Wright v. Munasinghe.
[Heabne J.—Where the deed of composition was approved by theCourt and the adjudication annulled, has the creditor who has not provedhis claim all his rights intact ?]
What does “ creditor ” in section 140 mean ? There are provisionsin the Bankruptcy Act which are not found in our Ordinance. Lewisv. Leonard1.) It is a question of fact whether a creditor assented tothe composition. Here I am asking for an order of payment in partsettlement of my claim. If I assented to the composition, my prayerwould be “ in full satisfaction ”.
The question of costs is to be decided independently of the composition,and costs can be recovered if they are not provable in insolvency.
[Heabne J.—The decree for costs is before the annulment ofinsolvency. Therefore they could have been proved.]
Costs decreed after the adjudication of the insolvent are not provable.(Cadiravel v. De Silva3.) Here the decree was entered on June 19,1933, and the adjudication was in August 3, 1932. The only section'under which debts can be proved is section 94.
The fact that I was aware of the composition is insufficient to hold meas assenting to it and if the composition is not binding on me, I canproceed to execution for the balance due to me of section 126 and section131 as regards the certificate of conformity. There is no correspondingsection as regards composition.
H. V. Perera, K.C. (with him N.^Er^Weerasooria and H. A. Wije-manne), for defendant, respondent.—Section 140 as it stands is against theappellant. Once the order is made by the District Judge having jurisdic-tion, the consequences set out in section 140 follow. The question iswhether every creditor means a creditor without, exception. The objectof the second notice is to enable other creditors to come in. Assumingthere is an irregularity the District Judge has made an order annullingthe adjudication. The irregularity would enable a creditor (though noclaim is proved by him in the insolvency) to take appropriate proceedingsto set aside the order of annulment. As this is not done, the order standsand every creditor is bound by the deed of composition. The plaintiffcannot come in collateral proceedings. Where there is an irregularitywhich vitiates an order, an application to set it aside should be madein the same proceedings. (Pinhamy v. Pieris m and 8 Moore 90, P. C.)
Once the adjudication is annulled, the' assignee has no longer anyrights to insolvent’s property. Then how could this creditor executehis present decree ? He will have to reopen the insolvency proceedings ;as long as the order for annulment stands, the rights of the creditorsstand with the deed of composition.
The act of a creditor who draws out money after the annulment is anacceptance of the annulment and the deed of composition. A creditorcannot take a further benefit for the balance. The fact of the debtorbeing discharged from further liability by the deed of composition isimplied.
I concede he is entitled to 25 per cent, costs. The deed of compositionis voidable and not void, for it cannot otherwise affect those who joinedin the deed—only voidable at the option of the appellant.
> (1880) 42 L 'T. 351.
3 (1908) 11 N. L. R. 102 at p. 104.
* 1 Br. 374.
HE ARNE J.—Wright v. Munasinghe.
When annulment takes place, the insolvent and assignee both go out,and the creditors are relegated to the deed of composition. Section 140discusses the amounts due to the creditors, irrespective as to whetherhe is aware of proceedings or not.
J. R. Jayewardene, in reply.—If the creditor has not acquiesced in thedeed, he can proceed against the insolvent for the balance due. It isnot the annulment but the composition which binds the creditors. InEnglish law there are special provisions as to the order in composition.There is a clear difference between a discharge of the insolvent after thecertificate of conformity and a discharge of a debtor who entered into adeed of composition. As regards costs, I am entitled to all my costsor to nothing. The composition is not bad, but does not bind me.
Cur. adv. vult.
July 1, 1937. Heahne J.—
The plaintiff in action No. 48,533 of the District Court of Colombosued the defendant who before the trial became an insolvent. After theinsolvent’s adjudication a decree was entered in favour of the plaintiffwith costs which have not yet been taxed. Thereafter the insolvententered into a scheme of composition with his creditors and his adjudica-tion was annulled. It was argued by Counsel for the plaintiff,-here theappellant, that the approval of the scheme of composition by the Courtwas irregular and does not bind him especially as he was not a provingcreditor in the insolvency proceedings. It would appear that theprocedure laid down in section 140 of the Insolvency Ordinance wasnot followed but it is impossible to concede to the plaintiff in DistrictCourt case of Colombo No. 48,533 the right to question the proprietyof the insolvency proceedings. He was not a proving creditor andin those proceedings had no status at all. He cannot in this appealraise any question regarding the correctness or otherwise of orders madein the insolvency proceedings which for the purposes of this appealare not even before us. Pinhamy v. Pieris ’ which, although the factswere there different, covers this point.
The appellant’s second point is that as he was not a party to thecomposition he is entitled to the full amount that has been decreedin his favour together with the entire costs when* they are taxed.
No argument was put forward to show why the original claim forwhich judgment had been obtained after adjudication but before thecomposition was not provable and in accordance with the provisionsof section 140 both the appellant and all the creditors of the insolventare entitled to no more than the composition which had been approved,in this case 25 per cent., in respect of all provable claims in the insolvency.The appellant would in fact appear to have adopted the compositionin respect of his original claim, for he withdrew the sum of Rs. 493 being25 per cent, thereof which had been deposited in Court in D. C. Colombo,No. 48,533. But the point he stresses is that he is entitled to recoverthe whole of his costs on the ground that they were not provable ininsolvency. The Insolvency Ordinance is a very old one and thereappears to be authority for the view that as section 108 applies only
1 {1908) 11 N. L. R. 102. at p. 101.
Savarimuttu v. Annamah.
to costs payable in respect of judgments obtained before the date ofinsolvency and that as costs subsequent to bankruptcy are not a claimwhich is anywhere-made provable under the Ordinance, such costsare outside the scheme of composition and may be recovered in full.
(Fernando v. Fernando1 and Caderavail v. De Silva*.
There will therefore be a direction to the District Judge that theappellant is entitled to a writ in respect of costs in his Court aftertaxation thereof and to this, extent the appeal is allowed. But as theappellant only succeeded on one point of three taken by him there willbe no order of this appeal.
Soertsz J.—I agree.
Appeal allowed.