MATHU VARKEY Vs. GRAND ESTERN BANK LTD

JUDGEMENT

(1.) THIS is an appeal by a debtor of a banking company which is being wound-up by this Court under the provisions of the Banking regulation Act, 1949. The Official Liquidator who represents the Bank, the first respondent, obtained a decree against the appellant and others on the mortgage documents executed by the appellant and others. After the institution of the suit which gave rise to the above decree the appellant filed an application under S. 15 of the Kerala Agriculturists Debt Relief Act, 1958 (hereinafter referred to as the 'debt Act' ). The Official Liquidator then moved this Court for stay of the proceedings under S. 16 and this Court stayed those proceedings. The appellant then moved the winding-up court for permission to proceed with the application under S. 15 of the Debt Act. The winding-up court by the order under appeal directed the removal of the first respondent from the party array in the proceedings under S. 15 of the Debt Act initiated by the appellant.

(2.) COUNSEL on behalf of the appellant has contended that the proceedings under S. 15 of the Debt Act are akin to proceedings in insolvency, that proceedings in insolvency do not involve any claim at any rate when those proceedings are initiated by a debtor seeking to be adjusted an insolvent against a banking company and therefore that S. 45-B of the Banking regulation Act, 1949 is not attracted there is no impediment to proceed with the application under S. 15 of the Debt Act. Reliance has been mainly placed on the decision of this Court in J aim Ali and Others v. Narayana Pillai and others (1961 KLT. 174) where Justice Raman Nayar as he then was took the view that insolvency proceedings initiated by a debtor do not involve any claim against a banking company in liquidation and that those proceedings cannot be said to relate to matters in winding-up. The learned judge was dealing with a batch of cases arising from two petitions in insolvency and two petitions under s. 15 of the Debt Act. The conclusion was that there was no reason whatever to stay the proceedings under S. 15 of the Debt Act. We must however point out that the learned judge also clarified that the proceedings under S. 15 of the Debt act or for that matter, the proceedings in insolvency may reach a stage when it will involve a claim against a banking company in liquidation and that when such stage was reached, the jurisdiction of the insolvency court or the court dealing with the application under S. 15 of the Debt Act will cease as the matter will come within S. 45-B of the Banking Regulation Act, 1949. It is sufficient to read one part of the judgment of the learned judge in this regard: "it might be that, after the adjudication, claims arise by or against the estate, and if such claims, being disputed or for other reasons, require to be entertained and decided by a court, then doubtless s. 45-B would operate to vest exclusive jurisdiction in this court, if the claim is by or against a banking company in liquidation. " We may add that the learned judge visualised the two stages in proceedings in insolvency and even in proceedings commenced under S. 15 of the Debt Act, a proceeding which ends with an order of adjudication and then proceeds to deal with the claims of the various creditors resulting in further orders settling the debts or settling the claims that have been put forward. The latter stage, the learned judge thought, might involve claims against a banking company in liquidation and that at that stage the insolvency court will cease to have jurisdiction as the jurisdiction for such purposes is vested exclusively with this Court.

(3.) WE accordingly set aside the order under appeal and reject the application of the appellant under S. 446 of the Companies Act.