FRAMROZE MERWANJI DESAI Vs. HORMASJI MANECKJI

JUDGEMENT

(1.) IN this case the judgment-creditors took out and served upon the judgment-debtor an insolvency notice in respect of the claim which they have had against him by virtue of a decree for Rs. 41,406-8-0 and interest of tained by them on June 18, 1945. The judgment-debtor has filed an affidavit before me stating that he has a counter-claim which exceeds the amount claimed by the judgment-creditors in respect of the decree and which he could not set up in the suit in which the decree was obtained, and claims that the insolvency notice be set aside.

(2.) THE suit which was filed by the judgment-creditors was a summary suit. When the summons for judgment came on for hearing before Mr. Justice Blagden, the learned Judge refused leave to defend the suit and passed the decree for the amount mentioned above on June 18, 1945. THE judgment-debtor appealed from this decree of Mr. Justice Blagden. THE appeal was heard by the learned Chief Justice and Mr. Justice Chagla on November 8, 1945, and by an order made on that day by the Appeal Court, the judgment-debtor was ordered to deposit in Court Rs. 20,000 as security for the claim of the judgment-creditors in suit on or before December 6, 1945, and on such deposit being made, he was granted leave to defend the suit, and the decree was to be set aside. THE judgment-debtor was also by the said order directed to Hie his written statement and counter-claim on or before December 10, 1945. THEre was an order, in default, that the appeal would stand dismissed if no such deposit was made by the judgment-debtor by, December 10, 1945. THE judgment-debtor failed to deposit the amount, and the appeal stood dismissed. THE judgment-debtor filed an application for review of the order of November 8, 1945, and that application was also dismissed by the learned Chief Justice and Mr. Justice Lokur on January 28, 1946. It may be observed that in the affidavit which he made on the summons for judgment, the same allegations had been made by way of defence to the suit and for the purpose of counter-claim which he proposed to file if leave to defend was granted to him, as have been;made in the affidavit which he has now filed before me.

(3.) IT has been urged by Mr. Boovariwalla appearing for the judgment-creditors that as regards the counter-claim also, the Court has got to see that the judgment-debtor has a counter-claim effective and capable of being enforced by action at the time of the application to set aside the notice. He relies upon the observations in Williams on Bankruptcy, 15th edn. , p. 34, with regard to set-off and submits that the same principles should apply also in the case of a counter-claim. I agree with this submission of Mr. Boovariwalla. IT is necessary for the judgment-debtor to establish that he has a counter-claim effective and capable of being enforced by action at the time when he makes his application before me to set aside the notice in insolvency. For that purpose, my attention has been drawn to a plaint in suit No.64 of 1946 which he has filed against the judgment-creditors on April 1, 1946, in which he has formulated this counter-claim and claimed to recover from the judgment-creditors a sum of Rs. 56,078-1-1 as and by way of damages and another sum of Rs. 20,000 also by way of damages for the alleged breach by the judgment-creditors of the agreement which was arrived at between the parties. In paragraph 10 of this plaint, he has stated the ground on which he says that his suit is not barred by the law of limitation. The plaint as presented, therefore, is prima facie one which seeks to avoid the bar of limitation which would otherwise have barred ids claim in the suit, and is prima facie in order. If I accede to the contention of Mr. Boovariwalla, it would involve me into investigating at this stage whether the claim was really barred by the law of limitation. I do not think it is the province of the Insolvency Court in considering the application to set aside the insolvency notice to go into the merits of the claim and adjudicate upon the question whether the claim, in spite of its being prima facie shown to be within the period of limitation, is really not so. What I have got to determine is the prima facie nature of the claim which has been put forward by the judgment-debtor. On a perusal of the plaint in suit No.64 of 1940, as on a demurrer, I have no reason to come to the conclusion that the claim of the judgment-debtor is barred by the law of limitation. If that is so, there is no reason also to come to the conclusion that the counter-claim which the judgment-debtor says he has got against the judgment-creditors is not an effective one and not capable of being enforced by action at the time of the application to set aside the notice Within the meaning of the authority cited by Mr. Boovariwalla, IT may be that the counter-claim may have been put forward by the judgment-debtor on the off-chance of success and merely to stave off the insolvency proceedings. On the other hand, as I have already observed above, the remedy by way of the insolvency notice which would result in the adjudication by the Court that an act of insolvency has been committed by the judgment-debtor is a very drastic one, and the Court is not called upon to make any order against the debtor as suggested by Mr. Boovariwalla, unless the hands of The Court are forced into that behalf.