Judgement

Appeal from an order of the high court (April 12, 1912) affirming an order of the district judge of Murshidabad (April 22, 1911).

The appellant in 1909 presented a petition to the district court under s. 5 of the provincial insolvency act (iii. Of 1907) praying that he might be adjudged an insolvent. He stated that his debts amounted to about twelve lakhs of rupees, that his assets were about five lakhs, and that he had failed to effect a compromise with his creditors. The respondents, who were creditors some of whom had issued executions, opposed the application and charged the appellant with acts .of bad faith in relation to his creditors. They pointed out that in march, 1906, he had filed a similar petition in the high court and that woodroffe j., in refusing to make an order, had said " it is clear that the insolvent for the last fourteen years has been doing everything possible to defeat and delay his creditors."

The district judge dismissed the petition upon the ground that it was not made bona fide, but for an inequitable and collateral purpose.

The high court (sir cecil brett j. And sharfuddin j.) Dismissed the appeal summarily under order xll, r. 11, of the code of civil procedure, 1908. A petition to the high court for leave to appeal [@ page lria 12] to his majesty in council was opposed upon the ground that the provincial insolvency act, 1907,

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C hhatrapat Singh Dugar V. Kharag Singh Lachmiram 168

contained no provision for such an appeal and by ss. 46 and 47 negatived the right. The learned judges (sir lawrence jenkins c.j. and mullick j.) Granted a certificate under s. 109 (c) of the code of civil procedure, 1908. The judgment upon this question is reported at i. L. R. 40 calc. 685.

1916. Nov. 1. Sir erie richards, k.c., and sir w. Garth, for the appellant. The appellant was entitled to an order of adjudication under s. 5 of the provincial insolvency act (iii. Of 1907). Ali the requirements of ss. 5, 6, and 11 were complied with. The act makes the discharge of the debtor under s. 44 depend upon his conduct and dealings, which are to be a subject of inquiry in the insolvency. The act differs in this respect from ch. 20 of the code of civil procedure, 1882, which it repeals; under s. 351 of the code the grant of an order was dependent upon the debtors conduct. The words " or for any other sufficient cause " in s. 15 of the act of 1907 are for the protection of the debtor ; they do not give the court a discretion to refuse an order to a debtor applicant. The Indian decisions strongly support the appellants contention Uday Chand Maiti v. Ram Kunwar Khala (( 1910) 15 calc. W. N. 213); sheikh abdul rezack v. Basiruddin ahmed (( 1910) 15 calc. W. N. 244.); samiruddin v. Kadumoyi dasi (( 1911) 17 calc. W. N. 405.); triloki nath v. Badri das (( 1914) i. L. R. 36 allah. 250.); bava jeer chetti v. Bava rengesami . (( 1911) i. L. R, 36 madr. 402.) The act of 1907 is framed on the english bankruptcy act, 1883 (46 & 47 viet. C. 52). It has been held that there is no inherent discretion in the court to refuse an order under that act on the ground that the petition is presented for a collateral purpose in re painter ([ 1895] 1 q. B. 85.) ; in re hancock . ([ 1904] 1 k. B. 585.) An order was refused in in re betts ([ 1901] 2 k. B. 39.) And in re bond (( 1888) 21 q. B. D. 17,); those were extreme cases in which the application did not really come within the statute.

De gruyther, k.c., and dube, for the second respondent. There was a discretion in the court to dismiss the petition ; s. 5 of the act provides that the court may make an order. The words in s. 15 " or for any other sufficient cause " are intended to preserve the [@ page lria 13] right to refuse an order if upon the examination of the debtors conduct and dealings, provided for by s. 14, it appears that the application is not made bona fide but with a collateral object. The decisions in India relied on for the appellant do not entirely exclude an inherent power in the court to refuse an order Girwardhari v. Jai Narain . (( 1910) i. L. R. 32 allah. 645, 650.) The appellant had not a bona fide intention to have his assets distributed among his creditors; his object was to delay and defeat certain execution creditors in favour of more favoured and fictitious creditors. Under the circumstances the petition was rightly dismissed.

Nov. 20. The judgment of their lordships was delivered by

Sir lawrence jenkins. Chhatrapat singh dugar, the present appellant, on may 21, 1909, presented as a debtor an insolvency petition under the provincial insolvency act, 1907, to the district court of murshidabad for an order adjudging him an insolvent.

His application was opposed by the present respondents and was dismissed. The debtors consequent appeal to the high court in bengal was dismissed by an order of april 12, 1912, and an application for review of the high courts judgment was equally unsuccessful. This appeal has been preferred by the debtor to his majesty in council from the high court order of april 12, 1912.

The provincial insolvency act presents a complete and exact delineation of a debtors right to an order of adjudication on his own petition. Subject to the conditions specified in the act, if a debtor commits an act of insolvency an insolvency petition may be presented by the debtor, and the court may on such petition make an order adjudging him an insolvent. The presentation by him of a petition is deemed an act of insolvency, and on that petition the court may make an order of adjudication (s. 5). Provision is made by the 6th and succeeding sections for the presentation and admission of the insolvency petition

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and other matters of procedure, but no express reference to them need be made in the circumstances of this case. It will suffice to say that all that is thus prescribed has been observed by the present debtor.

By s. 14 it is enacted that on the day fixed for the hearing of the petition, or on any subsequent day to which the hearing may be [@ page lria 14] adjourned, the court shall require proof that the debtor is entitled to present the petition, and shall examine him, if he is present.

Then it is provided by ss. 15 and 16 as follows " 15. (1.) Where the court is not satisfied with the proof of the right to present the petition or of the service of notice on the debtor as required by s. 12, sub-s. 3, or of the alleged act of insolvency, or is satisfied by the debtor that he is able to pay his debts, or that for any other sufficient cause no order ought to be made, the court shall dismiss the petition. 16. (1.) Where a petition is not dismissed under the preceding section .... The court shall make an order of adjudication."

The dismissal of chhatrapats petition by the district court does not purport to rest on any failure to comply with the express terms of the act. What was held was that the application was an abuse of the process of the court and so must be dismissed. Presumably it was on this ground, too, that the high court dismissed the appeal; no other reason is indicated. It is to be regretted that the courts in India allowed themselves to be influenced by this plea instead of being guided to their decision by the provisions of the act. In clear and distinct terms the act entitles a debtor to an order of adjudication when its conditions are satisfied. This does not depend on the courts discretion, but is a statutory right; and a debtor who brings himself properly within the terms of the act is not to be deprived of that right on so treacherous a ground of decision as an " abuse of the process of the court." this ca ,e illustrates the peril of this doctrine in India, for what has been treated by the courts below as such an abuse appears to their lordships in no way to merit this censure. It may, perhaps, give rise to a contest for priority between competing creditors, but that will be, if necessary, a matter for decision hereafter in the course of the insolvency. Be that, however, as it may, their lordships are now concerned only with the debtors position ; and as to that they are satisfied that he has complied with all the conditions specified in the act, and is entitled as of right to an order adjudging him an insolvent. This conclusion, apart from the decision under appeal, is in agreement with the current of authority in India, where it has been rightly held that the stage at which to visit with its due consequences any misconduct of a debtor is when his application for discharge comes before the court, and not on the initial pro-[@ page lria 15] ceeding. As the dismissal of chhatrapats petition was, in their lordships view, erroneous, they will humbly advise his majesty that the order of the high court of april 12, 1912, be reversed with costs, and in lieu thereof an order be made discharging the order of the district court and adjudging chhatrapat singh dugar an insolvent. The respondents will pay the costs of this appeal.