1 MSS IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 117 OF 2008 IN SUMMONS FOR JUDGMENT NO. 549 OF 2006 IN SUMMARY SUIT NO. 2598 OF 2006 OM PRAKASH NIHALANI & ANR. .. APPELLANTS Vs. MR. S. M. S. THAKUR .. RESPONDENT Mr. P. V. Nichani for appellants Ms. Vaishali Thorat i/b Mr. P.V. Shah for respondent Mr. Om Prakash Nihalani 1st appellant present in court. Mr. Kishore Jain for Official Assignee. Mr. Y. C. Parekh, Official Assignee present. CORAM:SMT.RANJANA DESAI & K. K. TATED, JJ. DATE: 19/12/2008 ORAL JUDGMENT:-(Smt. Ranjana Desai, J.) . This appeal filed by original defendants challenges judgment and decree dated 13/2/07 passed by Learned Single Judge of this court in Summary 2 Suit No. 2598 of 2006. 2. The case of the respondent-plaintiff in short is that he advanced a total sum of Rs.8 lakhs to the appellants-defendants as and by way of friendly loan. The appellants executed 8 promissory notes in favour of the respondent. The appellants failed and neglected to pay back the said amount. Hence the respondent filed the instant suit on the basis of the promissory notes. 3. It is not necessary to give the details of various orders passed by us in this appeal. Suffice it to say that since this is an appeal challenging a money decree, we asked learned counsel for the appellants whether the appellants are willing to deposit an amount of Rs.10 lakhs in this court. On 21/10/08 the appellants were present in the court. Learned counsel for the appellants on instructions from the appellants made a statement that the appellants undertake to deposit Rs. 10 lakhs within 6 weeks from the date of the order. Thereafter despite strong opposition from learned counsel for the respondent, we adjourned the appeal on several occasions with a fond hope that the appellants would deposit the 3 amount. However, the appellants failed to do so. 4. On 12/12/08, we were informed that the insolvency proceedings were taken out against the appellants by the respondent. On 15/12/08 the appellants were declared insolvent. On 18/12/08 a contention was raised by the learned counsel for the appellants that in view of the fact that the appellants have been declared insolvent the appeal has abated, unless the Official Assignee decides to prosecute it. The Official Assignee was present in the court. The appeal was adjourned to enable him to engage a lawyer. 5. Official Assignee is present in the court today. We have heard Mr. Jain, learned counsel appearing for him. Mr. Jain drew our attention to Section 17 of the Presidency Towns Insolvency Act, 1909 ("the said Act" for short). He submitted that Section 17 of the said Act does not provide for taking over of the proceedings initiated by the insolvent, by the Official Assignee. Section 17 entitles the Official Assignee to intervene only when the creditor seeks to proceed against the property of the insolvent. Mr. Jain submitted that in any case, an insolvent or any party or 4 Official Assignee will have to make an application for leave under Section 17 to the Insolvency Court and it is only pursuant to the order passed by the Insolvency Court, can the Official Assignee intervene in the matter. Mr. Jain further submitted that inasmuch as the present appeal is filed challenging a money decree, in law the appeal cannot be prosecuted by the Official Assignee. 6. It is necessary to have a look at Section 17 of the said Act, which states what is the effect of an order of adjudication. It reads as under: "17. Effect of order of adjudication. Effect of order of adjudication. Effect of order of adjudication.- On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the official assignee and shall become divisible among his creditors, and thereafter, except as directed by this Act,no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt or shall 5 commence any suit or other legal proceeding except with the leave of the Court and on such terms as the Court may impose: . Provided that this section shall not affect the power of any secured creditor to realize or otherwise deal with his security in the same manner as he would have been entitled to realize or deal with it if this section had not been passed." Thus once an order adjudicating a person insolvent is made all his property vests in the Official Assignee. . Section 68 delineates the duties and powers of the Official Assignee as to realization. Section 68 so far as it is relevant for the present case reads as under: "68. Duty and powers of official "68. Duty and powers of official "68. Duty and powers of official assignee as to realization.- assignee as to realization.- assignee as to realization.-(1) Subject to the provisions of this Act, the official assignee shall, with all convenient speed, realize the property of 6 the insolvent, and for that purpose may- (a) . . . . . (b) . . . . . (c) . . . . . (d) institute, defend or continue any suit or other legal proceeding relating to the property of the insolvent; (e) . . . . ." . Order 22 Rule 8 & 11 of the Code of Civil Procedure ("the Code" for short) are also relevant: Rule 8 reads thus; "8. When plaintiff’s insolvency bars When plaintiff’s insolvency bars When plaintiff’s insolvency bars suit. suit. suit.-(1) The insolvency of a plaintiff in any suit which the assignee or receiver might maintain for the benefit of his creditors, shall not cause the suit to abate, unless such assignee or receiver declines to continue the suit or (unless for any special reason the Court otherwise directs) to give security for the costs thereof within such time as the Court may direct. (2) Procedure where assignee fails to continue suit, or give security._ Where 7 the assignee or receiver neglects or refuses to continue the suit and to give such security within the time so ordered, the defendant may apply for the dismissal of the suit on the ground of the plaintiff’s insolvency, and the Court may make an order dismissing the suit and awarding to the defendant the costs which he has incurred in defending the same to be proved as a debt against the plaintiff’s estate." Rule 11 reads thus; "R.11. Application of Order to appeals.- Application of Order to appeals.- Application of Order to appeals.- In the application of this Order to appeals, so far as may be, the word "plaintiff" shall be held to include an appellant, the word "defendant" a respondent, and the word "suit" an appeal. 8. The above provisions fell for consideration of this court in Chandrakant Devji v. Narottamdas Amarchand, AIR 1941 Bombay 293. Facts of that case were similar to the facts of the case on hand. A 8 money decree was passed against the appellants therein. The appellants preferred appeal against the money decree. After passing of the decree, the decree holders got the debtor adjudicated insolvent. A motion was taken out by the respondent praying that the appeal may be dismissed under Order 22 Rule 8 of the Code. It was contended that the right to appeal against the money decree is vested in the Official Assignee and that the appeal having abated it must be dismissed. This court noted that Order 22 Rule 8 of the Code provides in sub-rule (1) that the insolvency of a plaintiff in any suit, which the assignee or the receiver might maintain for the benefit of his creditors, shall not cause the suit to abate, unless such assignee or receiver declines to continue the suit or to give security for the costs thereof. Thus the suit does abate, if the Official Assignee declines to continue the suit. This court noted that sub-rule (2) enables the court to dismiss the suit where it has abated under sub-rule (1) and Rule 8 is made applicable to appeals by Rule 11. While answering the question whether it can be said that the Official Assignee might maintain the appeal for the benefit of the insolvent’s creditors, Beaumont CJ.referred to 9 Section 68 (1)(d) of the said Act and speaking for the Bench observed as under: "By Section 68(1) (d) of the Act the Official Assignee has power to institute, defend or continue any suit or legal proceeding relating to the property of the insolvent. A suit relating to the property of the insolvent, in my opinion, means a suit which, if successful, will increase the assets distributable amongst the creditors, or the defence of which may prevent the assets being diminished. A right to institute an appeal, which merely relates to a money claim against an insolvent, is not, in my view, a legal proceeding relating to the property of the insolvent and does not fall within the powers given by S. 68 to the Official Assignee. I think, therefore, that the Official Assignee could not maintain the appeal for the benefit of the insolvent’s creditors, and consequently the appeal has not abated under O. 22 R. 8. The Official Assignee is not bound by the judgment 10 appealed from, and can in insolvency decline to admit the debt." 8. Similar view was taken by the Madras High Court in the Official Assignee, High Court Madras & Ors. v. Mangalambal & Ors., AIR 1980 Madras 200. In that case the Madras High Court was considering whether on the adjudication of the defendants in a suit for recovery of money as insolvents, the plaintiff is entitled to implead the Official Assignee as either a necessary party or even as a proper party and to continue the suit. The Madras High Court concurred with the view taken by this court in Chandrakant Devji’s case and observed as under: "A suit for the recovery of money against the defendant who has been subsequently adjudicated an insolvent cannot be said to relate to the property of the insolvent and to such a suit, the Official Receiver cannot be said to be either a necessary or a proper party by invoking S. 68 (1)(d). Under Cl. (d) of S. 68 (1) the official assignee would be necessary party to the suit "relating 11 to the property of the insolvent". The term "relating to" cannot be taken to mean "affecting". Therefore, a suit, such as a suit for money decree in the instant case, which might ultimately result in a decree which if executed or sought to be executed would be payable out of the assets of the insolvent and thereby indirectly, affects his property is not contemplated by S. 68(1)(d)". 9. The ratio of the above cases is clearly attracted to the present case. The appeal merely relates to a money claim against the insolvent and does not fall within the powers given by Section 68 of the said Act to the Official Assignee. The Official Assignee cannot maintain the appeal. The appeal cannot be said to have abated. In view of this conclusion of ours, we have proceeded to hear the appeal for admission. 10. The impugned order indicates that the summons for judgment was served on the the appellants on 29/1/07. As per order 37 of the Code, the appellants had to apply for leave to defend within 10 days. However, the appellants failed to do so. Learned Single Judge observed that when the demand 12 notice was issued to the appellants they sought inspection of the promissory notes. The respondent gave reply and offered inspection of the documents but the appellants did not respond. Having perused the record learned Single Judge observed that the appellants are not entitled to any leave to defend because they have not applied for the same within ten days. Summons for judgment was, therefore, granted. The suit was decreed. 11. Assailing the impugned order, learned counsel for the appellants submitted that the appellants are uneducated. He submitted that the promissory notes are fabricated and in fact no money was advanced to the appellants. He submitted that for a period of three years no claim of any nature was made by the respondent. According to learned counsel the entire case is false. 12. So far as the claim of the appellants that they are uneducated is concerned, we are not inclined to accept it. We were told that the 1st appellant does not know English. However, Official Assignee’s report indicates that the 1st appellant has given him an undertaking which is signed in English by him. In any case the case of the 13 appellants that the promissory notes are fabricated is difficult to digest. Nothing prevented the appellants from making an application for leave to defend. The impugned order indicates that when the order was passed both the appellants were present. Nothing prevented the appellants from putting forward their case. The order does not indicate that any such attempt was made by the appellants. The outright denial of the respondent’s case does not stand to reason. It is difficult to digest that all the 8 promissory notes are fabricated. In our opinion, learned Single Judge has rightly decreed the suit. The appeal must be dismissed for the reason that the appellants have committed a breach of the solemn undertaking given to this court that Rs.10 lakhs will be deposited in this court and also because on merits the appellants have not made out any case for interference with the impugned order. The appeal is therefore, dismissed. JUDGE JUDGE 14 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL (L) NO. 117 OF 2008 DATE OF DECISION: 19/12/2008 Submitted for approval. THE HON’BLE (SMT.) JUSTICE RANJANA DESAI: THE HON’BLE SHRI JUSTICE K.K. TATED: 1. Whether Reporters of Local Papers ) be allowed to see the Judgment? ) 2. To be referred to the Reporters or ) not? ) 15 3. Whether Their Lordships wish to ) see the fair copy of the Judgment? ) 4. Whether this case involves a ) substantial question of law as to ) the interpretation of the ) Constitution of India, 1950 or any ) Order made thereunder? ) 5. Whether it is to be circulated to ) the Civil Judges? ) 6. Whether the case involves an impor- ) tant question of law and whether ) a copy of the judgment should be ) sent to Nagpur, Aurangabad and Goa ) Offices? )