Subbaraya Chettiar vs The Debt Conciliation Board and Others

Alfred Henry Lionel Leach, C.J.—This is an application for the issue of a writ of certiorari for the purpose of quashing an order of the Debt

Conciliation Board, Cuddalore. The record shows that the order complained of has been passed without jurisdiction and the application will be

granted.

On the 18th September, 1939, the debtor respondents filed a petition u/s 4 of the Madras Debt Conciliation Act, 1936, asking for the

settlement of their debts. Section 5 of the Act states that every application shall be in writing and shall be signed and verified in the manner

prescribed by the CPC for signing and verifying plaints. Section 6 sets out the particulars which a debtor must give in his application. If the

application does not comply with the requirements of Section 5 or Section 6, Section 7 requires the Board to reject it. When an application has

been accepted as complying with the provisions of Sections 5 and 6 the Board must by reason of Section 8 pass an order fixing a date and place

for the hearing of the application and notice of this order must be sent by registered post to the applicant and his creditors. Section 9 gives the

Board power to dismiss an application at any stage of the proceedings if the Board does not consider it desirable or practicable to effect a

settlement of debts or if in its opinion the applicant fails to pursue his application with due diligence or if it includes a claim which the Board

considers is collusive and intended to defraud a creditor. Section 17 states that if no amicable settlement is arrived at under Sub-section (1) of

Section 14 within twelve months'' from the date of the application u/s 4 the Board shall dismiss the application. There is no power to extend the

proceedings beyond twelve months.

In this case the Board dismissed the petition, which the debtor respondents filed on the 18th September, 1939, because of non-compliance with

the provisions of Section 6. The order dismissing the petition was passed on the 11th November, 1939. A dismissal u/s 7 does not preclude a

debtor from filing a fresh application and this course being open the debtor respondents adopted it five days later. The new petition was found to

be in order and the Board took the steps which it was bound to take in view of the provisions of Section 8. The debtor respondents obviously did

not proceed to serve their creditors or the legal representatives of deceased creditors with due diligence. The creditor who has instituted the

present proceedings alleges that the debtor respondents did not do so because they intended to delay the proceedings as far as they possibly could

with the object of being allowed to file a fresh petition at the end of the twelve months. The petitioner is a secured creditor and has obtained a

mortgage decree against the debtor respondents. Whether there is some excuse to be found for their failure to serve the creditors or whether they

deliberately neglected to do so as the result of a deep laid plot on their part matters not for the purpose of deciding the application now before the

Court.

What is important here is that on the 12th November, 1940, four days before the expiration of the twelve months contemplated by Section 17

the debtor respondents filed an application asking the Board to dismiss their petition by an order purporting to be passed under the provisions of

Section 7 of the Act and this the Board did. There is no doubt that in taking this action the Board acted contrary to the spirit and the letter of the

Act. The second petition having complied with the provisions of Sections 5 and 6, the Board had no power to reject it u/s 7 and its action in

purporting to do so can only be regarded as an evasion of its statutory duty u/s 17. That section leaves no option to the Board. If before the

expiration of the twelve months no settlement has been arrived at the debtor''s petition must, as already stated, be dismissed. It is common ground

that a dismissal u/s 17 would have prevented another petition being filed. It may be that in some cases, especially where there is a large number of

creditors and some of them die after the application has been filed, it is not possible to comply within the twelve months with all that the Act

contemplates, but that is a defect in the Act which the Court cannot remedy. The remedy lies with the legislative authority. On other occasions this

Court has had to point out defects in this Act. The omission to give a Board power to extend the proceedings beyond twelve months if it considers

it right and proper to do so, perhaps, adds another to the list of defects. The fact that the Board considered it to be equitable to give the debtor

respondents an opportunity of filing still another petition is, however, a matter which the Court cannot take into consideration. What the Court has

to decide is whether the Board had jurisdiction to dismiss the petition u/s 7 of the Act in the circumstances of this case. Obviously it had not the

jurisdiction. Consequently the Board''s order will be quashed.

The result is that the petition will still be regarded as being on the file and it will be the duty of the Board to pass an order of dismissal u/s 17.

The petitioner is entitled to his costs which will be paid by the debtor respondents.