CHARLO SESHU REDDI Vs. AMPERAYANI SUBBARAO

JUDGEMENT

(1.) This case arises under the Provincial Insolvency Act. Respondent 2 is the appellant. He was adjudicated insolvent on 30 August 1933 in I. P. No. 50 of 1932 on the file of the District Court at Nellore. He then filed I.A. No. 326 of 1934 under Section 38, Provincial Insolvency Act, submitting a proposal for composition of his debts. The names of 24 creditors were given in this petition. The matter was notified in the papers and 22 creditors who were served with notice consented to the composition. The 13 creditor was declared ex parte. The 3 creditor opposed the application. Since the amount due to him was only Rs. 5500 and the amount due to the remaining 23 creditors was Rs. 59,000, the statutory requirement about the majority of creditors who should consent to the composition was fulfilled and the proposal for composition submitted in the application was accepted by the Court. The adjudication was accordingly annulled on 18 April 1935. At the time that the scheme for composition was submitted, a doubt seems to have arisen as to whether the respondent to this appeal, who was the 25 creditor of the insolvent, had proved his debt or not. It appears from the records that it was brought to the notice of the Court that there was such a creditor and that the debt due to him was about Rs. 2500. In view of the amount of the debt due to this creditor who was not impleaded as a party to the proceedings, the Court seems to have felt that there was no necessity to inquire further into the matter and that the ends of justice and the requirements of law would be satisfied if provision was made in the composition arrangement for payment of dues to this additional creditor as well in case he came forward and proved his claim. It now transpires that prior to the acceptance of the scheme for composition, the respondent had proved his claim to the extent of Rs. 754-11-8. This was due to him under the decree in O.S. No. 623 of 1938 which was passed in a suit for possession of property together with. mesne profits. In the decree there was. provision for payment of future mesne profits and such future profits have since been ascertained. According to the petition filed in the Court below the total amount due to this creditor under the decree is Rs. 2550.

(2.) After the composition scheme was approved by the Court and the total amount required for paying a dividend at six annas in the rupee, which was the arrangement in the composition deed, was deposited into Court, notice was served on the respondent by the special receiver appointed for carrying out the scheme on 12 November 1940 intimating that the amount that was payable to him under the arrangement was in Court deposit and that it was open to him to draw it out. It is the respondent's case that that was the first notice that he had of the composition arrangement having been accepted by the Court. He thereupon filed a petition under Section 4, Provincial Insolvency Act, in the Court below on 21 January 1941. It is from this petition that the present appeal arises. The main allegations in the petition were that prior to the acceptance of the scheme for composition the respondent here was not served with notice as required by law and that therefore he is not in any way bound by the composition scheme approved by the Court. He asked for a declaration to that effect so that it may be possible for him to execute the decree that he had obtained against the insolvent without being hampered by the composition scheme approved by the Court. The learned District Judge has granted this declaration holding that since the respondent to this appeal had received no notice of the proceedings under Section 38, Provincial Insolvency Act, he was not bound by the composition scheme approved by the Court.

(3.) Mr. Subba Rao, the learned advocate for the appellant, urges three main contentions in this appeal. These are : (i) since the proceedings in insolvency had terminated and the adjudication had been annulled by the lower Court, it was not open to the respondent here to have filed his petition under Section 4, Provincial Insolvency Act; (ii) the respondent was an "aggrieved" person within the meaning of Section 75, Provincial Insolvency Act if, as he says, he had no notice of the composition scheme which was approved by the lower Court and therefore the proper remedy open to him was to appeal under Section 75, Provincial Insolvency Act, and not to file an application under Section 4. Since no such appeal had been filed within the time allowed by law, his application under Section 4 was not competent; (iii) by merely proving that he was not served with notice prior to the approval of the scheme for composition the respondent did not become entitled to the relief that he asked for in his application in the lower Court. He ought to go further and make out a case under Section 38, Provincial Insolvency Act.