060-NLR-NLR-V-36-In-re-Insolvency-of-H.-H.-A-.ISMAIL.pdf
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MAARTENSZ J.—In re Insolvency of H. H. A. Ismail,
1934Present: Garvin SJPJ. and Maartensz J.
In re Insolvency of H. H. A. Ismaxl642—D. C. Galle
Insolvency-Application for recall of certificate—Second adjudication—Validity—Voidable not void.
A certificate of insolvency cannot be recalled merely because it followson a second adjudication.
A second adjudication may be permitted where the insolvent had beenallowed to carry on business and he had acquired other property andIncurred fresh liabilities.
T
HIS was an application to recall the certificate of conformity grantedto one H. H. A. Ismail in insolvency proceedings No. 642 of the
District Court of Galle.
NtuLarajah (with him S. Alles), in support of application.de Zoysa, K.C. (with him D. R. Jayakody), for insolvent.
D. S. L. P. Abeyasekera, for petitioning, creditor.
Cur. adv. vult.
May 4, 1934. Maartensz J.—
The respondent, H. H. A. Ismail, who was adjudged an insolvent inproceedings No. 3,791 of the District Court of Colombo, was refused acertificate of conformity on June 11, 1929, and this order was affirmed inappeal on September 24, 1929.
The respondent was again adjudicated insolvent by the District Courtof Galle iii proceedings No. 642 on October 13, 1930. The petitioner inthose proceedings averred that the respondent was indebted to him in asum of Rs. 500 on a promissory note dated February 27, 1930, that is, ona debt incurred by the respondent after he had been refused a certificateby the District Court of Colombo. He was granted a certificate of con-formity on April 26.
The balance sheet filed in proceedings No. 642 is almost identical withthe balance sheet filed in proceedings No. 3,791. The balance sheet filedin proceedings No. 642 shows on the debit side additional debts amountingto Rs. 1,020 and on the credit side additional assets to the value of Rs. 127.
One creditor, Ramanathan Chetty, besides the petitioner proved aclaim in proceedings No. 642. Ramanathan Chetty had proved the samedebt in proceedings No. 3,791. He was appointed assignee in proceedingsNo. 642 and was removed from office on October 5, 1931. On October 19,1931, the petitioning creditor, O. L. M. Mohamed, was appointed assigneein his place.
The insolvent at his examination disclosed the fact that he had beenrefused a certificate by the District Court of Colombo, but the DistrictJudge of Galle without stopping the proceedings and insisting on personalnotice to the other creditors granted the respondent a certificate ofconformity. In the meantime, the proved creditors in proceedings
MAARTENSZ J.—In re Insolvency of H. H. A. Ismail.
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No. 3,79i were taking steps to arrest the insolvent. The warrants werenot executed. The last application for a warrant was made by andgranted to Meyappa Chetty on August 29, 1930; the warrant was madereturnable on September 8, 1931. There is no record of the return to thewarrant. On January 18, 1932, Mr. Proctor Navaratne moved for areissue of the warrant issued by another creditor on November 4, 1929.
The District Judge of Colombo directed notice to issue on the insolventto show cause why he should not be arrested on a warrant. The insolventin response to the notice appeared on July 5, 1932, and produced thecertificate of conformity granted to him by the District Court of Galleand the District Judge of Colombo refused to make an order.
The petitioner on September 26, 1932, moved' this Court under section. 129 of the Insolvency Ordinance to recall the certificate granted to theinsolvent by the District Court of Galle. The motion came up for hearingon September 28, when a notice on the respondent was allowed. OnDecember 15 counsel for the petitioner and the respondent were heardby my brother Garvin and myself, and judgment was reserved. OnDecember 20, we made order that notice of the application should begiven to the assignee and the creditors in case No. 642, D. C. Galle, andthe assignee in proceedings No. 3,791, D. C. Colombo, and the matter belisted before the same Bench after the holidays. The notices were notreported served till February 17, 1933. Unfortunately, the same Benchcould not for various reasons be constituted until April 30 this year.
Kamanathan Chetty, the first assignee appointed in the Galle proceed-ings No. 642, has filed an affidavit in which he states that he has no causeto show against the application. The petitioning creditor, who wasappointed assignee after Kamanathan Chetty was removed from office,has filed an affidavit in which he states that he is unable to support thepetitioner’s application. These affidavits were filed on February 16 and17, 1933.
The petitioner contended that the certificate should be cancelled, firstly,because the respondent had obtained it by fraud and, secondly, becausethe second adjudication was ipso facto void.
1 am unable to accept either contention. The respondent was notguilty of fraud as he made a full disclosure of the proceedings in theDistrict Court of Colombo to the Judge who granted him the certificate.As regards the second contention, there was a conflict of authority inEngland’ as to whether a second adjudication was voidable or void till thecase of Morgan and another v. Knight In that case Erie C.J. afterreviewing all the decisions, held that a second adjudication was not ipsofacto void but, at the most, voidable under certain circumstances. Thatdecision was followed in the case of In re Frederick Pulley *, and the caseof In re Jayasekere *.
A second adjudication has been permitted by the English law where,after the. first adjudication, the insolvent had been allowed to trade orcarry on business without any interference by the assignee of the firstinsolvency and he has acquired other property and incurred fresh liabilities.This rule has been laid down in cases in which there has been an inquiry1 (1864) S3 L. J. C. P. 168.2 (IW) 8 8. C, C. 118.
* (1928) 28 N. L. B. 310.
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AKBAR J.—Eliyatamby v. Wijeylath Menika.
as to whether the insolvent had been allowed to trade or acquire freshproperty and to incur fresh liabilities. Such an inquiry is necessary forthe second adjudication which may be void in some cases and not inothers. No case has been cited to us, nor have I been able to find one,in which a certificate was recalled merely because it followed on a secondadjudication.
I am of opinion, therefore, that the application of the petitioner mustbe refused. Another reason why I would refuse to grant the applicationis the fact that the proceedings in the Galle case were brought to the noticeof the District Court of Colombo and, I take it, to the creditors so far backas December 2, 1930, when in a motion filed to withdraw his promissorynote a proved creditor’s proctor stated that “ the insolvent had onceagain filed papers for insolvency in the District Court of Galle”. Thismotion was allowed. If the other proved creditors were vigilant theycould have taken steps to stop further proceedings in the District Court ofGalle or again proved their claims in the Galle case and opposed the grantof certificate. As they did nothing, it appears to me that they have nowno right to have the certificate recalled.
In the circumstances of this case, I make no order as to costs.
Garvin S.P.J.—I agree.
Application refused.