RAMA SUBHA IYER Vs. JANAKI AMMAL

JUDGEMENT

(1.) This appeal is directed against the order of the learned District Judge of Quilon dismissing Company Petition No. 11 of 1124 of his Court filed by the liquidators of a limited Company by name The Sri Ram Tile Works, Ltd., Quilon, which has gone into voluntary liquidation. On 17.8.1121 respondent obtained a decree against the Company in O.S. No. B of 1121 on the basis of a hypothecation bond dated 31.1.1107. When execution was taken out by the respondent an application was filed on behalf of the Company to have the debt discharged as per the provisions of S.8, 9 and 11 of the Debt Relief Act 11 of 1116. It was dismissed on 11.7.1124 under Ext. 11 order. Thereafter the entire decree amount appears to have been deposited in Court on behalf of the Company by a vendee of the liquidators. But before the decree holder drew the money from Court the liquidators filed Company Petition No. 11 of 1124 attacking the hypothecation bond was wanting in consideration and the decree based thereon as fraudulent and collusive and praying for an enquiry into the claim of the decree holder and to call her for proof of the debt. The respondent decree holder resisted the application on the grounds (1) that the Court has no jurisdiction to entertain such an application (2) that the liquidators are concluded by the order of the execution Court and (3) that the application is barred by limitation. The Court below repelled the first two grounds of objection but it upheld the plea of limitation and dismissed the petition. One of the joint liquidators has therefore come in appeal. The respondent has filed a memorandum of objections in regard to the findings against her on the first two points.

(2.) As already stated the hypothecation bond is dated 31.1.1107. The decree was passed on 17.8.1121. It is admitted that the resolution for the voluntary winding up of the Company was passed only on 4.2.1123. The respondent is therefore a secured creditor who has obtained her decree long before the winding up proceedings. This being the case it is contended for the respondent that the winding up Court has no jurisdiction to call her for proof of the debt or to institute an enquiry into the extent and validity thereof. We think that there is considerable force in this argument.

(3.) S.284 of the Travancore Companies Act which corresponds to S.229 of the Indian Act provides that:- In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; and all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up, and make such claims against the company as they respectively are entitled to by virtue of this section. The words the same rules ............................. as are in force for the time being under the law of insolvency, in the above section are wide enough to include rules contained in the sections of the Insolvency Act, rules if any made under the Act, and any appropriate established rules of practice in the insolvency proceedings unless there is something in the Companies Act itself already providing for the matter in question, or in conflict with the rules which the section purports to import. (Vide AIR 1929 All. 353 F.B.). There are no such provisions in the Companies Act except those contained in S.208 of the Act regarding stay of proceedings and in S.210 regarding granting or refusing leave to commence or proceed with suit or legal proceeding, with which we are not concerned here as no reliefs are sought for in this case on the basis of those sections. Therefore in determining the respective rights of secured and unsecured creditors under S.284 of the Companies Act in a winding up proceeding under the Act the provisions of the law of insolvency in respect of that matter are attracted. It is a well etablished principle of insolvency law, that in the case of insolvency of an individual a secured creditor can stand outside the proceedings as indicated by S.9(2), S.28(2) and S.47 of the Travancore Insolvency Act VII of 1108 more particularly the proviso to S.28(2) which provides that nothing in the Sub-section shall affect the power of any secured creditor to realise or otherwise deal with his security in the same manner as he would have been entitled to realise or deal with it if the Sub-section had not been enacted.