Pushkaran v. Ramakrishnan Nair — 1954 DIGILAW 99 (KER)

Judgment :- 1. This is an appeal from an order of the District Judge of Alleppy rejecting an application for the review of an order dismissing a creditor's petition to adjudge a debtor insolvent. 2. On 7.3.1124 one Ramakrishnan Nair filed an application (I.P. No. 6 of 1124) before the lower court seeking to adjudicate one Krishna Pillai (Respondent 2 here, and counter-petitioner No.1 before the lower court) an insolvent alleging that he had committed an act of insolvency by transferring all his properties to the 2nd counter-petitioner thereto (Respondent 3) for a nominal, if not for no consideration. The said transfer was on 26.12.1123. On the very day of the presentation of the petition the court posted it to 16.3.1124 to cure certain alleged defects. Really there were no defects. The petition satisfied all the requirements of a valid petition by a creditor to adjudicate a debtor an insolvent. As the court did not sit on 16.3.1124 the petition was adjourned to 23.3.1124. This adjournment was also for curing defects. Before that date, on 21.3.1124, the petitioner filed another petition stating that as he had made a settlement with his debtor there was no need to prosecute the petition and that it may therefore be struck off the file. Apparently nothing was done on 23.3.1124 with reference to the main petition to which date it stood posted for curing defects. The petition was not even adjourned to a subsequent date. The second application was taken up for orders on 30.3.1124 and the court passed on it the order "Struck, off". No order whatever was made on the main petition. Evidently the order "struck off" meant that the main petition i.e., I.P. No. 6 of 1124 was removed from the file of the court. A contrary view would mean that the main petition still remains on the file of the lower court undisposed of. The progress-diary of the case and subsequent events clearly show that all concerned took the order on the second petition as one dismissing the insolvency petition itself. 3. On 19.4.1124 the present appellant filed the application giving rise to this appeal seeking a review of the order dismissing the insolvency petition and to substitute him as the petitioning creditor in place of the original petitioner. 3. On 19.4.1124 the present appellant filed the application giving rise to this appeal seeking a review of the order dismissing the insolvency petition and to substitute him as the petitioning creditor in place of the original petitioner. The petition and the affidavit in support thereof disclose that the appellant is a creditor of Krishna Pillai and that the debt due to him exceeded the sum of Rs. 500/-. The learned judge who disposed of I.P. No. 6 of 1124 directed notice of the application to all the parties. The petition finally came up for hearing before that judge's successor-in-office and he dismissed it on two grounds. In the first place it was stated that the Travancore Insolvency Act, VIII of 1108, contained no provision for a review of an order passed by a court in the exercise of its insolvency jurisdiction. Secondly, the learned judge said the substitution under S.16 of the Act VIII of 1108 contemplated a petition that is alive and is not dead, a petition that is pending and has not been dismissed. Obviously the learned judge's second point is sound; otherwise the words "where the petitioner does not proceed with due diligence" occurring in S.16 would be meaningless. The position finds good support in decided cases both in India and in England. Maung Gye v. A.L.K.P. Chettyar Firm A.I.R. 1933 Rang. 251, Raghuraj Singh v. Abdul Rahman A.I.R. 1938 Oudh. 206 are clear authorities in support of this view and In re Maugham (1888) 21 Q.B.D. 21 is also to the same effect. Pages 114 and 115 (1953 Edn.) of Rameshwar Dial's commentary on the Provincial Insolvency Act, may usefully be referred to in this context. In all the Indian decisions referred to by the learned commentator at the time when substitution was ordered the insolvency proceedings were pending. 4. The appellant had however anticipated the objection that he cannot be substituted as a petitioning creditor unless the proceedings are pending. That is why he asked for a review of the order dismissing I.P. No. 6 of 1124. The learned judge is correct when he stated that the Travancore Insolvency Act like the Provincial Insolvency Act, 1920, but unlike the Presidency Towns Insolvency Act does not contain a provision for the court to review an order made by it in its insolvency jurisdiction. The learned judge is correct when he stated that the Travancore Insolvency Act like the Provincial Insolvency Act, 1920, but unlike the Presidency Towns Insolvency Act does not contain a provision for the court to review an order made by it in its insolvency jurisdiction. That does not, however, mean that under the Travancore Act or the Provincial Insolvency Act the court cannot review its order passed in insolvency matters. The learned judge has failed to comprehend the full implication of S. 5 of the Travancore Insolvency Act which is identical in terms with S. 5 of the Provincial Insolvency Act, 1920. The result of the absence of a provision for review in the concerned Insolvency Act is only that before the court can review its own order, the power so exercised should have been conferred on it by some provision of the Code of Civil Procedure. In other words, unless the case falls under O. XLVII R.1 the court will have no power of review. The learned judge's view that under the Travancore Insolvency Act he had no power of review is wrong. The material provisions of the Travancore Act are the same as those of the Provincial Insolvency Act, 1920 and decisions under that Act have clearly held that the court can invoke the power of review when the provisions of the Civil Procedure Code would warrant it. Nanak Ram v. Jugal Kishore A.I.R. 1935 Pat. 177; Sher Singh v. Firm Bishan Lal-Suraj Bhan A.I.R. 1937 Lah. 568 and Satyanarayanan Rao v. Official Receiver A.I.R. 1948 Mad. 233. 5. The question then is whether this was a proper case where the learned judge below should have invoked the power of review. The second petition the petitioning creditor filed before the lower court did not ask for any permission of the court to withdraw I.P. 6. S.14 of the Travancore Insolvency Act like S. 14 of the Provincial Insolvency Act, 1920 enacted that no petition, whether presented by a debtor or by a creditor, shall be withdrawn without the leave of the Court. The contents of the petition asking the insolvency application to be struck off clearly show that the petitioning creditor had not asked for any leave to withdraw his earlier application. Likewise the court's order shows the court had not applied its mind to the provision in S.14 when it passed the laconic order "struck off". The contents of the petition asking the insolvency application to be struck off clearly show that the petitioning creditor had not asked for any leave to withdraw his earlier application. Likewise the court's order shows the court had not applied its mind to the provision in S.14 when it passed the laconic order "struck off". The court acted in a confused manner when it struck off the second application and passed no order whatever on the main petition. No doubt, we have construed the striking of as applying to the main petition but the present point is the court struck off the main petition without adverting to S. 14. In our view this is an error apparent on the face of the record and it attracted the application of O. XLVII R.1 C.P.C. The learned judge should have allowed the review asked for. The Judge would seem to have been not aware that the proceeding before him was one which the party could not withdraw without his leave. Once the creditor presents an insolvency petition he has no unfettered control of it. 6. A passage from Rameshwar Dial's commentary to S.14 which has been quoted with approval by Rajadhyaksha, J. in Keshav Appa v. Sitaram Hanumandas A.I.R. 1946 Bom. 20 may with advantage quoted here: "The insolvency proceedings are for the administration of the estate of the debtor, for the benefit of not any particular creditor but for the general body of creditors. Very often petitions are made not with the bona fide intention of getting the debtor's estate administered under the insolvency laws but for the collateral purpose of bringing pressure to bear upon the debtor. It is to check this abuse of the process of the court that the section has been enacted." 7. Again, as observed in Sagarmal Hanoman Prasad v. Abdul Rahman A.I.R. 1938 Oudh.101 where a petitioning creditor, who is a representative of the whole body of creditors, comes to an arrangement with the debtor and seeks not to prosecute his application any further, his action amounts to a failure to proceed with due diligence in the highest degree and S.16 which permits substitution has to be invoked. To quote again from Rameshwar Dial: "The section (S. 16) is intended to serve as a check on the fraud of either the debtor or the creditor who has presented the application for insolvency. To quote again from Rameshwar Dial: "The section (S. 16) is intended to serve as a check on the fraud of either the debtor or the creditor who has presented the application for insolvency. It is not difficult to imagine the case of a creditor, who has presented the application for insolvency against the debtor, having entered into a private treaty with his debtor, not prosecuting his application with diligence and allowing it to be struck off for default. This may no doubt enure to the benefit of the creditor and to the advantage of the debtor inasmuch as it saves his voluntary and gratuitous transfers within two years from the date of the presentation of the application, and transfers by way of fraudulent preference within three months from the date thereof, but it will not be to the advantage of the general body of the creditors. The creditor presenting the petition is considered to prosecute the petition not only for his own benefit, but also for the benefit of the creditors generally." 8. The consequence of the court striking off the insolvency application as a matter of course when the petitioning creditor did not want to proceed with it, without advertence to S.14 and the special procedure prescribed in S. 16, was the court brought upon creditors like the appellant the dangers envisaged in the above extract. It could at least have disposed of the insolvency petition after posting it to a particular date and notifying such posting. An opportunity to rectify the error presented itself when the appellant filed his application. Instead of allowing that application the court took shelter under imaginary technicalities to perpetuate the injustice his predecessor-in-office had caused. In the circumstances the lower court's order has to be vacated. Not only the order striking off I.P. No. 6 of 1124 has to be reversed and that petition restored to the file, but the appellant has to be substituted as the petitioning creditor in place of the original petitioner Ramakrishnan Nair for the further prosecution of the petition. We are not unaware that there is a school of thought that when the review power is invoked under the Civil Procedure Code no appeal from an order rejecting a review petition can be entertained. Nanak Ram v. Jugal Kishore A.I.R. 1935 Pat. 177 cited earlier takes that view. We are not unaware that there is a school of thought that when the review power is invoked under the Civil Procedure Code no appeal from an order rejecting a review petition can be entertained. Nanak Ram v. Jugal Kishore A.I.R. 1935 Pat. 177 cited earlier takes that view. We however prefer to follow the opposite view that under the Insolvency Act an appeal is entertainable even against an order rejecting an application for review. The provisions of the Civil Procedure Code are made applicable to insolvency proceedings subject to the provisions of the Insolvency Act. Consequently when the right of appeal is expressly regulated by the Insolvency Act it should not be taken to be governed by the provisions of O. XLVII, R. 7 C.P.C. Sher Singh v. Firm Bishan Lal Suraj Bhan A.I.R. 1937 Lah. 568. In Satyanarayana Rao v. Official Receiver A.I.R. 1948 Mad. 233 which is another case already cited a Division Bench of the Madras High Court allowed an appeal against an order rejecting an application for review. S. 77 of the Travancore Insolvency Act imposes no limitations whatever as to appeals against orders in the exercise of insolvency jurisdiction. Unlike the Provincial Insolvency Act, 1920 no leave of the Insolvency Court or the High Court is required to entertain an appeal against any order in insolvency. In the result we allow the appeal, set aside the lower court's order rejecting the appellant's application for review, annul the order dismissing I.P. No. 6 of 1124, restore the same to the file, substitute the appellant as the petitioning creditor and direct the lower court to proceed with the trial of the said insolvency petition according to law. The appellant will have his costs of the appeal and that of the petition before the lower court from the contesting respondent (Respondent 3). Order accordingly. Allowed.