Rosa vs Sreemutty Biddadhurry Dassee and Another

Cunningham, J.—The question raised in this motion is the claim of the Agra Bank, one of the creditors in the administration suit against the estate of Heera Lal Seal, to have a preferential dividend paid to them out of the available assets before any further dividend is paid. The original administration decree was made on the 12th June 1876; the Agra Bank proved for Rs. 1,12,617-10-2, inclusive of interest to the 14th April 1876. This claim, however, did not include a sum of Rs. 71,500 representing certain cheques drawn on the Bank in favour of Heera Lal by the Cossipore Hydraulic Company, which sum the Bank had transferred from the account of the Cossipore Company to that of Heera Lal. It was subsequently decided that this transfer was improper and that, on repayment of it to the Cossipore Company, the Bank would be entitled to add it to their claim against Heera Lal and on the 12th September 1876 an order in this suit was made, upon the Bank undertaking to repay the Official Trustee on behalf of the Cossipore Company the amount: of the cheques and interest, that the Bank''s claim against the estate should be amended by the addition of that sum.

On the 16th October 1876 the Bank paid the Cossipore Company the Rs. 71,500+ Rs. 1,674-14-5 interest: but they appear to have taken no stops to see that the order of amendment was carried out and consequently their claim was not amended and on the 12th August 1878 a decree in this suit was passed declaring the creditors and their claims, shewing the Bank as a creditor for Rs. 1,12,617-10-2 only, and omitting the Its. 73,174-14-5 and on this occasion, again,, the Bank failed to take steps for having the decree amended. They say that they became aware of the error only on the 25th April 1880, when they got the first dividend. They then took action and on the 20th December 1880 an order was made in this suit that, without disturbing any past dividend, already declared, the schedule containing the list of creditors attached to the administration decree of the 12th August 1878 should be amended by adding the sum of Rs. 73,174-14-5 to the Bank''s claim, thus increasing it to Rs. 1,85,792-8-7 and by inserting in the 4th column of the schedule a direction that the sum of Rs. 71,500 part of the added amount bears interest at 6 per cent, from the 12th October 1876.

The Bank now prays to be allowed, out of assets, which they believe to have been realized since the order of the 20th December 1880, before any further dividend is paid to the other creditors, to be allowed a first dividend on the Rs. 73,174-14-5 In support of the Petitioners it is urged that all that the order does is to amend the schedule of debts with a proviso that past dividends should be undisturbed, and that the schedule being thus amended there is nothing in the order to prevent the Bank, now that assets are actually in hand, from asking for a preferential dividend in respect of the sum erroneously omitted from the original schedule. On the other hand the creditors contend that the position which the Bank asks for now and would occupy if I make the order, is something very different from that which it occupies under the order of the 20th December 1880. That order, it is urged, gave the Bank merely the right to come in, for the future, and prove pari passu with the other creditors. The order now prayed for would entitle them not only to come in pari passu but to have the first dividend on the Rs. 73,174-14-5, which, as matters now stand, they have lost, paid to them in preference to any other claim of the creditors; and that the present order, accordingly, would materially alter the position assigned to the Bank by that of the 20th December 1880 and be in fact a supersession of that order.

The general principle, governing the position of creditors of an estate under administration by the Court, is that creditors will on due cause shown be let in at any time while the fund is in Court: Lashley v. Hogg 11 Ves. 602(1805), Hartwell v. Colvin 16 Beav. 143 (1852) and that, even where the money has been apportioned amongst the creditors and transferred to the Accountant General for payment to them : Angell v. Haddon 1 Madd. 529(1816). The effect of the proceedings in an administration suit was clearly explained by the Master of the Rolls in David v. Frowd 1 Mylne and Keen''s, p. 200 (1833). That though a claim is not established in the first instance, if a person comes in and shows that his failure to do so has not been by willful default, he will, on establishing his claim, have the same benefit of his title as if he had originally claimed (p. 209). This principle of a rateable apportionment amongst creditors without preference or priority, is obviously just and equitable--it is lecognized by our own legislature in the case of the administration of a deceased''s estate,-- sec. 282 of the Indian Succession Act-- in the Insolvency section of the Civil Procedure Code, sec 356 (d), in the English Insolvency Act, 32 and 35 Vic, c. 71, 543.

It is, however, qualified in its practical application by another important principle, viz., that when any creditor has been guilty of remissness in the assertion of his claim, his default shall not be allowed to operate so as to prejudice or inconvenience others more diligent than himself and, moreover, as in the case of Cattell v. Simons 8 Beavan 243 (1845), a creditor, who had failed for nine years to obtain due recognition of an equitable mortgage, was not allowed to disturb the existing arrangement by inducing the Court to recognize his security to the detriment of the other creditors. Such being the law applicable to the case, I have to consider what the intention of the order of the 20th December 1880 was and whether it precludes the Bank from asking the relief now prayed. It forbade the disturbance of any past dividend, and as there were sums in Court apportioned under the first dividend but not claimed, it was no doubt directed immediately to the exemption of those sums from any claim on the part of the Bank. Thus the Bank suffered pretty heavily for its default, for, in the firnt place, it has been kept out of the dividend due on the Rs. 71,500 ever since the declaration of dividend, and in the next place, had further assets not been available, it would have lost its money altogether. Now, however, that further assets have come in, is there anything in the order to imply that the Bank may not claim to have its first dividend paid to it before any further distribution? I do not think that there is; but, on the contrary, that this is the legal position assigned to a creditor, who, for some reason or other, has been excluded from a first dividend and subsequently gets his claim admitted to the schedule "so as not to disturb past dividends." This view is strongly favoured by the case Snee v. Prescot 1 Atkyne 246 (1743), where the Lord Chancellor observed that a creditor who has admitted " so as not to disturb former dividends," and by that means must in the first place be brought up equal to the creditors, under the former dividend, before the Commissioners can proceed to make a second. There is, at any rate, nothing in the order to show an intention to exclude the Petitioners from this advantage and I think that I ought to read it in the light most favourable to the equity of the ease and to what I understand to be the policy of the law. I must therefore admit the claim, but the Bank must pay the costs of and incidental to the application.