Raghava and Veera and Another vs Lachhmandas (died) and Others

Mohan, J.—The short facts leading to the appeal are as follows: On the Original Side of this Court under insolvency jurisdiction, I.P. No. 66

of 1977 was filed by a creditor viz. Munuswamy Reddiar for adjudicating the appellant M/S. Raghava and Veera Reddi as insolvents. This was on

6.8.1977. The first respondent viz. Lachhmandas filed Appln. No. 561 of 1977 u/s 92 of the Presidency Towns Insolvency Act, hereinafter

referred to as ''the Act'' f or substituting petitioning creditor in the place of he original creditor. In 1978, Appln. No. 70 of 1978 was filed by M/s

Ajith India Private Limited for substitution u/s 92 of the Act. The petitioning creditor Munuswami Reddiar died on 17.4.1978. No legal

representative''s were brought on record on 7.9.1978 a request was made on behalf of the petitioning creditor to grant time to bring on record the

legal representatives of the deceased petitioning creditor. Ismail, J. (as he then was) declined to grant time and dismissed the main petition I.P. No.

66 of 1977 along with Appln. No. 561 of 1977. Aggrieved by this order, O.S.A. No. 25 of 1979 was preferred by first respondent Lachhmandas

in so far as Appln. No. 561 of 1977 for substitution was dismissed. We must at this stage point out that there was no appeal against the dismissal

of the main petition I.P. No. 66 of 1977. The matter came before the Division Bench, consisting of Ramanujam, J. and Swamikkannu, J., and the

appeal was allowed and the learned Judges observed thus in Paragraph 10 of the judgment, which is reported in K. Lakshmandoss, sole

Proprietor, Sethkanyalal Lachmandas Vs. Raghava and Veera and Others,

The learned Counsel for the respondents at this stage points out that in this case the appeal has been filed only as against the order dismissing his

application for substitution and no appeal has been filed as against the order of the Court dismissing the insolvency petition as abated, and after the

dismissal of the insolvency petition, there is no question of the appellant being substituted as a petitioning creditor even if he succeeds in this appeal.

It is true, a substitution can be ordered only when the original petition is pending and not when it has been disposed of. However, if we hold that

substitution u/s 92 is possible even in case of death of the original petitioner, it is always open to the appellant to go before the Insolvency Court to

have the main Insolvency Petition restored to file and to ask for substitution thereafter.

Against this judgment, SLP No. 10568 of 1980 was preferred. Their Lordships of the Supreme Court (Justice O.P. Chinnappa Reddy, Justice

A.P. Sen and Justice Bahrul Islam) dismissed the petition on 11.8.1980. Thereafter, on21.8.1980, an application was taken up in Appln. No. 353

of 1980 for restoration of the main Insolvency Petition. Shanmukham, J. allowed the application on 3.3.1981. It is against the said order dated

3.3.1981, the present appeal has been filed.

It is the contention of Mr. T.R. Mani, learned Counsel for appellants, that this Court had no jurisdiction to restore the petition at the instance of

Lachhmandas. The power under review cannot be invoked u/s 8 of the Act. Even assuming review is permissible, it is subject to Article 124 of the

Limitation Act. Where, therefore, reckoned from the date of dismissal of the insolvency petition viz. 7.9.1978, the application filed on 21.8.1980 is

beyond the period of 30 days, prescribed under the said Article of Limitation Act, it ought to have been dismissed on the singular reason as time

barred. Of course, if the first respondent in this appeal was interested, in following the procedure as laid down under law, he should have resorted

to the procedure under Order 47, C.P.C. because, having regard to the terms of letters patent, it is as much a Civil Court and, therefore, the failure

to follow the procedure will mean that the petition was liable to be dismissed. In this case, one peculiar fact that cannot be lost sight of is that no

appeal had been filed against the order of Ismail, J. (as he then was), dismissing I.P. No. 66 of 1977. Lastly, it is urged that where no limitation had

been prescribed under the Presidency Towns Insolvency Act, the Limitation Act would apply and, therefore, the learned Judge was not right in

assuming in favour of the first respondent herein. In any event, failure to file an application for condonation of the delay is fatal to the appellant.

In opposition to these, Mr. N.C. Raghavachari, learned Counsel for first respondent, would urge that in any insolvency proceeding what is

sought to be done is to seek a declaration as to the status of an individual on behalf of a body of creditors. Therefore, so looked at, there is no

individual lis between a petitioning creditor and vis-a-vis a debtor. It is a judgment in rem. Under those circumstances, where the first respondent

could not have applied for review, no question of limitation would arise under the Act. Therefore, reckoning from the date of dismissal of the

insolvency petition viz 9.7.1878 would not arise. However, the application u/s 8 for restoration of the I.P. came to be filed, only because of the

direction granted by the Division Bench of this Court, when it dismissed O.S.A. No. 25 of 1979. But for that, the first respondent would not have

been enabled to file an application for review. As a matter of fact, when the learned single Judge, originally, dismissed the application for

substitution viz. Appln. No. 561 of 1977, filed u/s 92 of the Act, this respondent could do nothing more than to agitate against the dismissal. If the

general dismissal of that application was as a result of the dismissal of the main I.P a fortiorari it follows that the consequential order of allowing the

appeal in O.S.A. No. 25 of 1979 would mean restoration or the I.P. itself. Therefore under no circumstances, Pursuant to the direction given by

the Division Bench the application u/s 8 of the Act came to be filed. If the law of limitation prescribed under Article 121, for application of a

review, is applied, it is well within time and the date from which it has to be reckoned is 25.7.1980, the application having been filed on 21.8.1980

is within 30 days. As submitted above, if there is no lis between an individual creditor and an individual debtor and if it is a judgment in rem in

relation to the declaration of status of a debtor, the arguments advanced on behalf of the appellants will have no application to the facts of the

instant case. Even assuming otherwise, as laid down in Jivraj Gordhandas and Another Vs. Gaganmal Ramchand, , where a petitioning"" creditor

does not obtain any individual benefit for himself, but is only agitating a cause on behalf of a body of creditors, he cannot be scuttled by raising

these technicalities and the proposed insolvent trying to defeat the very object of the creditors'' petition.

We have given our careful consideration to the above arguments. One thing is beyond dispute. In any insolvency proceeding, there is no

individual lis between a petitioning creditor and a debtor. The application is filed by the petitioning creditor on behalf of the body of creditors.

Therefore, it is a judgment in rem in relation to the adjudication of status of the insolvent. The benefit of the order is not confined to the petitioning

creditor alone but the benefit flows to the entire body of creditors. These are too well known propositions to require reference to any case law. If

this is kept in the background, we find no difficulty whatever in upholding the arguments of Mr. N.C. Raghavachari and consequently, the judgment

of the learned single Judge. However, what Mr. T.R. Mani would say is that the application for review ought to have been filed under Article 124

of the Limitation Act in which event, if it is beyond 30 days, there ought to be an application for condonation of the delay, we are of the considered

view that but for the direction given by the Division Bench of this Court in O.S.A. No. 25 of 1979, Paragraph 10 already having been extracted

above, the first respondent before us would not have been enabled to file an application u/s 8 by way of review. When it is stated ''review'', what is

it that he wants? The review, not of the judgment dismissing the insolvency petition on merits. He merely prays the order dismissing the insolvency

petition for non-prosecution, consequent to the failure to bring on record the legal representatives, be set aside and the I.P. be restored. Therefore,

in fact, there is no review at all. It is only a corollary order. The moment, the appeal of the first respondent viz. O.S A. No. 25 of 1979, came to

be allowed, because there cannot be a vacuum, the application for substitution viz. Appln. No. 561 of 1977 came to be filed and it having been

dismissed, it is to avoid this hiatus, in spite of the Division Bench itself ordering restoration of the insolvency petition, as a logical sequel, the Bench

merely directed the appellant before it viz. first respondent before us, to move the learned Judge on the insolvency side. Therefore, to bring in

literally that it was a review of the order u/s 8 and, therefore, he should have come within 30 days or at any rate with the application for

condonation of the delay, and that such an application not being there, it is liable to be dismissed, all seem to us not only hyper technical but

intended to defeat the very object of insolvency proceedings.

Even assuming for a moment, limitation as prescribed under Article 124 applies, from what date is limitation to be reckoned? It was on

25.7.1980, the direction was given by the Division Bench. Therefore limitation even if reckoned only from that date, the application for restoration

viz. Appln. No. 353 of 1980, having been filed on 21.8.1980, it is well within 30 days and there is no question of condonation of the delay. In fact,

the argument of Mr. Mani, if accepted, would amount to procedure defeating the ends of justice. As repeatedly pointed out by the Privy Council

and the Supreme Court, procedure is only handmaid. Therefore, we have to accept this argument.

Assuming everything in favour of the appellants, if as laid down in Jivraj Gordhandas and Another Vs. Gaganmal Ramchand, . Section 8 would

enable the Court to review suo motu, all these arguments pale into insignificance. At this stage, it would be necessary to refer to the following

observations of the Division Bench in the said decision; (Chagla, C.J., speaking for the Bench)

The jurisdiction conferred by Section.8 is a very wide and far reaching jurisdiction. It is also a very salutary jurisdiction. It must never be forgotten

that when a petitioning creditor files a petition for adjudication of a person insolvent he is not in the same position as a plaintiff in a suit. A plaintiff in

a suit is dominus lite and he has every right to proceed with the suit or to withdraw it or to allow it to be dismissed for default, but a petitioning

creditor is not a ''dominus lite'' in that sense. Once he presents a petition, the order that he seeks is not only for his benefit but for the benefit of the

general body of creditors, and the Insolvency Court at all times has jurisdiction over that petition and can control it and regulate it u/s 8. If the

Court is satisfied that the order made by it formerly is not a proper order and that it should not have been made, it has got jurisdiction u/s 8(1) to

rescind that order and to restore the petition which was dismissed"", The jurisdiction u/s 8(1) is so wide that the insolvency Court can exercise that

jurisdiction ''suo motu'' even without the application of any party. The order being for the general body of creditors, whatever laches the

respondents may be guilty of, the order made by the Insolvency Judge will not be interferred with....

This affords complete answer to the arguments of Mr. T.R. Mani and the learned Judge has rightly relied on this ruling to fortify his conclusion. We

find no difficulty whatever in upholding the judgment. Accordingly, the O.S.A. will stand dismissed. However, there will be no order as to costs.

Pending disposal of the insolvency petition, the order passed in C.M.P. No. 5849 of 1983 dated 20.6.1983 shall continue. The first

respondent''s legal representatives who have been brought on record in this appeal will also be formally brought on record in the insolvency

proceedings, for which an application shall be filed and there will be no question of limitation.