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Present: Schneider and Garvin JJ.• 1928.
FREUDENBERG v, WEERAPASS et'al.'"
25—D.C (Inty.) Colombo, 3,592.
Iw'l.’ency—Proof of jiul/jinenl-dcbt—Counterclaim by insolvent—Setoff—Ordinance No. 7 of 1S-5-3, as: 99 and 'J09.
Proof of a judgmcnfc-dobt in insolvoncy proceedings does notdoprivo tho judgment-creditor of the right to sot off, as against thodebt, a sum decreed to tho insolvent by way of counterclaim intho action.
A PPEAL from an order of the District Judge of Colombo. Inaction No. 16,521 of the District Court of Colombo, oneWecrapass sued the appellant and another person to recover,damages for wrongful dismissal. The appellant counterclaimed asum of money due on certain promissory notes. Weerapass’ claimwas dismissed and judgment was entered for the appellant for a sumof Rs. 4,281 ’66. Weerapass was adjudicated an insolvent in thepresent action and the appellant proved his claim in the insolvency. proceedings. Eventually, as a result of an appeal and a second trial,Weerapass got judgment against the appellant for a sum of Rs. 6,280as damages. That sum and the sum payable to the appellant wereset off against each other and satisfaction of the decree enteredaccordingly. The second respondent, a creditor of Weerapass,moved in the insolvency proceedings for an order directing theappellant'to bring into Court the whole of the said sum of Rs. 6,280.
The learned District Judge'ordered the appellant to bring the saidsum into Court and in default allowed writ to issue against him.
H. V. Perera, for the appellant.
March 28,1928. Schneider J.—
There is no appearance for either one of the respondents to thisappeal. Counsel, who appears for the appellant, Mr. Freudenberg,states the facts to be the following :—Weerapass, the insolvent inaction No. 16,521 of the District Court of Colombo, sued the appellantand another person to recover damages for his dismissal in breachof an agreement for his service. The appellant counterclaimed a .sum of money as due to him upon certain promissory notes.' Weera-pass’ claim was dismissed -and judgment was entered for “tfie .appellant upon, his counterclaim for the sum of Rs. 4,281'66.Weerapass was thereafter adjudicated an insolvent in this action.Eventually, as the result of an appeal and a second trial, judgmentwas entered declaring Weerapass entitled to a sum of Rs. 6,280 as
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damages recoverable from the appellant and the other defendant.The appellant undertook the liability to satisfy the decree for thesum of Rs. 6,280. That sum and the sum payable to the appellantwere set off one against the other, and the Proctor for the appellantand the Proctor for the assignee in that action moved that satisfac-tion of the sum decreed to be paid by and to the appellant be enteredof record, the appellant having paid to the assignee’s Proctor thebalance due. The Court thereupon entered order accordingly.Before that order was made the appellant had proved in this actionhis claim for the debt due to him upon the decree in action No. 16,521.The assignee’s Proctor brought to the credit of this action the sumreceived by him from the appellant. The second respondent, whois also a proved creditor, moved in this action for an order directingthe appellant to bring into this action the whole of the said sum ofRs. 6,280. This the appellant resisted. The Judge of the lowerCourt, after hearing argument, made order that the appellant shouldbring into Court the whole of the said sum and that on his defaultthe assignee was to issue writ for its recovery. In the course of hisorder he held that he was .entitled to set aside the order made inaction No. 16,521 of set off and satisfaction of decree; that theappellant by proving his claim in these proceedings in insolvencyhad extinguished his rights under the decree and that the appellantwas not entitled to “ take payment in full.”
I am unable to accept the views of the Judge of the lower Court.Clearly he has no jurisdiction to set aside the order of adjustmentmade in action No.16,521. That power belongs solely to this Court.So long as that order stands he has no jurisdiction in this action toorder the appellant to bring the sum of Rs. 6,280 or any other suminto Court. The appellant discharged all his legal liability by pay-ment into the hands of the Proctor who acted for the assignee in thataction. I am unable to take the same view as the District Judgethat the appellant and the plaintiff in action No. 16,521 could notset off the sum adjudged to be paid by the one against the sumadjudged to be paid by the other. Even if it were otherwise itwould make no difference. Those sums were “ mutual debts ”within the meaning of section 99 of the Ordinance No. 7 of 1853.Under the provisions of that section it is the duty of the Court to .state the account between the insolvent and the appellant, and nomore than the balance due could be claimed from the appellant.That balance the appellant has already paid. Even if the appellantshould have brought the whole of the sum of Rs. 6,280 into Court hewould have been entitled to claim payment of the debt due to him inpreference to the other creditors out of the sum brought into Court.The learned District Judge appears to be in error in taking the viewthat when the appellant proved his claim his rights under the decreewere extinguished by virtue of the provisions of section 109. So
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far as the povisions of that section are applicable to the questionbefore us that section precludes the appellant from enforcing thedecree in his favour by execution in the ordinary course as byproving his claim he has elected to take the benefit of a provedcreditor in the insolvency proceedings.
His rights under the decree are not extinguished, but as thesection itself enacts, if the petition for sequestration be subsequentlydismissed, the appellant might proceed to levy execution. In myopinion Mr. Abeyeratne acted rightly, and within his powers, inmoving for the adjustment and satisfaction of the two parts of thedecree.
For these reasons, in my opinion,the order of the Judge of thelowerCourt appealed from is wrong. I set it aside and hold that thewhole of the sum which should have been brought into Court by theappellant has already been brought by him, and that the claimproved by him has been fully paid and satisfied. The costs of theappellant, both of the lower Court and of this appeal, will be paid bythe second respondent whose agitation had resulted in the orderappealed against.
Gabvln J.—I agree.
FREUDENBERG v. WEERAPASS et al