RATNAKAR SARANGI Vs. NARADA MOHAPATRA

JUDGEMENT

(1.) To appreciate the points in controversy facts may be stated in brief. On 16th of July, 1956, Ratnakar Sarangi (appellant) presented an insolvency petition under Section 7 of the Provincial Insolvency Act (Act V of 1920) (hereinafter to be referred to as the Act). It was registered as Misc. Case No. 6/56 in the Court of the District Judge, Cuttack. On 20th of July, 1956, some immoveable properties belonging to the insolvent were put to sale in execution case No. 11/53 in the Court of the Subordinate Judge, Cuttack. The execution case was from a decree obtained by Narada Mohapatra, creditor No. 1, against the insolvent in M. S. No. 125/ 51 which was a decree on contest for Rs. 7,567.75 paise, on 16-10-52 with future interest as was allowed in F. A. No. 5/53. On 25-7-56 the insolvency case was admitted. On 12th of September, 1956, confirmation of sale in execution case No. 11/53 was stayed on an application made by the insolvent. On 15-11-56 this stay order was vacated and the Nazir was appointed as the interim receiver to take steps for realisation of the assets held in the Subordinate Judge's Court in execution case No. 11 of 1953. Sukadeb Mohapatra is the creditor No. 2. On 17-12-56, creditors 1 and 2 filed an application for appointment of an interim receiver for management of the properties of the insolvent. On 15-12-56 the, Nazir was discharged from receivership and Shri B. B. Rath, Advocate, was appointed as receiver. On 20-12-56 the insolvent filed an application for staying execution case No. 5/56 in the Court of the Additional Subordinate Judge, Cuttack, which was started on 2-5-56 by creditors 1 and 2 for recovery of their dues amounting to Rs. 11,1211.98 paise with pendente lite and future interest at 6 per cent per annum. This application was rejected. The executing court was informed to realise the assets and to hold the amount awaiting further orders from the insolvency court. On 16th January, 1957, the interim receiver Sri B. B. Rath filed a report regarding the movable assets of the insolvent that had been taken charge of by him and kept in the custody of one Bhagyarathi Sarangi. On 9-2-57 the interim receiver Sri B. B. Rath was discharged and thereafter no other receiver was appointed. On 22nd of May, 1958, certain properties were sold in execution case No. 5/56 and the entire sale-proceeds amounting to Rs. 1371.00 were deposited in the Court of the Additional Subordinate Judge, Cuttack. On 5-7-62 the appellant was adjudged insolvent and was directed to apply for discharge within six months under Section 27 (1) of the Act. A conditional order of discharge was passed on 1-4-64. The question of absolute discharge was directed to be considered after one year, and during that period the khata accounts of the insolvent was directed to be scrutinised by a receiver. The Nazir was appointed receiver on 10-4-64 to inspect the Khata accounts of the insolvent. On 22-11-67 the report of the Nazir was put up before the District Judge and after hearing the insolvent's advocate an absolute order of discharge was passed on 11-12-67. About two years after creditors 1 and 2 filed a petition on 9-12-69 for distribution of assets including the amounts in deposit in execution case No. 11/53 and 5/56 in the Courts of the Subordinate Judge and Additional Subordinate Judge, Cuttack, respectively and also by sale of 2.06 acres of land which were judicially determined to be the property of the insolvent. The history of litigation, so far as this property is concerned, shows that on 10-8-56 this land was attached in execution case No. 5/56; but the additional Subordinate Judge released the property from attachment on the application of the daughters of the insolvent under O. XXI, R. 58 C. P. C., on a finding that the property belonged to them as being inherited from their mother which was her Stridhan property. On 18-7-57, creditors 1 and 2 filed a suit under Order XXI, Rule 63, C. P, C. in T. S. No. 126 of 1957 against the claimants and the insolvent. On 29-1-62 the suit was decreed. Title Appeal No. 13/ 32 of 64/62 at the instance of the claimant was dismissed on 12-3-66 and the second appeal to the High Court (S. A. No. 233/65) was dismissed on 21-1-66 Thus the 2.06 acres of land were held in a contested litigation as belonging to the insolvent. On 23rd of February, 1970, creditors 1 and 2 filed an application praying that the properties mentioned in Schedules A and B of that petition should be distributed amongst the creditors. Sch. A related to the movable property which were taken delivery of by the receiver Sri B. B. Rath and this had been mentioned in the insolvency petition, and Sch. B property constituted lots 23, 25, 26, 28, 29 and 31 of the insolvency petition. Their case was that as A and B sch. properties had not been disposed of, they should be sold and the sale-proceeds should be made available for distribution amongst the creditors. In an affidavit filed by creditor No. 1, reference was made to the decrees of creditors 1 and 2 under execution in ex. case Nos. 11 of 1953 and 5 of 1956. Creditors 1 and 2 in their application dated 9-12-69 gave details of the litigation wherein the 2.06 acres of land were ultimately judicially held to be the property of the insolvent. An affidavit by way of formal proof of the debts was filed in accordance with the provisions of Section 49 (1) which lay down that a debt may be proved under the Act by delivering or sending by post in a registered letter, to the Court an affidavit verifying the debt. On 24th of July, 1970, the District Judge passed an order directing that the aforesaid assets should be distributed among the creditors. On 11-8-70 a petition for clarification of the order dated 24-7-70 was filed by creditors 1 and 2. Clarification was sought on account of the fact that in the earlier order, the District Judge appeared to be under the impression that the 2.06 acres of land had already been included in the insolvency application. The District Judge, in the clarificatory order dated 22-9-70, stated that the properties left out from the insolvency petition and the new item of property shall be proceeded against for satisfaction of the dues of the creditors. Against the two orders passed by the District Judge on 24-7-70 and 22-9-70 M. A. No. 153/70 was filed in this Court which was dismissed by our learned brother, R. N. Misra, J. on 14-9-71. The A. H. O. has been filed against the judgment of the learned single Judge.

(2.) Mr. A. B. Misra for the appellant raised two contentions: (i) Creditors 1 and 2 did not prove their debts before the final order of discharge, and their debts were not included in the schedule of creditors as contemplated in Section 33 of the Act, and such debts should not be permitted to be proved after the final order of discharge; and (ii) an order of discharge shall release the insolvent from all debts provable under the Act as prescribed in Section 44 (2) save as otherwise provided by sub-section (1). The debts of creditors 1 and 2 do not fall within the ambit of debts referred to in Section 44 (1) and as such, the properties of the insolvent are not available towards the discharge of the debts of creditors 1 and 2. Both the contentions require careful examination.

(3.) Section 33 of the Act runs thus: