141-NLR-NLR-V-39-MOOSAJEE-et-al.-v.-PEIRIS.pdf
KOCH J.—Moosajee v. Peiris.519
1938Present: Poyser and Koch JJ.
MOOSAJEE et al. v. PEIRIS.
215—D.C. Colombo, 5,118.
Insolvency—Insolvent about to leave the Island—Arrest under certificate inform R—Payment of debt to secure release-^-Right of other creditors toshare in payment—Ordinance No. 7 of 1853, s. 152.
Where a person, adjudged Insolvent, was about to leave the Islandand was arrested under a certificate in the form R obtained by a provedcreditor, and where the insolvent paid the debt in order to secure hisrelease,—
Held, that the money paid should be brought to the insolvency casefor the benefit of all the creditors.
The costs incurred in procuring the arrest and in recovering the moneywill be a first charge on the said sum.
■A.PPEAL from an order of the District Judge of Colombo.'
E. F. N. Gratiaen, for creditors, appellants.
C. X. Martyn, for assignee, respondent.
Cur. adv. vuli.
March 31, 1938. Koch J.—
The first respondent, John Yorke, was adjudicated an insolvent onJuly 19, 1937, and on August 24, the second respondent was appointedprovisional assignee. The appellants who are doing business as foragemerchants had on September 28, inter alios, proved a claim of Rs. 628.50against the insolvent. Learning that the insolvent was making arrange-ments to leave for India, the appellants, through their proctor, Mr. Wilson,applied for and obtained on October 25, 1937, an order withdrawingfurther protection to the insolvent. He also obtained on the same dayan order allowing a certificate in the form “ R ” to issue to the appellants.On this certificate, a writ of execution against the body of the insolventwas obtained and on the same day the insolvent'was arrested by the Fiscalat the Jetty. The Fiscal immediately removed the insolvent in a car.The insolvent’s wife accompanied him. On the way the Fiscal was toldthat the -claim would be paid if the party was taken back to the wharfpremises. The Fiscal took the party back to the wharf and the sum ofRs. 628.50 was there paid by the insolvent’s w;ife who took the moneyout of a box-and handed the same to the Fiscal. A receipt was immediatelymade out for this payment by the Fiscal and handed to the insolvent’s wifeand the insolvent discharged from arrest. The receipt, however, purportedto state that the money was received from the insolvent.
-The appellants contend that they are entitled to , the entirety of thispayment. The respondent objects and claims the sum for the benefit ofall the creditors. The learned District Judge, on the meagre evidenceled, seemed to think that the money paid was the money of the insolvent,but nevertheless, made order allowing the appellants a further opportunityof renewing their application on or before February 1, 1938, if they werein a position to prove more specifically that the amount paid was not the39/38
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money of the insolvent. He further directed that if no such applicationwas made, the assignee would be entitled to deal with this money asbelonging to all the creditors. It has transpired that no such applicationhas been made, and therefore, the effect of the learned District Judge’sorder now is in favour-of all the creditors. The reason for this reservationin the order is apparently due to the fact that Counsel for the assigneeadmitted that the appellants would be entitled to be paid the amount if itcould be proved that the amount was paid not by the insolvent but byanybody else on his behalf.
In the first place, I do not think that an assignee, who is always underthe control of the Court while insolvency proceedings last, can do whathe pleases and be permitted to take up a position detrimental to theinterests of the creditors he represents—section 78 of Ordinance No. 7 of1853. His admission cannot therefore be viewed seriously. The learnedJudge himself seems to think that the assignee has gone too far in makingthis admission and I am inclined to agree with him.
In the second place, I do not think that it matters materially whetherthe money paid was that of the insolvent or of anyone else. It was moneypaid to discharge a proved debt of the insolvent who was under arrest inthe insolvency proceedings and, in my opinion, that money should bebrought to the credit of the insolvency case for the benefit of all thecreditors.
Learned Counsel for the appellants has candidly admitted that it isimpossible to prove that the money was actually that of the insolvent’s. wife, although there is the fact that she opened a box and drew the moneyout of that box. He argues that his client’s vigilance in obtaining thearrest should Be rewarded as it was solely owing to that vigilance thatthe money was recovered. He cited a case reported in Ramanathart’sReports (1863—1868), at page 124, namely, Findlay v. Miller, where,under the old practice obtaining before the Civil Procedure Code cameinto operation, it was held that concurrence cannot be claimed by othercreditors to proceds of execution against the person of the debtor. Thisdecision cannot, in my opinion, be extended to apply to the arrest of aninsolvent effected under a prescribed procedure in insolvency proceedingswhich are regulated entirely and exhaustively by a special Ordinance oflengthy proportions, namely, Ordinance No. 7 of 1853.
In the case cited, the other creditors were not parties to the case underthe decree of which the debtor'was arrested ; while in these proceedings,the assignee and proved creditors are obviously parties and have a directinterest in the developments which occur in the course of the insolvency^proceedings and which are in addition of an in rem character.
Mr. Gratiaen also cited the case of Mutturafnen Chetty v. SuppramaniamPulleHere again the same differentiation applies. The plaintiff inthis case obtained a warrant of arrest against the judgment-debtor. Thedebtor duly tendered the amount of the judgment-debt into Court andobtained a release. The plaintiff, thereupon, moved under section 350of the Civil Procedure Code that this money should be carried to hisseparate account. This was allowed, but thereafter, a judgment-creditorin a different case seized this money and contested the application of the
1 12 N. L. R. 193.
KOCH J.—Moosajee v. Pciris.
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arresting creditor to draw the money which was, as I have just said,carried to the separate account of the applicant. It was held, and, Iwould respectfully remark, rightly so, that the money having beenvested in the applicant at the time of the appropriation order was notliable to seizure at the hands of the claimant, a judgment-creditor in adifferent case.
I fail to see how decisions, adverse to parties to cases other than thecase in which proceeds are recovered, who make their claim to concurrenceby reason of a special section, namely, section 352, of the Civil ProcedureCode, can be said to apply to parties in the case itself, and particularly sowhen the case itself is of a special nature controlled by a procedure ofits own.
Mr. Gratiaen also argued that although under section 109 of the Insol-vency Ordinance a creditor by proving his debt under the insolvency isdeemed to have elected to take the benefit of the petition with respect tothe debt so proved and to have relinquished his other remedies, the effectof a later section, namely, section 152, is to whittle down this disabilityby placing the proved creditor in the position of an active judgment-creditor. He referred us to a passage on page 202 of Archbold on the Lamand Practice in Bankruptcy (11th ed.) which says that the effect of12 & 13 Viet. c. 105, s. 257—this section corresponds precisely toour section 152—“ is an exception to the general proposition that acreditor by proving his debt abandons all other remedies for its recoveryThere can be no doubt that the provisions of section 152 do grant a rightto any proved creditor to act independently of the assignee and otherproved creditors and to obtain the arrest of an adjudicated insolvent incertain circumstances, but, in the absence of any special advantageconveyed by the terms of this section or of any other section of theOrdinance with respect to any benefit which he might thereby derive,such benefit must, in my opinion, be considered to be to the advantage ofall the proved creditors, who, under the section, are further regarded asjudgment-creditors.
The provisions of this section are somewhat elaborate and, if it was theintention of the law to conserve to a judgment-creditor a benefit derivedthrough action on his part under the section to the exclusion of the otherjudgment-creditors referred to in this section, the section would haveproceeded to say so.
It is pointed out that under the section the right to proceed to executionis given not only to the assignee but to any proved creditor, and that thisconcession would not have been granted unless the intention was toreward the active creditor. I hardly think so, I feel that the extensionof the right to proved creditors has been made in order to safeguard themgenerally against any apathy displayed by the assignee.
Mr. Martyn, on behalf of the assignee, referred us to Archbold p. 565.It is here set out that a proved creditor is entitled only to his proportionof the nett produce of a bankrupt’s estate, and that the only instances ofpriority of debts known to the law of bankruptcy are cases of a landlordfor rent, secured creditors, servants, clerks, &c. It will be noted that thislearned authority does not make the case of a vigilant creditor who by
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ABRAHAMS C.J.—Saibo v. Mohamadu.
his sole efforts has recovered monies an exception to this rule. In ourOrdinance, the sections dealing with the priority of debts are sections 95et seq. and here again, the case of a vigilant creditor is not introduced.
I am not prepared to regard the payment of the money by the insolvent’swife—if it were her own—as a gift to the insolvent which, under section70, would vest in the assignee. I feel however that the underlyingprinciple of that section is to catch up any asset which may come intoexistence whereby the insolvent has been benefited and that such assetmust be regarded as obtained for the advantage of all the creditors.
I would therefore dismiss the appeal. In the circumstances, there willbe no costs of appeal. The learned District Judge has made no order asto the costs of the inquiry in the Court below. This will stand. I,further direct 'that all costs incurred by the appellants in procuring thearrest of the insolvent and in recovering the sum of Rs. 628.50 be a firstcharge on the said sum.
Poyser J.—I agree.
Appeal dismissed.