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Smart Summary

Factual and Procedural Background

The plaintiffs and defendant No. 11 carried on business in Bombay as the firm Maya Ookeda & Co. On 28 January 1927 the firm of Kurpal Doongersey & Co. passed three hundis in favour of Maya Ookeda & Co., each for Rs. 10,000, payable on 28 May 1927. Those hundis (Ex. B) were not paid on the due date or at all.

The present suit was instituted against the surviving partners of Kurpal Doongersey & Co. and the heirs and legal representatives of partners who were deceased. Defendant No. 11 was joined as a defendant though no relief was claimed against him because he declined to join as a plaintiff despite being a member of Maya Ookeda & Co. Written statements were filed by defendants 3 & 5 (joint) and defendant 4 (separately); other defendants either filed no written statement or were represented by counsel. Affidavits of service were put in for defendants 9, 10 and 11.

In the written statement of defendants 3 and 5 it was alleged that by an order of the Rangoon High Court on or about 25 January 1928 the firm of Kurpal Doongersey & Co. and the partners thereof were adjudged insolvents, and that the plaintiffs had not obtained leave of the insolvency Court to institute the present suit; it was submitted that the suit was therefore not maintainable. Defendant 4 denied being the heir or legal representative of Mulji Tejsey and adopted alternatively the defence of defendants 3 and 5.

Legal Issues Presented

  1. Whether the firm of Kurpal Doongersey & Co. was adjudicated insolvent on 25 January 1928.
  2. Whether the suit is maintainable in view of no leave being obtained under Section 17 of the Presidency Towns Insolvency Act.
  3. Whether defendant 4 is the heir and legal representative of Mulji Tejsey.
  4. The general issue.

Arguments of the Parties

Defendants' Arguments (as presented by Mr. Amin)

  • It was alleged that Kurpal Doongersey & Co. and its partners were adjudged insolvent by the Rangoon High Court on or about 25 January 1928.
  • Relying on Section 17 of the Presidency Towns Insolvency Act, Mr. Amin submitted that, after adjudication, no creditor may commence any suit against the property of the insolvent except with the leave of the Court, and that the plaintiffs had not obtained such leave before instituting this suit (filed 28 May 1930), so the suit is not maintainable against those partners adjudicated insolvent.
  • Mr. Amin relied particularly on the decision of Davar, J., in In re Dwarkadas Tejbhandas to support the proposition that leave under S.17 is a condition precedent that must be obtained before initiating the suit.

Plaintiff/Respondent Arguments (as presented by Mr. Mehta)

  • Mr. Mehta did not dispute that an adjudication order against a firm operates as an adjudication against each partner at the date of the order, and drew attention to Rangoon High Court Insolvency Rule 83 (corresponding to Bombay Rule 154) which states that an adjudication against a firm operates as if made against each person who is a partner at the date of the order.
  • In opposition to Mr. Amin's submission, Mr. Mehta relied on the authority of Mahomed Haji v. Abdul Rahiman, where leave under the Act had been obtained after the suit was filed and issues concerning stay orders under Section 18(3) were considered; Mr. Mehta also relied upon the decision in Bheraji Samrathji & Co. v. Vasantrao where it was held that a suit filed after adjudication need not be dismissed but may be stayed under Section 18(3).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
In re Dwarkadas Tejbhandas (decision of Davar, J.) Held that leave under Section 17 must be obtained before a suit is commenced; leave is a condition precedent to institution. The Court regarded this decision as binding and followed it. It accepted the principle that suits instituted after adjudication without prior leave are not maintainable.
In re Wanner Ltd. (English case) Referred to by counsel in argument (English authority raised by parties). The Court noted Davar, J. had declined to apply the English authorities in his case. The Rangoon/Bombay statutory context was treated as decisive.
Brownscombe v. Fair (English case) English authority referred to in arguments and by other decisions. The Court observed that Davar, J. considered the English cases inapplicable and that the appellate consideration of Brownscombe in Mahomed Haji did not decide the specific question whether leave could be obtained after institution under Section 17.
Mahomed Haji v. Abdul Rahiman Dealt with a factual situation where leave was obtained after institution and the appeal concerned a stay under Section 18(3); the appellate court considered whether the stay was properly made. The Court distinguished this case: it held that the appellate decision did not decide whether leave could be granted after institution under S.17, so it did not overrule Davar, J.'s requirement that leave be obtained prior to institution.
Bheraji Samrathji & Co. v. Vasantrao (decision of Fawcett, J.) Held, with hesitation, that a suit filed after adjudication need not be dismissed under Section 17 but may be stayed under Section 18(3). The Court expressed disagreement with this view, observing that Davar, J.'s decision remained binding; the Court did not follow Fawcett, J.'s approach.

Court's Reasoning and Analysis

The Court proceeded in two main analytical steps: (1) whether an adjudication order was made affecting the firm and its partners, and (2) whether the present suit was maintainable in the absence of leave under Section 17 of the Presidency Towns Insolvency Act.

First, the Court examined the adjudication material and the status of partners at the relevant dates. It observed that the Rangoon High Court had made an order adjudicating the firm of Moolji Dharsee & Co. insolvent (Ex. 2). By operation of Section 17 (which vests the property of the insolvent in the Official Assignee), and by reference to Rangoon High Court Insolvency Rule 83 (which mirrors Bombay Rule 154), an adjudication against a firm operates as an adjudication against each person who was a partner at the date of the order. The Court therefore concluded that the adjudication against Moolji Dharsee & Co. adjudicated insolvent all the adult partners of that firm, who were the same persons conducting business elsewhere as Kurpal Doongersey & Co. Accordingly the Court answered Issue 1 in the affirmative.

Second, the Court addressed maintainability. It quoted the operative provision of Section 17 which, after adjudication, prohibits a creditor from commencing a suit in respect of a debt provable in insolvency during the pendency of insolvency proceedings except with the leave of the Court. Mr. Amin relied on this provision and on Davar, J.'s decision in In re Dwarkadas Tejbhandas for the proposition that leave is a condition precedent and must be obtained before initiating the suit. The Court accepted that rule as binding.

The Court considered contrary authorities relied on by Mr. Mehta. It examined the appellate decision in Mahomed Haji v. Abdul Rahiman and concluded that that decision dealt primarily with a stay under Section 18(3) and did not decide whether leave under Section 17 could be obtained after institution of a suit; therefore it did not overrule Davar, J.'s view. The Court also noted the decision of Fawcett, J. in Bheraji Samrathji & Co. v. Vasantrao, where a different view was taken (that a post-adjudication suit need not be dismissed but could be stayed), but the Court rejected that approach and followed Davar, J.'s requirement that leave be obtained prior to institution.

Applying these conclusions to the facts, the Court held that the suit was not maintainable against those partners who were partners at the date of the adjudication order (defendants 1, 2, 5, 7 and 8). It further held that the suit was not maintainable against defendant 6 (the widow and heir of Virji Monsey) because Virji Monsey was a partner and was alive at the date of adjudication and therefore adjudicated insolvent at that date as well. After considering other matters (not detailed in the extract) the Court dismissed the suit.

Holding and Implications

DISMISSED

Holding (core ruling): The Court dismissed the suit. It held (1) that the partners of the firm operating as Kurpal Doongersey & Co. had been adjudicated insolvent by the Rangoon High Court on or about 25 January 1928 (Issue 1 answered affirmatively), and (2) that the suit was not maintainable without the prior leave of the insolvency Court under Section 17 of the Presidency Towns Insolvency Act as to those partners who were partners at the date of adjudication (specifically defendants 1, 2, 5, 7, 8 and defendant 6 in her representative capacity).

Implications: The immediate consequence is that the plaintiffs' claim against those partners adjudicated insolvent could not be pursued in this suit and the suit was dismissed. The Court applied Section 17's operation (vesting of property in the Official Assignee) and followed existing authority (in particular the decision of Davar, J. in In re Dwarkadas Tejbhandas) in holding that leave under Section 17 is a prerequisite to instituting such proceedings. The opinion applies and affirms existing precedent rather than announcing a new legal principle.

S.N/R.K

    Maya Ookeda v. Kuverji Kurpal

    1. In this case the plaintiffs and defendant 11 formerly carried on business in Bombay in the firm name of Maya Ookeda & Co. On 28th January 1927, the firm of Kurpal Doongersey & Co., passed three hundis in favour of the firm of Maya Ookeda & Co., each for a sum of Rs. 10,000 payable on 28th May 1927. Those hundis have been put in before me as Ex. B, and it has not been disputed that the firm of Kurpal Doongersey & Co., passed those hundis for valuable consideration, and that they did not pay them on the due date or at all. The present suit is brought against the surviving partners of the firm of Kurpal Doongersey & Co., and the heirs and legal representatives of persons who were partners at the time that the hundis were passed, but who are since deceased. Defendant 11 was joined as a defendant, because, although he was a member of the firm of Maya Ookeda & Co., he refused to join as a plaintiff in the suit. No relief is claimed against him. Defendants 3 and 5 have put in a joint written statement. Defendant 4 has put in a written statement. Mr. Amin appears for defendants 1 to 8, although some of those defendants have put in no written statement. Defendants 9, 10 and 11 are absent. Affidavits of service upon them were put in.

    2. In the written statement of defendants 3 and 5 it is alleged that by an order made by the Rangoon High Court on or about 25th January 1928, the firm of Kurpal Doongersey & Co., and the partners thereof were adjudged insolvents. It is further alleged that the plaintiffs have not obtained the leave of the insolvency Court to institute this suit, and it is submitted that the suit is therefore not maintainable and should be dismissed. Other defences were raised in that written statement, but they have not been proceeded with, and no issues have been raised in reference thereto. Defendant 4 in his written statement denies that he is the heir or legal representative of Mulji Tejsey who was a partner in the firm of Kurpal Doongersey & Co., and he submits that the suit against him should be dismissed. He also adopts in the alternative the written statement of defendants 3 and 5.

    3. The issues in the case are as follows:

    1. Whether the firm of Kurpal Doongersey & Co., was adjudicated insolvent on 25th January 1928.

    2. Whether the suit is maintainable in view of no leave being obtained under Section 17 of the Insolvency Act.

    3. Whether defendant & is the heir and legal representative of Mulji Tejsey.

    4. The general issue.

    4. It will, I think, facilitate the understanding of this judgment if I here mention which of the defendants was alive and still a partner at the date of the alleged adjudication order, and which of the partners had died before that adjudication order is alleged to have been made. Defendants 1, 2, 5, 7 and 8 were alive and were partners in the firm of Kurpal Doongersey & Co., at the time at which the alleged adjudication order against that firm was passed. Defendant 8 is the same as defendant 5, but as defendant 3, he is sued along with defendant 4 in a representative capacity, namely, as being the heir and legal representative of Mulji Tejsey. The latter died on 4th May 1927, that is to say, after the hundis were passed, but before the date of the alleged adjudication, order. Defendant 6 is the widow and heir and legal representative of Yirji Monsey, who was a partner in the firm of Kurpal Doongersey & Co., at the time the hundis were passed. He died on 24th February 1928, after the alleged adjudication order was passed. Defendants 9 and 10 are sued as the heirs and legal representatives of Khimji Korsey, who died on 19th March 1927, after the hundis were passed but before the date of the alleged adjudication order. The contention put forward by Mr. Amin on behalf of defendants 1 to 8 is that the firm of Kurpal Doongersey & Co., were adjudicated insolvents on 25th January 1928, and that as no leave of the insolvency Court to institute this suit, which was filed on 28th May 1930, was obtained prior to its institution or at all, the suit is not maintainable. (After dealing with other matters, the judgment proceeded as below.) Section 17 of the Presidency Towns Insolvency Act, provides that on the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the Official Assignee. An order of adjudication therefore having been made by the High Court of Rangoon against the partners of the firm of Moolji Dharsee & Co., I hold that the property of the partners in that firm wherever situate thereby vested in the Official Assignee. Accordingly, it follows in my judgment that the property of the same partners, who carried on business in Bombay and elsewhere also under the name of Kurpal Doongersey & Co., likewise vested in the Official Assignee of the Rangoon High Court. Mr. Mehta does not dispute that the effect of an adjudication order against a firm operates as an adjudication order against all the persons who were partners in the firm at the date of the order of adjudication. He has been good enough in this connexion to draw my attention to R. 83 of the Rangoon High Court Insolvency Rules which is in these terms:

    “(1) An order of adjudication made against a firm shall operate as if it were an order of adjudication made against each of the persons who at the date of the order is a partner in that firm. (2) Subsequent proceedings shall continue in the name of the firm so far as is practicable, but applications for discharge must be made by the partners individually.”

    5. That rule corresponds word for word with R. 154 of the Bombay High Court Insolvency Rules. It is to be observed that the order made by the learned Judge of the Rangoon High Court in Ex. 2 is that the firm of Moolji Dharsee & Co., other than infant partners if any, should be adjudicated insolvent. That order in my opinion clearly operates as an order adjudicating insolvent all the adult partners of that firm at the date of the order. Accordingly, I hold that the adjudication order operated to adjudicate as insolvent the partners carrying on business under the name of Kurpal Doongersey & Co., who are in fact the same partners as were carrying on the business under the name of Moolji Dharsee & Co. Accordingly, I answer issue 1 in the affirmative.

    6. The next question arising is that as to the maintainability of the suit. Mr. Amin for defendants 1 to 8 has relied in this connexion on the latter part of Section 17 of the Presidency Towns Insolvency Act, which provides that after an order of adjudication

    “… 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 commence any suit or other legal proceeding except with the leave of the Court and on such terms as the Court may impose.”

    7. Relying upon that section Mr. Amin submits that the suit is not maintainable against defendants 1 to 8. In support of his argument he has relied upon a decision of Davar, J., in In re Dwarkadas Tejbhandas (1). In that case an application was made to the learned Judge for leave under S. 17 of the Act. The suits had been filed without leave before a Subordinate Judge, and he adjourned the hearing of those suits to enable the plaintiff to apply for leave under S. 17. The learned Judge said that the words of the section were so clear and explicit that they left no room for any construction other than the construction he had put upon them, namely, that leave must be obtained before the suit was commenced as a condition precedent to its institution. Accordingly he refused the leave in question. He was referred in the course of the argument to two English cases, In re Wanner Ltd. (2) and Brownscombe v. Fair (3), upon the analogy of which he was asked to give leave, but he expressed the opinion that they had no bearing on the question before him and he had to construe a section of an Indian Act which was so clear and emphatic that it could bear only one construction, and that cases decided under the provisions of other laws of another country were therefore of no assistance to him.

    8. Mr. Mehta relied, in answer to this argument put forward by Mr. Amin based on the decision to which I have referred, on the case of Mahomed Haji v. Abdul Rahiman (4). In that case the plaintiff had filed a suit on a promissory note against two defendants on 28th May 1915. Defendant 1 had been adjudged insolvent on 27th October 1913, and defendant 2 firm was adjudged insolvent on 1st November 1913. On 8th November 1915, a petition by defendant 1 for discharge had been refused, but he had been granted a protection order for one year on 16th April 1915. Leave to file the suit was applied for after its institution and was in fact obtained under Section 17 of the Presidency Towns Insolvency Act, on 2nd June 1915. The suit came on for hearing on 6th July 1915. Counsel for defendant 1 appeared and stated that the claim was admitted and that the sole object in filing the suit was to strengthen the plaintiff's position as an appellant against the order male on the application for the insolvent's discharge. Macleod, J., thereupon stayed the proceedings in the suit Later, Macleod, J., refused to remove the stay order and the plaintiff appealed. It will therefore be observed that the question before the appeal Court was not whether leave should be granted under Section 17 of the Presidency Towns Insolvency Act, after the institution of a suit or not, but whether the stay order under Section 18(3) of the Presidency Towns Insolvency Act, had been properly made or not. In the course of the judgment of the Court, Scott, C.J, stated that there were two questions in the case, the first being whether the learned Judge in making the stay order under appeal acted without jurisdiction. He referred to the fact that it had been contended that S. 18(3) was the only section which could apply, and that only applied where a suit had been instituted before the adjudication order was made. The learned Chief Justice then stated that the Court had been referred to the observations of the Divisional Court in England in Brownscombe v. Fair , the case to which Davar, J., had also been referred; and without expressing any opinion upon that decision apparently the learned Chief Justice was content to follow it. It is plain however that there was no argument on the question whether leave could be obtained under Section 17 of the Presidency Towns Insolvency Act, after the institution of a suit, and that question was not decided by the appeal Court in this case. Consequently, in my view. Davar, J's. decision has not been overruled either expressly or impliedly. I may say with respect that I entirely agree with the decision arrived at by Davar, J. Whether I agree with it or not it is in my judgment binding upon me and I follow it.

    9. Mr. Mehta also referred me to a decision of Fawcett, J., in Bheraji Samrathji & Co. v. Vasantrao (5) where that learned Judge, with some hesitation, held that a suit filed against an insolvent after the date of the adjudication order need not be dismissed as barred under Section 17, but may be stayed under Section 18(3) of the Presidency Towns Insolvency Act, 1909. In my opinion, the doubt expressed by that learned Judge was well founded. He appeared to take the view that the appeal Court decision, to which I have referred, compelled him to come to the conclusion at which he arrived. With great respect to him, I do not think it compelled him to come to any such conclusion. As I have already said, in my opinion, Davar, J's. decision is still a binding decision on the point, and as I do not agree with the view taken by Fawcett, J., of the appeal Court decision, I still follow the decision of Davar, J.

    10. Accordingly, I hold that this suit is not maintainable against those partners of the firm, who were partners at the date of the order of adjudication, that is, defendants 1, 2, 5, 7 and 8. I also hold that it is not maintainable against defendant 6 who is the widow of Virji Monsey, inasmuch as he was a partner in the firm of Kurpal Doongersey & Co., and was alive at the date of the adjudication order against that firm, and was therefore himself adjudicated insolvent at that date. (The judgment then considered other matters, and dismissed the suit.)

    S.N/R.K

    11. Suit dismissed.

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    Maya Ookeda v. Kuverji Kurpal
    (Feb 14, 1931)