.K.R. & C.N.B., since the debtor is the resident of Madras city and pass such further or other
orders as this Honourable Court may deem fit and proper in the circumstances of the case and render justice.
The publication was made on 11-9-1989 and the date of hearing was given as 18-9-1989 in the publication. It must also be noted that apart from
the publication, with regard to the other modes of service, namely, affixture on the last known place of address and affixture on the Court Notice
Board, nothing is known to have been done On 18-9-1989, on an affidavit being filed, enclosing a copy of the publication, an order of
adjudication against the respondent was made ex parte. The respondent took out Application No. 391 of 1989 to set aside the ex parte order of
adjudication, and that Application has been dismissed by the learned Judge of this Court in Insolvency, and, as already noted, this Original Side
Appeal is directed against that order of the leaned single Judge in Insolvency.
Mr. G. Subramanian, learned counsel for the respondent, would urge the following points coveting interference in appeal with the order of the
learned single Judge in Insolvency when he declined to set aside the ex parte order of adjudication. The first point is that there was no justification,
both in law and on facts, to resort to the process of substituted service and the ingredients for resorting to that process were patently lacking and
hence service by substituted mode, as done in present case by publication, must be held to be no service at all in the eye of law, and on that
ground the ex parte order of adjudication must be set aside. In support of the first point, learned counsel relied on the pronouncement of a Bench
of this Court in Chockalingam v. Rajarathnam 1964-2-M.L.J. 376. By way of supplemental aspects or aspects ancillary to the first point, learned
counsel for the respondent would urge that there is no proof of adhering to the other modes of substituted service ordered and further, sufficient
time was not given even in the notice published. The second point urged by the learned counsel for the respondent is the petitioner knew that the
respondent was no longer at No. 34, Venkataraman Street, T. Nagar, Madras-17, as borne out by the very averments in the Petition for
adjudication and without any bona fides the petitioner took notice through Court to the said address as well as made the publication to the said
address, and the notice taken through Court and later published being to the wrong address, cannot be taken note of at all, so as to hold service
sufficient on the respondent. With regard to the second point, learned counsel for the respondent cited the pronouncement of a Bench of this Court
in Padmanabhan v. R.R. Shah & Four others 1988-I-L.W. 1.
Taking up the first point, we are obliged once again to touch the factual aspects. The notice taken as per order dated 10-7-1989 to the address
of the respondent at No. 225, Lakshmanaswamy Road, 7th sector, 36th Street, K.K. Nagar, Madras-600 078, by registered post, with
acknowledgment due, had been returned unserved. Thereafter-wards, on 3-8-1989, the court deemed fit to order fresh notice through court.
Steps in this behalf had been taken to serve the respondent at the address No. 34, Venkataraman Street, T. Nagar, Madras-600 017. The notice
sent through the Bailiff of the Court had not yet returned on 28-8-1989 when Application No. 286 of 1989 came to be filed asking for substituted
service. The averments in the affidavit filed in support of this Application do not say that the respondent was keeping out of the way for the
purpose of avoiding service or for any other reason the notice could not be served in the ordinary way. What all that had been stated was that the
Bailiff''s endorsement of return regarding service had not been filed till that date and the matter was urgent. The endorsement of return of the Bailiff
came on 31-8-1989. This endorsement of return of the Bailiff does not appear to have had been placed before the learned single Judge in
Insolvency for any consideration of his when be was requested on 6-9-1989 to order the Application No. 286 of 1989, as prayed for.
With regard to service of notice in Insolvency proceedings, certain provisions of law have got to be adverted to and set down. S. 90(1) of the
Act says that in proceedings under the Act, the Court shall have the like powers and follow the like procedure as it has and follows in the exercise
of its ordinary original civil jurisdiction. There are rules framed pursuant to powers conferred by S.112 of the Act under the caption Insolvency
Rules, 1958. hereinafter referred to as the Rules, by this Court, and O.1, R. 11 says, ""All notices and other documents for the service of which no
special mode is directed may be sent by registered post prepaid for acknowledgement to the last known address of the person to be served
therewith"". O.3, R.13, (a) may also be looked into and it reads as follows:
13(a). If the Court orders the petition to be served upon the debtor, and other respondents, if any the Registrar shall endorse upon the copy
thereof the date of presentation, and the date fixed for the hearing, and the same shall be served upon the debtor by the petitioning creditor through
registered post prepaid for acknowledgment to the last known address of the debtor and the affidavit of service be filed or by any special mode
directed by the Court
The rules by themselves do not specifically refer to the contingency for and the method and manner of effecting service of notice by substituted
mode. By virtue of S. 90(1) of the Act, we can look into the rules framed by this Court to govern proceedings on its Original Side and those rules
are found in O. IV thereof. We may straightway say after analysing the rules, that except for the position that the rules require a minimum gap of
fourteen days between the service of summons upon the defendant and the date of hearing so as to enable the defendant to enter appearance and
make his defence, the Original Side Rules are not elucidative on this aspect. But, then we find O.1 R. 3 of the Original Side Rules contemplate that
except to the extent specifically provided by the Original Side Rules, the provisions of the Code of Civil Procedure, hereinafter referred to as the
Code, shall apply to all proceedings. By virtue of the implication of this rule, the Court has to go back to the Code to find out as to when
substituted service could be ordered, O.5, R. 20 of the Code is relevant and it reads as follows:
Substituted service.
(1) Where the Court is satisfied that there is reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or
that for any other reason the summons cannot be served in the ordinary way, the Court shall order the summons to be served by affixing a copy
thereof in some conspicuous place in the court-house, and also upon some conspicuous part of the house (if any) in which the defendant is known
to have last resided or carried on business or personally worked for gain or in such other manner as the Court thinks fit.
(1A) where the Court acting under sub-rule (1) orders service by an advertisement in a newspaper, the newspaper shall be a daily newspaper
circulating in the locality in which the defendant is last known to have actually and voluntarily resided, carried on business or personally worked for
gain,
(2) Effect of substituted service;
Service substituted by order of the Court shall be as effectual as if it had been made on the defendant personally.
(3) where service substituted, time for appearance to be fixed.
where service is substituted by order of the Court, the Court shall fix such time for the appearance of the defendant as the case may require.
As we could see from the extract, O.5, R. 20(1) of the Code lays down that there must be satisfaction on the part of the Court that there is no
reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot
be served in the ordinary way. The resort to substituted service is not a matter of course. It could also be stated that there is a duty cast on the
Court to record in writing the factum of its own satisfaction about the defendant''s evasion of service. But, at least there must be an indication that
adequate and convincing materials were placed before the Court for it to arrive at the satisfaction that the defendant was keeping out of the way
for the purpose of avoiding service or the summons could not be served in the ordinary way. Without the satisfaction of the condition, namely, that
the defendant is keeping out of the way to avoid service, the Court will not be in order to direct substituted service. The non-fulfilment of the
condition set down in the provision, the satisfaction of which is necessary before the Court orders substituted service would amount to a material
irregularity justifying the setting aside of an ex parte decree. In such a contingency, the Court could bold that the defendant had not been properly
served, as required by law. Sub-rule (2) of rule 20 of Order 5 of the Code says that service substituted by order of the Court shall be as effectual
as if it had been made on the defendant personally. Hence, the rigour with regard to fulfilment of the condition before ordering substituted service
cannot be lost sight of. In the instant case, the Court deemed fit on 3-8-1989 to order fresh notice through Court. Steps having had been taken in
this regard, there ought to have had been an awaiting of the results of such steps taken. On 17-8-1989, the Court further adjourned the matter to
await service, having taken note of the fact that steps were taken. Again on 31-8-1989, the Court directed the matter to be called after two
weeks, awaiting service through Court. The two weeks time could have lapsed only on 14-9-1989. Even before that, the petitioner had taken out
Application No. 286 of 1989 with the very unsatisfactory and inchoate averments, as per the extract made above, seeking orders of Court for
substituted service. The endorsement of return of the Bailiff came on 31-8-1989 and from a plain reading of the endorsement, it is not possible to
categorically from an opinion that the respondent was purposely evading service. Even that endorsement of return of the Bailiff had not been
placed before the learned single Judge in Insolvency and he had no occasion to be satisfied either on the perusal of the endorsement of return of
the Bailiff or after examination of the Bailiff, or otherwise that the respondent was purposely evading service and it was not as if thereafter the
learned single Judge in Insolvency deemed fit to order substituted service. If these processes had happened, there may not be straightway room for
any demur or grievance, as expressed now. But, none of these things did happen. We are not to be understood as ruling out the possibility of
complaint of lack of warrant for ordering substituted service, even if these things had happened. In such a situation also there could be attack on
the propriety of the satisfaction arrived at by the Court. But here there had been faltering even with regard to the primaries.
In Chockalingam v. Rajarathnam 1964-2 MLJ 376, a Bench of this Court dealing with more or less similar situation and facts, stressed the
importance of conforming to the conditions prescribed in O.5, R. 20 of the Code, and in our view, it will be worthwhile to extract the relevant
passage occurring in the said pronouncement, as follows:
From the records now available, it is seen that there was no notice to the first judgment-debtor of the application for recognition of the assignment
in the Court which passed the decree. There was one attempt made, and that by registered post, to serve the appellant, whose permanent place of
residence was somewhere near Devakottai. That notice which was addressed to the place where G.V. Raman was originally residing was returned
unserved. There is nothing to show that the Court was satisfied that there was any reason to believe that the appellant was keeping out of the way
for the purpose of evading service. But yet it directed notice by substituted service. There again there was no compliance with the mandatory
provisions of O.5, R. 20, sub-Cl.(3) CPC by way of giving a reasonable time for the published notice to come to the knowledge of the person
concerned. The notice was published at Madras on the 12th and the hearing was fixed for the 14th. The appellant who was at Devakottai could
not be reasonably expected to look into that notice and be able to go to Bangalore in time, attend the hearing on the 14th. R. 20 of O.5, Civil
Procedure Code, provides for substituted service; the main purpose of it is to bring to the notice of the person to whom it is intended Substituted
service cannot be regarded as an idle formality to be gone through. The Code intends it as a substitute to actual, personal service. Unfortunately
the learned Subordinate Judge appears to have thought that as substituted service had been ordered by the Court and effected the question of the
sufficiency of it will no longer arise. That however is not the correct way of approaching the question. A valid substituted service of a notice should
conform to the conditions prescribed in Order 5, rule 20, Civil Procedure Code. If it does not conform to that rule, service will have to be
regarded as not in accordance with law and therefore not sufficient.
Thus, we see the learned Judges of the Bench of this Court have categorically held that if there was non-conformity to the rule, service will have to
be recorded as not in accordance with law and therefore not sufficient.
Even while on this first point, there are ancillary aspects urged by the learned counsel for the respondent to buttress it. The substituted service
ordered by the Court on 6-9-1989 took in three modes. Of the three, only one was admittedly adopted and the other two modes had been safely
forgotten. When the special mode of service as a substituted service, as asked for by the petitioner was accorded by the Court, certainly it is not
open to the petitioner to choose one or other of the modes, leaving the rest and then covet a finding from the Court that service is sufficient. We
have not heard any explanation from the learned counsel appearing for the petitioner as to why the other modes of substituted service, though
asked for and obtained at the hands of the Court, were not adhered to. Further, the publication was made only on 11-9-1989. The hearing was
given in the publication as 18-9-1989. The Original Side Rules, which are certainly invocable, contemplate a gap of fourteen days from the date of
service and the date of hearing. This abridgement of the time could also be and in fact, in our view, legitimately is being complained of, as not
conforming to the statutory provisions with regard to service of notice even assuming that substituted, service could be legitimately resorted to.
With regard to the second point urged by the learned counsel for the respondent, there is no need to do well upon it because we have sustained
the first point, and the respondent is entitled to reliefs on that basis Before we conclude, we must advert to the reasonings of the learned single
Judge when he negatived the request of the respondent to set aside the ex parte order of adjudication. The reasons stand expressed in paragraphs
8 and 9 of the order of the learned single Judge and they stand extracted as follows :
The applicant is not an ordinary individual, who contracted certain debts from a few individuals, but on the other hand he is the proprietor of the
chit company having business transactions throughout the territory of Tamil Nadu and had secured deposits to the tune of about two crores of
rupees from innumerable depositors. He is having the main office at Madras as well about twelve branches, as adverted to earlier, thought out the
State of Tamil Nadu spread over in all the Districts. In the normal course of business, it is to be expected that he is to be available in the premises
where he is expected to be available for him to be contacted in the course of his dealings with his depositors. The service of summons sent through
registered post as well as through Court could not at all be effected, obviously because of his absence from his last known address and that was
the reason for the summons sent through registered post returned with the endorsement that the addressee left the premises and the bailiff could not
effect service for a pretty long time and ultimately returned the summons to Court that he could not effect service on his being apprised by some
one in the last known address of the applicant that no such addressee was available in the premises, thereby making it appear that he had been
taking effective steps to conceal his presence. The very act of insolvency complained of against him was that he secluded himself from the purview
of his creditors, with the avowed purpose and intention of defeating or delaying their claims. Even according to the applicant, he was threatened
with criminal prosecution from innumerable persons and consequently, he had moved criminal Court for anticipatory bail and in such an application,
he was granted the necessary relief by his being directed to reside at Trichy, far away from the headquarters, namely, Madras. In such
circumstances, it cannot be stated that he is not quite conscious of his being sought of by innumerable depositors and therefore it is well-nigh
possible for him to have taken concrete steps in secluding himself from the purview of the creditors. Because of this attitude of the applicant,
summons through registered post could not be effected and also the bailiff could not effect service.
The very act of evading service of summons is identical to the act complained of against the applicant for his being adjudged as an insolvent. Such a
person, as the applicant, cannot at all be served in the normal run of things either by registered post or through bailiff and the best course to be
adopted cannot be anything other than the one by way of substituted service by publication in a newspaper, which, in fact, had been done in this
case by causing publication in a newspaper, in the issue dated 11-9-89 of ''Malai Murasu'' intimating the factum of the petition having been posted
on a particular day for his appearance or otherwise, the same will be decided ex parte. If the applicant, placed in such a situation, comes forward
with a theory of his not having any knowledge about such publication, his statement that he came to know of his adjudication as an insolvent only
through a relative cannot at all be given any weight credence at all and on the contrary it must be held that he must be having full knowledge about
such a publication having been made. In such a circumstance, the publication so made must be held to be sufficient service.
From the above extract, it is clear that the learned single Judge has not at all approached the question from the angle in which it should have been
done. The learned single Judge has concentrated mainly on the aspects relating to the alleged acts of Insolvency and he has not adverted to the
question as to whether there was a justification in law for ordering substituted service. We are not able to subscribe our support to the above
reasonings of the learned single Judge, in view of our discussion of the relevant factual aspects and the law governing the same. Accordingly, this
Original Side Appeal is allowed; the Order of the learned single Judge of this Court, sitting in Insolvency, in Application No. 391 of 1989 in I.P.
No. 46 of 1989 is set aside and that Application will stand allowed. The main insolvency petition, I.P. No. 46 of 1989 shall be taken up by the
learned single Judge in Insolvency for proceeding further in accordance with law. We make no order as to costs.