Haradageri Basavana Gowda and Others vs The Official Assignee Bombay

Bhimasankaram, J.—This is. an appeal, u/s 75 of the Provincial Insolvency Act against the order of the District Judge, Bellary, in LA. No. 171 .of 1951, which was filed in LP. No. 2 of 1950. LP. No. 2 of 1950 was a creditor''s petition to adjudge the firm of T.A. Deshi Bombay, insolvent. It was presented to the District Court, Bellary, on 25th of January, 1950. and there was an order of adjudication on 13th December, 1950, Pending the adjudication, the Official Receiver was appointed interim receiver at the instance of the petitioning creditors, for taking over possession of certain good''s alleged to belong to the insolvents and which were then in transit to Bombay. The receiver took possession of those goods and Subsequently under orders of that Court disposed ''for/ them and deposited in Court the money so realised. The present Appellants filed applications "before the learned District Judge claiming to be entitled to a portion of the money in deposit on . the ground that the railway receipt relating to the goods in question had been made over to hem by the insolvents for consideration. They also asked that as an interim measure the proceeds'', to which they laid claim might be paid over "to them because they had borrowed money from 1: bank on the security of the railway receipt and that when the goods were taken over by the "Receiver, the bank demanded immediate payment and they had therefore to borrow elsewhere noises favorable terms in order to avoid injury to their commercial credit. The learned District Judge'', saw no reason why an interim payment Should not be directed on terms especially in view of the fact that the money if kept in Court, would be idle. He ordered the Appellants before taking the money to give security and an undertaking to re-deposit the sum into Court with) interest at per cent, per annum. The Appellants thus withdrew the money from the Court on 6th April, 1950. On 14th April, 1950, I.P. No., 52 of 1950, was presented on the Original Side of the Bombay High Court against the same firm by certain other creditors and there was an order of adjudication made by that High Court on 17th April, 1950. The Official Assignee of Bombay in -whom all the properties of the insolvents vested by that order applied to the District Court, Bellary, in LA. No. 183 of 1950 for stay of all proceedings in that Court and for the transfer of all the assets and books of account belonging to the estate of the insolvents to the jurisdiction �of the Bombay High Court. On the same day on Which 4 made the order of adjudication, i.e., on 13th December, 1950, the District Court, Bellary, passed orders on LA. No. 183 of 1950. Therein, it directed the Official Receiver of Bellary to move the High Court of Bombay to annul the adjudication made by it. It also observed in the course of its order, that

If the High Court at Bombay ultimately decided that the assets of the insolvents should be administered from Bombay, the Official Receiver, Bellary, should hand over to the Official Assignee all the assets and documents and accounts books relating to the estate of the insolvents.

The present Appellants were also parties to LA. No. 183 of 1950. No appeal was filed as against that order. Apparently, no application was made by the Official Receiver, Bellary, for a long time; despite the aforesaid direction with the result that the Official Assignee of Bombay filed Anr. application (LA. No. 171 of 1951) in the District Court, Bellary and it is out of this that the present appeal arises. By this application, purporting to be filed under Sections 4, 5 and .16 of the Provincial Insolvency Act, the Official Assignee Of Bombay prays.

to direct the Respondents 3 to 9 to deposit all, the amounts drawn by them from the Insolvency; Court; and transfer all such sums and such other sums and movables standing to the credit of this insolvency Court in this case and all sums and assets with the Official Receiver and also all account books and documents pertaining to the; insolvents firm in die possession of the Official Receiver

to the insolvency case, LP. No. 52 of 1950. It may be noted that in the meanwhile, an application was filed by the Official . Receiver, Bellary, in the dictation there The7Bombay High Court, however, declined to annul the adjudication and directed the continuance of the insolvency ''proceedings in that Court observing that the estate of the insolvents could the administered more conveniently in Bombay: than in Bellary. On the present application; the lower Court took the view that

having regard to this border refusing to annul and also the terms of the order in LA. No. 183 of 1950, the only proper, order to pass is that the assets of the insolvents in this Court which are in the hands of the. Official Receiver should be handed'' ovary to. the Official Assignee at Bombay.

This order was made despite the opposition of the present Appellants. The jessant appeal questions the correctness-of this order of the Court .

Two contentions are raised oh behalf of the Appellants. In the first place, it is urged that any order transferring the assets from the District Court, Bellary to the. High Court at Bombay could only be passed on a letter of request emanating from the High Court at Bombay to this Court (District Court, Bellary) u/s 77 of the Provincial Insolvency Act which runs thus:

All Courts having jurisdiction in insolvency and the officers of such Courts, respectively, shall severally act in aid of and be auxiliary to each other in all matters of insolvency, and an order of a Court seeking aid with a request to Anr. of the said Courts shall be deemed sufficient to enable the latter Court to exercise, in regard to the matter directed by the order, such jurisdiction as either of such Courts could exercise in regard to similar matter within their respective jurisdiction.

Construing Section 126 of the Presidency Towns Insolvency Act (III of 1909) and Section 118 of the Bankruptcy Act, 1883, both of which are couched in terms similar to those in this section Harrington, J., of the Calcutta High Court held in In re L. King & Co. ILR 38 Cal 542 (A).

the jurisdiction in respect of which this Court is asked to exercise its powers as a Court in aid, is given on the request of the English Court, and in the absence of a request by the English Court to this Court, the jurisdiction cannot properly be exercised.

A similar view was taken in the case reported in Ramaswamy Chettiar v. Official Assignee of Madras, 34 Mad LW 765: (AIR 1932 Mad 264) (B). In this case, their Lordships were interpreting Section 126 of the Presidency Towns Insolvency Act and Section 122 of the English Bankruptcy Act, 1914. They held that

in order to give the Court, whose aid is sought by Anr. Court, jurisdiction to act, there must be an order of the Court seeking such aid together with a request.

It is true, as decided in Official Assignee of Madras v. Official Assignee of Rangoon ILR 42 Mad 121: (AIR 1919 Mad 566) (C). that where there are successive adjudications in insolvency by two Courts, all the property of the insolvent vests in the Official Assignee appointed by the Court in which the prior adjudication was made and it will not be divested from him by the subsequent adjudication by the other Court lt is also true that ''it would not be just or equitable to allow the proceedings in both Courts to go on concurrently" leading to a; most undesirable conflict of jurisdictions. The proper procedure in such a case would be for one of the Courts either to annul the adjudication or to stay all proceedings thereof as provided by Section 22 of the Presidency-Towns Insolvency Act and Section 36 of at he Provincial Insolvency Act. In the circumstances, it is clear that the present application by the Official Assignee of Bombay is clearly unsustainable. No order such as is asked by him on his application can be passed u/s 36 which is invoked by him. Any assets in the hands of the District Court, Bellary, can only be transferred to the Bombay High Court in pursuance of a letter of request made by the latter Court to the former. There is also a further difficulty in this case. The moneys in the hands of the Official Receiver to the extent claimed by the present Appellants cannot be stated to be indisputably ''the assets'' of the insolvents. Some Court or other will have to adjudicate upon the claim, of the Appellants and it appears to at that considerations of convenience clearly point to the District Court at Bellary as the proper forum for such determination as it is in its jurisdiction that all the witnesses are available. It seems to us to be highly inconvenient that the moneys \\ should be first handed over to the Bombay High Court and that the claimants who are here should be directed to take appropriate proceedings in that Court for the determination of their claims. Section 77 of the Provincial Insolvency Act quoted above enables the District Court at Bellary to exercise such jurisdiction upon a letter of request coming from the Bombay High Court. We hold that the application of the Official Assignee of Bombay is unsustainable but that will be open to him to ask the Bombay High Court to forward a letter of request to the Court at Bellary authorising the latter Court to decide in the first instance upon the claims of the Appellants and then to transfer to the Bombay High Court such assets as may be ultimately adjudicated to belong to the estate of the insolvents.

It remains to consider whether the prior order on LA. No. 183 of 1950 operates as resjudicata and precludes the present claimants from raising the contention that the application of the Official Assignee is not sustainable. It does not seem to us that there was any final adjudication of any point in controversy between the '' parties by the order passed on that application. v. As already stated, that was itself an application by the Official Assignee, Bombay, exactly similar to the present one and presented under sections "4, 5 and 36 of the Provincial Insolvency Act. The actual order passed on that application was that status quo would be maintained ''until final orders are obtained from the High Court of Bombay on the question as to whether the adjudication made at Bellary or at Bombay should be annulled having regard to the circumstances of the case.

It is true that there is a sentence in that, order to the following effect:

If the High Court at Bombay decides that the assets and effects of the insolvents should be administered from Bombay, all the assets and documents and account books relating to the estate of the debtors will be handed over to the 15 Official Assignee at Bombay.

This clearly was not a final order and indeed, if it were, the present petition I.A. No. 171 of 1951 would be unnecessary. Again, it is to be noticed that it was not intended as a direction to the Official Receiver at Bellary to act without further orders of the Court, on the High Court at Bombay refusing to annul the adjudication. Nor does it mean that the handing over would take place without further .need for complying with the requisites of procedure as laid down by the Provincial Insolvency Act. It may also be pointed out that these sums have not been adjudged to be ''the assets'' of the insolvents. They would be such only if the claims made by the Appellants are rejected.

For the aforesaid reasons, we think that the appeal should succeed and there should be an order directing stay of all further proceedings in the District Court at Bellary for a period of six months pending steps to be taken by the Respondent for moving the High Court at Bombay to take appropriate action u/s 77 of the Provincial Insolvency Act. Of course, such of the assets as regards which no claims have been preferred may be transferred on a letter of request praying for such transfer. But in regard to the money to which the claims are made by the Appellants, the Official Assignee will request the High Court at Bombay to authorise the Court at Bellary to determine the claims and transfer all or such portion of that money to the Bombay High Court as may be adjudged to constitute the assets of the insolvents. The Appellants are entitled to the costs of these proceedings both her and in the Court below. Under the Andhra State Act these proceedings which were pending in the District Court, Bellary, are now pending in the District Court, Kurnool. So, the directions given in this appeal will apply to the District Court, Kurnool.