Chander Mohan vs Jagdish Chand Etc.

S.P. Goyal, J.—This Judgment will dispose of two appeals S.A.C. Nos. 58 and 59 of 1977 which are directed against the same judgment of the learned District Judge, Ambala, dated 20th September, 1977.

Chander Mohan, appellant filed an application for adjudging Jagdish Chand, respondent, as an insolvent. Alongwith that petition was filed an application u/s 20 of the Provincial Insolvency Act (hereinafter referred to as the Act), for the appointment of an Interim Receiver. The Insolvency Court allowed that application and appointed the Interim Receiver. The Interim Receiver deputed his nominee to take possession of the property of the insolvent, and in consequence thereof shop comprising rooms Nos. 1, 2, 3 and 4 was taken possession of alongwith the foodgrains found lying in those rooms Thereupon, Bishna Ram, Prem Chand and Babu Ram filed three applications claiming that the foodgrains found lying in room No. 1 and 2 belonged to them which had been brought by them for sale on the shop of Jagdish Chand. Another application was moved by Jaipal claiming that the shop consisting of rooms Nos. 3 and 4 and the goods lying therein belonged to him.

From the perusal of the record of the Insolvency Court it appears that some affidavits were filed by the parties of January 9 1976, though there is no order asking the parties to do so, the Insolvency Court released the shop consisting of rooms Nos. 3 and 4 on the statement of the Counsel for the appellants. The application of Jaipal with respect to the goods was dismissed and that of the other three applicants allowed on the basis of the said affidavits. On appeal, the order of the Insolvency Court respecting the applications of Bishna Ram, Prem Chand and Babu Ram was confirmed and respecting the application of Jaipal it was reversed and his application was also allowed Dissatisfied with that judgment, the creditor-appellants has filed the said appeals.

Mr. D.C. Ahluwalia, the learned counsel for the appellant, in support of the appeals, contended that the impugned orders were wholly without jurisdiction as no issues were framed on the pleadings of the parties nor they were called upon to lead any evidence According to the learned counsel these petitions have to be tried like a suit and the same could not be disposed of on the basis of the evidence consisting of affidavits produced by the parties. In support of his contention, the learned counsel relied on AIR 1928 556 (Lahore) AIR 1925 109 (Oudh) In (Ghani Muhammad''s case supra), Addison, J. held that that in the proceedings u/s 4 (1), Insolvency Act, it was necessary to try the matter like a regular suit after having all the parties before him, taking their pleadings, admitting their documents and hearing their evidence and that it was not possible to decide the question of title in a summary manner. In the present case, no issues were framed nor the parties were called upon to lead evidence. From the perusal of the record it appears that even they were not even called upon to file affidavits in support of their respective claims. However, even if it may be assumed that some oral order was passed for the production of their evidence by way of affidavits, that was wholly illegal because u/s 4 of the Act all such matters were to be tried like a suit and in a suit evidence by way of affidavits cannot be allowed. It is only under Order 19 of the CPC that the Court for sufficient reason, can direct the parties to prove a fact by an affidavit. But no such order is available on the file. Moreover, as held in the case cited above, the question of title u/s 4 (2) of the Act has to be decided by affording an opportunity to the parties to lead their evidence. The procedure adopted by the Insolvency Court was, therefore, wholly unwarranted and the impugned judgment has to be set aside.

The learned counsel for the respondents, however, urged that neither the appellant nor the official receiver raised any objection in the Insolvency Court regarding the procedure adopted by that court. It is true that no objection was raised neither in the Insolvency Court or even in the first Appellate Court but the non-raising of an objection would not validate the proceedings which were illegal from its very inception.

In view of the above discussion, these appeals are allowed, the judgment of the learned District Judge set aside and the case remanded to the Insolvency Court for fresh decision in accordance with law. The sale proceeds of the foodgrains attached by the Receiver was allowed to be withdrawn by the respondents on security that security will continue to be in force till the decision of the Insolvency Court. The parties, though their Counsel have been directed to appear in the Insolvency Court on January 8, 1979.