Satrasala Hanumanthu and Others vs Receiver to the Estate of Insolvent Talisetti Subbayyar and Others

In this case the District Judge of Bellary has, u/s 23 of the Provincial Insolvency Act, Act III of 1907, directed that the entries relating to the

debts purported to be owing to creditors Nos. 5 to 11 in the schedule filed by the insolvent be expugned, Several amounts are alleged to be due

on promissory-notes executed by the insolvent on various dates in 1910, 1911 and 1912: on the debtor''s own petition the adjudication was made

some time in 19-3 and in his petition he entered these debts in the schedule. There is a creditor named Matta Gattayya who claims to be entitled to

a large amount under a decree obtained by him against the Insolvent, The winding up of the estate was delayed owing to some suits filed by certain

persons claiming to be mortgagees and it appears that in 1918 the Receiver made a report to the District Judge asking, among other things, for

directions as to whether the debts now in question had been proved. The creditor Gattayya had also made a similar application alleging that all

these debts are false and fictitious. The Receiver is not an, Official Receiver appointed by the Local Government under the Act. The District Judge

sailed upon the creditors Nos. 5 to 11 to prove their debts. They filed affidavits in support of their claims, and the District Judge, instead of calling

for evidence in proof of their claims, asked the Receiver to take any evidence which might be adduced by these creditors and submit such

evidence to him. He fays that this procedure was agreed to by the parties. The Receiver examined a number of witnesses and submitted their

evidence to the Judge bat without expressing his own opinion of the evidence adduced before him. The District Judge, upon perusal of the

evidence and after hearing the arguments of the parties, held that these debts were not duly proved, in the circumstances of this case, I am not

satisfied that the learned District Judge adopted a proper procedure in delegating the taking of the evidence to the Receiver and acting upon that

evidence and deciding the case without himself having even the advantage of the report from the Receiver as to his estimation of the evidence of the

witnesses who deposed before him.

Section 26 says that the District Judge will decide upon the claim after such enquiry as the Court might think necessary. That, prima facie,

suggests that the enquiry should be held by the Court itself and in cases where there is no Official Receiver authorised u/s 52(4) of the Act to admit

or reject proofs of creditors. In any event, the Judge thought it advisable that evidence should be recorded by the Receiver he ought to have taken

the prosecution to and the Receiver to report to the opinion formed by him of that evidence. Here there were a number of persons claiming to be

creditors of the insolvent and some of their claims are for substantial amounts. It seems to me that it would have been more satisfactory if the

district Judge had examined the witnesses himself so that we might have the advantage of his opinion as to what he thought of the witnesses. It is

not satisfactory that the Court should have to come to a conclusion as to the reliability of the evidence without having the witnesses. I would,

therefore, set aside the order of the district Judge and remand the case to the District Judge of Anantapur for proper enquiry u/s 26, so that he

might enquire into the case as required by law in the light of the above observations and dispose of the matter.

It must also be pointed out that the district Judge had admitted into evidence the public examination of the insolvent recorded u/s 14. That, no

doubt, as laid down in that section, forms part of the record, but it is not relevant evidence in an enquiry held u/s 26. This is clearly laid down in a

ruling in Brunntr beard of Trade, Ex parte (1887) 19 Q.B.D. 572 . by Mr. Justice Cave. The object of an enquiry u/s 11 if, as set out in that

section, to ascertain mainly whether an act of insolvency has been committed and whether a petitioner was competent to present the petition and

the public examination held for such a purpose would, as pointed cui by Mr. Justice Cave, be necessarily complicated if in such an examination

proof of the debts of various creditors was to be gone into, The statements in the examination of the insolvent u/s 14 were not, therefore, relevant

evidence upon which the district Judge entitled to act in this case, without the debtor being examined once again.

The Receiver, who is a party to this appeal, will continue to be a party in the farther proceedings.

Costs will abide the result.

Sadasiva Aiyar, J.

I think that in this case the enquiry was commenced by the Court not u/s 26(1), but u/s 26(2) of the Provincial Insolvency Act. Section 26(1)

refers to a case where the Receiver thinks that a debt had been improperly entered in the schedule. There is nothing in the record to show that the

Receiver expressed any suth opinion in connection with any of the debts in dispute, namely, the debts alleged to be due to the creditors Nos. 5 to

11.

Under Clause (2), however, the Court may make the enquiry otherwise than on the application of the Receiver, and I think that the enquiry in

this case must be deemed to have been an enquiry under Clause (2) because the 12th creditor, Mattu Gattayya, disputed the truth and validity of

the debts of the creditors Nos. 5 to 11 and requested the Court to enquire into the matter.

It seems to me that the enquiry u/s 26 ought to have been made by the Court itself and not by the Receiver in this case.

As regards the Receiver, it is admitted that he is not an Official Receiver.

As regards an ordinary Receiver, he possesses only the powers given u/s 20 of the Act and those do not empower him to take evidence as a

Court or to administer oaths or solemn affirmation to witnesses. It is only u/s 52 of the Act that the High Court, with the sanction of the Governor

in Council, can direct delegation of powers to Official Receivers which powers include the powers of a Court of Justice. I have, therefore, grave

doubts whether the evidence taken by this Receiver, who is not an Official Receiver, is at all legal evidence on which any action can be taken or

conclusion can be arrived at by a Court. For this and other reasons given by my learned brother I agree in the order proposed by him. I might

suggest that in further enquiry directed by our order, the lower Court might, even if the parties do not wish to examine either the 12th creditor or

the insolvent itself, examine them if it is possible and convenient to do so. The Receiver who has been made a party to the proceedings in this

appeal might be also continued as a party in the later stages of these proceedings.