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1985 DIGILAW 396 (KER)

C. K. P. VILASAM SERVICE CO-OP. BANK. v. KESAVA PILLAI

1985-12-05

SREEDHARAN

body1985
Judgment :- 1. The first counter petitioner in T. P. No. 4/78 on the file of Subordinate Judge's Court, Quilon is the petitioner in this civil revision petition. I. P. No. 4/ 78 was filed by the first respondent herein for adjudicating him as an insolvent under the Insolvency Act, Act 2 of 1956. The petitioner is a cooperative society who has got an award against the first respondent. The society contended that the Subordinate Judge's Court has no jurisdiction to entertain the petition under the Insolvency Act because of the provisions contained in the Kerala Co-operative Societies Act, 1969. Reliance was placed by the society on S.69 and 100 of the Kerala Co-operative Societies Act. The learned Subordinate Judge by his order dated 16-11-1979 over-ruled the objections and found the petition to be maintainable. The society challenged that decision before the District Court, Quilon in A. S. No. 32/80. The learned District Judge by judgment dated 23-1-1981 dismissed the appeal and hence this civil revision petition. 2. The short question that arises for consideration in this civil revision petition is whether the insolvency petition filed by the first respondent before the Subordinate Judge's Court, Quilon is barred in view of the provisions contained in the Kerala Co-operative Societies Act, 1969. S.100 of the Kerala Co-operative Societies Act reads as follows: "Bar of jurisdiction of courts. No civil or revenue court shall have any jurisdiction in respect of any matter for which provision is made in this Act." This section bars the jurisdiction of civil courts in respect of matters for which provisions are made in the Act. S.69 provides for settlement of disputes between parties. It states that "Notwithstanding anything contained in any law for the time being in force" a dispute between a co-operative society on the one hand and the parties mentioned therein on the other has to be decided in accordance with the provisions laid down in that section. This shows that in case if there is a dispute between the present petitioner on the one hand and the first respondent on the other, as provided by Clause.2 of S.69, such a dispute is to be decided as provided therein. Only in respect of matters for the settlement of which provisions are seen made in the Kerala Co-operative Societies Act can it be said that the jurisdiction of the civil court is ousted. 3. Only in respect of matters for the settlement of which provisions are seen made in the Kerala Co-operative Societies Act can it be said that the jurisdiction of the civil court is ousted. 3. In the instant case there was a dispute between the petitioner and the first respondent regarding the amounts due to the society. That was adjudicated upon as provided by the Kerala Co-operative Societies Act. The arbitrator found that the first respondent is liable to pay a sum of Rs. 64,920/-to the society. Once the award is passed the dispute between the parties has been decided upon and thereafter it cannot be said that the dispute subsists. There remains nothing further to be done in the matter. The Co-operative Societies Act provides for the steps to be taken by the society for realising the amounts covered by the award. But if the judgment debtor has other debts and according to him his debts exceed the assets he has got the right to approach an insolvency court to get himself adjudicated an insolvent. This matter is outside the purview of the Co-operative Societies Act. That Act does not provide for any machinery to deal with such a situation. 4. The first respondent is not in a position to discharge his debt due to the petitioner. The 2nd respondent is another creditor. Therefore he wants to get himself adjudicated an insolvent under the provisions of the Insolvency Act. For that matter he has approached the civil court. Since such a situation is not one for which provision has been made in the Kerala Co-operative Societies Act, 1969, the bar of jurisdiction of the civil court under S.100 of that Act cannot operate against the proceedings. In the decision State of Punjab v. Rattan Singh (A.I.R.1964 SC 1223), a bench of 5 judges of the Supreme Court had to consider the jurisdiction and powers of an insolvency court. The Patiala Recovery of State Dues Act 2002 BK provided a special machinery for adjudicating the amount due to the State from defaulters and also the question whether a person is a defaulter. S.11 of that Act barred the jurisdiction of the civil court from enquiring into the question whether the alleged debtor was really a debtor and liable to pay sums said to be payable by him. S.11 of that Act barred the jurisdiction of the civil court from enquiring into the question whether the alleged debtor was really a debtor and liable to pay sums said to be payable by him. Their Lordships of the Supreme Court held that the said bar under S.11 will not in any way affect the jurisdiction of the Insolvency Court to determine whether the alleged debtor does owe the debts mentioned by the creditor. I consider it advantageous to quote para 22 of the judgment. "The next question then to decide is whether the Insolvency Court can, in spite of the provisions of S.11 of the Act and the jurisdiction which the head of the department has, under S.4, as construed by us, go into the question whether the alleged debtor sought to be adjudicated insolvent really owed the debt which has been determined or could be determined only by the head of department under S.4 of the Act. It is well settled that the Insolvency Court can, both at the time of hearing the petition for adjudication of a person as an insolvent and subsequently at the stage of the proof of debts re-open the transaction on the basis of which the creditor had secured the judgment of a Court against the debtor. This is based on the principle of that it is for the Insolvency Court to determine at the time of the hearing of the petition for Insolvency whether the alleged debtor does owe the debts mentioned by the creditor in the petition and whether, if he owes them. What is the extent of those debts. A debtor is not to be adjudged an insolvent unless he owes the debts equal to or more than a certain amount and has also committed an act of insolvency. It is the duty of the Insolvency Court therefore to determine itself the alleged debts owed by the debtor irrespective of whether those debts are based on a contract or under a decree of Court. It is the duty of the Insolvency Court therefore to determine itself the alleged debts owed by the debtor irrespective of whether those debts are based on a contract or under a decree of Court. At the stage of the proof of the debts, the debts to be proved by the creditor are scrutinized by the Official Receiver or by the Court, in order to determine the amount of all the debts which the insolvent owes as his total assets will be utilised for the payment of his total debts and if any debt is wrongly included in his total debts that will adversely affect the interests of the creditors other than the judgment creditor in respect of that particular debt as they were not parties to the suit in which the judgment debt was decreed. That decree is not binding on them and it is right that they be in a position to question the correctness of the judgment debt. It is on their behalf that the Insolvency Court or the Official Receiver is to scrutinize the proof of debts to be proved and can even demand proof of the debts on which the judgment debt has been decreed. The decree is binding only on the parties. The debtor sought to be adjudged is bound by it and so is the creditor. But this binding effect of the decree is only to be respected by the Insolvency Court in circumstance where nothing is reasonably alleged against the correctness of the judgment debt. The Insolvency Court has the jurisdiction to re-open such debts and will do so ordinarily when such judgments have been obtained by fraud, collusion or in circumstances indicating that there might have been miscarriage of justice. On similar grounds it must be held that the determination of the amount of the debt and the liability of the defaulter to pay it could be open for scrutiny by the Insolvency Court in the aforesaid circumstances in spite of the provisions of S.11 of the Act, which provisions really contemplate a decision of the dispute about the matters covered by it between the same parties. viz. the creditor Bank and the the alleged defaulter. The determination of the amount of State dues recoverable from the defaulter under S.4 of Act can have no better status than the ordinary judgment and decree of a civil Court have. viz. the creditor Bank and the the alleged defaulter. The determination of the amount of State dues recoverable from the defaulter under S.4 of Act can have no better status than the ordinary judgment and decree of a civil Court have. The head of the department could not have decided a dispute about the amount of the State dues recoverable from the defaulter between creditors other than the Bank and the defaulter and therefore such a dispute between the creditors in general and the defaulter cannot be a dispute which comes within the mischief of S.11 of the Act." In view of the principles laid down by their Lordships of the Supreme Court. I hold that nothing contained in the Kerala Co-operative Societies Act 1969 bars the jurisdiction of the Insolvency Court to adjudicate a debtor of a co-operative society as an insolvent as provided by the Insolvency Act. It therefore follows the decision arrived at by the court below calls for no interference. In the result I find no merit in the revision petition. It is accordingly dismissed. No costs.