Satyabadi Sahu and Others vs Sri Jagannath Mahaprabhu

Reuben, J.—This appeal by the judgment-debtors against an order of the Subordinate Judge of Puri, dismissing their application u/s 47, Civil P.C., raises a point of limitation u/s 78(2), Provincial Insolvency Act.

The decree under execution was obtained by the decree-holder-respondent on 2-1-1936. The judgment-debtors were adjudged insolvent on 19-3-1937. The adjudication was annulled on 27-10-1942. The present execution petition was filed on 2-12-1942. The Subordinate Judge relied upon Section 78(2), Provincial Insolvency Act as saving limitation. It is contended on behalf of the appellants that the section does not apply. If it does apply, it is clear that the execution petition is within time.

Section 78(2) provides that:

Where an order of adjudication has been annulled under this Act, in computing the period of limitation prescribed for any suit or application for the execution of a decree (other than a suit or application in respect of which the leave of the Court was obtained under Sub-section (2) of Section 28) which might have been brought or made but for the making of an order of adjudication under this Act, the period from the date of the order of adjudication to the date of the order of annulment shall be excluded.

There is a proviso to this section which provides that:

nothing in this section shall apply to a suit or application in respect of a debt provable but not proved under this Act.

It is not contested that the debt, with which we are concerned, is one which was provable under the Act, but it is contended that it was not proved within the meaning of this proviso. The evidence in the case indicates that, after the adjudication, a Receiver, Gangadhar Misra, (witness No. 1 of the opposite party), was appointed and, upon some information sent by him, the decree-holder forwarded to him a certified copy of the decree under execution along with a letter, giving particulars of the amount due under the decree. The letter and the decree were endorsed by the Receiver and a note was made by him on the decree:

This was produced before me in support of proof of debt in favour of Jagannathballabh muth against the insolvents. I accept it as proof of debt against the insolvents in I.P. No. 8 of 1936.

The witness deposes that he was satisfied that the decree was outstanding and accepted the decree-holder as one of the scheduled creditors and included his name in the list of creditors. No schedule, as contemplated by Section 33 of the Act, seems, however, to have been prepared. The reason given by the Receiver is that the proceedings were annulled. Mr. Mohapatra for the appellants contends that the tendering of the certified copy of the decree along with this letter to the Receiver is not proof within the meaning of Section 78 for two reasons: (1) that a different method of proof has been prescribed u/s 49 of the Act and (2) that the proof should have been tendered to the Court and not to the Receiver.

5 For his first contention, Mr. Mohapatra relies upon AIR 1943 98 (Privy Council) . This was a case in which the creditor-decree-holder had complied with the provisions of Section 49 and had tendered an affidavit stating the necessary particulars of the debt. The name of the creditor was initially included in the schedule, but later was "suspended" from the schedule on the ground that the Receiver alleged that the debt was not binding upon him. No decision appears to have been coma to in the insolvency proceedings as to whether or not the debt was binding. Nevertheless, their Lordships held that the tendering of the proof in the mode prescribed by the statute was proof for the purposes of Section 78(2). In other words, their Lordships held that the tendering of proof as permitted by Section 49 was sufficient proof of the debts without an acceptance of this proof as establishing the existence of the debts. There was no occasion in this case to consider whether other methods of proving the debt were open to the creditor.

The same point was considered in Lakshmi Bai v. Rukmaji Rao AIR 1934 Mad. 465 which is referred to with approval by their Lordships of the Judicial Committee in the case just cited. In that case also the creditor had tendered proof in accordance with the provisions of Section 49. Sir Owen Beasley C.J. stated:

Some assistance upon this point is to be got from the English Bankruptcy Act and the rules which are set out in the second schedule of that Act. Rule 23 deals with the admission or rejection of proofs and the Trustee has to examine every proof and may admit or reject it in whole or in part or require further evidence in support of it. Rules 24, 25 and 28 also speak of proofs.

and concluded that a person who has lodged a proof has proved the debt within the meaning of the Insolvency Act. In this case also, it may be noted, there was no order of the Court accepting the proof filed as establishing the existence of the debt. R.M. Jassawala Vs. Amulya Chandra Dutta, is another case to the same effect upon similar facts. In none of these cases was it necessary to consider whether any mode of proof other than that provided u/s 49 is open to the creditor. Some observations to the effect that the mode of proof permitted by Section 49 is the only one available to the creditor are to be found in the judgment of Krishnaswamy Ayyangar J. in AIR 1940 Mad. 716 Sogmull Lachiram Firm v. Parandhamayya. The question which arose in that case, however, was whether the proof of debt necessary for establishing insolvency for the purposes of adjudication is to be regarded as proof of debt within the meaning of Section 78. Id appears to me that the question of proof intended by Section 78(2) cannot arise until after the adjudication, when the framing of a schedule under the provisions of Section 33 is taken up. The question so far as this Court is concerned is settled by the decision in Firm Bhudermull Chandi Prasad v. Firm Haji Mahammad Ali-Jagarnath AIR 1938 Pat. 65 which lays down that Section 49 provides only one of the modes in which a debt may be proved. I would, therefore, hold that the certified copy of the decree, which was legally acceptable in evidence, was proof within the meaning of this section.

As regards the second point, I would refer to the provisions of Section 33 which provide that:

When an order of adjudication has been made under this Act, all persons alleging themselves to be creditors of the insolvent in respect of debts provable under this Act shall tender proof of their respective debts by producing evidence of the amount and particulars thereof, and the Court shall, by order, determine the persons who have proved themselves to be creditors of the insolvent in respect of such debts, and the amount of such debts respectively, and shall frame a schedule of such persons and debts.

These words lay on the Court the responsibility for determining who are the creditors and for framing a schedule showing the amount of the debts. The record would show that for some reason the necessary steps were left to be taken by the Receiver. I say this, because the letter (exhibit A), with which the certified copy of the decree was forwarded, referred to an intimation from the Receiver as a result of which the document was being sent. The Receiver was merely an officer of the Court and, when the proofs were tendered to him, it was his duty to have placed them before the Court for the necessary action. As he tells us in his evidence, this would have been done in the ordinary course if the adjudication had not been annulled. The creditor, having tendered the proof as required by the law, cannot be penalised for the failure of the Court to perform the duty imposed upon it by Section 33. I would, therefore, hold that there has been sufficient compliance with Section 33, and that the debt has been proved within the meaning of the proviso to Section 78(2). On the above grounds, the appeal fails and is rejected with costs.

Beevor, J.

I agree.