Sunder Parmanand Lalvani vs Shreepad Moreshwar Velkar and Official Assignee, High Court

S.K. Desai, J.—This is an appeal by the appellant-original judgment-debtor impugning an adjudication order made on January 28, 1986 by the Insolvency Court. It is pertinent to note that at the stage when the order of adjudication was made, the advocate for the debtor withdrew or rested content with the bald statement that he had no instructions and had not even filed an affidavit in reply opposing the order sought. This shows clear non-application of mind and we feel that if at that stage or even at the earlier stage when the respondent (substituted petitioning creditor) was substituted, had the advocate on behalf of the insolvent drawn attention of the Court to the points urged in the appeal, the Court might have refrained from passing the order of substitution and certainly the order of adjudication.

A few facts may be stated. The original petition was filed by Addison-Wesley Publishing Company Incorporated, a company incorporated under the laws of Commonwealth of Massachusetts, U.S.A., and the said petitioner claim-ad to be the appellant''s creditor under a consent decree dated March 26, 1979 in Suit No. 1258 of 1974. The ground of insolvency averred in the petition was non-compliance with Insolvency Notice N/25 of 1980 issued and duly served on the judgment-debtor. We are told that there has been a chequered history of this petition but that history does not appear to be very relevant for our purpose. The next stage of the proceeding is on August 23, 1985 when the petition came up before Aggarwal J. It was then found that both the petitioning creditor and his advocate on record as also the insolvent and his advocate were absent. At that stage, one S.M. Velkar applied to be substituted in place of the original petitioning creditor and leave for substitution and amendment of the petition was granted. It is pursuant to the said order dated August 23, 1985 that the present respondent had been substituted as the petitioning creditor.

In para 3 (amended) the substituted petitioning creditor has given particulars as regards his claim of being a creditor of the judgment-debtor. The entire paragraph may be reproduced:

That the said Debtor is justly and truly indebted to me in a sum of Rs. 79,582.20 nP. with further interest on Rs. 52,319/- at the rate of 15% per annum from the date of the filing of the suit i.e. December 21, 1981 till payment and realisation being the amount claimed in the Plaint dated 21st day of December 1981 filed in the High Court of Judicature at Bombay, in its Ordinary Original Civil Jurisdiction being Suit No. 91 of 1982 (Shreepad Moreshwar Velkar v. Sunder Parmanand Lalvani and Ors.), which is still pending.

The judgment-debtor did not file any proceedings against the order of substitution nor did he, as already indicated, choose to give instructions to his advocate to oppose the Insolvency Petition before Shah J. in January 1986. This is recorded, as already noted, when the order of adjudication was beam passed against him by the Insolvency Court on January 28, 1986.

We are told by the Official Assignee that after the order was passed there has not been sufficient compliance or co-operation of the judgment-debor with the requirements of the Act and the requisitions made by the Official Assignee. According to the Official Assignee, he has not appeared for private examination. However, these defaults need not deter us further from disposing of the point raised in the appeal although we may observe that if there has been any breach between January 28, 1986 and our order passed in the appeal today or any transgression requiring any further action the Official Assignee may move for appropriate orders if so advised.

The principal contention or more appropriately the only contention raised by Mr. Vimadalal is that the substituted petitioning creditor was not a subsisting creditor either on the date on which the adjudication order was made or even on the earlier date when he was substituted, i.e., on August 3, 1985. He has drawn our attention to the plaint filed by the respondent in Suit No. 91 of 1982. A copy of this plaint is to be found at page 58 of the compilation and Exhibit ''B'' to the affidavit of the substituted petitioning creditor.

We have been told that the suit has been subsequently withdrawn. We will ignore for the time being the withdrawal of the suit and indeed ignoring the same we may now proceed to analyse the plaint. Prima facie it would appear that the claim in suit was clearly barred by the law of limitation on the data on which the suit was filed, i.e., in 1982 itself. The question then to be considered is whether such a creditor, i.e., a creditor whose claim was time barred in the past, i.e., even before he was brought on the record as a substituted petitioning creditor, was entitled to be substituted, thereafter to maintain the-petition and finally to obtain an order of adjudication against the judgment debtor.

To hold contrary would be absurd. The Insolvency Petition was filed in 1980 by the American Company. Suppose, in the present suit under consideration a preliminary question as to limitation had been raised and answered in favour of the defendant and against the plaintiff prior to 1985 and the matter not carried further, could the plaintiff in the said suit have applied for being substituted or if an order of substitution was passed because the insolvent chose to remain absent, could he have secured an Order of Adjudication? Once posed in this manner, the answer to the question under consideration must be clearly in the negative.

Our attention was drawn to a decision of a single Judge of this Court in re: Messrs Bhimji Nanji & Co. (1967) 71 Bom. L.R. 638 but the single Judge (Tulzapurkar J. as ha then was) was only considering the case of a creditor under the Presidency-Towns Insolvency Act whose claim was within time when he filed the petition but became time barred by the date the petition was actually heard. We do not have before us such a case but a case of a creditor (whose claim had become time barred by 1982) and that fact can be ascertained from the suit filed by him in this Court i.e. on an analysis of his own pleadings in the said suit, viz., Plaint in Suit No. 91 of 1982 (page 58). We are not required to consider here whether the single Judge was correct in the view that he took in Bhimji Nanji''s case that a creditor whose claim was not barred and therefore subsisting at the time when he filed the petition would not be entitled to obtain an order of adjudication subsequently if he allowed the claim to become time barred after the filing of the Insolvency Petition. Since that is not the case before us, any further consideration or reconsideration of the said judgment appears to us to be unnecessary. Mr. Vimadalal drew our attention to a decision given under the Companies Act in Company Petition No. 221 of 1977 where the judgment of Tulzapurkar J. has been analysed but it is unnecessary to go into the said decision in the view that we have taken.

We have, therefore, before us the clear position that in 1982 itself the claim of the present substituted petitioning-creditor had become time barred. Indeed it would appear to us on a perusal of the plaint in Suit No. 91 of 1982, where the cause of action is stated to be on cheques encashed in Bombay, which encashment took place some time in 1972, that the claim was hopelessly time barred. In para 6 of the plaint the plaintiff has relied upon a letter dated January 8, 1980 as constituting the last acknowledgement of the liability. Now, if the claim is one based on cheques encashed in 1972, the clear averment in the pleadings must be that there is an extension within the first period of limitation, i.e., on or before 1975, and further extension within three years� period thereafter and that the last of such acknowledgements was within three years of the filing of the suit. Hence it can be said that the pleading in para 6 is not in accord with the requirements of the Civil Procedure Code. Since there was no proper pleading, it would appear that the substituted petitioning creditor was by the previous Bench directed to file an affidavit explaining fully his cause of action and the correspondence to consider whether the claim was or was not time barred when the suit was filed. According to the chronology given to us as per the affidavit, the last of the payments of interest was made by the debtor by a cheque dated October 13, 1975. Thereafter in para 3 of the said affidavit the creditor has referred to two letters, one dated May 5, 1977 and the other dated September 12, 1977, which, according to the creditor, would constitute acknowledgements of liability. If thereafter the plaint is perused along with the said affidavit, it is clear that the alleged Agreement of July 1978 was not a written agreement nor confirmed by the debtor by any letter. We have seen the letters Exhibits 3 and 4 annexed to this affidavit and it is clear that the judgement debtor has not accepted the creditor''s case as to the oral agreement pleaded nor acknowledged any liability to pay any amount to the creditor. To turn once again to the plaint, it is clear that the alleged letter dated January 8, 1980 is not clearly indicated in the list of documents annexed to the plaint on which the plaintiffs would rely. Thus we have the position that a copy of the letter dated January 8, 1980 has not been annexed to the plaint nor specifically mentioned in the list of documents annexed to the plaint. This lends support to the statement of the appellant that there was no such letter. Indeed, para 6 of the said plaint as well as the entire pleadings filed in Court do not prima facie appear to be in accord with the requirements as to how extensions of the period of limitation are required to be specifically pleaded.

Thus it is clear that when the substituted petitioning creditor was allowed to be substituted, i.e., by Aggarwal J. on August 23, 1985, his claim was time barred. Indeed it is pertinent to note that it is not clear whether the that time the defendant in that suit had been served. We are told by Mr. Samant that he was served and was represented by an advocate. However, there was no written statement and still the plaintiff in that suit, i.e., the substituted petitioning creditor, had refrained from applying to Court for judgment for want of written statement. Thus, the suit was merely kept alive because, perhaps, to take a decision would have been to invite an adverse decision on the plea of limitation.

Thus, we are entitled to and must proceed on the clear footing that the claim was time barred in 1985. Can such a person step into the shoes of the original petitioner and get the benefit of act of insolvency which was qua the decree in favour of the original petitioner? In our opinion, no. The substituted petitioning creditor would have been entitled to be substituted if his claim was alive in 1985. Merely filing of a time-barred suit does not keep the claim alive. That the suit was hopelessly time-barred can be established, as we have done, by the analysis of the pleadings and the plaintiff''s conduct in the suit after filing the plaint till 1985.

In the view that we have taken, the relevant point of time for consideration would be August 23, 1985 which is the date on which the substituted petitioning creditor comes to the Court seeking an order of adjudication. On that day if his claim against the debtor was not subsisting, then, in our opinion, no order of adjudication can be subsequently passed merely because his right to be substituted was not contested and his claim not then investigated by the Court ordering substitution. If that be so, the appeal will have to be allowed and for the reasons indicated, the order of adjudication set aside. Order accordingly. The appellant and the respondent will bear their respective costs.

Mr. Samant states that the appellant had made certain allegations against the respondent and his advocate, which the appellant has withdrawn. We are shown a writing recording this. We have verified the writing but, in our opinion, it is unnecessary to keep the writing on record and the appropriate place would be in the record of the respondent and/or the respondent''s advocate.

The Official Assignee points out that in this matter the conduct of the judgment-debtor has not been proper and that as many as 11 meetings were required to be held by the Official Assignee by reason of the failure of the Appellant to comply with various requisitions of the Official Assignee. The principal requisition concerns private examination of the insolvent. The ex~ planation given by Mr. Vimadalal is that the insolvent was not in India during the period. In our opinion, the insolvent must compensate the Official Assignee for the waste of time and efforts and bearing in mind that there have been 11 infructuous meetings fixed (on rough and ready reckoning) we propose to direct that the appellant should pay a sum of Rs. 1100/- to the O.A-In addition Mr. Samant points out that certain expenses were required to be incurred by the Insolvency Registrar during the course of the insolvency proceedings which have initially been paid by the substituted petitioning creditor. Mr. Samant has asked for reimbursement of these and in our opinion he is entitled to such reimbursement. Mr. Vimadalal on behalf of the appellant undertakes to Court to pay to the respondent''s advocate on behalf of the respondent all amount advanced by the respondent to the Insolvency Registrar. This should be done on a letter being written to the respondent''s advocate by the appellant''s advocate. The letter to be written within four weeks from today, and the payment to be made within two weeks thereafter. We are also told that Race Club and the erstwhile trainer (of the debtor) had preferred some claims against the O,A. The Official Assignee will retain the amount in his hands and write to the concerned Club and the concerned trainer as to their claims as of today. The letters to be addressed forthwith. Reply to be awaited upto March 31, 1987. If no reply is received by the said date, the claim of such persons to be ignored. If the claims are made by both the parties and exceed the amount in the hands of the Official Assignee, the amount to be divided between them protanto. The appellant will also pay to the Official Assignee the further amount of Rs. 1100/- mentioned earlier which we tax as reimbursement for the time and efforts wasted on the part of the Official Assignee and occasioned by reason of default of the appellant. It is made clear to the Official Assignee that the Official Assignee is not concerned with the shortfall if there are further claims or larger claims than the amounts in his hands and he is only able to pay the claims protanto. If there is excess amount, the excess amount to be returned to the appellant provided the amount of Rs. 1100/- has been paid by him. Liberty to apply in case of difficulty.

No order as to costs both of the appeal and the petition.