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Present: Fisher.C.J. and Drieberg J.
SOCKALINGAM CHETTY v. MARAKAYAR
165—D. 0. (Insolvency), Jaffna.
Insolvency—Proof of debt—Further inquiry—Motion to expunge debt—Effect of order—Ordinance No. 1 of-1853, ss. 93 and 110.
In insolvency proceedings a creditor filed an affidavit in proof of-a debt which was noted, and the Court ordered further inquiry.Thereafter two creditors moved to expunge the debt and themotion was disallowed.
Held, that under the circumstances the debt must be regarded asproved.
PPEAL from an order of the District Judge of Jaffna. Thefacts appear from the judgment.
H. T Per era (with Choksy), for. appellant.
Hayley, K.C. (with Subramaniam), for respondent.
December 20, 1929. Drieberg J.—
This is an appeal by the appellants against an order requiringthem to bring into Court a sum of money which they undertook topay to Secretary of the District Court on the fulfilment of a certaincondition.
By a bond dated August 5, 1927, the first appellant -as principaland the second and third appellants as sureties undertook, inconsideration of all the available assets of the two insolvents, K. V.Saminathan Chetty and K. Y. Kasivisuvanathan Chetty, being■assigned to the first appellant to pay to S. N. Karutha Marakayarat the rate of 31 cents on the rupee “ on the amount that is-decidedto be declared proved by the Honourable the Supreme Court inappeal or such other amount fixed by this Court. ” It was alsorecited in the bond that the security was being giveh " for theamount that might be found due to the appellant S. N. KaruthaMarakayar …. if he succeed in the appeal which is now-pending in this case and to be decided by the Honourable theSupreme Court. ”
The appeal referred to is dated February 28, 1927, and was filedunder these circumstances. The first appellant, SockalingamChetty, concluded an arrangement with the insolvents, the asignee.and the majority of the creditors by which all the assets of theinsolvents were to be assigned to him and he was to-pay the creditorsa certain proportion of their claims. This, deed of assignment (X5)was executed on August 5, 1927, and of the amount due on it,Rs. 56,868.11, the first appellant deposited in Court Bs. 45,233.65.
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1929 As the claims of the respondents was then undecided a separateDbihberg J agreement was made regarding it and this was embodied in the bond executed on the same day.
Ghettyv. Before their adjudication the insolvents had sued the respondentsMarakayar ^ D QNq 19190> foj. ^ recovery 0f Rs 97,048.83. The
respondents denied the claim, the first respondent claiming inreconvention Rs. 8,640 and the other respondents a sum ofRs. 37,520.32. The respondents elected to prove their claim in theinsolvency proceedings, and this amounted to an election not to'proceed with their counter claim in the action. The insolvents’claim against them was included in the assignment (X5) to the firstappellant, the claim being described as “ amount advanced onaccount of shares of K. V. S. N. firm sued in case No. 19,190, D. C.Jaffna, Rs. 125,546.47. ”
On November 15, 1926, the first respondent filed an affidavitstating that the sum of Rs. 8,640 was due to him from the insolvents,amd on some day before November 17 he filed affidavit that sumsaggregating Rs. 37,610.32 were due to the other respondents. Icannot find the motion papers submitting these claims, but theywere before the Court on November 17, 1926. The claims werechallenged by the insolvent, who said they would “ take steps tohave it expunged under section 110.” The Judge made an entry“ The, claim now made may be noted " and adjourned the matterfor inquiry.
On December 13, 1926, a motion was submitted by two creditors,Kandiah and Subramaniam, who 14 moved under section 110 thatthe Court should summon and examine Karutha Marakayar (thefirst appellant) regarding the various claims sought to be provedby him on behalf of the second to tenth defendants in D. C. 19,190,and if after investigation, these claims, or any of them, are foundnot to be just or bo?ui fide to have such claims expunged from theproceedings in the case. ” Summons was accordingly issued on therespondents, the two creditors giving security and filing a statementof their objections. In this statement, in addition to the groundswhich were upheld by the Judge, they said the claims were not justand bona fide.
The Court on February 15, 1927, upheld the objections takenby the two creditors that the claim of the first respondent forRs, 8,640 was barred by the Prescription Ordinance, that thepower of attorney under which the first respondent acted in provingthe claim of the other respondents was defective, and further thattheir claim could not be maintained unless the estate of SeguMahamadu, through whom they claimed, was administered. Orderwas made that the claims be expunged in terms of section 110 of the.Insolvency Ordinance.
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The present respondents appealed from that order, the assignee. 1929the insolvents, and Kandiah and Subramaniam being named re6- DBn^jjo J,
pondents to the appeal. On September 11, 1928, the Supreme
Court held- that there was no proof of the matters on which theDistrict Judge based his judgment, i.e., that the second to eighth Maralcayiarrespondents were vested with their interests as the heirs of SeguMohamadu, and the minority of the two respondents, which theDistrict Judge held, rendered their power of attorney to the firstrespondent defective. It was also held that there was no material.before the Court to support the finding of prescription of the firstrespondent’s personal claim. The appeal was allowed, the decreebeing that " the judgment of the District Court dated February 1,
1927, be set aside and the application be dismissed. ” Costs wereallowed against Kandiah only, as Subramaniam stated at thehearing that he did not oppose the appeal.
The application referred to in the decree is that of December 13,
which I have set out. The present respondents subsequently-applied to the Court for an order" directing the appellants to paythem the sum of Ks. 14,309.70, being 81 per cent, of their claim,and in default of payment for an order directing a sale of theproperty mortgaged. The learned District Judge allowed thisapplication, directing the ' appellants to bring the money intoCourt and that in default the bond would be declared forfeitedand writ issued to recover the amount. The appeal is fromthis order.
The only ground urged at the hearing of this appeal was that theclaim of the respondents had not been proved, and in support of this-the appellants rely on the wording of the appeal by the respondentsfrom the order of February 15, 1927, ordering the expunging of theirclaims. They prayed that that “ order be set aside and the caseremitted to the lower Court for the appellants to prove their claimand that an order be made for a correction .of the irregularities thathave occurred in this case.
The grounds upon which the learned District Judge had actedwere not sufficient., even if they were right, to justify the order whichhe made. Failure to administer the estate of Segu Mohamadu wasnot a ground for rejecting the claim of the respondents, for order onit could have been suspended until the estate was administered.
Further, only two of the respondents who gave a power of attorney ■to the first respondent were minors; the power was not bad asregards the others, and even in the case of the minors the mattercould have been set right.
At the hearing of that appeal, however, the only grounds ofobjection to the claim having been held not to be established,the application to expunge the claim was dismissed. The bond
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contemplated- the possibility of a final determination in the Supreme.Court of the claims of the respondents, and the judgment of theSupreme Court had that effect.
The provisions of the Insolvency Ordinance as to proof are notvery definite. Proof is effected by an affidavit; this is sufficient,but the Court can require further proof and examine the creditor orother persons, if it thinks fit. There is no provision for a definiteorder admitting proof, and the mere fact that the insolvent does notadmit a debt does not mean that the debt is not proved (MohamaduCassim v. Perianan Ghetty1).
Here the Court merely ordered that the claims be noted, and 1think this means that the Court thought the claim was one of whichfurther proof was needed and deferred the matter for further inquiryunder the proviso to section 93. The two creditors, however,treated the debt as proved and said they would move to expunge it,and the further inquiry was on their motion.
So far as the appellants are concerned it makes little differencewhether the final order was made on the application to expunge aproved debt or as the result of a/n inquiry under the proviso tosection 93 on a claim of which further proof was required. Thefinal rejection of the only objections advanced to the respondent'sclaim was to leave it in either case a proved debt. The first appel-lant agreed to be bound by the result of the appeal and pay “ theamount that might be due to S. N. Karutha Marakavar if hesucceeds on the appeal.
It was open to Kandiah and 8'ibramaniam to ask for an opportu-nity of proving what was necessary to sustain their objections andthat the insolvents were not indebted to the respondents; theycould have had the case remitted for that purpose. This apparentlywas riot- done.
It should be noted that the assignee was a party to the appeal.
In support of their contention that. the claim cannot be regardedas proved, the appellants point to the words of the bond, thatpayment of 31 cents on the rupee was to be made *’ on the amountthat is decided to be declared proved by the Honourable theSupreme Court in appeal on such other amount fixed by this Court,as indicating that it was intended that even if the objectionsadvanced by Kandiah and Subramaniam at the inquiry failed,there was to be an inquiry as to what was the exact amount due tothe respondent .
1 do not think that this was intended. There were two claims,one by the first respondent personally and another by him onbehalf of the other respondents. The objection to one might havesucceeded and the other might have failed in appeal.
' (1911) 19 N. L. R. 38S.
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In my opinion the appellants are concluded by the judgment inappeal, which in dismissing the application of Kandiah and Subra-maniam left these claims in the position of proved debts. If thematter was not affected by any arrangement with the first appellant,would not the respondents, after the order of the Supreme Court,have been entitled to demand payment of dividends from theassignee? Could the District Court have called for further proofof their claims? The answer must be in the negative. If the orderof the Court that the claims should be noted be regarded as onerequiring further proof, I take it that the Court was not obliged totake further action of its own motion when the two creditors tookformal steps to question the claims under section 110 and suchfurther inquiry as was wanted could be made in those proceedings.
The judgment of the learned District Judge is right. I had somedoubts whether the amount on the bond could -be recovered sum-marily by issue of writ and whether the proper course was notrecovery bv an action on the bond brought by the Secretary.Mr. Hayley has referred us to the case of Vairavan Chetty v. UkkuBanda. 1 It is possible, I think, to follow the principle laid down inthis case and to regard the bond as one granted for the performanceof a decree for the payment of money, and the recovery of theamount secured by the. bond and the realization of the security canbe effected in the manner ordered by the District Judge by issueof writ, in these proceedings. The appellant does not question thecorrectness of the order of the District Judge directing recovery bywrit. The appeal is dismissed with costs.
Fisher C.J.—I agree.