K. V. Muthu Pathar vs R. S. Mani Rao

Panchapakesa Ayyar, J.—This is a petition filed by one Muthu Pathar for revising and setting aside the order of the Subordinate Judge,

Kumbakonam, dated 14th July 1953. in E. P. No. 85 of 1953, in S. C. S. No. 107 of 1949, directing his arrest by 29th July 1953. The facts are

briefly these : The decree in S. C. S. No. 107 of 1949 was passed against the petitioner on 14th April 1949. Later on this petitioner filed I. P. No.

12 of 1949 for adjudicating him as an insolvent. That petition was treated as a summary petition. He was adjudicated insole vent on 2nd February

1950. The adjudication was annulled on 22nd September 1950, as he did not apply for discharge. In that I. P. on 5th October 1949, when it was

pending, he had mentioned the decree debt under the above small cause suit as a debt binding on him. On 3rd January 1953, E. P. No. 85 of

1953 was tiled by the decree. holder for arresting him, as he was said to be "" possessed of sufficient assets and was yet evading to pay the decree

amount. The petitioner, the judgment-debtor, remained absent. But as the learned Subordinate Judge felt some doubt regarding limitation, he

insisted on a further notice and personal service on the judgment debtor viz., this petitioner. This petitioner then appeared by Counsel, and

contended that the decree was barred by limitation and that even if it was not so barred, it could not be executed because the decree-holder had

not proved his debt in the insolvency.

The learned Subordinate Judge held against the petitioner on the point of limitation because of the judgment of Chandrase khara Aiyzr J. in

Velayudha Naicken v. Annamalai Chetti and another 58 L.W. 169., where the learned Judge held that a period of three years was available to any

creditor, whose debt was acknowledged by the insolvent during the insolvency proceedings, from the date of the annulment or termination of the

insolvency, and this E. P. would, therefore, be in time, as the adjudication was annul, led on 22nd September 1950, and this E. P. was filed on 3rd

January 1953 within three years thereof. Regarding the objection raised by the petitioner that S. 78 (2) of the Provincial Insolvency Act would be a

bar to this E. P., as the decree-holder had not proved his debt in insolvency, the learned Subordinate Judge held that it would not be of any use in

a case of summary proceedings, as in this case where the creditor had no need to prove his debt, and indeed is not expected to prove his debt.

Having rejected these two contentions, he forthwith ordered the petitioner to be arrested without recording his reasons. Hence this civil revision

petition I have perused the entire records, and heard the learned Counsel on both sides. The learned Counsel for the petitioner raised the fame old

two contentions before me, and also one additional contention, viz., that the arrest had been ordered without giving a finding that the petitioner was

possessed of sufficient assets and yet had evaded payment of the decree amount. I agree entirely with the lower Court regarding its finding on the

first two contentions. Though the learned Counsel for the petitioner wanted to canvass the correctness of the decision of Chandrasekhara Aiyar J.

in Velayudha Naicken v. Annamalai Chetti and another 58L. W. 269. he was unable to show any ruling to the contrary, let alone a Bench ruling or

a Full Bench ruling or a Supreme Court ruling. I am satisfied that the view of Chandrasekhara Aiyar J. is the only possible view which can be taken

in such circumstances An acknowledgment during insolvency would not give any right to the creditor to file a suit forthwith. Laws of limitation are

intended to cover periods when a suit could be filed, at least the starting point must allow of a suit being filed. Here, no suit could be filed on the

date of the acknowledgment or till the insolvency proceedings closed. So, the only sensible view to take would be to treat the three years'' period

of limitation, given by that acknowledgment, as running from the date of the annulment of the adjudication, when alone a suit could have been filed.

Hence the first contention fails.

The next contention also fails because in summary proceedings creditors do not prove their debts, and it is the Court which has to go into the

claims of creditors and frame a schedule of creditors and distribute whatever assets are available. Even in regular I. Ps., the available assets will be

very few, a dividend of one anna in the rupee being a very usual dividend. In summary 1. PS., where (1) only the mamool rope-cot and chembu

are disclosed as assets, there will be practically nothing to distribute. But I agree with the learned Counsel for the petitioner that if the Court in

summary proceedings had framed a schedule of creditors and distributed the assets and granted the petitioner a discharge, this creditor would have

found it hard to sustain the E. P., as he would be trying to undo what had been done by the Court, and he had not appeared before the Court and

objected to the schedule of creditors framed by it omitting him. But the Court in this case did no such thing. It did not frame a schedule of

creditors, obviously because the adjudication itself was annulled. It was a case of dropping the proceedings midstream. This creditor did not rush

to Court and prove his debt for two reasons : firstly, the insolvent himself had mentioned his debt as binding on him; secondly, he did not want to

throw good money after bad by incurring the traveling expenses and legal expenses in Court, when all the prospect held out to him was recovery of

a pie in the rupee at the most. In summary proceedings of this kind, which are not carried through to their completion, and where the Court has not

framed the schedule of creditors and distributed the assets and closed the insolvency proceedings in the usual course, but has annulled and

dropped the adjudication, proceedings mid-stream, this contention cannot hold good.

Now we come to the last contention viz., that the Court should not have ordered the judgment-debtor to be arrested forthwith without giving its

finding that he had sufficient assets to pay the debt and yet had evaded payment. I have myself held in Kuttalingam Pillai v. Chinnakannu Pillai 1951

(2) M.L.J. 588., that a bald order for arrest will violate the mandatory provisions of S. 51, CP. C, and will affect the liberty of a person and his

fundamental rights. The law clearly requires the Court to give the judgment-debtor an opportunity of showing cause why he should not be

committed to prison. Even if he does not appear and show cause the Court should record its reasons in writing for ordering his arrest, and the

usual reason in such cases will be that it is satisfied that the judgment-debtor has or has had, since the date of the decree, means to pay the amount

of the decree or some substantial part thereof and has refused or neglected to pay the same. The lower Court has omitted to record any such

finding and ordered arrest forthwith without giving reasons. Learned Counsel for the decreeholder urged that it was because the judgment-debtor

failed to appear in pursuance of the first notice and, that, even in reply to the second notice he did not specifically raise the contention that he was

not liable to arrest as he had no means to pay the decree debt, and had not, therefore, rendered himself to arrest by having sufficient means to pay

the debt and yet failing to pay it. While this may be an explanation for the lower Court''s order of arrest immediately, it does not justify the order,

Whenever a Court does not act on the first failure to appear in pursuance of a notice, but issues another notice, it should wait and see whether the

person appears in pursuance of the second notice. After he has appeared in pursuance of the second notice, it cannot act on his absence in

pursuance of the first notice. But, as already stated, whether the judgment-debtor appears or not, the Court has to record the reasons for ordering

his arrest, and has to be satisfied positively, in cases like this, that the judgment-debtor has or has had since the date of the decree the means to

pay the amount of the decree or some substantial part thereof and has refused or neglected to pay the same. It is not for the judgment-debtor to

prove the negative, but for the decreeholder to prove the positive, and for the Court to find in favour of the contention of the decree holder and to

record its reasons for ordering arrest. In that view, the civil revision petition is allowed in part, and the order of arrest passed by the lower Court is

set aside, and the execution petition is remanded to the lower Court for deciding the third point alone and for a fresh order regarding the liability or

non-liability of the judgment-debtor for arrest, after complying with the provisions of S. 51, Civil Procedure Code. In the circumstances, there will

be no orders as to costs in this civil revision petition.