de Zoysa v. Baur & Co.
1933Present: Dalton and Poyser JJ.
DE ZOYSA v. BAUR & CO.
136.-r-D. C. Colombo, 4,644.
Insolvency—Petition for sequestration of estate—Petition and affidavit ofpetitioning mcreditor—Proof of petitioning creditor’s debt.
Where, in a petition for the adjudication of a person as insolvent, theonly material before the Court was the petition and affidavit of thepetitioning creditor,—
Held, that there was insufficient proof of the petitioning creditor’sdebt.
^ PPEAL from an order of the District Judge of Colombo.
Hayley, K.C. (with him H. V. Perera, Nadarajah, and Aluwihare),for appellant.
No appearance for respondent.
Cur. adv. vult.
POYSER J.—de Zoysa v. Baur & Co.319
November 30, 1933. Poyser J.—
This is an appeal against two orders of the District Judge of Colomboadjudging the appellant an insolvent. The proceedings in the DistrictCourt were as follows:—There were two petitions to have the estate ofthe appellant adjudged insolvent and placed under sequestration, viz.,the petition of W. C. Brodie which set out that the appellant was indebtedto him in a sum of Rs. 28,124.51 due under a decree entered in caseNo. 49,373 of the District Court of Colombo and had failed to pay suchamount within thirty days after a notice under section 12 of the InsolvencyOrdinance had been served on him. This petition was dated January 14,1933.
The second petition was that of Alfred Baur.' It was dated March 7,1933, and was in respect of a sum of Rs. 1,261.15 due to the petitionerunder a decree of the same Court.
Both the petitions were in the statutory form and no question arises inregard to them.
On March 18, 1933, Messrs. Julius & Creasy, Proctors for both creditors,filed proxies and the petitions for the sequestration of the appellant’sestate and affidavits in support and moved that the appellant be adjudgedan insolvent.
The learned Judge then ordered that the appellant be and is herebyadjudged an insolvent and directed notice to be issued on the insolventto show cause against the adjudication on April 4, 1933.
On that date the appellant moved for one month’s time to show causeagainst such adjudication and was allowed time till April 7. On thelatter date the petitioning creditor, W. C. Brodie, withdrew his applicationand the adjudication on his petition was annulled.
The application of Baur & Company by consent stood over till May 16.
On May 15 the appellant filed a motion in the following terms:—“Asthe application by Messrs. Brodie & Company for Rs. 25,000 to adjudicate
R. de Zoysa insolvent having been withdrawn and as the said G. R. deZoysa is making arrangements with Mr. Hale of Messrs. Julius & Creasyto settle Messrs. Baur & Company’s application for Rs. 700, I move for afurther two weeks’ time to show cause in this matter ”.
On May 16 the case was called but the appellant was absent. Themotion for a further two weeks’ time to show cause was then considered,the petitioning creditor objected to further time being granted and thelearned Judge upheld the objection. The journal entry is as follows: —“ No cause being shown by insolvent he is adjudicated insolvent in termsof section 12 of the Insolvency Ordinance
On May 19 the appellant’s proctor filed his proxy and moved that theorder of May 16 be vacated and proceedings were stayed until May 30.On that date appellant’s proctor moved that the order of May 16 shouldbe vacated on the ground that the order of May 16 was made oninsufficient material and also that his client was unable to be present inCourt on that date.
The appellant gave evidence and stated that his non-appearance onMay 16 was due to the fact that he thought that he would be given timeas he did not anticipate any objection from the proctors for the petitioner.He also stated that he disputed the adjudication.
POYSER .T.—de Zoysa v. Baur & Co.
The learned Judge in his order dated June 6 found that the appellanthad adduced no satisfactory explanation for the default committed byhim on May 16 and, in regard to the point raised by the appellant’sproctor that the order of May 16 was made on insufficient material, heheld that the appellant did not challenge the adjudication and there wasno necessity for the petitioning creditors to adduce any further proofthat the affidavits filed by them established their debts and the adjudi-cation must stand.
It is argued on behalf of the appellant that the orders made by thelearned District Judge adjudicating the appellant insolvent were made oninsufficient material, that there must be a definite inquiry before anadjudication is made and evidence adduced as in a trial at law arid thatneither on March 18 nor May 16 was there any evidence before the Courtother than the affidavits in support of the petitions.
The Insolvency Ordinance, No. 7 of 1853, is based on the EnglishBankruptcy Act of 1849. The section of the Ordinance in connectionwith the proof of petitioning creditor’s debt is section 26, and this sectionis practically identical with section 101 of the 1849 Act and, subsequentEnglish legislation in regard to such proof.
The material words of section 26 are as follows : —“ The District Court,under a petition filed by a creditor, shall, upon proof of the petitioningcreditor’s debt and of the act of insolvency of the person against whomsuch petition is filed, adjudge such person insolvent;. . . . ”
The principal point in this appeal is whether there was sufficient proofof the petitioning creditor’s debt. The only proof before the DistrictJudge both on March 18 and May 16 was the petition and the affidavit insupport. These have been held to be insufficient proof. In the case ofex parte Lindsay in In re Lindsay the headnote is as follows :—
“At the hearing of a bankruptcy petition, even though the respond-ent has given no notice of his intention to show cause against thepetition and does not appear the allegations contained in the petitionmust be supported by further evidence than the common affidavit.That affidavit is made only for the purpose of justifying the sealing ofthe petition”.
This case was followed in ex parte Dodd in In re Ormston“. In that casethe debtor gave notice of his intention to dispute the statements in thepetition and attended at the hearing but did not give any evidence orattempt to prove his objections. The Registrar made an order of adjudi-cation on the production of the petition and affidavit in support andwithout any further evidence being adduced. Bacon C.J. held this wasnot sufficient proof of the petitioning creditor’s debts and the Court ofAppeal affirmed his decision.
In view of these authorities I think this appeal must succeed. It isclear from the record that both on March 18 and May 16 the only materialbefore the learned District Judge was the petition of the petitioningcreditor and the affidavit in support. No fresh evidence was adducedand there was consequently no evidence upon which an order of adjudi-
cation could be made.
110 Lavs Rep. (Equity Cose*) 52.
2 3 Chan. Die. 492.
GARVIN A.C.J.—Alvarappa Pillai v. Perera
It will be seen from the cases already referred to that the fact that theadjudication is not disputed, assuming it to be undisputed in this case,is no reason for dispensing with formal proof of the petitioning creditor'sdebt. Further, as proceedings in bankruptcy are in th$ nature of penalproceedings inasmuch as they result or may result in ari-fg^eration of thedebtor's status (Buckley L.J. in In re a Debtor1) there must be strictproof of the petitioning creditor's debt, that is, the debt must be provednot only to have existed at the time of the presentation of the petitionbut also to have continued to exist at the hearing and down to the makingof the adjudication order.
In this case there was no such proof and I think the appeal must beallowed and the orders of the learned District Judge dated March 18 andMay 16, adjudging the appellant insolvent set aside.
The petition however must be referred back to the District Court inorder that it may be dealt with regularly, if the respondent so desires.The respondent does not contest this appeal, and we have been informedthat he does not object to the adjudication being annulled. Furtherthe proceedings in the District Court show that the adjudications werenever contested on their merits but only on technical grounds.
Under all these circumstances I do not consider there should be anyorder as to costs.
Dalton J.—I agree.
DE ZOYSA v. BAUR & CO