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 14-7-1953, in E.P. No. 85 of 1953, in S.C.S. Nos. 107 of 1949, directing his arrest by 29-7-1953.

The facts are briefly these : The decree in S.C.S. No. 107 of 1949 was passed against the petitioner on 14-4-1949. 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 insolvent on 2-

2-1950. The adjudication was annulled on 22-9-1950, as he did not apply for discharge.

In that I.P., on 5-10-1949, when it was pending, he had mentioned the decree debt under the above small cause suit as a debt binding on him. On

3-1-1953, E.P. No. 85 of 1953 was filed 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 Chandrasekhara-Aiyar J. in

Velayudha Naicker Vs. Annamalai Chetty and Others, 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 annulled on 22-9-1950, & this E.P. was filed on 3-1-1953 within three years

thereof.

Regarding the objection raised by the petitioner that S. 78(2) 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 same 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 Velayudha Naicker Vs. Annamalai Chetty and

Others, , 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 falls 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 I. Ps. where only the mamool rope-cot and ''chebu'' 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 proceeding 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 S.K. Kuttalalingam Pillai Vs. S.V.N.

Chinnakannu Pillai, , that a bald - order for arrest will violate the mandatory provisions of S. 51 C.P.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 there of and has refused or neglected to pay the same.

The lower court has omitted to record any such finding & ordered arrest forthwith without giving reasons. Learned Counsel for the decree-holder

urged that it was because the judgment debtor failed to appear in pursuance of the first notice, & 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 decree-holder 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.